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Reconciliation is a process established under Section 310 of the Congressional Budget Act of 1974 ( P.L. 93-344 , as amended). The purpose of reconciliation is to change substantive law so that revenue and mandatory spending levels are brought into line with budget resolution policies. Reconciliation generally has been used to reduce the deficit through spending reductions or revenue increases, or a combination of the two. In some years, however, the reconciliation process also encompassed revenue reduction generally and spending increases in selected program areas. Reconciliation is a two-step process. Under the first step, reconciliation instructions are included in the budget resolution, directing one or more committees in each House to develop legislation that changes spending or revenues (or both) by the amounts specified in the budget resolution. If more than one committee in each House is given instructions, each instructed committee submits reconciliation legislation to its respective Budget Committee, which incorporates all submissions, without any substantive revision, into a single, omnibus budget reconciliation measure. Reconciliation procedures during a session usually have applied to multiple committees and involved omnibus legislation. Under the second step, the omnibus budget reconciliation measure is considered in the House and Senate under expedited procedures (for example, debate time in the Senate on a reconciliation measure is limited to 20 hours and amendments must be germane). The process culminates with enactment of the measure, thus putting the policies of the budget resolution into effect. Reconciliation, which was first used by the House and Senate in 1980, is an optional procedure, but it has been used in most years. Over the period covering from 1980 to the present, 20 reconciliation bills have been enacted into law and four have been vetoed. During the first several years' experience with reconciliation, the legislation contained many provisions that were extraneous to the purpose of reducing the deficit. The reconciliation submissions of committees included such things as provisions that had no budgetary effect, that increased spending or reduced revenues, or that violated another committee's jurisdiction. In 1985 and 1986, the Senate adopted the Byrd rule (named after its principal sponsor, Senator Robert C. Byrd) as a means of curbing these practices. Initially, the rule consisted of two components, involving a provision in a reconciliation act and a Senate resolution. The Byrd rule has been modified several times over the years. The purpose of this report is to briefly recount the legislative history of the Byrd rule, summarize its current features, and describe its implementation from its inception through the present. During the first five years that the Byrd rule was in effect, from late 1985 until late 1990, it consisted of two separate components—(1) a provision in statute applying to initial Senate consideration of reconciliation measures, and (2) a Senate resolution extending application of portions of the statutory provision to conference reports and amendments between the two houses. Several modifications were made to the Byrd rule in 1986 and 1987, including extending its expiration date from January 2, 1987, to January 2, 1988, and then to September 30, 1992, but the two separate components of the rule were preserved. In 1990, these components were merged together and made permanent when they were incorporated into the Congressional Budget Act (CBA) of 1974 as Section 313. There have been no further changes in the Byrd rule since 1990. The Byrd rule originated on October 24, 1985, when Senator Robert C. Byrd, on behalf of himself and others, offered Amendment No. 878 (as modified) to S. 1730 , the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985. The Senate adopted the amendment by a vote of 96-0. In this form, the Byrd rule applied to initial Senate consideration of reconciliation measures. Senator Byrd explained that the basic purposes of the amendment were to protect the effectiveness of the reconciliation process (by excluding extraneous matter that often provoked controversy without aiding deficit reduction efforts) and to preserve the deliberative character of the Senate (by excluding from consideration under expedited procedures legislative matters not central to deficit reduction that should be debated under regular procedures). He opened his remarks by stating we are in the process now of seeing ... the Pandora's box which has been opened to the abuse of the reconciliation process. That process was never meant to be used as it is being used. There are 122 items in the reconciliation bill that are extraneous. Henceforth, if the majority on a committee should wish to include in reconciliation recommendations to the Budget Committee any measure, no matter how controversial, it can be brought to the Senate under an ironclad built-in time agreement that limits debate, plus time on amendments and motions, to no more than 20 hours. It was never foreseen that the Budget Reform Act would be used in that way. So if the budget reform process is going to be preserved, and more importantly if we are going to preserve the deliberative process in this U.S. Senate—which is the outstanding, unique element with respect to the U.S. Senate, action must be taken now to stop this abuse of the budget process. The Byrd amendment was included in modified form in COBRA of 1985 ( P.L. 99-272 ), which was not enacted into law until April 7, 1986, as Section 20001 (100 Stat. 390-391). The Byrd rule, in this form, thus became effective on April 7. As originally framed, the Byrd rule was set to expire on January 2, 1987. Over the years, the Senate has expanded and revised the Byrd rule through the adoption of two resolutions and the inclusion of provisions in four laws. Table 1 lists the laws and resolutions that have established and revised the Byrd rule. On December 19, 1985, the Senate adopted by voice vote a resolution ( S.Res. 286 ), sponsored by Senator Alan Simpson and others, that extended the application of portions of the statutory provision to conference reports and amendments between the two houses. Because the enactment of COBRA of 1985 was delayed until early 1986, the portion of the Byrd rule dealing with conference reports became effective first. The provisions of S.Res. 286 were set to expire on the same date as the provision in COBRA of 1985 (January 2, 1987). In the following year, the Senate was involved in two actions affecting the Byrd rule. First, the Senate adopted S.Res. 509 by voice vote on October 16, 1986. The measure, offered by Senator Alan Simpson and others, modified S.Res. 286 in a technical fashion. Second, the Omnibus Budget Reconciliation Act of 1986 was enacted into law, as P.L. 99-509 , on October 21, 1986. Section 7006 of the law made several minor changes in the Byrd rule and extended its expiration date by one year—until January 2, 1988. Further changes in the Byrd rule were made in 1987. These changes were included in a measure increasing the statutory limit on the public debt, modifying procedures under the Balanced Budget and Emergency Deficit Control Act of 1985, and making other budget process changes ( P.L. 100-119 , signed into law on September 29; see Title II (Budget Process Reform)). Section 205 of the law added an item to the list of definitions of extraneous matter in the Byrd rule and extended its expiration until September 30, 1992. In 1990, Congress and the President agreed to further modifications of the budget process by enacting the Budget Enforcement Act (BEA) of 1990 (Title XIII of the Omnibus Budget Reconciliation Act of 1990). Section 13214 of the law made significant revisions to the Byrd rule and incorporated it (as permanent law) into the CBA of 1974 as Section 313 (2 U.S.C. 644). Finally, the Budget Enforcement Act of 1997 (Title X of the Balanced Budget Act of 1997) made minor technical changes in Section 313 of the CBA of 1974 to correct drafting problems with the BEA of 1990. A Senator opposed to the inclusion of extraneous matter in reconciliation legislation has two principal options for dealing with the problem. First, a Senator may offer an amendment (or a motion to recommit the measure with instructions) that strikes such provisions from the legislation. Second, under the Byrd rule, a Senator may raise a point of order against extraneous matter. The Byrd rule is a relatively complex rule that applies to two types of reconciliation measures considered pursuant to Section 310 of the CBA of 1974—reconciliation bills and reconciliation resolutions. (A reconciliation resolution could be used to make changes in legislation that had passed the House and Senate but had not yet been enrolled and sent to the President. The practice of the House and Senate has been to consider only reconciliation bills.) In general, a point of order authorized under the Byrd rule may be raised in order to strike extraneous matter already in the bill as reported or discharged (or in the conference report), or to prevent the incorporation of extraneous matter through the adoption of amendments or motions. A point of order may be raised against a single provision or two or more provisions (as designated by title or section number, or by page and line number), and may be raised against a single amendment or two or more amendments. The chair may sustain a point of order as to all of the provisions (or amendments) or only some of them. Once material has been struck from reconciliation legislation under the Byrd rule, it may not be offered again as an amendment. A motion to waive the Byrd rule, or to sustain an appeal of the ruling of the chair on a point of order raised under the Byrd rule, requires the affirmative vote of three-fifths of the membership (60 Senators if no seats are vacant). A single waiver motion can (1) apply to the Byrd rule as well as other provisions of the Congressional Budget Act; (2) involve multiple as well as single provisions or amendments; (3) extend (for specified language) through consideration of the conference report as well as initial consideration of the measure or amendment; and (4) be made prior to the raising of a point of order, thus making the point of order moot. When a reconciliation measure, or a conference report thereon, is considered, the Senate Budget Committee must submit for the record a list of potentially extraneous matter included therein. This list is advisory, however, and does not bind the chair in ruling on points of order. In practice, the list has been inserted into the Congressional Record in some years but not in others. Further, in some years, the chairman and the ranking minority member of the committee each have submitted their own lists. Finally, in some cases the list merely has stated that no extraneous matter was included in the measure. Determinations of budgetary levels for purposes of enforcing the Byrd rule are made by the Senate Budget Committee. Subsection (b)(1) of the Byrd rule provides definitions of what constitutes extraneous matter for purposes of the rule. The Senate Budget Committee, in its report on the budget resolution for FY1994, noted "'Extraneous' is a term of art. Broadly speaking, the rule prohibits inclusion in reconciliation of matter unrelated to the deficit reduction goals of the reconciliation process." A provision is considered to be extraneous if it falls under one or more of the following six definitions: it does not produce a change in outlays or revenues or a change in the terms and conditions under which outlays are made or revenues are collected; it produces an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions; it is outside of the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure; it produces a change in outlays or revenues which is merely incidental to the non-budgetary components of the provision; it would increase the deficit for a fiscal year beyond the "budget window" covered by the reconciliation measure; and it recommends changes in Social Security. The last definition complements a ban in Section 310(g) of the CBA of 1974 against considering any reconciliation legislation that contains recommendations pertaining to the Social Security. For purposes of these provisions, Social Security is considered to include the Old-Age, Survivors, and Disability Insurance (OASDI) program established under Title II of the Social Security Act; it does not include Medicare or other programs established as part of that act. Subsection (b)(2) of the Byrd rule provides that a Senate-originated provision that does not produce a change in outlays or revenues shall not be considered extraneous if the chairman and ranking minority members of the Budget Committee and the committee reporting the provision certify that— the provision mitigates direct effects clearly attributable to a provision changing outlays or revenues and both provisions together produce a net reduction in the deficit; or the provision will (or is likely to) reduce outlays or increase revenues: (1) in one or more fiscal years beyond those covered by the reconciliation measure; (2) on the basis of new regulations, court rulings on pending legislation, or relationships between economic indices and stipulated statutory triggers pertaining to the provision; or (3) but reliable estimates cannot be made due to insufficient data. Additionally, under subsection (b)(1)(A), a provision that does not change outlays or revenues in the net, but which includes outlay decreases or revenue increases that exactly offset outlay increases or revenue decreases, is not considered to be extraneous. The full text of the Byrd rule in its current form is provided in the Appendix . Congress and the President considered 24 omnibus reconciliation measures (as shown in Table 2 ) between calendar year 1980, when the reconciliation process was first used, and the present. As stated previously, 20 of these measures were enacted into law and four were vetoed. The Byrd rule has been in effect during the consideration of the last 19 of these 24 measures, covering from the end of calendar year 1985 through 2015. The Byrd rule had not been established when the first five reconciliation bills were considered. As discussed in more detail below, actions were taken under the Byrd rule during the consideration of 15 of the 19 reconciliation measures. The Byrd rule was only partially in effect during the consideration of the first of these 19 reconciliation bills. During consideration of that bill, the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, the Byrd rule applied to the consideration of an exchange of amendments between the two chambers, but not to initial consideration of the bill. The 19 reconciliation bills considered and passed by the House and Senate during this period stemmed from reconciliation directives in 17 different budget resolutions. Two budget resolutions, in 1997 (for FY1998) and 2005 (for FY2006), led to the enactment of two reconciliation measures in each year. As Table 3 shows, there have been 70 points of order and 57 waiver motions, for a total of 127 actions, considered and disposed of under the Byrd rule. The 127 actions involve only those instances in which the Byrd rule was cited specifically; due to the manner in which budget enforcement provisions operate in the Senate, the Byrd rule potentially could have been involved in other instances which cannot be identified. There is not a one-to-one correspondence between points of order and waiver motions. A point of order can be raised under the Byrd rule without a waiver motion being offered; conversely, a waiver motion can be offered without a point of order having been raised. On the whole, the points of order and waiver motions were disposed of in a manner that favored by a large margin those who opposed the inclusion of extraneous matter in reconciliation legislation, as discussed in more detail below. Five of the six definitions of extraneousness (the exception being recommending changes in Social Security) have been cited as bases for points of order under the Byrd rule. The most common basis, that the provision or amendment did not change outlays or revenues, was cited as the sole basis in 34 instances and as one of two bases in three other instances. None of the other bases were cited as often; the second-most cited basis, that the provision or amendment was outside an instructed committee's jurisdiction, was cited in 15 instances. In some instances, the basis for the point of order was not cited. The Byrd rule has been used primarily during initial consideration of a reconciliation measure. It has been invoked only five times during consideration of a conference report—twice in 1993, once in 1995, once in 1997, and once in 2005: in 1993, two points of order against matter characterized as extraneous in a conference report were rejected by the chair. In both instances, the chair's ruling was upheld upon appeal. The two motions to appeal the chair's rulings were defeated by identical votes, 43-57; in 1995, two sections were struck from a conference report and the two chambers had to resolve the final differences with a further amendment between them; in 1997, a section in the conference report was retained following a successful vote (78-22) to waive a point of order; and finally, in 2005, three provisions were struck from a conference report (another provision was retained), necessitating action on a further amendment between the two chambers. As shown in Table 3 , points of order and waiver motions under the Byrd rule have occurred more frequently in the 1990s (81) compared to the 1980s (5) or the 2000s (41 so far). The middle years of the decade of the 1990s, covering calendar years 1993 through 1997, were especially active in this regard, accounting for 65 of the total 81 points of order and waiver motions during that decade. The most active single year was 2010, which involved 20 points of order and waiver motions. In total, 70 points of order were raised and disposed of under the Byrd rule. Points of order generally were raised successfully; 60 were sustained (in whole or in part), enabling Senators to strike extraneous matter from the legislation in 22 cases and to bar the consideration of extraneous amendments in 38 cases. Ten of the points of order fell, either upon the adoption of a waiver motion or upon the ruling of the chair. Two points of order were withdrawn and are not counted in Table 3 . In two instances, a point of order was not raised because a waiver motion previously had been offered and approved, thus making the point of order moot. In many instances, a point of order was raised against multiple provisions, sections, or titles of the bill, sometimes covering a variety of different topics. In a few cases, the chair ruled that most, but not all, of the provisions violated the Byrd rule. A total of 57 motions to waive the Byrd rule, to permit the inclusion of extraneous matter, were offered and disposed of by the Senate. Waiver motions generally were not offered successfully; nine were approved and 48 were rejected. Two other waiver motions were withdrawn and a third waiver motion was changed to a unanimous consent request; they are not counted in Table 3 . Eight of the nine successful motions were used to protect committee-reported language in the bill or language in the conference report; only one motion to protect a floor amendment was successful. Eight of the successful waiver motions exceeded the required 60-vote threshold by between two votes and 21 votes; on average, they exceeded the threshold by nearly 12 votes. The remaining successful waiver motion was approved by voice vote. With regard to the 48 unsuccessful waiver motions, 47 of them fell short of the threshold by between one vote and 43 votes; on average, they fell short of the threshold by about 13 votes. The remaining unsuccessful waiver motion was rejected by voice vote. Nineteen of the unsuccessful waiver motions garnered at least 51 votes. In one instance, the Senate set aside the Byrd rule without employing a waiver motion. The FY1988 budget resolution, in Section 4, set forth reconciliation instructions to various House and Senate committees, including the House Ways and Means and Senate Finance Committees. Section 6(a) of the budget resolution stated the assumption that in complying with their instructions, the two committees would establish a "deficit reduction account." Section 6(b) waived the Byrd rule for the consideration of any legislation reported under the assumed procedure: (b) Legislation reported pursuant to subsection (a) shall not be considered to be extraneous for purposes of section 20001 of the Consolidated Omnibus Reconciliation Act of 1985 (as amended by section 7006 of the Omnibus Budget Reconciliation Act of 1986) or Senate Resolution 509 (99 th Congress, 2d Session). The references in Section 6(b) were to the legislation that initially established the Byrd rule and extended it temporarily, before it was incorporated into the CBA of 1974 act on a permanent basis as Section 313. Table 4 , at the end of this section, provides more detailed information on points of order and waiver motions made under the Byrd rule from 1985 through 2015. The Senate considered four different reconciliation measures without taking any actions under the Byrd rule. First, no points of order were raised, or waiver motions offered, under the Byrd rule during final consideration of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 in late 1985 and early 1986; as previously mentioned, this was the first instance in which the Byrd rule applied. In 1989, no actions involving the Byrd rule occurred, in large part because the Senate leadership chose to use an amendment rather than the Byrd rule to deal with extraneous matter in the bill. On October 13, 1989, during consideration of the Omnibus Budget Reconciliation of 1989, the Senate adopted Mitchell Amendment No. 1004 by voice vote. The amendment struck extraneous matter from the bill; its stated purpose was "to strike all matter from the bill that does not reduce the deficit." In 2001, no actions under the Byrd rule were taken during consideration of a significant revenue-reduction measure, the Economic Growth and Tax Relief Reconciliation Act of 2001. The potential application of the Byrd rule to the measures was averted by the inclusion of "sunset" provisions that limited the duration of the tax cuts, thereby preventing deficit increases beyond the applicable budget window. Finally, the Byrd rule was not invoked during consideration of the College Cost Reduction and Access Act of 2007. In another instance, the Senate considered two reconciliation bills in 2005 (the Deficit Reduction Act of 2005 and the Tax Increase Prevention and Reconciliation Act of 2005); final Senate action on the tax measure carried over into 2006. While points of order were raised successfully under the Byrd rule with regard to both measures in 2005, no actions under the rule occurred in 2006 as the Senate completed action on the tax measure. Although the Byrd rule has advocates in the House and Senate, its use sometimes has engendered much controversy, especially between the two houses. Several of the major controversies are discussed below. In 1993 and 1994, during the 103 rd Congress, the stringent application of the Byrd rule by the Senate significantly influenced the final shape of the reconciliation act and later affected the deliberations of the Joint Committee on the Organization of Congress. The House considered its version of the Omnibus Budget Reconciliation Act of 1993, H.R. 2264 , on May 27. The Senate considered its version, S. 1134 , on June 23 and June 24 (after completing consideration of S. 1134 , the Senate amended and passed H.R. 2264 for purposes of conference with the House). Senator Pete Domenici, ranking minority member of the Senate Budget Committee, inserted a list of potentially extraneous matters included in S. 1134 in the Congressional Record of June 24 (at p. S7984). The list identified more than a dozen sections in five titles of the bill as possibly being in violation of the Byrd rule, specifically Section 313(b)(1)(A) (i.e., producing no change in outlays or revenues). At the House-Senate conference stage, the Senate leadership directed the parliamentarian and Senate Budget Committee staff to thoroughly review the legislation to identify any provisions originating in the House or Senate that might violate the Byrd rule. As a result of this review, many provisions were deleted from the legislation in conference. During Senate consideration of the conference report, Senator James Sasser, Chairman of the Senate Budget Committee, discussed this process: with regard to the Byrd rule, we worked very hard and very faithfully over a period of well over a week in going over this bill to try to clarify and remove items that might be subject to the Byrd rule. As the distinguished ranking member indicated, I think over 150 items were removed from the reconciliation instrument here, because it was felt that they would be subject to the Byrd rule.... I might say some of our House colleagues could not understand, and I do not blame them because there were a number of things that were pulled out of this budget reconciliation that had been voted on and passed by large majorities in both houses. But simply because they violated the Byrd rule, we had to go to the chairmen of the appropriate House committees and tell them they had to come out. They simply did not understand it. I think it made them perhaps have a little less high esteem for some of us here in the Senate.... In the final analysis, their leadership had to demand that some of these provisions subject to the Byrd rule come out. During House consideration of the conference report, several Democratic Members criticized the Byrd rule and discussed its impact on the legislation. For example, Representative Dan Rostenkowski, chairman of the House Ways and Means Committee, stated I also have to express my grave concerns regarding the other body's so-called Byrd rule. As a result of this procedural rule, policies that would have significantly improved the Medicare Program could not even be considered. Over 80 pages of statutory language were stripped out of the Medicare title. Staff wasted countless hours, scrutinizing every line to ensure that there is nothing that would upset our friends at the other end of the Capitol. Even more absurd is the fact that most of the items stripped were minor and technical provisions that received bipartisan support when they passed both the House and the Senate last year. I hope that Members on both sides of the aisle share my grave concerns about how this rule has been used, and its impact on reconciliation. I sincerely hope that this rule will be reconsidered before we ever return to the reconciliation process again. Controversy over the Byrd rule persisted during late 1993 and into 1994. The Joint Committee on the Organization of Congress, co-chaired by Representative Lee Hamilton and Senator David Boren, was slated to make recommendations on congressional reform, including changes in the budget process, in December of 1993. Representative Martin Olav Sabo, chairman of the House Budget Committee, wrote to Co-Chair Hamilton in October, telling him that "widespread use [of the Byrd rule] this year was extremely destructive and bodes ill for the reconciliation process in the future." Further, he stated that "the use of mechanisms like the Byrd rule greatly distorts the balance of power between the two bodies" and that strict enforcement of the Byrd rule "requires that too much power be delegated to unelected employees of the Congress." Chairman Sabo attached two Budget Committee staff documents to his letter: (1) a 29-page listing of reconciliation provisions "dropped or modified" in conference in order to comply with the Byrd rule, and (2) a three-page statement identifying specific problems caused by the rule (including a bar against including authorizations savings in reconciliation, the forcing of piecemeal legislation, incentives to use counterproductive drafting techniques to mitigate effects, and a bar against provisions achieving savings or promoting efficiency when the Congressional Budget Office was unable to assign particular savings to them). The Senate Members of the Joint Committee on the Organization of Congress recommended in their final report that a provision clarifying "that the 'Byrd rule' is permanent, applies to conference reports, requires sixty votes to waive, and applies to extraneous matters" be included in a broad reform bill. Legislation embodying the Senate recommendations ( S. 1824 ) was introduced on February 3, 1994 (the recommendation pertaining to the Byrd rule was set forth in Section 312 of the bill). The House Members of the Joint Committee did not include any recommendations regarding the Byrd rule in their report or legislation ( H.R. 3801 , also introduced on February 3, 1994). The day after the two reform bills were introduced, the chairmen of 15 House committees wrote to Speaker Tom Foley. They urged him to meet with Senate Majority Leader George Mitchell in order to get Section 312 of S. 1824 , dealing with the Byrd rule, removed from the reform package. On July 19, 1994, Chairman Sabo introduced H.R. 4780 . The bill would have amended the CBA of 1974 to make the Byrd rule "applicable to the Senate only," chiefly by removing references to conference reports in Section 313 of the act. None of the three bills cited above were acted upon before the 103 rd Congress adjourned. During the 106 th Congress, the budget resolutions for FY2000 and FY2001 included reconciliation instructions directing the House Ways and Means and Senate Finance Committees to develop legislation implementing substantial reductions in revenue. The reconciliation instructions in the two budget resolutions called for total revenue reduction over five years of $142 billion and $150 billion, respectively. Neither budget resolution included any instructions regarding spending. This marked the first time that the House and Senate had recommended substantial reductions in revenue through the reconciliation process without offsetting savings to be achieved in spending programs. Any resultant reconciliation legislation was expected under these budget resolutions to reduce large surpluses, not to incur or worsen deficits. In each of these two years, there was controversy in the Senate regarding the appropriateness of using reconciliation procedures under circumstances that worsened the federal government's fiscal posture. Some Senators argued that the use of reconciliation, with its procedural restrictions that sharply curtail debate time and limit the offering of amendments in comparison to the usual Senate procedures, could be justified only when it was necessary to reduce or eliminate a deficit (or to preserve or increase a surplus). Other Senators maintained that reconciliation is neutral in its orientation—the language in Section 310 of the CBA of 1974 refers to "changes" in spending and revenue amounts, not increases or decreases—and is intended to expedite the consideration of important and potentially complex budgetary legislation. Against the backdrop of the larger issue of the appropriate use of reconciliation under these circumstances, Senators also debated in particular the impact of the Byrd rule on the scope of the resultant tax-cut legislation. One of the determinants of extraneousness under the Byrd rule is whether the legislation reduces revenues or increases spending in the net beyond the budget window (i.e., the period to which the reconciliation instructions apply). Changes in tax law, however, often are made on a permanent basis. As a consequence, reconciliation legislation recommending permanent tax cuts may run afoul of the Byrd rule. During consideration of the Taxpayer Refund and Relief Act of 1999 and the Marriage Tax Relief Reconciliation Act of 2000, the Byrd rule was used successfully to ensure the inclusion of sunset provisions in the bills, limiting the effectiveness of the tax cuts to the period covered by the reconciliation instructions. During the first session of the 107 th Congress, the Senate again addressed these issues as it considered H.R. 1836 , largely embodying President Bush's proposal for a $1.6 trillion tax cut. In addition to debating the appropriateness of using the reconciliation process to expedite tax-cut legislation, Senators argued for and against the inclusion of the 10-year "sunset" provision necessary to achieve compliance with the Byrd rule. Some Senators maintained that permanent changes in tax law should be allowed under reconciliation procedures, just as they often are customarily made in freestanding tax legislation. Other Senators praised the value of being able to reexamine such significant modifications in budgetary policy in future years when economic circumstances may have changed materially. The sunset provision was retained in the final version of the legislation, as Section 901 (115 Stat. 150) of P.L. 107-16 , the Economic Growth and Tax Relief Reconciliation Act of 2001. In 2003, during the first session of the 108 th Congress, the Byrd rule influenced the form of revenue reconciliation directives in the FY2004 budget resolution ( H.Con.Res. 95 ). Initially, House and Senate leaders indicated that they would settle on a conference agreement instructing the House Ways and Means Committee to reduce revenues through reconciliation by $550 billion or more for the period covering FY2003-FY2013 and the Senate Finance Committee to reduce revenues by $350 billion for the same period. A majority of Senators had indicated their opposition to revenue reductions greater than $350 billion. The use of dual reconciliation instructions in the budget resolution would enable the leadership to secure passage of the budget resolution while leaving open the possibility that a subsequent conference on the differing versions of the revenue reconciliation measure passed by the two houses might reach an acceptable compromise between these two amounts. However, it soon became apparent that, if the Senate initially passed a revenue reconciliation measure consistent with the directive in the budget resolution (i.e., reducing revenues by $350 billion), the later consideration of a conference agreement reflecting a compromise level of revenue reductions greater than $350 billion could violate the Byrd rule. In particular, Section 313(b)(1)(B) defines as extraneous any provision reported by a committee that reduces revenues (or increases outlays) if the net effect of all of the committee's provisions is that it fails to achieve its reconciliation instructions. Proposing revenue reductions greater than the level of reductions set in the reconciliation instructions would be considered a failure to achieve the instructions. In order to resolve the problem, the conference agreement on the FY2004 budget resolution instructed both the House Ways and Means Committee and the Senate Finance Committee to reduce revenues by $550 billion over FY2003-FY2013, but a point of order barred the initial consideration in the Senate of a reconciliation measure (as distinct from a conference report) containing revenue reductions in excess of $350 billion for this period. The FY2004 budget resolution further provided that the Senate point of order could be waived only by the affirmative vote of three-fifths of the Members duly chosen and sworn (i.e., 60 Senators, if no seats are vacant). This procedural formulation strengthened the position of those who favored initial Senate passage of a reconciliation measure limited to $350 billion in revenue reductions, but removed the potential Byrd rule hurdle should a majority of Senators later choose to support a conference agreement providing as much as $550 billion in revenue reductions. Senator Max Baucus, the ranking minority member of the Senate Finance Committee, questioned whether the directive to the committee should be regarded as $350 billion or $550 billion. Ultimately, Senator Charles Grassley, chairman of the Senate Finance Committee, indicated that he had reached agreement with other Senators to adhere to the $350 billion level in the conference on the reconciliation measure, notwithstanding the fact that the limitation in Section 202 of the budget resolution only applied to initial consideration of the measure. The resultant reconciliation measure ( H.R. 2 ), according to final estimates of the Congressional Budget Office and Joint Tax Committee, contained $349.7 billion in revenue reductions and related outlay changes. The bill, which became P.L. 108-27 , the Jobs and Growth Tax Relief Reconciliation Act of 2003, on May 28, 2003, included sunset provisions in Section 107 (117 Stat. 755-756) and Section 303 (117 Stat. 764). During the 109 th Congress, the House and Senate considered separate revenue and spending reconciliation bills pursuant to the FY2006 budget resolution. The budget resolution provided for a revenue reconciliation bill that reduced revenues by up to $70 billion over the five-year budget window (FY2006-FY2010) used in the budget resolution. The conference agreement on the revenue reconciliation bill, H.R. 4297 , recommended significant revenue reduction beyond the budget window, principally with respect to extensions of current capital gains and dividends provisions through December 31, 2010. Instead of incorporating sunset provisions in order to comply with the Byrd rule, as had been done in the past, the conferees included offsets of the revenue losses. The JCT estimated the total revenue loss over 10 years (FY2006-FY2015) at $69.084 billion, an amount nearly $900 million smaller than the five-year revenue loss. The measure became P.L. 109-222 , the Tax Increase Prevention and Reconciliation Act of 2005, on May 17, 2006. At the beginning of the 111 th Congress, in 2009, President Barack Obama proposed a legislative agenda focusing on health care reform, as well as broad initiatives in education and other policy areas. An immediate point of contention was whether the proposals regarding health care reform should be pursued through the regular legislative process or the expedited procedures available under the reconciliation process. The Democratic leadership in the Senate was concerned, in particular, that passage of the proposals in the Senate could be stymied by a filibuster conducted by Republican opponents. Use of the reconciliation process, with its debate limitations and other expedited features, would ensure that a filibuster could not be employed against the legislation. On the other hand, in such a comprehensive reform proposal, many important provisions might be vulnerable to challenge under the Byrd rule and other enforcement procedures; the resulting legislation might become like "Swiss cheese" if many parliamentary challenges were successful. Congressional leaders decided to consider health care reform (and education reform) proposals under the regular legislative process, but to include reconciliation directives in the FY2010 budget resolution so that reconciliation procedures could be used as a fallback if regular legislative procedures failed. One of the factors influencing the decision was that, at the time, the Democrats held a 60-seat majority in the Senate, exactly the minimum number of votes needed to invoke cloture (i.e., to terminate a filibuster). Title II of the FY2010 budget resolution, S.Con.Res. 13 , included reconciliation directives for FY2009-FY2014 to three House and two Senate committees that would accommodate health care and education reform initiatives. The House and Senate passed separate versions of health care reform legislation in late 2009 but did not resolve their differences before the session ended. The House passed H.R. 3962 on November 7 by a vote of 220-215. The Senate chose another House-passed bill dealing with unrelated subject matter, H.R. 3590 , and transformed it into a health care reform measure; the Senate passed the bill on December 24 by a vote of 60-39. (In addition, the House passed an education reform measure in 2009, H.R. 3221 , but the Senate did not.) In early 2010, the Democratic leadership in the Senate found an altered political situation; a special election held in Massachusetts in January to fill a vacant seat (due to the death of Senator Ted Kennedy) resulted in a changeover to Republican control of the seat, thereby reducing the Democratic majority in the Senate to 59 seats. In assessing how to resolve the House-Senate differences in the health care reform legislation, the Democratic leadership faced a dilemma: the Democrats no longer held the 60-seat majority necessary to thwart a filibuster (and Republican opposition to the measure was unified), and the House could not pass the Senate version without change, thereby sending it to the President, because that version was not acceptable to a majority of House Members. The solution to the dilemma settled on by the Democratic leadership was for the House to pass the Senate version of health care reform legislation, H.R. 3590 , while simultaneously passing a reconciliation measure (referred to colloquially as a "sidecar") that would amend H.R. 3590 in a manner acceptable to majorities in both chambers. In this manner, comprehensive health care reform legislation could be enacted without concern about challenges under the Byrd rule that could strip away many of its provisions, while the revisions to the measure necessary to accommodate the political agreement could be achieved through an expedited reconciliation process that relied upon a simple majority vote in the Senate rather than a 60-vote supermajority. Education reform provisions also would be included in the reconciliation measure. Compared with the comprehensive health care reform measure, the reconciliation bill was much more narrow in scope and focused on budgetary matters. To execute this strategy, the House on March 21, 2010, adopted a special rule reported by the House Rules Committee, H.Res. 1203 , by a vote of 224-206. Under the terms of the special rule, the House then concurred in the Senate amendments to H.R. 3590 (thus clearing the bill for the President) by a vote of 219-212. Finally, the House passed H.R. 4872 , the reconciliation measure, by a vote of 220-211. Following the House's actions on March 21, the Senate considered H.R. 4872 on March 23, 24, and 25, passing the measure on March 25 by a vote of 56-43. Republican opponents of the measure offered a series of amendments and motions to recommit to the bill, all of which were defeated by motions to table or points of order. Nine of the amendments fell when points of order raised under the Byrd rule were sustained (in each instance, after a waiver motion had been rejected). All but one of the points of order were raised on the ground that the amendment included provisions outside the jurisdiction of the instructed committees. Toward the end of Senate consideration of the reconciliation measure on March 25, Senator Judd Gregg successfully raised two points of order under the Byrd rule, striking two brief provisions in the education reform portion of the measure dealing with the Pell grant program. The provisions were judged to be in violation of the Byrd rule on the ground that they produced no changes in outlays or revenues. As required under the Byrd rule, the Senate then returned the reconciliation measure (with the two provisions pertaining to the Pell grant program removed) to the House for further action. On March 25, the House agreed to a special rule, H.Res. 1225 , providing for the consideration of a motion for the House to concur in the Senate amendment to H.R. 4872 . The House agreed to the motion by a vote of 220-207, thus clearing the measure for the President. President Obama signed H.R. 3590 , the Patient Protection and Affordable Care Act, into law on March 23 as P.L. 111-148 , and H.R. 4872 , the Health Care and Education Reconciliation Act of 2010, into law on March 30 as P.L. 111-152 . (Section 313 of the Congressional Budget Act of 1974) EXTRANEOUS MATTER IN RECONCILIATION LEGISLATION Sec. 313. (a) In General .—When the Senate is considering a reconciliation bill or a reconciliation resolution pursuant to Section 310, (whether that bill or resolution originated in the Senate or the House) or Section 258C of the Balanced Budget and Emergency Deficit Control Act of 1985 upon a point of order being made by any Senator against material extraneous to the instructions to a committee which is contained in any title or provision of the bill or resolution or offered as an amendment to the bill or resolution, and the point of order is sustained by the Chair, any part of said title or provision that contains material extraneous to the instructions to said Committee as defined in subsection (b) shall be deemed struck from the bill and may not be offered as an amendment from the floor. (b) Extraneous Provisions .—(1)(A) Except as provided in paragraph (2), a provision of a reconciliation bill or reconciliation resolution considered pursuant to Section 310 shall be considered extraneous if such provision does not produce a change in outlays or revenues, including changes in outlays and revenues brought about by changes in the terms and conditions under which outlays are made or revenues are required to be collected (but a provision in which outlay decreases or revenue increases exactly offset outlay increases or revenue decreases shall not be considered extraneous by virtue of this subparagraph); (B) any provision producing an increase in outlays or decrease in revenues shall be considered extraneous if the net effect of provisions reported by the Committee reporting the title containing the provision is that the Committee fails to achieve its reconciliation instructions; (C) a provision that is not in the jurisdiction of the Committee with jurisdiction over said title or provision shall be considered extraneous; (D) a provision shall be considered extraneous if it produces changes in outlays or revenues which are merely incidental to the non-budgetary components of the provision; (E) a provision shall be considered to be extraneous if it increases, or would increase, net outlays, or if it decreases, or would decrease, revenues during a fiscal year after the fiscal years covered by such reconciliation bill or reconciliation resolution, and such increases or decreases are greater than outlay reductions or revenue increases resulting from other provisions in such title in such year; and (F) a provision shall be considered extraneous if it violates Section 310(g). (2) A Senate-originated provision shall not be considered extraneous under paragraph (1)(A) if the Chairman and Ranking Minority Member of the Committee on the Budget and the Chairman and Ranking Minority Member of the Committee which reported the provision certify that (A) the provision mitigates direct effects clearly attributable to a provision changing outlays or revenues and both provisions together produce a net reduction in the deficit; (B) the provision will result in a substantial reduction in outlays or a substantial increase in revenues during fiscal years after the fiscal years covered by the reconciliation bill or reconciliation resolution; (C) a reduction of outlays or an increase in revenues is likely to occur as a result of the provision, in the event of new regulations authorized by the provision or likely to be proposed, court rulings on pending litigation, or relationships between economic indices and stipulated statutory triggers pertaining to the provision, other than the regulations, court rulings or relationships currently projected by the Congressional Budget Office for scorekeeping purposes; or (D) such provisions will be likely to produce a significant reduction in outlays or increases in revenues but, due to insufficient data, such reduction or increase cannot be reliably estimated. (3) A provision reported by a committee shall not be considered extraneous under paragraph (1)(C) if (A) the provision is an integral part of a provision or title, which if introduced as a bill or resolution would be referred to such committee, and the provision sets forth the procedure to carry out or implement the substantive provisions that were reported and which fall within the jurisdiction of such committee; or (B) the provision states an exception to, or a special application of, the general provision or title of which it is a part and such general provision or title if introduced as a bill or resolution would be referred to such committee. (c) Extraneous Materials .—Upon the reporting or discharge of a reconciliation bill or resolution pursuant to Section 310 in the Senate, and again upon the submission of a conference report on such reconciliation bill or resolution, the Committee on the Budget of the Senate shall submit for the record a list of material considered to be extraneous under subsections (b)(1)(A), (b)(1)(B), and (b)(1)(E) of this section to the instructions of a committee as provided in this section. The inclusion or exclusion of a provision shall not constitute a determination of extraneousness by the Presiding Officer of the Senate. (d) Conference Reports .—When the Senate is considering a conference report on, or an amendment between the Houses in relation to, a reconciliation bill or reconciliation resolution pursuant to Section 310, upon— (1) a point of order being made by an Senator against extraneous material meeting the definition of subsections (b)(1)(A), (b)(1)(B), (b)(1)(D), (b)(1)(E), or (b)(1)(F), and (2) such point of order being sustained, such material contained in such conference report or amendment shall be deemed struck, and the Senate shall proceed, without intervening action or motion, to consider the question of whether the Senate shall recede from its amendment and concur with a further amendment, or concur in the House amendment with a further amendment, as the case may be, which further amendment shall consist of only that portion of the conference report or House amendment, as the case may be, not so struck. Any such motion in the Senate shall be debatable for 2 hours. In any case in which such point of order is sustained against a conference report (or Senate amendment derived from such conference report by operation of this subsection), no further amendment shall be in order. (e) General Point of Order .—Notwithstanding any other law or rule of the Senate, it shall be in order for a Senator to raise a single point of order that several provisions of a bill, resolution, amendment, motion, or conference report violate this section. The Presiding Officer may sustain the point of order as to some or all of the provisions against which the Senator raised the point of order. If the Presiding Officer so sustains the point of order as to some of the provisions (including provisions of an amendment, motion, or conference report) against which the Senator raised the point of order, then only those provisions (including provisions of an amendment, motion, or conference report) against which the Presiding Officer sustains the point or order shall be deemed struck pursuant to this section. Before the Presiding Officer rules on such a point of order, any Senator may move to waive such a point of order as it applies to some or all of the provisions against which the point of order was raised. Such a motion to waive is amendable in accordance with the rules and precedents of the Senate. After the Presiding Officer rules on such a point of order, any Senator may appeal the ruling of the Presiding Officer on such a point of order as it applies to some or all of the provisions on which the Presiding Officer ruled.
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Reconciliation is a procedure under the Congressional Budget Act of 1974 by which Congress implements budget resolution policies affecting mainly permanent spending and revenue programs. The principal focus in the reconciliation process has been deficit reduction, but in some years reconciliation has involved revenue reduction generally and spending increases in selected areas. Although reconciliation is an optional procedure, it has been used most years since its first use by the House and Senate in 1980 (20 reconciliation bills have been enacted into law and four have been vetoed). During the first several years' experience with reconciliation, the legislation contained many provisions that were extraneous to the purpose of implementing budget resolution policies. The reconciliation submissions of committees included such things as provisions that had no budgetary effect, that increased spending or reduced revenues when the reconciliation instructions called for reduced spending or increased revenues, or that violated another committee's jurisdiction. In 1985 and 1986, the Senate adopted the Byrd rule (named after its principal sponsor, Senator Robert C. Byrd) on a temporary basis as a means of curbing these practices. The Byrd rule was extended and modified several times over the years. In 1990, the Byrd rule was incorporated into the Congressional Budget Act of 1974 as Section 313 and made permanent (2 U.S.C. 644). A Senator opposed to the inclusion of extraneous matter in reconciliation legislation may offer an amendment (or a motion to recommit the measure with instructions) that strikes such provisions from the legislation, or, under the Byrd rule, a Senator may raise a point of order against such matter. In general, a point of order authorized under the Byrd rule may be raised in order to strike extraneous matter already in the bill as reported or discharged (or in the conference report), or to prevent the incorporation of extraneous matter through the adoption of amendments or motions. A motion to waive the Byrd rule, or to sustain an appeal of the ruling of the chair on a point of order raised under the Byrd rule, requires the affirmative vote of three-fifths of the membership (60 Senators if no seats are vacant). The Byrd rule provides six definitions of what constitutes extraneous matter for purposes of the rule (and several exceptions thereto), but the term is generally described as covering provisions unrelated to achieving the goals of the reconciliation instructions. The Byrd rule has been in effect during Senate consideration of 19 reconciliation measures from late 1985 through the present. Actions were taken under the Byrd rule in the case of 15 of the 19 measures. In total, 70 points of order and 57 waiver motions were considered and disposed of under the rule, largely in a manner that favored those who opposed the inclusion of extraneous matter in reconciliation legislation (60 points of order were sustained, in whole or in part, and 48 waiver motions were rejected). This report has been updated to include the consideration of the Restoring Americans' Healthcare Freedom Reconciliation Act of 2015 (H.R. 3762, 114th Congress).
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RS21353 -- New Partnership for Africa's Development (NEPAD) Updated April 30, 2003 The New Partnership for Africa's Development (NEPAD), described as a multi-sector sustainable development policy framework, was collectively formulatedand promoted by leading African heads of state. It was endorsed and adopted in mid-2001 by the Organization ofAfrican Unity (OAU), founded in 1963 duringthe decolonization era, and later also endorsed by the African Union, which in July 2002 superseded the OAU. (1) NEPAD seeks to reduce poverty and increaseeconomic growth across Africa, in part by improving the policy-making and implementation capacities of Africanstates. It has won the support of many Africanleaders and regional inter-governmental organizations, and has been generally well-received by leaders ofinternational multilateral organizations and the Groupof Eight (G-8). NEPAD is based on a policy blueprint, the New African Initiative (NAI), which merged severalearlier continental economic development plans. Objectives. NEPAD seeks to spur economic growth and improvesocio-economic development across Africaby increasing capital flows to Africa in the form of private sector investment, development assistance, debt relief,and broadened market access for Africanexports. A key NEPAD aim is improving the institutional, regulatory, and planning capabilities of African statesto allow them to achieve gains both asindividual entities and as economically integrated sub-regional groupings. NEPAD seeks to increase democraticdecision making, transparency, andaccountability in governance; improve economic policy-making and public sector management; and increaseinvestments in infrastructure. Other goals includeexpanding access to social services and education; eradicating poverty; and promoting peace, security, and humanrights. Sectoral investment targets includeagriculture, energy, environment, physical and communications infrastructure, and institutional efforts to increaseeconomic diversification and trade. Economic Integration. NEPAD endeavors both to strengthen linkages among African countries, and todeepen and accelerate Africa's economic and political integration with other world regions. A key aim is to ensurethat Africa surmounts what one NEPAD textasserts is the significant degree of Africa's marginalization in the face of increasingly interconnected global tradeand markets. At the same time, NEPAD seeksto buffer Africa from the perceived negative effects of "globalization" on public health, local industries, theenvironment, and public safety. Some NEPAD critics assert that increased African economic integration with global markets may yield significant unanticipated problems, such as increasedexternal pressure to adhere to trade rules and regulatory frameworks defined by market forces and policy makersoutside of Africa. Some critics fear that rates ofnatural resource extraction in Africa, possibly accompanied by increased rates of environmental degradation, maygrow. They also argue that as greaterintegration takes place, Africa's relative lack of industrial capacity will prevent it from taking advantage of potentialearnings opportunities generated byvalue-added secondary processing of export commodities, which typically takes place in importing countries. Criticsalso maintain that weak prices for manykey African exports may make it vulnerable to exploitation by powerful global economic actors, while global labormarkets may drain Africa of much of itseducated work force. Governance and Reform. NEPAD aims at promoting good governance, democratization, and public sectorreforms as primary means of attracting greater foreign investment, political support, and aid flows to Africa. Themain NEPAD document posits these ends asnecessary pre-requisites for socio-economic policy success, long-term political stability, and social justice. It callsfor market-oriented economic and governancereforms that substantially mirror those advocated by multi-lateral lenders and western donor governments. NEPADrequires, however, that these policies beimplemented and monitored by African states themselves -- not by foreign actors. A new NEPAD institution, theAfrican Peer Review Mechanism (APRM,discussed below), has been described as a primary means of implementing NEPAD's governance goals. Organizational Structure and Linkages. NEPAD, a term used interchangeably to refer both to the keyNEPAD policy document and to the governments and organizations that support it, is a major policy vehicle forAfrican Union (AU). The AU assumed theOAU's organizational apparatus and affirmed many of its decisions, including OAU's adoption of NEPAD as a keypolicy framework. The annual AU summitof heads of state is the supreme NEPAD decision-making body. Subsidiary to it is the NEPAD ImplementationCommittee, which must annually report to theAU summit. The AU Chairman and Secretary-General are ex-officio members of the Implementation Committee,and the AU Secretariat will participate in itsmeetings. The final OAU heads of state summit enlarged the Implementation Committee in July 2002 from fifteento twenty members by adding to it anadditional representative from each of five AU sub-regions. Subsidiary to the Implementation Committee is theNEPAD Steering Committee. It coordinatesNEPAD's relations with multilateral lenders, bilateral donors, and with international and regional multilateralbodies. The Steering Committee is supported by aNEPAD Secretariat that supervises NEPAD marketing, communication, finance and administrative functions andoversees NEPAD program initiatives onsocio-economic development, market access, infrastructure development, and governance. NEPAD includes a private component, the NEPAD Business Group, which is made up of twelve business councils, chambers of commerce, and relatedorganizations. The group will disseminate information and coordinate relations between NEPAD and private firmsthat support its aims, with a particular focuson trade and investment opportunities in Africa. The U.S. Corporate Council on Africa (CCA), a coalition of over170 U.S. companies with Africa-relatedbusiness interests and a NEPAD Business Group member, plans to act "as a major source of support in the UnitedStates" for NEPAD. (2) Financing. NEPAD is primarily a framework for coordinating policy-making by sub-regional economicdevelopment bodies and specialized functional agencies, particularly as regards cross-border initiatives. Fewreferences to specific amounts required for thefinancing of NEPAD goals or sector-focused projects appear within NEPAD texts. The primary NEPAD policydocument, however, anticipates that to achieve"the goal of reducing by half the proportion of Africans living in poverty by the year 2015, Africa needs to fill anannual resource gap of 12% of its GDP, or $64billion." It also calls for an annual $10 billion increase in funding for public health. (3) Meeting such goals, it asserts, "will require increased domestic savings[and] improvements in the public revenue collection systems." It also states that "the bulk of the needed resourceswill have to be obtained from outside thecontinent... [in the form of] debt reduction and overseas development assistance (ODA) as complementary externalresources required in the short to mediumterm." Private capital flows are described by the document as a longer-term concern. Some analysts have criticizedthe lack of specific cost projections and thegeneral nature of many statements in the document, asserting that it contains few measurable, explicit benchmarksby which to judge the success of itsimplementation. Defining the Goals of NEPAD. The NEPAD Implementation Committee was enlarged in July 2002, in partto broaden and diversify the base of support for NEPAD, and to accommodate leaders who had not played key rolesin its formation. A key figure in this regardwas Libyan leader Muammar al-Qadhafi. He has long advocated greater African integration, but has alsoemphasized a need for broad African politicalautonomy. He has rejected donor-imposed conditions on development assistance and has opposed close politicalties between Africa and the industrializedworld. Al-Qadhafi largely initiated the OAU reform process that led to the AU's formation, but he criticized theheavily NEPAD-oriented policy agenda that theAU adopted, calling NEPAD a project of the "former colonisers and racists." (4) Several other African leaders have echoed these sentiments. Efforts to bridgethedifferences between al-Qadhafi and advocates of NEPAD, in particular President Mbeki of South Africa, appearto have been successful, albeit broadly in favorof the South African agenda. Libya has indicated its acceptance of NEPAD and the APRM, and has joined theNEPAD Implementation Committee. Some commentators view NEPAD as a state-centric, elite-generated framework created with little input from political opposition parties or civil society.Although many civic activists see much hope in NEPAD, some warn that NEPAD may fail without greater publicengagement in its implementation -- acriticism publicly recognized by leading NEPAD architects, such as President Mbeki. African Peer Review Mechanism. Under the APRM, signatory states will monitor one anothers' adherenceto the collective, economic and corporate governance goals, codes, and standards contained in the NEPAD Declaration on Democracy, Political, Economic andCorporate Governance . APRM participation is voluntary, and African leaders emphasize that it will functionby providing a positive incentive structure forlong-term, incremental political reform and regime transformation. They stress that the APRM is not intended asa punitive instrument or as a mechanismthrough which APRM member states would condemn or sanction their peers. Despite such assurances, someNEPAD critics believe that implementation of theAPRM will eventually cause NEPAD to become subject to donor demands for externally defined economic andpolitical reforms, imposed as conditions on aid.The effectiveness and intent of the APRM was questioned by many observers after South African President ThaboMbeki made statements that appeared tofundamentally redefine the purpose and scope of the APRM. He reportedly suggested that the APRM would assessstates' economic performance but not theirgovernance or human rights records. His remarks were seen by some observers as having the potential tosignificantly undermine donor support for NEPAD.However, a March 2003 NEPAD document, the African Peer Review Mechanism Organization andProcesses , which lays out an APRM organizational andprocedural structure, makes specific reference to APRM assessments "on matters relating to human rights,democracy and political governance," which will beconducted by a range of specialized AU organs. (5) TheAPRM will become operational after one-fifth of AU members join the Mechanism. Implementation Activities. Current NEPAD implementation activities center on creating the organizationalstructures, mechanisms, and procedures through which NEPAD will operate and coordinate policy with the AfricanUnion. The U.N. Economic Commissionfor Africa and the African Development Bank have been appointed as technical coordinating institutions forNEPAD. A second major focus of activity is onpublic outreach efforts targeted at diverse multi-lateral forums and the publics of African countries. Several NEPADImplementation Committee meetings havebeen held to refine NEPAD priorities and set program guidelines, and there have been workshops to coordinate theroles within NEPAD of key regionaleconomic communities (6) and multi-lateral Africanfinancial institutions. Several conferences have been held focusing on private sector, scholarly, and civilsociety contributions to NEPAD. A series of NEPAD sector-focused program assessments reports have beenundertaken were considered by the 6th NEPADHeads of State Implementation Summit in March 2003. Current NEPAD news and documentation can be accessedonline; see http://www.nepad.org . Officials of donor governments and the international financial institutions have expressed general support for NEPAD and indicated that they may provideassistance for it. The broad thrust of NEPAD, but not explicitly the $64 billion in increased capital flows thatNEPAD envisions as deriving mainly fromoutside the continent, was endorsed in principle by the G-8 Group summit in Kananaskis, Canada in June 2002. Intheir G8 Africa Action Plan , which containsa range of detailed but non-binding commitments to Africa that largely mirror NEPAD goals, G-8 heads of statedeclared that they would: establish enhanced partnerships with African countries whose performance reflects the NEPAD commitments ...onthe basis of measured results. This will lead us to focus our efforts on countries that demonstrate a political andfinancial commitment to good governance andthe rule of law, investing in their people, and pursuing policies that spur economic growth and alleviate poverty.We will match their commitment with acommitment on our own part to promote peace and security in Africa, to boost expertise and capacity, to encouragetrade and direct growth-oriented investment,and to provide more effective official development assistance ... [while recognizing] that the prime responsibilityfor Africa's future lies with Africaitself. Some analysts see prospects of exponentially increased capital flows to Africa as unrealistic and interpret the $64 billion figure as a bargaining target, not a setNEPAD requirement. Such views are reflected in a G-8 Kananaskis summit statement entitled Building a NewPartnership for Africa's Development: A NewPartnership , which qualifies the G-8 response to NEPAD. It states: The G8 Africa Action Plan is a political response to a political initiative; it is not a pledging document. G8 Leadersnonetheless recognized that additional resources are needed to help give effect to the NEPAD. In the ActionPlan , they indicated that half of the new [overseas]development assistance they had announced at Monterrey could go to Africa if the NEPAD is implemented. Thiswould amount to US$6 billion per year forAfrica by 2006, in addition to existing development assistance and to the much larger private-sector financial flowsthat both the NEPAD and G8 Africa ActionPlan seek to encourage by creating the conditions necessary to increase trade and investment. Despite the important role expected to be played by external financing, leading NEPAD advocates assert strongly that NEPAD is an African-initiated endeavor,that must -- for reasons of sustainability, legitimacy, and in order to build local capacities for long-term self-reliance-- remain fully controlled by Africans.They reject the explicit linking of policy conditions by outside actors in exchange for financing related to NEPAD.Several donor governments, however,including the United States, have stressed that if the AU fails to implement political reform-related aspects ofNEPAD early in its development, investment inAfrica and external support for NEPAD may be undercut. Bush Administration. The Bush Administration has welcomed NEPAD as an ambitious, African-initiatedpolicy framework, but has not offered specific assistance in support of NEPAD. Instead, Administration officialsassert that the United States is alreadypursuing development assistance and supporting policy reforms in Africa by providing substantial assistance underexisting and forthcoming U.S. assistanceprograms. Congressional Reception. Congressional reactions to NEPAD have been mixed. On March 20, 2003,Representative Meeks introduced H.Res. 155 , which proposes sense of the House language urging thePresident to encourage support for NEPADand associated investment and economic development goals. Other members have offered more qualified views ofNEPAD. On September 18, 2002, during ahearing on NEPAD before the Subcommittee on Africa of the House Committee on International Relations,Subcommittee Chairman Edward Royce stated that NEPAD is particularly relevant in light of the Bush Administration's Millennium Challenge Account (MCA), adeveloping initiative that seeks to direct added development aid to countries committed to political and economicreform. We need to better understand howthese two initiatives complement one another, but also how they differ from past development aid plans andapproaches. Calls for greater development aid,whether from Africa or here at home, must confront the fact that hundreds of billions of dollars of such aid has beenspent in Africa, much producing fewresults... While I have always had doubts about big economic and social plans and their bureaucracies, I certainlyhope NEPAD meets itsgoals... (7) Some congressional and Administration policymakers have warned that future U.S. support for NEPAD may not materialize unless African leaders undertakedemonstrable, concrete actions to actively confront and hold to account undemocratic AU/NEPAD member states.Some have specifically cited what they viewas the reluctance of African leaders to criticize the government of Zimbabwe for what U.S. officials see as anextensive record of violent political oppressionand human rights abuses. (8)
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The New Partnership for Africa's Development (NEPAD), described by its proponentsas a multi-sector, sustainabledevelopment policy framework, seeks to reduce poverty, increase economic growth, and improve socio-economicdevelopment prospects across Africa. MajorNEPAD aims are to attract greater investment and development aid to Africa, reduce the continent's debt levels, andbroaden global market access for Africanexports. NEPAD emphasizes increased democratization, political accountability, and transparency in governancein African states as primary means ofachieving its goals. NEPAD is a key policy vehicle of the African Union (AU), which succeeded the Organizationof African Unity (OAU) in July 2002; seeCRS Report RS21332, The African Union. H.Res. 155, introduced in March 2003, urges U.S.and international support for NEPAD. This reportwill be updated as events warrant.
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Social Security Disability Insurance (SSDI) is a federal social insurance program that provides monthly cash benefits to non-elderly disabled workers and their eligible dependents provided the worker paid into the system for a sufficient number of years and is determined to be unable to perform substantial work because of a qualifying disability. In the past three decades, the total number of disabled-worker beneficiaries continually increased from 2.7 million in 1985 to 9.0 million in 2014 and then started to decline to approximately 8.7 million in December 2017. The size of the beneficiary population has a strong impact on SSDI expenditures and thus the solvency of the program's trust fund. Multiple factors have contributed to the change in the number of SSDI beneficiaries over time. Understanding the importance of each competing factor helps inform predictions of SSDI solvency status and analysis of related legislation. This report analyzes the relative importance of factors affecting SSDI benefit receipts and terminations over the past 30 years. Figure 1 shows that between 1985 and 2017 the total number of disabled-worker beneficiaries continually increased before 2014 and has declined for the last three years. The number of Social Security disabled-worker beneficiaries has experienced different growth rates in the last three decades. The disability rolls increased relatively slowly between 1985 and 1989 and then went through two faster-growing periods, 1989-1997 and 2000-2010. The number of disabled-worker beneficiaries grew slowly again after 2010 and has declined since 2014. Among disabled workers, the proportion of female beneficiaries increased from 33% in 1985 to nearly 50% in 2017. The number of disabled-worker beneficiaries in current payment status increases with new disability awards and declines with benefit terminations. In general, to qualify for SSDI, workers must be (1) insured in the event of disability, (2) statutorily disabled, and (3) younger than Social Security's full retirement age (FRA), which is 65-67, depending on the year of birth. A disabled worker's SSDI benefits are terminated when they (1) die, (2) attain FRA (the age at which unreduced Social Security retired-worker benefits are first payable), (3) medically improve (i.e., no longer meet the statutory definition of disability), or (4) return to work. The main reason for the decline in the number of SSDI beneficiaries is the decrease in disability benefit awards, which dropped down below the number of terminations starting in 2014 (see Figure 2 ). The number of new awards to disabled workers in the SSDI program grew from approximately 416,100 in 1985 to more than 1 million in 2010. However, this trend was reversed in 2011, with a gradual decline in new disability awards to approximately 716,000 in 2017. From 1985 to 2017, the number of disabled-worker beneficiaries whose benefits were terminated rose from 340,000 to 859,000, which was higher than the number of new disability awards in the recent three years. Multiple factors may have contributed to the trends in SSDI benefit receipts and terminations. The following sections examine the effects of different factors and discuss the relative importance of competing factors at different time periods. Several factors may affect the change in the number of SSDI disabled-worker beneficiaries, including changes in demographic characteristics of the insured population, changes in employment and compensation, and changes in program rules and implementation. This section discusses the impact of those factors on SSDI benefit awards and terminations, as well as the roles they have played over time. The number of SSDI disabled-worker beneficiaries depends in part on the size of the working-age population who are disability insured—the workers who have paid into the Social Security system for a sufficient number of years. From 1985 to 2017, the SSDI insured population grew from 109 million to 155 million at an average rate of about 1.6% per year during 1985-2007 and 0.4% per year in the more recent 10 years. Two factors—increased eligibility among female workers and the aging of the workforce—may play important roles in the relatively faster growth in the insured population between 1985 and 2007. However, because the share of women in the workforce was no longer increasing and the baby boom generation (people born between 1946 and 1964) was aging out of the disability insurance program, the growth in the insured population slowed after 2007. Starting in 2003, the increase in full retirement age, combined with the aging of the baby boomer generation, also contributed to the growth of the disability-insured population. Some studies have shown that increased eligibility for the SSDI program and the rising incidence of disability among women played an important role in disability benefit receipt during the 1980s and the 1990s. Some experts attribute the increase in beneficiaries to increased labor force participation of women, which resulted in more women becoming potentially eligible for SSDI. Between 1985 and 2005, the proportion of women who participated in the labor force increased from 54% to 60%, and the proportion of women who were insured for disability increased from 49% to 59% (see Figure 3 ). During this period, the female proportion of disabled worker beneficiaries increased from 33% to 46% (see Figure 1 ). The SSDI incidence rate—the ratio of new disability awards to the number of disability insured who are not already receiving benefits (i.e., disability-exposed population)—increased substantially for women, from 2.97 per 1,000 disability-insured women in 1985 to 5.89 in 2005 (see Table 1 ). During the same time, the incidence rate for men has been relatively steady after adjusting for the population age distribution and the business cycle. The difference between SSDI incidence rates for men and women became negligible in and after 2005 (see Table 1 ). In 1984, approximately 1½ non-elderly males were receiving SSDI for every non-elderly female. By 2008, this ratio was close to parity. The effect of female labor force participation on the growth in SSDI enrollment diminished after 2010. The female labor force participation rate remained relatively stable for 10 years between 2000 and 2010 and then started to go down after the conclusion of the Great Recession in 2010 (see Figure 3 ). The share of women among disabled-worker beneficiaries and the share of women in the workforce both stabilized around 46% after 2005. The incidence rate for women peaked in 2010 and then declined to 4.7 in 2017. Some argue that those developments have contributed to slower growth in SSDI enrollment in recent years. Another factor that contributes to the trends in SSDI enrollment is the aging of the workforce. The aging of the baby boom generation (people born between 1946 and 1964) has an effect on the composition of the overall working-age population. Some argue that as baby boomers reached their peak disability-claiming years (usually considered between age 50 and FRA), the number of disability beneficiaries rose, and as baby boomers convert from disability benefits to retirement benefits and are replaced by lower-birth-rate cohorts in the peak disability-receiving ages, the disability enrollment rates will likely fall. The baby boom generation reached the age of 50 between 1996 and 2014, during which time the share of disabled workers between age 50 and FRA increased from 56% to 73%. As the baby boomers continue to reach their FRA between 2012 and 2031, there is expected to be a growing proportion of disabled workers who terminate disability benefits due to the attainment of FRA. Since 2000, between 7% and 10% of disabled worker beneficiaries have been terminated from the SSDI rolls each year. The overall number of disabled worker terminations increased from 460,351 to 859,020 between 2000 and 2017 (an increase of 87%), while the number of disabled workers who attained FRA more than doubled during this period (from 212,948 to 494,651). Before 2012, the proportion of disabled workers terminated due to attainment of FRA stayed relatively constant at approximately 50%. However, starting in 2012, the proportion gradually rose, reaching approximately 58% at the end of 2017 (see Figure 4 ). Statistics from the Social Security Administration (SSA) show that the share of new disability insurance awardees who are between age 50 and FRA started to decline in 2017. In addition to the reason of attaining FRA, there was a declining proportion of disabled workers who terminated benefits due to death, medical improvement (i.e., no longer meeting the statutory definition of disability ), or returning to work. Among these terminations, death accounted for about one-third of the overall terminations, with the proportion decreasing from 36.7% in 2000 to 29.3% in 2017, and medical improvement and returning to work accounted for approximately 10% of all the terminations between 2010 and 2017. The aging of the population also impacts the incidence rate (i.e., the ratio of new awards to the disability-exposed population) of the SSDI program. The left graph of Figure 5 shows the gross and age-sex-adjusted incidence rate from 1985 to 2017. The gross incidence rate is unadjusted, which was affected by the changing age-sex distribution of the disability-exposed population, while the age-sex-adjusted incidence rate assumes that the age and the sex distributions of the population were constant at its 2000 level. The age-sex-adjusted incidence rate was higher than the gross incidence rate between 1985 and 2000 as the baby boom generation swelled the size of the younger-age population, whose disability incidence is generally lower than that in older populations. After 2000, the age-sex-adjusted rate was lower than the gross rate as the baby boom generation moved into an age range where disability incidence peaks. SSA projects that the gross incidence rate will generally decline as the baby boom generation moves above the FRA and the lower-birth-rate cohorts of the 1970s enter prime disability ages (50 to FRA). The right graph of Figure 5 shows the age-sex-unemployment-adjusted incidence rate from 1985 to 2017, which is the predicted age-sex-adjusted incidence rate, under the counterfactual assumption that unemployment rates were constant at the 1985-2017 mean value of 6.02% for the entire period. Compared with the age-sex-adjusted incidence rate, the age-sex-unemployment-adjusted incidence rate appeared to be relatively stable after 1992. The effect of business cycles on the disability incidence rate will be discussed in the section " Business Cycle and Unemployment Rate ." Under the scheduled increases enacted by Social Security Amendments of 1983 ( P.L. 98-21 ), the FRA increases gradually from 65 to 67 for workers born in 1938 or later. Between 2003 and 2009, the FRA gradually increased in two-month increments until it reached 66 for workers born between 1943 and 1954, and then between 2020 and 2027, it will gradually increase again until it reaches 67 for workers born in 1960 and later. Raising the FRA increased the size of the SSDI program. From 2002 (the year prior to the FRA increase) to 2017, the number of new awards for workers ages 65-FRA increased from 750 to 6,136, and the share of SSDI beneficiaries who were ages 65-FRA increased from 1% to 11%. In December 2017, there were about 495,600 disabled workers between ages 65 and FRA. In addition, the rise in the FRA increased the value of SSDI cash benefits relative to early retirement benefits. When a worker claims benefits before the FRA, there is an actuarial reduction in monthly benefits. The earliest a worker can claim retirement benefits is age 62. For a worker with an FRA of 65, claiming benefits at 62 results in a 20% reduction in the monthly benefit. The reduction rises to 25% if the FRA is 66 and will be 30% for a FRA of 67. Since SSDI benefits are approximately the same as full retirement benefits, the SSDI program has become relatively more attractive for the later birth cohorts whose FRA—and penalty for early retirement benefits—is larger. Although some studies suggest that an increase in the value of disability benefits relative to early retirement benefits induces more individuals to apply for SSDI benefits, researchers are divided over whether such individuals are actually awarded benefits. In summary, many researchers show that demographic changes account for the bulk of the SSDI program's growth. Although results may differ in the measure of time period and calculation methods, most analysis suggests that more than half of the growth in SSDI enrollment before 2014 stems from factors of a growing share of working women eligible for DI, an aging population, and the increase in Social Security's full retirement age. The opportunity of employment and the relative value of compensation over disability benefits may also contribute to the change in SSDI enrollment. In deciding whether to apply for SSDI benefits, workers typically compare the value of SSDI benefits (cash payments, health coverage, and the amount of leisure and family time) with their opportunities for work and compensation. This section discusses how employment opportunities and the earnings and benefits associated with working are likely to affect SSDI benefit receipts. Figure 6 displays the number of SSDI applications (left axis) and the national unemployment rate (right axis) for each year between 1985 and 2017. The shaded areas mark the three economic recessions that took place July 1990-March 1991, March 2001-November 2001 and December 2007-June 2009 as dated by the National Bureau of Economic Research. In all three cases, SSDI applications rose during the recession and peaked after the official end of the recession. One explanation for these business cycle effects is that they are driven by conditional disability applicants—those who would prefer to remain in the labor force but would apply for SSDI benefits if they lost their present jobs. When opportunities for employment are plentiful, some people who could qualify for disability insurance benefits find working more attractive, and when employment opportunities are scarce, some of those people apply to the SSDI program instead of looking for work. Some studies find that SSDI applications during recessions have higher past earnings and more recent work experience than those during other time periods. Researchers also find that the percentage of claims that are allowed drops under conditions of high unemployment. Despite the higher number of denials among disability insurance applications, the incidence rates (both gross and age-sex-adjusted) generally increase during and after economic recessions (see the left graph of Figure 5 ). The right graph of Figure 5 displays the predicted incidence rate under the assumption that unemployment rates were constant at 6.02% for the entire period, the mean value between 1985 and 2017. Compared with the fluctuation in the gross and age-sex-adjusted incidence rates, the relatively stable unemployment-adjusted incidence rate after 1990 indicates that business cycles are likely to explain some of the trends in the SSDI enrollment. Some studies show that average preapplication earnings of disability insurance applicants have been declining over time relative to nonapplicants. A possible reason might be that more low-wage earners are incentivized to apply for SSDI since the value of disability insurance benefits relative to earnings has been steadily rising for low-wage workers. The initial amount of SSDI benefits is tied to the growth in average national earnings, which are growing faster than earnings for low-wage workers. Historical data show that the cumulative growth in real wages from 1979 to 2017 was 34.3% for the 90 th percentile (high-wage earners), 6.1% for the 50 th percentile (middle-wage earners), but 1.2% for the 10 th percentile (low-wage earners). One possible reason for people to apply for the disability insurance program might be the availability of Medicare to participants in SSDI (after a two-year waiting period). Some studies show that Medicare availability has encouraged some people to apply for disability insurance benefits, because many people with disabilities did not have access to health insurance coverage otherwise. Beginning in 2014, the Affordable Care Act (ACA) provided more options for people with disabilities to obtain insurance. By enabling access to private health insurance and expanding access to subsidized public health insurance, the ACA may alter disability claiming decisions. The effect of the ACA on SSDI enrollment is not yet clear. Some researchers find that people who have an alternative source of health insurance coverage (from a spouse's employer or retiree coverage) are more likely to apply for SSDI benefits. They argue that the Medicare's two-year waiting period for SSDI beneficiaries may deter disability applications from workers who have health insurance through their jobs but no alternative source of health coverage after leaving work. The availability of the ACA improves coverage options for those with disabilities, which may cause the number of disability applications to rise. In addition, by providing greater access to health care, the ACA may make it easier for people to obtain the documentation necessary to prove they have a disability, thus resulting in more people applying for disability insurance or an increase in the acceptance rate. Others suggest that by creating good health insurance opportunities, the ACA may lower the value of the disability program, causing fewer people to apply for disability and more SSDI beneficiaries to return to work. Although the actual effect of the ACA on disability applications is hard to examine due to the short length of time since implementation, some studies using state-level data show that disability applications are likely to decrease with the introduction of the ACA. Researchers suggest that the ACA, with reasonable health care costs through the income-adjusted premium, may reduce dependency on health insurance coverage (i.e., Medicare) for some disabled-worker beneficiaries and allow them to return to work, thus reducing the number of people receiving disability benefits. Some analytical results also indicate that the ACA may cause SSDI recipients to be healthier, which has the potential to lower the likelihood that people become disabled while at work and increase their likelihood of exiting the disability rolls. Some of the observed trends in SSDI enrollment were the result of changes in policies. This section examines how changes in eligibility criteria for disability determination and continuing disability reviews (CDRs) affected SSDI benefit awards and terminations. In 1984, the Disability Benefits Reform Act ( P.L. 98-460 ) expanded the ways in which a person could medically qualify for disability insurance benefits. Some researchers argue that, under this legislation, the SSA relaxed its screening rules of mental disorders and placed more weight on applicants' reported pain and discomfort. Applicants were able to qualify on the basis of the combined effect of multiple medical conditions, each of which might not have met the criteria if considered alone. Some studies claim that these changes made it easier for some applicants to qualify for benefits due to certain difficult-to-verify impairments, such as back pain or depression. One study shows that eligibility standards expanded significantly after the 1984 legislation but have been relatively stable since the early 1990s. The age-sex-unemployment-adjusted incidence rate increased from 4.1% in 1985 to approximately 5.6% in the early 1990s, and there has been no increase since then (see the right graph in Figure 5 ). After controlling for the effect of rising incidence among women and the aging of the workforce, analysis shows that the 1984 legislative reform still contributed a significant proportion of the increase in the incidence rate from 1985 to the early 1990s. The 1984 act has resulted in some compositional changes in the SSDI beneficiary population. First, the change in eligibility criteria has contributed to a shift in the types of disabilities for which beneficiaries qualify. The share of disabled-worker beneficiaries with mental disorders or musculoskeletal system and connective tissue disorders (typically back pain or arthritis) has increased from 30% of newly awarded disabled workers in 1983 (the year before the legislation was enacted) to 52% in 2004 and remained around this level for more than 10 years from 2005 to 2016. Researchers argue that in conjunction with labor market developments that increased the incentive for low-wage workers to apply for benefits, these new program rules likely led to an increase in disability receipts, although the extent of the increase is unclear. Second, because mental disorders may have an early onset and low age-specific mortality, SSDI beneficiaries with those diagnoses are likely to experience relatively long durations on the program. The proportion of disabled workers who died in 1983 was 4.9%; 2.9% died in 2017. Although it is conceivable that medical progress has reduced mortality for a wide range of conditions, researchers claim that it seems likely that a portion of the decline in mortality rates among SSDI recipients is the result of a change in the composition of the beneficiary population. Third, incidence rates at younger ages have increased relative to rates at older ages. Table 1 shows that the difference between the incidence rates of disabled workers below and above age 50 became smaller over time. One possible explanation is that young disabled workers are more likely to be on the rolls due to mental disorders, which tend to have an early onset. Some statistical results show that successive birth cohorts have been increasingly entering SSDI at younger ages, and, combined with a declining mortality rate, the average duration of disability benefit receipts has lengthened. These phenomena are likely to result in a further increase in SSDI rolls and program spending. Continuing disability reviews (CDRs) are periodic reviews conducted by SSA to determine whether SSDI beneficiaries continue to meet the definition of disability under the Social Security Act. Disabled beneficiaries whose medical conditions are determined to no longer be disabling are generally terminated from the SSDI rolls. Due to the high number of initial disability applications since 2003, SSA dedicated resources to processing initial applications rather than conducting CDRs. As a result, SSA has had a backlog of full medical CDRs since FY2002. Between 2003 and 2009, the backlog increased to about 1.5 million full medical CDRs. With increased program integrity funding from FY2014 to FY2018, SSA has increased the number of full medical CDRs completed, and the backlog decreased to about 64,000 cases at the end of FY2017. SSA completed all available CDRs, eliminating the backlog, by the end of FY2018. This is a possible reason that the number of disabled workers who no longer meet the medical requirement in 2017 was more than 150% higher than in 2014. The recovery rate (medical improvement and return to work) was 18.2 per 1,000 beneficiaries for 2017 and projected to go down to 11.0 per 1,000 beneficiaries with the elimination of the backlog. The total allowance rate is the proportion of SSDI claimants who are ultimately allowed benefits (excluding applicants disqualified for nonmedical reasons—that is, technical denials). The initial disability determination is made by the Disability Determination Services. Individuals who are dissatisfied with SSA's initial determination may request a further review, an appeals process that is generally composed of three levels: (1) reconsideration of the case by a reviewer who did not participate in the initial determination, (2) a hearing before an administrative law judge (ALJ), and (3) a request for review by the Appeals Council. Figure 7 shows the final outcome of disabled-worker applications from 1992 to 2016. The allowance rate at all adjudicative levels (the initial determination and the appeals process) reached a peak of 62% in 2001 and then declined steadily to 48% in 2016. Considered separately, the allowance rate for disabled-worker applicants at the initial determination level decreased from 40% to 33% between 2001 and 2016, the allowance rate at the reconsideration level declined from 13% to 9%, and the allowance rate at the hearing level or above declined from 73% to 46% during the same time period. Thus far, it is unclear what causes the decline in the total allowance rate among disabled-worker applications. Some researchers claim that the total allowance rate is generally countercyclical: SSDI applications increase when the unemployment rate rises but the allowance rate generally falls after one to two years of recession, likely because a larger share of the applications filed during a recession is motivated by financial hardship. Those researchers suggest that the decline in allowance rates since 2001, and particularly after 2009, is attributable to fluctuations in the unemployment rate. Some others believe that the persistent low total allowance rates would indicate a "regime shift" in the SSDI determination process, and they also show that more recent cohorts of ALJs at the hearing level have lower allowance rates than did earlier ALJ cohorts with the same level of experience. The number of SSDI beneficiaries has experienced large growth in the past 30 years, but the trend was reversed starting in 2014. The decline in SSDI rolls was driven by two forces: the decrease in new disability awards since 2011 and the continuous increase in the termination of disability benefits. Based on the previous discussion, this section summarizes the possible causes of the recent decline in SSDI enrollment. Since 2010, new awards to disabled workers have decreased every year, dropping from 1 million to 762,100 in 2017. Although there has been no definitive cause identified, four factors may explain some of the decline in disability awards. 1. Avai lability of j obs . The unemployment rate was as high as 9.6% in 2010 and then gradually decreased every year to about 4.35% in 2017. The opportunities for employment make working more attractive than disability benefits for people who could qualify for SSDI. If the unemployment rate were kept at 6.02%—the average level between 1985 and 2017—the age-sex-adjusted incidence rate would have been 3.5% (0.35 per 1,000 disability-exposed population) higher in 2016. Thus about 50,000 more disabled-worker benefits would have been awarded in that year. 2. Aging of lower-birth-rate cohorts . The lower-birth-rate cohorts (people born after 1964) started to enter peak disability-claiming years (usually considered ages 50 to FRA) in 2015, replacing the larger baby boom population. This transition would likely reduce the size of the insured population who are ages 50 and above, as well as the number of disability applications. As the baby boomers reached age 50 between 1996 and 2014, the growth rate of the insured population ages 50 to FRA has been consistently around 5% from 1997 to 2008. The growth rate started to decrease in 2009, dropped down below 1% in 2014, and became negative (no growth) in 2018. 3. Availability of the Affordable Care Act (ACA) . The ACA expanded health insurance opportunities beginning in 2014. The availability of health insurance under the ACA may lower the incentive to use SSDI as a means of access to Medicare, thus reducing the number of disability applications. The nationwide effect of the ACA on disability benefit receipt is still unclear. 4. Decline in the allowance rate . The total allowance rate at all adjudicative levels declined from 62% in 2001 to 48% in 2016. While this decline may in part reflect the impact of the Great Recession (since SSDI allowance rates typically fall during an economic downturn), the Social Security Advisory Board Technical Panel suspects that the declining initial allowance rate may be a result of the change in the SSDI adjudication process. In addition to the factors contributing to a decline in SSDI applications and awards, some others may have the opposite effect of pushing disability benefit receipt upward. Some of those factors may include the increase in the FRA, the growth in applications from low-wage workers, and higher incidence rates among young applicants resulting from an expansion of SSDI eligibility rules. But the effect of those factors was smaller than the ones that decreased new SSDI awards between 2011 and 2017. The number of benefit terminations among disabled workers has been increasing from 2001 to 2017 (see Figure 2 ), and the share of total disabled-worker beneficiaries who terminated benefits also increased from 8% to almost 10%. The following factors are likely to contribute to the increase in disability terminations. Baby boomers reached FRA . As the relatively large baby boomer population reaches its FRA (gradually increased from 65 to 66) between 2012 and 2031, there is expected to be a growing proportion of disabled workers who terminate disability benefits due to the attainment of FRA. As shown in the previous section, the proportion of terminations that were due to attainment of FRA was about 50% before 2012, but the ratio gradually increased to nearly 60% in 2017. The potential increase in the number of terminations may slow down due to the scheduled increase in the FRA from 66 to 67 between 2020 and 2027, which will result in fewer disabled workers exiting the SSDI program due to the attainment of FRA. Efforts in CDRs . With increased program integrity funding in recent years, SSA has increased the number of full medical CDRs completed, and the backlog was reduced to about 64,000 cases at the end of FY2017. Between 2013 and 2017, about 147,000 benefits were terminated after CDRs. The effect of CDRs on SSDI terminations will become relatively smaller, as the SSA eliminated the backlog by the end of FY2018. Availability of the ACA . The prevalence of the ACA after 2014 is likely to cause some SSDI recipients to return to work for two reasons. First, the ACA may reduce beneficiary reliance on SSDI as a path to Medicare access. Second, the ACA may improve the health conditions of disabled-worker beneficiaries. The actual magnitude of the effect awaits further analysis. Some factors may work in the opposite direction to decrease disability terminations. Examples include the scheduled further increase in FRA from 66 to 67 and the declining mortality rate among disabled-worker beneficiaries.
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The Social Security Disability Insurance (SSDI) program pays cash benefits to non-elderly workers and their dependents provided that the workers have paid into the Social Security system for a sufficient number of years and are determined to be unable to continue performing substantial work because of a qualifying disability. The total number of disabled-worker beneficiaries was approximately 2.7 million in 1985, peaked at approximately 9.0 million in 2014, and then declined over the last three years by nearly 0.3 million. In December 2017, 8.7 million disabled workers received SSDI benefits. Multiple factors have contributed to the growth in the SSDI enrollment between 1985 and 2014. Some of the main factors are (1) the increased eligibility and rising disability incidence among women, (2) the attainment of peak disability-claiming years (between age 50 and full retirement age) among baby boomers (people born between 1946 and 1964), (3) the increase in full retirement age (FRA) from 65 to 66, (4) fewer job opportunities during economic recessions, and (5) the legislative reform that expanded the eligibility standard in SSDI. Some factors may have prolonged effects on SSDI benefit receipt. For example, the increase in the FRA from 65 to 66 has resulted in a larger proportion of SSDI beneficiaries who are ages 65 and older, and this proportion is likely to increase further as the FRA increases from 66 to 67 between 2020 and 2027. Another example is the consequence of the expansion in the eligibility criteria, which has resulted in more than half of the disabled-worker beneficiaries being enrolled into the program based on mental disorders or musculoskeletal disorders (typically back pain or arthritis). This trend is likely to persist in the future. However, some of the effects on the growth in SSDI enrollment are likely to diminish over time. For example, the rise in labor force participation among women resulted in more women becoming eligible for SSDI benefits during the 1980s and the 1990s, but its positive effect on SSDI rolls became smaller as the female labor force participation rate stabilized and the disability incidence rate of women approached that of men. In addition, some factors may have started to work in opposite directions. One example is the change in age distribution of the population. As the baby boomers reach their FRA (gradually increased from 65 to 66) between 2012 and 2031, there is expected to be a growing proportion of disabled workers who terminate disability benefits due to the attainment of FRA. About the same time, the lower-birth-rate cohorts (people born after 1964) started to enter peak disability-claiming years in 2015, which would likely reduce the size of the insured population between age 50 and the FRA and, consequently, result in a lower number of disability applications. Another example is the availability of more jobs during the post-Great Recession period. The increasing opportunity in employment may have made working more attractive than disability benefits for people who could qualify for SSDI, thus reducing the disability applications and awards after 2010. These factors are likely to contribute to a decline in the number of disabled-worker beneficiaries. In addition to the change in the population age distribution and the availability of jobs in the market, some other factors may also be acting to decrease SSDI rolls in the recent three years. These factors are likely to include the prevalence of the Affordable Care Act (ACA) and the decline in the allowance rate (i.e., the share of applicants who are awarded disability benefits). The nationwide effects of the ACA on disability benefit receipt and the cause of the decreasing allowance rate are as yet unclear.
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Conventional hydropower accounted for more than 6% (258,749 gigawatt hours) of total net U.S. electricity generation in 2014. The United States has considerable hydropower potential beyond what is already developed. Although there is some interest in increasing the current level of hydropower investment, such investment remains limited, in part because of federal and nonfederal financial constraints, high uncertainty in electricity generation policies and markets (which may dissuade capital investment), and the environmental operating requirements required for hydropower projects. Some hydropower proponents are pursuing policies to reduce what they view as impediments to hydropower development. Other stakeholders prefer that hydropower investments only proceed when they are protective of other interests, including other water users and the aquatic environment and its species. At issue for the 114 th Congress is whether, and if so how, to change federal support for hydropower and what priority to give hydropower vis-à-vis other energy investments, and social and environmental concerns. These issues are ongoing and are shaped by the introduction and consideration of hydropower-related bills from past Congresses. For example, more than 25 bills dealing with various aspects of hydropower were introduced in the 112 th Congress, a quarter of which were state- or site-specific legislation. And more than 30 hydropower-related bills were introduced in the 113 th Congress. For example, Congress passed P.L. 113-20 (Bonneville Unit Clean Hydropower Facilitation Act), P.L. 113-23 (Hydropower Regulatory Efficiency Act of 2013) P.L. 113-24 (Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act), and P.L. 113-121 (Water Resources Reform and Development Act of 2014). So far, four hydropower-related bills have been introduced in the 114 th Congress: S. 1236 (Hydropower Improvement Act of 2015), S. 1264 (Renewable Electricity Standard Act), S. 1338 (Small Hydropower Dependable Regulatory Order Act of 2015), and S. 1270 (Reliable Investment in Vital Energy Resources [RIVER] Act). Over time, there has been a variety of hydropower legislative proposals and stakeholder opinions, which stem partly from differing views of the benefits and costs of hydropower development. Many have pointed out advantages and drawbacks of conventional hydropower. Cited advantages include its possible renewable energy status, zero to minimal greenhouse gas emissions during operation, and high operational efficiency. Supporters also note its ability to generally serve as a reliable and flexible domestic energy source. Generally speaking, hydropower generation can be dispatched on relatively short notice, and can supplement shortfalls in generation. However, others note that conventional large hydropower has relatively high initial capital costs, can be detrimental to surrounding ecosystems (e.g., fish and wildlife), may not be reliable during low water years and seasons, and may disrupt recreational or scenic values. The legislative environment for hydropower can be complicated. Whether the hydropower project investor is a federal or nonfederal entity dictates which laws apply and thus may affect which committees are involved in oversight or changes to such laws. Several federal government agencies own and operate large hydropower projects, while other agencies administer the process by which nonfederal hydropower projects are built, maintained, and operated. Large federal hydropower projects are managed primarily by the U.S. Department of the Interior's Bureau of Reclamation (Reclamation) and the U.S. Army Corps of Engineers (Corps). The power from these projects is generally marketed by the Department of Energy's Power Marketing Administrations (PMAs). FERC regulates investigation, construction, and operations of nonfederal hydropower projects as well as overseeing dam safety for nonfederal projects. This report explains how the federal government is involved directly in hydropower generation at federal facilities and in the regulation of nonfederal hydropower generation; the focus is on current roles and processes and common concerns and questions about changing those roles. Most of U.S. hydropower capacity is from conventional hydropower. Conventional hydropower plants take three general forms: storage (or impoundment), run-of-river (or diversion), and pumped storage. A storage plant uses a dam to store enough water in a reservoir so that, when released, it flows through a penstock to a turbine, spinning it, which in turn activates a generator to produce electricity. A run-of-river plant directs a portion of a river through a canal or penstock to generate electricity without the need for a reservoir. A pumped storage facility stores energy and generates electricity by pumping water from a lower reservoir to an upper reservoir during off-peak hours, releasing the stored water from the upper reservoir to the lower reservoir during periods of higher electricity demand. Conventional hydropower is a significant contributor to the national electric power portfolio. Hydroelectric facilities produced 6%-9% of U.S. electric generation between 1998 and 2014. When considered a renewable power source, hydropower was the largest contributor to renewable electric power generation in 2014, followed by wind and by wood and wood-derived fuels. The western states produced the most hydropower in 2014, but the top individual hydropower-producing states were Washington, Oregon, and New York. As the West continues to experience drought, hydropower generation may decline. For example, in 2014, hydropower in California (the fourth-largest producer of hydropower among the states) contributed half (10%) of its average generation (20%) to California's energy portfolio. Generally, reductions in hydroelectric generation are addressed by increasing the use of natural gas, which some argue is more expensive and produces more greenhouse gas emissions than hydropower. Facilities in western states, such as the Hoover Dam, are producing significantly less power than average due to drought conditions. There is an ongoing debate about whether hydropower should be characterized as "renewable." It has historically been characterized as renewable because it is a replenishable resource. More recently, others have asserted that it is not renewable because of its size (e.g., in the case of large-scale projects) and environmental impact, particularly on ecosystems, and in some cases induced evaporation (particularly at reservoirs at low elevations in dry climates) and greenhouse gas emissions during construction. However, for purposes of this report, hydropower is discussed as renewable because it does not originate from a fossil fuel (i.e., its source is not finite). The precise number of hydropower projects in the United States is unknown. Different databases yield different results based on selected criteria. As of 2015, 90 nonfederal hydropower projects are licensed to operate at Corps dams and 28 are licensed to operate at Bureau of Reclamation sites. The public sector (federal, states, cooperatives, and municipalities) owns the majority of hydropower capacity because it owns mostly large (>30 megawatt [MW]) hydropower plants (see Figure 1 ). The private sector (e.g., private utility, private nonutility, and industrial entities) owns the majority of hydropower projects, and many are small hydro (1 MW-30 MW) and low-power (< 1 MW) plants (see Figure 2 ). Small hydro and low-power plants make up of 83% of total plants but constitute approximately 10% of total hydropower production capacity in the United States. In contrast, large hydropower plants are responsible for approximately 90% of total hydropower capacity though they make up 16% of total plants. Without considering economics, current hydropower capacity represents a fraction of U.S. hydropower resources that technically could be developed at non-powered dams in addition to accessing new stream-reaches. The National Inventory of Dams identifies that of the more than 80,000 dams in the United States, 2.5% are used for hydropower. According to a 2012 Department of Energy (DOE) study, there are more than 54,000 non-powered dams with a total potential capacity of 12 GW, which would increase hydropower capacity by 15% (See Figure 3 ). The majority of this capacity (8 GW) is concentrated at 100 non-powered dams, 81 of which are operated by the Corps. Some have argued that many of the monetary costs and environmental impacts of construction already have occurred at non-powered dams, so using non-powered dams for hydropower is an option for increasing the U.S. renewable energy portfolio. However, the actual cost and economic feasibility of powering these dams is unknown, and additional costs for site-specific studies may be required before hydropower capacity could be added. The federal government owns and operates approximately half of all U.S. hydroelectric generating capacity. This capacity is principally at large multi-purpose dams owned and operated by the Corps or Reclamation. Combined, the Corps and Reclamation operate almost all federal hydroelectric dam capacity (90% of federal capacity). Other federal entities operating hydroelectric generation facilities include the Tennessee Valley Authority, the Bureau of Indian Affairs, and the International Boundary and Water Commission. Other entities also own facilities that generate hydroelectric power, but they are relatively small. While the electricity generated by these facilities is owned by these federal agencies, the Power Marketing Administrations (PMAs), which are part of the U.S. Department of Energy, are generally responsible for selling and distributing this power. Federal hydropower capacity varies substantially by state and region. For instance, 90% of all federal capacity is found in 13 states, and the majority of this capacity is in the West. Washington and California contain the greatest federal hydroelectric capacity, while Oregon, Arizona, Montana, and Idaho also have significant federal hydropower capacity. In the East, New York, Georgia, South Carolina, and North Carolina have the most federal capacity. The Corps' multi-purpose dams are the largest producer of hydropower in the United States. Much of this power generation capacity is concentrated in the Pacific Northwest. The Corps constructed hydropower facilities at many of its water resources projects, beginning in 1925. Its most recent hydroelectric construction project was the R.D. Willis project in Texas, completed in 1989. Today, the Corps owns and operates 353 units at 75 projects, with a total estimated capacity of 22.9 GW, or approximately one-fourth of all national hydropower capacity. These projects generate approximately 77,000 gigawatt hours (GWH) of hydropower annually, with an average gross revenue of $5 billion. Revenues from the sale of this hydropower are deposited into the U.S. Treasury. Hydropower generating units have a nominal 50-year life expectancy, and many Corps hydropower projects are nearing or exceeding this age. In 2014, the average age of Corps hydropower facilities was 49 years, and approximately 40% of the Corps hydro fleet was 50 years old or older. Hydroelectric generation is highly variable and depends on a number of factors. In the past, some have raised concerns that generation at Corps facilities may be declining due to aging infrastructure. However, the exact effects of aging infrastructure on Corps facilities has not been documented on a nationwide basis and thus remains uncertain. Relative to national generation totals, the Corps contribution to total hydropower generation has remained steady since 2008 at approximately 24%. In addition to overall declining generation, the delivery of Corps hydroelectric power is also an issue connected to aging infrastructure. That is, unit availability is down because of maintenance and repairs. According to the Corps, many of its hydropower assets have fallen below the generally accepted hydropower industry goal of 95% unit availability. Unit availability at Corps dams has fallen to the point where no Corps division is meeting the 95% target, while at the same time, the total hours of "forced outages" have grown. Concerns related to aging infrastructure have resulted in internal reviews of the Corps hydropower program and recommendations for ways to improve Corps hydropower operations. Under its Hydropower Modernization Initiative (HMI), the Corps has reviewed facilities requiring rehabilitation that would produce the greatest returns on investment, reliability, and safety. In the first phase of the HMI, the Corps concluded that modernization of six "critical needs" projects could produce 341 GWH in additional electricity per year, or an average increase in production of approximately 8% per plant. The cost for these upgrades would have been approximately $600 million. The second phase of the HMI looked at facilities outside the Federal Columbia River Power System (i.e., projects not eligible for funding by the Bonneville Power Administration, or BPA) and concluded that if the Corps took no action to modernize the 54 units not financed by BPA, it would forego potential revenues of approximately $7 billion over a 20 year horizon. Costs for the upgrades necessary to avoid the aforementioned losses were estimated at $3.7 billion. The Corps currently is working on prioritizing efficiency improvements and capacity upgrades at these plants as well as developing an annual budget-based HMI implementation strategy. Besides federal investment and development, nonfederal development of hydropower at Corps sites is also permissible under certain circumstances. According to the Corps, as of 2015 there are 63 nonfederal power units at Corps dams with a total capacity of 2.36 GW. Such development requires a Federal Energy Regulatory Commission (FERC) license and a Corps Section 408 permit, which authorizes the nonfederal use of a federal facility. The Corps and FERC signed a Memorandum of Understanding (MOU) in March 2011 to coordinate the regulatory review; among other things, the MOU indicates that the Corps will conduct its regulatory review concurrently to the FERC process to the extent possible. After the Corps, Reclamation is the second-largest producer of hydroelectric power in the United States. Reclamation operates in the 17 western states, and 11 of these states have Reclamation hydropower facilities. As part of its mission to facilitate settlement of the West through water resources development, Reclamation built numerous projects that included facilities to impound water to provide water supply for irrigation and municipal use and to capture floodwaters. Reclamation also constructed hydropower units at some of these facilities, in part to finance project construction for these other purposes. Reclamation constructed some of these units in the early part of the 20 th century, and significantly increased its hydropower production during World War II to meet wartime production demands. Reclamation operates 176 generating units at 53 power plants, with total capacity of 14.7 GW, or about 14% of the hydroelectric generating capacity of the United States. Reclamation generates on average 40,000 GWH annually. There are two tiers of customers for federal hydropower projects. For Reclamation projects, power is first used for project purposes (e.g., pumping of water for irrigation); the remaining power is marketed by one of the Power Marketing Administrations with jurisdiction over the area—Bonneville Power Administration (BPA), Western Area Power Administration (WAPA), or Southwestern Power Administration (SWPA). In turn, the PMAs provide this power for distribution and sale (see below section, " Federal Power Marketing Administrations "). Receipts from hydropower revenues at Reclamation Facilities are deposited into the Reclamation Fund and are first applied to project repayment costs. Like the Corps, Reclamation has identified challenges associated with the operation of its facilities. Reclamation's facilities also are aging; as of 2015, the average age of its hydropower plants is 58 years old. Reclamation estimated the cost of rehabilitation and replacement for all assets (not exclusively hydropower) for FY2012-FY2016 to be $2.6 billion. However, net generation at Reclamation facilities has remained somewhat constant over the last 10 years, and Reclamation has stated that its project performance is generally favorable compared with most industry benchmarks. Reclamation has also studied the potential gains associated with upgrades to its hydropower facilities. However, the potential for additional development at Reclamation facilities appears to be considerably less than that for Corps facilities. In a 2010 study, Reclamation concluded that significant upgrades were only feasible at 10 of its then-58 facilities and would increase Reclamation's total capacity by 0.067 GW, or less than 1%. Adding nonfederal hydropower facilities at existing Reclamation projects is permitted by Reclamation. The process is accomplished through either (1) obtaining a FERC license (for projects not currently authorized for hydropower); or (2) a process managed by Reclamation known as the Lease of Power Privilege Process (for projects currently authorized for hydropower but not developed). As of 2010, Reclamation reported this type of development at 47 sites that provided capacity of more than 46 GW. According to Reclamation, whichever of these processes is used, power development must not conflict with the purposes for which Congress authorized the original Reclamation project, and it must not affect the structural and operational integrity of the project. Furthermore, the development must not have significant adverse environmental, cultural, or historical impacts. The 113 th Congress enacted legislation to further facilitate this development. Legislation to continue hydropower research and development have been proposed in the 114 th Congress: H.R. 459 , H.R. 1806 , and H.Res. 215 (see below section, " Hydropower Legislation in the 114th Congress ," for additional information). Interest in dam removal for ecosystem and species restoration and recreational purposes is a controversial issue, especially when the dam is producing hydroelectric power. Congress becomes involved as proposals for federal dam removal (or support for dam removal) are considered for authorization and appropriations, as well as in the ongoing implementation of some dam removal projects. H.R. 6247 , introduced in the 112 th Congress, would have barred federal agencies from funding the removal of hydroelectric dams unless explicitly authorized to do so by Congress. There are a few federal facilities with hydropower units where dam removal has been debated and actively pursued. Most notably, two formerly nonfederal dams on the Elwha River in Washington (outside of Olympic National Park) were purchased and removed by the federal government to restore fish passage and the river ecosystem. The Department of the Interior is involved in an ongoing effort to remove four nonfederal hydroelectric dams on the Klamath River in Oregon (near a major Reclamation project) through an agreement among project water users, a private dam owner, and others. While the Elwha project was authorized by Congress, the Klamath Dam removal project (including the relevant studies) has yet to receive congressional authorization. In addition to the aforementioned efforts involving the federal government, some nonfederal groups are also involved in ongoing efforts (i.e., litigation) to force the removal of federal and nonfederal hydroelectric dams. The most prominent of these are efforts to remove four hydroelectric dams on the lower Snake River in Washington State that are operated by the Corps. The dams supply power to the Bonneville Power Administration and customers in the Pacific Northwest. The status of these dams is controversial among some, who have called for their removal. To date, the Obama Administration has not included removal of these dams as reasonable or prudent alternatives in several successive biological opinions on the effect of the Federal Columbia River Power System (FCRPS) on federally listed threatened and endangered species. However, litigation by nonfederal parties on this issue is ongoing, and some are concerned it could result in removal of the dams. If dam removal were mandated by the courts, the Corps would likely require specific authority from Congress to breach or remove any of these four dams. Some interests oppose removal of hydroelectric dams, arguing that hydropower is a clean, renewable energy source. Others argue that dam removal should be considered among the suite of options in deciding whether to relicense and/or maintain aging hydropower dams, some of which may no longer be cost-effective to maintain and operate. Still others argue that dam removal is the best way to restore fish passage and avoid extinction of certain species. The federal government operates four Power Marketing Administrations—Bonneville Power Administration (BPA) in the Pacific Northwest, Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA). Each is operated as a distinct and self-contained entity within DOE. Among other responsibilities, the PMAs are responsible for marketing surplus power from Corps and Reclamation facilities to their customers. The revenue collected from the sale of this power is deposited into the U.S. Treasury. It is generally used to pay with interest the federal investment in the hydropower facilities. Gross annual revenue returned to the Treasury from power sales of electricity at federal facilities is estimated at approximately $5 billion, and usually amounts to considerably more than the budgets for hydropower and related operations and maintenance (O&M) for the Corps and Reclamation. The Flood Control Act of 1944 requires that the PMAs sell and distribute power "at the lowest possible rate consistent with sound business practices." This means that the PMAs typically sell power at a lower price than investor-owned utilities (whose purpose is to provide a financial return to investors). For instance, in 2014, BPA's average industrial firm power rate was 3.9 cents per kilowatt-hour (kWh), compared with the nationwide average industrial retail price of 7.0 cents/kWh that same year. This rate-setting policy was established to encourage regional economic development and appropriate use of federal assets. Some have pointed out that current PMA policies result in long-term, low-cost contracts that do not take into consideration major O&M upgrades and replacement, and are therefore artificially lower than the true cost needed to maintain these facilities. The use of hydropower revenues for fish mitigation has been another controversial issue associated with the PMAs. Previous Congresses have debated the cost of environmental laws to PMA ratepayers. In previous testimony, BPA estimated that costs for fish and wildlife mitigation, including the Endangered Species Act, accounted for $802 million, or approximately 30% of BPA's charges in 2010. In addition to the magnitude of these costs, critics of these requirements also note that most PMA power customers are unaware that a part of their bill goes to fish and wildlife mitigation. The last proposal to address this issue was introduced in the 112 th Congress; Section 5 of H.R. 6247 , which was not enacted, would have required that the four PMAs include in their monthly billing statements to power customers estimates of the direct and indirect costs related to compliance with any federal environmental laws impacting the conservation of fish and wildlife. Hydropower generation at federal facilities has occurred since the early 20 th century and is well established. These projects have provided low-cost power to many, but also have associated environmental costs. As previously mentioned, several recent studies have noted the potential for increases in federal hydropower, both through efficiency gains and through development of nonfederal power at federal sites. Two bills in the 112 th Congress, H.R. 2842 and H.R. 6247 , would have facilitated nonfederal development by directing revenues from lease of power privileges toward the rehabilitation and expansion of storage at Reclamation facilities and increasing opportunities for project authorization. Neither bill was enacted. Challenges to future production and development persist. At Corps facilities in particular, hydroelectric production is facing a number of challenges, including aging infrastructure. The federal government is faced with limited options for dealing with these issues. Financing major upgrades and expansions of federal hydropower facilities beyond immediate maintenance needs is difficult to accomplish without congressional appropriations and, in some cases, authorizations. Construction of new projects also faces challenges. As with expansions and upgrades, new federal developments are dependent upon congressional actions. Other challenges for hydropower at or on federal facilities include Environmental operating restrictions to protect species that would otherwise be harmed by these projects; Uncertain and variable hydrologic conditions (e.g., precipitation and snowpack runoff patterns related to climate variability and change); Limited operational flexibility (e.g., limits derived from congressional authorization and carefully negotiated operating manuals balancing multiple uses); and Demand for water by other competing uses (e.g., municipal water supply, navigation, and recreation). Nonfederal hydropower projects can be privately owned or publicly owned, and may or may not be located at a federal site. They differ from federal projects primarily in that they are subject to regulation stemming from their licensing by FERC. According to U.S. Energy Information Administration (EIA) data, roughly 1,261 nonfederal hydropower plants generated 142,340 GWh of net electricity in 2013. The amount generated constitutes roughly 53% of total electricity generated from hydropower and roughly 3.5% of total U.S. electricity in 2013. In addition to the general advantages and disadvantages of hydropower discussed earlier in this report, nonfederal projects have unique benefits. For example, some argue that nonfederal projects are more likely to receive regular maintenance and major upgrades than federal projects, since the plant owner has a financial incentive to generate as much electricity as possible. On the other hand, drawbacks of nonfederal projects generally mirror those of federal projects (e.g., initial high capital costs, environmental concerns, regulatory requirements). An additional drawback of nonfederal projects is the length of time required to obtain state and federal approval. Still, some surmise that any increase in hydropower generation is most likely to come from nonfederal projects because, as described earlier, federal projects face hurdles that could prevent them from adding substantial generation capacity quickly, with the major barrier being federal financing for major upgrades and expansions. FERC licenses the construction and operation of nonfederal hydropower projects. It has the exclusive authority to license new nonfederal hydropower projects, relicense existing projects and provide oversight for all ongoing projects, and it has a role in the decommissioning of projects. FERC was granted this authority under the Federal Power Act of 1935 (FPA; 16 U.S.C. §§791-828c). FERC may issue a license for a hydroelectric project that is located on navigable waters of the United States; occupies public lands or reservations of the United States; utilizes surplus water or water power from a U.S. government dam; or is located on a body of water over which Congress has Commerce Clause jurisdiction, for which project construction occurred on or after August 26, 1935, and which affects interstate or foreign commerce. FERC reports that nonfederal projects represent 54 GW of hydropower capacity, or more than half of all U.S. hydropower capacity. FERC has issued a license for 1,023 projects and has exempted 631 additional projects from the licensing process. Licenses typically are issued for 50 years, but if the relicensing process is under way, an annual license is issued. A CRS analysis of 2015 FERC license expiration data suggests that 61 licensed projects (3.7%) are set to expire between January 2016 and December 2020 and that 296 licensed projects (17.9%) are set to expire between January 2016 and December 2026. Exemptions are issued in perpetuity. FERC's role with respect to hydropower is to license and oversee projects. Historically, FERC placed more emphasis on encouraging hydropower development. However, most large-scale hydropower sites have been developed and FERC's current role focuses more on relicensing hydropower projects and examining the role of small hydropower projects and hydrokinetics. FERC has worked with stakeholders, as directed by Congress, to streamline its application process. FERC now has three licensing processes that applicants may use to apply for a new license or relicense—the Traditional Licensing Process (TLP), the Alternative Licensing Process (ALP), and the Integrated Licensing Process (ILP). In July 2005, the ILP became the default licensing process (see Appendix ). In many respects, nonfederal projects face the same challenges and opportunities as federal projects for both increased capacity at existing facilities and new capacity. Both federal and nonfederal projects must consider power generation, environmental concerns, and surrounding community issues (e.g., safety, recreation). Furthermore, they must consider power grid connection and transmission capacity. However, there are some issues unique to nonfederal projects, such as satisfying FERC licensing requirements. Many contend that generation capacity at nonfederal projects should be expanded and that financial incentives are necessary to do so. For nonfederal investment, this could require Congress to consider whether to modify tax incentives or provide other subsidies and to further examine the role of FERC. Mitigating environmental costs and impacts associated with expansion also could be considered. Challenges unique to nonfederal hydropower projects generally emerge from the regulatory framework. Some regulatory challenges involve the issuance and renewal of licenses in a timely manner, and the adequacy of the federal workforce to oversee the license and exemption process. Other challenges include community opposition, market demand fluctuations, and data collection and analysis to better assess production capability. For some time there has been criticism of FERC's handling of its licensing responsibilities, much of which centers on the assertion that the full potential of nonfederal hydropower is not being delivered because of licensing delays. Some argue that additional generation capacity from hydropower would be possible if FERC's licensing process were less of a barrier, specifically with respect to the amount of information needed to apply for a license and the time it takes to acquire a license. Others may contend that the amount of information needed in the licensing process is appropriate, given the safety and environmental concerns surrounding hydropower development. Several factors affect the length of time it takes to issue a hydropower license, which in some cases may take six years or more. Obtaining a FERC license can involve roughly a dozen federal and state agencies. Federal and state agencies that are consulted during the process may not always adhere to the prescribed time frames. For instance, a 2001 FERC report to Congress on hydroelectric license policies notes that one common reason license applications are delayed is untimely receipt of state water quality certification under the Clean Water Act. Testimony by a FERC representative delivered at a 2011 congressional hearing further expresses FERC's perspective: Project developers and other stakeholders, not the Commission, in most instances play the leading role in determining project success and whether the regulatory process will be short or long, simple or complex. To the extent that a proposed project, even one of small size, raises concerns about water use and other environmental issues, it may be difficult for the Commission to quickly process an application. It is important to remember that the small capacity of a proposed project does not necessarily mean that the project has only minor environmental impacts. Another issue of particular concern to some stakeholders is the requirement that agencies review and provide "mandatory conditions" to protect fish and other resources as part of the licensing process. Others argue that the licensing process needs to be comprehensive, allowing impacted parties adequate time to review the application and offer comment because, once approved, licenses are valid for 30 years to 50 years. A legislative proposal to address some of these issues has been introduced in the 114 th Congress. S. 1236 would designate FERC as the lead agency in coordinating federal authorization of projects and establishing a schedule with which federal and state agencies must comply. Additionally, the bill would have FERC investigate best practices for license studies, with the goal of producing a comprehensive methodology to inform future environmental impact reports. Although the challenges for nonfederal projects are significant, there may be opportunities to overcome or minimize the significance of the barriers mentioned above. For example, legislation incorporating a federal renewable electricity or clean energy standard that includes hydropower or sets a price on carbon could reduce some market anxiety and lead to large-scale investments in new nonfederal projects. Moreover, energy efficiency measures and technological advancements could spur additional generation at existing projects. Other issues associated with nonfederal hydropower include its treatment in state renewable portfolio standards, annual charges by FERC for federal lands transferred with a power site classification, and residential and commercial development on the shoreline of FERC-regulated hydropower projects. These issues, which are discussed below, may have an indirect impact on the progress of hydropower to meet current and future energy demand. Some in Congress are interested in strategies that could support more domestic renewable energy production. One proposed strategy in the 114 th Congress is a federal renewable electricity standard (RES) or clean energy standard (CES) ( S. 1264 ), which would require certain retail electricity suppliers to provide a minimum percentage of the electricity they sell from renewable energy sources or other resources (see " Hydropower Legislation in the 114th Congress "). While a federal RES does not exist, many states have created a renewable portfolio standard (RPS)—essentially the same as an RES but carried out at the state level. As of June 2015, 37 states and the District of Columbia allow hydropower in their RPS. The inclusion of hydropower in state standards is not uniform, with each state setting its own criteria. The state standards generally have similar intents, but differ in how they achieve their goals. For example, many have different yearly targets and eligibility requirements for renewable sources. Some state standards include hydropower, but almost always with conditions (e.g., allowing only new hydro projects that have a capacity of 10 MW or less and do not require a new dam, allowing only existing hydro projects of 30 MW or less, excluding pumped storage, only including incremental production at existing facilities). Furthermore, the location and delivery requirements for the electricity generated differ for state standards, with a handful of states having caveats for "geographic eligibility" concerns for hydro projects. Power site classification is the classification of federal lands that have potential value for water power development. Traditionally, the U.S. Geological Survey (USGS) has had the authority to classify the lands as having potential value for water power development (i.e., power site classification), FERC has jurisdiction over the power value on the lands, and BLM has certain management jurisdiction over the surface and subsurface resources, but not the power value. Once land is assigned a power site classification, this classification remains with the land. The classification is not extinguished if the land has been transferred out of federal ownership, although there is a process to extinguish the classification. The "power site reservation" under Section 24 of the FPA has been the subject of a number of administrative disputes over the years. One administrative dispute associated with power site classification is that hydropower projects on land transferred from federal ownership to state ownership are still subject to annual fees if the land has a power site classification. According to FERC, annual charges are still required for federal lands that were transferred with a power site classification because the classification remains with the land and the United States still has the right to obtain power from this land. FERC does not keep a record of the number of acres transferred with a power site classification. Controversies over property rights in areas near hydropower facilities have drawn attention to the FERC "Shoreline Management Plan" (SMP) process. An SMP governs the use and occupancy of the project reservoir shoreline for activities not related to hydropower production. With an SMP, FERC is trying to ensure that waterfront development along the shoreline of hydropower projects does not have an adverse impact on project operations, public safety, commercial navigation, and other interests. In the past, FERC orders proposing to limit acceptable use and occupancy near hydroelectric facilities, including potential interference with existing recreational and other structures, have drawn the ire of nearby communities (see Appendix ). For example, in 2013, local property owners contended that their rights and land use were limited by an SMP that included their property within the boundaries of a relicensed project. In the past, property owners along some reservoirs have complained when reservoirs are drawn down to produce power. Such conflicts between shoreline uses can be especially acute during droughts. A proposal to amend Sections 4(e) and 10(a)(1) of the FPA to require FERC to consider the property rights of non-licensees during the licensing process has been introduced in the 114 th Congress. The source of FERC's authority to require SMPs and to enforce their terms on hydropower license applicants is primarily found in Sections 10(a)(1) and 4(e) of the FPA. However, the requirement that FERC-permitted hydropower facilities file and abide by SMPs is not in the FPA. In fact, the phrase "shoreline management plan" does not appear anywhere in the U.S. Code . The only reference to SMPs is in the titles of the Code of Federal Regulations as a requirement that existing licensees include their SMPs in their pre-application filing for renewal of the license. Section 10(a)(1) directs FERC to issue hydropower licenses that include a "comprehensive plan for improving or developing a waterway or waterways for the use or benefit of interstate or foreign commerce, for the improvement and utilization of waterpower development, for the adequate protection mitigation, and enhancement of fish and wildlife … and for other beneficial public uses." Shoreline management plans are one way that FERC ensures that hydroelectric facilities that it permits satisfy these requirements. Within this broad statutory framework, FERC decides on a case-by-case basis whether an SMP is warranted for a proposed hydropower licensee. On occasion an applicant has submitted a proposed SMP without prompting by FERC. In some cases, FERC determined an SMP was not needed. Regardless of whether a hydropower licensee is required to submit an SMP, all licensees must obtain the property rights needed to satisfy any obligations that may be included in an SMP. As previously discussed, declining generation trends at federal facilities have been tied to aging infrastructure and the need for funds to replace and/or upgrade this infrastructure. Several policy options have previously been proposed to deal with aging federal hydropower infrastructure. Some of these options are specific to the Corps or Reclamation, while others could generally apply to both agencies. All of these options have budgetary costs in one form or another. Some of the options commonly mentioned include Increase federal funding for hydropower upgrades and/or modernization initiatives within annual appropriations processes . This option would maintain the status quo practice of funding hydropower upgrades within existing discretionary budget allocations, albeit at increased levels or over a different timetable. Some point out that increased funding in annual appropriations is unrealistic in the current budgetary climate. Use alternative funding mechanisms to finance hydropower upgrades . Some have proposed alternative funding mechanisms that fall outside of the regular appropriations process, such as an infrastructure bank or some form of private sector contracting vehicle (such as Energy Savings Performance Contracts, or ESPCs). Advocates argue that these funding mechanisms could increase hydropower production without requiring annual appropriations. However, using these alternative programs to fund federal projects typically entails "up-front" budgetary costs, especially if they entail federal backing (e.g., loan guarantees) or otherwise commit future federal outlays. Increase rates to re-coup "full" costs of operations and maintenance (including major upgrades) and/or institute new user charges to pay for upgrades. Some argue that rates charged by the PMAs should be increased to recover the costs for major infrastructure upgrades. Congress could alter existing law to allow for these increased rates. However, any practice that results in increased rates for PMA customers may be viewed negatively by customers and some Members of Congress. Privatize federally owned dams through divestiture of assets. One option sometimes raised is the potential to privatize federally owned hydropower assets, thereby relieving the federal government of its operation and maintenance responsibilities and putting these dams in the hands of other interests, who might better afford to invest in facility upgrades that would increase generation. However, private entities might also increase electricity rates to achieve greater revenues and repay investments in these projects. Allow customers to commit future power revenues to pay for upgrades to federal facilities. Some would prefer that those entities that benefit from federal hydropower upgrades be allowed to directly finance these upgrades by redirecting funds that would otherwise flow to the Treasury for these projects. Some PMAs, including BPA, already have some form of this authority, and some advocate for extending it to the other PMAs. In the 112 th Congress, Section 6 of H.R. 6247 could have allowed PMA customers to harness funding streams to pay for future facility upgrades under some circumstances. Although a number of the studies previously mentioned in this report collected data on federal hydropower resources, several data gaps have been identified. For instance, one study identified a data gap on the value of ancillary benefits from federal hydropower operations. Ancillary benefits, such as the ability to suddenly increase hydropower production when power is needed (and/or other sources are not available), have the potential to boost the stability and resilience of the nation's power system. However, the role and value that federal hydropower sources currently provide or could provide through ancillary benefits has not been well documented. Additionally, although Reclamation has investigated the economic feasibility of uprating and capacity additions at its facilities, the Corps has not published a similar study. Other gaps related to availability of downscaled climate data of sufficient quality to inform operations of hydropower facilities are a source of ongoing controversy for federal projects. Uncertainty, in the form of natural climate variability and related changes (e.g., precipitation, runoff), has affected water resources in the past and may affect how much and when water is available for hydroelectric generation in the future. Both the Corps and Reclamation have found that operations of federal hydropower infrastructure will need to be altered due to climate change. Federal facilities are often operated based on procedures set out in operating manuals, which are commonly put together based on past trends and the assumption of "stationarity" (i.e., the idea that future hydrologic trends will be similar to past time periods). Revising these estimates can be difficult, and much uncertainty still exists in the process. Alterations to federal operations are further complicated by existing requirements to meet multiple competing goals in the face of uncertain water conditions. Some stakeholders have questioned whether federal agencies will require greater flexibility in operating existing reservoirs if climate conditions result in changes to weather patterns, less predictability, and more extreme events. In 2009, the Secretary of the Interior, Ken Salazar, issued an order stating that the department (which has purview over the Bureau of Reclamation) would consider and analyze climate change impacts when undertaking long range planning exercises, but to date the effect of the order on hydropower operations at specific facilities remains unclear. Similarly, in a 2013 report to Congress, DOE gave an assessment on the projected effects of climate change on hydropower generation in each of the PMA regions over near-term (2010-2024) and midterm (2025-2039) periods. There is a debate about whether more nonfederal hydropower could help to meet current and future electricity demand. Additional hydropower could be used as a tool to minimize the electric utility industry's overall emissions. Hydropower can also be a flexible source of generation. It can be a baseload energy source, meaning that it is readily available, or it can be used for peaking, meaning that it is turned off and on to meet peak demand. On the other hand, there can be environmental concerns, regulatory concerns, and security concerns. Congress could decide whether to support additional hydropower development, how much additional development is necessary, and whether the current regulatory environment for nonfederal hydropower is appropriate. Congress could also determine how involved it wants to be with nonfederal hydropower projects. Hydropower is one of the few remaining energy sources where the federal government owns a significant portion of the projects that generate the bulk of the electricity. Congress could decide that hydropower development of a certain size and scale is an energy resource that no longer requires such large ownership and intervention by the U.S. government, possibly transferring some of those activities and infrastructure to nonfederal entities. Congress could offer support for additional hydropower generation using numerous mechanisms. For example, the 113 th Congress passed the Hydropower Regulatory Efficiency Act of 2013 ( P.L. 113-23 ), which grants small hydropower projects with a capacity of 10 megawatts or less an exemption from licensing requirements, promotes conduit hydropower projects, and requires FERC to examine the feasibility of a two-year licensing process to promote hydropower development at nonpowered dams and closed-loop pumped storage projects, among other things. Small hydropower—less than 10 MW—represents approximately 5% of total U.S. hydropower capacity. Congress could choose to assess current federally funded efforts for nonfederal hydropower projects and take action by providing supplementary funds or modifying efforts to ensure that congressional goals are met on schedule. Congress may evaluate tax credits available for hydropower. Some could argue that hydropower does not need assistance in the form of tax credits because it is an established source and tax credits should be issued to ease the entry of new renewable energy sources to the market, or all types of generation should have to compete without federal support. Others could argue that tax credits are needed for hydropower to defray the large capital costs associated with new projects. Additionally, Congress could establish a clean energy standard that includes hydropower as an eligible clean energy source (e.g., S. 1264 , H.R. 1971 , introduced in the 114 th Congress). As mentioned earlier, some contend that FERC licensing is an impediment to increasing hydropower capacity. Congress could amend specific laws to expedite the licensing process for select projects (e.g., S. 1236 ). Congress may decide to further examine FERC's role in nonfederal hydropower regulation. One oversight issue includes time delays throughout the licensing process, such as those related to gathering input from multiple affected parties and agencies. If the length of time required for licensing continues to be a concern, Congress could impress upon federal, state, and local agencies involved in the licensing process the need to complete their contributions in a prompt manner. However, some stakeholders might object if they believe their concerns (e.g., fish, wildlife, recreation, water use, or other impacts) are not given sufficient time to be thoroughly vetted. Several bills related to the expansion of hydropower development and modifying the regulatory process have been introduced in the 114 th Congress. These bills are discussed below: S. 1236 , the Hydropower Improvement Act of 2015, proposes to amend the FPA with regard to FERC's authority on hydropower projects, as well as other issues. The bill would designate FERC as the lead agency for coordinating all federal authorization of hydropower projects, as which it would establish and comply with a schedule for granting licenses and permits, collect all required information from federal and state agencies, and make determinations on projects. FERC would examine and compile existing data and methodologies to form a comprehensive environmental impact statement framework for license studies. Under S. 1236 , both FERC and resource agencies would submit to Congress annual reports on the changes in the quantity and capacity of energy as well as an assessment of the economic, climatic, air quality, and environmental costs and benefits of all licensed, exempt, and proposed hydropower projects. The bill would extend the preliminary permit term for up to eight years and would allow the possibility of additional permits under special circumstances. S. 1236 would modify the administrative hearing process to allow license applicants to contest disputes related to the licensing process in trial-type hearings conducted by FERC's Office of Administrative Law Judges. The bill states that hydropower would be a renewable resource for the purposes of all federal programs. S. 1236 also would modify the operation and maintenance of fishways near projects on the condition that FERC determines that there is a direct link in which fishways are necessary for the mitigation of project effects on fish populations. S. 1264 , the Renewable Electricity Standard Act, proposes to amend the Public Utility Regulatory Policies Act of 1978 to establish a federal renewable energy standard and a federal renewable energy credit program. The bill would require retail electric suppliers who sell 1,000 GWh or more of electric energy to meet an annual standard in which a percentage of the base quantity of electricity must be generated from renewable energy resources. (The annual percentage requirement ranges from 7.5% in calendar year 2015 to 20.0% in 2025 and 30.0% in years 2030 through 2039.) Retail electric suppliers may submit an application to be issued credits and may submit credits to the Secretary of Energy, who would manage the program. Under S. 1264 , incremental hydropower, in the form of efficiency improvements or capacity additions to hydropower facilities, constructed from the date that the bill is enacted, would qualify for renewable energy credits. S. 1338 , the Small Hydropower Dependable Regulatory Order Act of 2015, proposes to amend the FPA by adding that covered projects with a capacity of 5 MW or less would receive licensing decisions from FERC within 180 days of the submission of an application. Licenses for covered projects would be modified to 10-year terms. S. 1270 , the Reliable Investment in Vital Energy Resources (RIVER) Act, proposes to amend Section 242 of the Energy Policy Act of 2005 to reauthorize incentives for the production and efficiency improvement of hydropower. The 113 th Congress authorized appropriations payments for FY2014. S. 1270 would extend this incentive program from FY2016 to FY2025. In addition to these bills, the 114 th Congress may consider conducting oversight on policies or programs authorized by laws passed in previous Congresses. The 113 th Congress enacted legislation that made changes to hydropower development and related processes: P.L. 113-23 (Hydropower Regulatory Efficiency Act of 2013) and P.L. 113-24 (Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act). Each of these laws is discussed below. P.L. 113-23 , The Hydropower Regulatory Efficiency Act of 2013, contains a number of provisions that are intended to promote the development of additional select hydropower projects. Section 3 amended the Public Utility Regulatory Policies Act of 1978 (PURPA) to redefine small hydropower as 10 MW or less. Previously, PURPA defined small hydropower as 5 MW or less. P.L. 113-23 permits FERC to grant an exemption for small hydropower projects. Section 4 amended Section 30 of the FPA by not requiring qualifying conduit hydropower projects to be licensed and by expediting the approval process. The law gives FERC 15 days to make an initial determination on the project's notice of intent, and it gives the public 45 days to contest the notice. Previously, there was no explicit time limit by which FERC had to make a determination. The law allows FERC to grant an exemption for conduit projects with certain stipulations and for those projects with an installed capacity of 40 MW or less. Previously, the FPA allowed FERC to issue an exemption only for generating capacities of 15 MW or less for nonmunicipal and 40 MW or less for municipal projects. Section 5 of P.L. 113-23 amended Section 5 of the FPA to allow preliminary permits to be extended once for two years. Previously, the FPA allowed for the issuance of preliminary permits for three years with no extension. Section 6 requires FERC to study the feasibility of issuing a license within a two-year period for projects at nonpowered dams and closed-loop pumped storage facilities. Section 7 requires the Secretary of Energy to study various aspects of pumped storage facilities and to submit to Congress a report with study results and any recommendations. P.L. 113-24 , the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act, made changes to the process by which Reclamation permits nonfederal hydropower development at its projects (see " Nonfederal Development at Reclamation Facilities ," above). Lease of Power Privilege previously was possible only at Reclamation facilities specifically authorized for hydropower development. P.L. 113-24 authorized this development for all Reclamation projects (e.g., irrigation projects). It also clarified that Reclamation's Power Resources Office shall be the lead office to set policy and procedures for this type of hydropower development (i.e., not FERC), that local project operators shall be the first entities offered the chance to develop conduit hydropower, and that these projects shall receive categorical exclusions under the National Environmental Policy Act of 1969 (42 U.S.C. §4321 et seq). P.L. 113-121 , the Water Resources Reform and Development Act of 2014, states that the approval and construction of nonfederal hydropower at Corps facilities should be expedited. It required the Secretary of the Army to submit a biennial report describing the initiatives to encourage nonfederal hydropower development at Corps facilities as well as the status, costs, and environmental impact of nonfederal hydropower projects associated with the Corps. P.L. 113-76 , the Consolidated Appropriations Act, appropriated funds to DOE to carry out a hydropower development program under Section 242 of the Energy Policy Act of 2005. This program directs the Secretary of Energy to provide incentive payments to owners or operators of nonfederal hydropower facilities for electricity generated from hydropower over a 10-year period. To be eligible, the hydropower facility must have been built before 2005 and the facility owner must sign and file a formal application. The guideline given for potential incentive payment is 1.8 cents/kWh, adjusted for inflation. It is unclear whether financing to construct, operate, and maintain hydropower projects will be a congressional priority. Federal operators of hydroelectric facilities have noted the need for infrastructure improvements. The private sector has a sizeable presence in the small hydropower market. Depending on the economics of the power market, the private sector could expand power capacity and production. However, it is unlikely that there will be public or private sector investment in large hydropower projects in the near term owing to economic and geographic constraints, environmental concerns, changes in climate, and public perception. It is possible that other forms of water power (e.g., hydrokinetics, ocean thermal) may one day contribute to the U.S. energy portfolio, but small hydropower is a more likely near-term option. If Congress determines that increasing hydropower capacity is a priority, then Congress could pursue several policy options to add additional hydropower generation in the public or private sectors or both. As Congress considers whether to alter support for future hydropower development, it is also dealing with current hydropower infrastructure issues. These include aging infrastructure, delayed maintenance, the permitting process, and water availability. Many of the hydropower issues Congress is likely to address in the near term are the same issues it has addressed for some time: operation of federal projects, the permitting process for nonfederal projects, and environmental impacts. The federal government has been responsible for ownership and operation of the bulk of the larger projects. Regular maintenance and upkeep of federal projects has not kept a pace that some would prefer. Also, developers of nonfederal projects would like an easier way to obtain permits and financing for their projects. The nonfederal project permit process has been revised over time in an effort to streamline the process, but still is unacceptable to some. Hydropower has a long tenure in the electricity market, and its advantages and disadvantages are well documented. However, there are questions for Congress about whether hydropower capacity could or should be increased, and whether that increase should occur at existing projects or by building new projects (including small and low-head hydropower), or both. Other issues affecting conventional hydropower involve the development of nonconventional hydropower technologies, competition from other energy sources (e.g., wind) that are perceived to be more environmentally friendly, and competition from fossil fuel energy sources that may be significantly cheaper (e.g., natural gas). FERC's Integrated Licensing Process The Integrated Licensing Process (ILP) was implemented in 2005 to offer a more efficient licensing process. The ILP incorporates elements of the Traditional Licensing Process (TLP) created in 1985 (e.g. , deadlines for multiple steps), and the Alternative Licensing Process (ALP) created in 1997 (e.g., focus on early stakeholder involvement). Additionally, the ILP includes a new process for resolving study disputes and requires FERC to participate earlier in the licensing process. FERC indicates that these changes are intended to make the process shorter and more efficient without altering agencies' authorities under the FPA or the Clean Water Act (33 U.S.C. §1341) to develop license conditions that protect fish, federal reservations (e.g. , national forests, Indian reservations), or rivers' state-designated uses. The ILP differs from the TLP and the ALP in that it is more collaborative than the TLP and more structured than the ALP. Also, the ILP moves FERC's National Environmental Policy Act (NEPA) scoping process from the post-application phase to the pre-application phase in an effort to resolve study disputes early in the licensing process. Some entities that might be consulted during the licensing process include National Marine Fisheries Service (NOAA Fisheries); U.S. Fish and Wildlife Service (FWS); National Park Service (NPS); U.S. Environmental Protection Agency (EPA); the federal agency administering any United States lands or facilities to be used or occupied by the project (e.g., U.S. Forest Service, Bureau of Land Management, etc.); any state agency with responsibility for fish, wildlife, and botanical resources, water quality, coastal zone management plan consistency certification, shoreline management, and water resources; the State Historic Preservation Officer (SHPO) and Tribal Historic Preservation Officer (THPO—if applicable); local, state, and regional recreation agencies and planning commissions; local and state zoning agencies; any Indian tribe that may be affected by the project; and any potentially affected landowners; Applicable laws that might have to be complied with throughout the licensing process include Section 401 of the Clean Water Act (CWA); Endangered Species Act (ESA); Magnuson-Stevens Fishery Conservation and Management Act; Coastal Zone Management Act (CZMA); National Historic Preservation Act (NHPA); Pacific Northwest Power Planning and Conservation Act; Wild and Scenic Rivers and Wilderness Act; and National Environmental Policy Act.
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Congress continues to look at various fuel contributions to the electricity market and federal involvement with these fuel sources. Hydropower, the use of flowing water to produce electricity, is one such contribution. Conventional hydropower accounted for approximately 6% of total U.S. net electricity generation in 2014. Hydropower has advantages and disadvantages as an energy source. Its advantages include its ability to be a continuous, or baseload, power source that releases minimal air pollutants during power generation relative to fossil fuels. Some of its disadvantages, depending on the type of hydropower plant, include high initial capital costs, ecosystem disruption, and reduced generation during low water years and seasons. Hydropower project ownership can be categorized as federal or nonfederal. The bulk of federal projects are owned and managed by the Bureau of Reclamation and the U.S. Army Corps of Engineers. These projects are typically authorized and funded by Congress. Nonfederal projects are licensed and overseen by the Federal Energy Regulatory Commission (FERC). Considered by many to be an established and renewable energy source, hydropower is not always discussed alongside clean or other renewable energy sources in the ongoing energy debate due to its potential environmental impacts. However, hydropower proponents argue that hydropower is cleaner than some conventional energy sources, and point to recent findings that additional hydropower capacity could help the United States reach proposed energy, economic, and environmental goals. Others argue that the expansion of hydropower in the form of numerous small hydropower projects could have environmental impacts and regulatory issues similar to those of existing large projects. The 114th Congress may face several issues as it considers how hydropower fits into a changing energy and economic landscape. For example, existing large hydropower infrastructure is aging; many of the nation's hydropower generators and dams are more than 30 years old. Proposed options to address these concerns include increasing federal funding, utilizing alternative financing and/or customer investments, and privatizing federally owned dams, among other options. Additionally, whether to significantly expand hydropower (either through new or more efficient federal hydropower generation or through federal incentives to encourage expansion or efficiency gains of nonfederal hydropower) may require congressional input due to the role of the federal government in hydropower development and permitting. Another issue receiving attention is the rate at which FERC issues licenses for nonfederal projects, which some find slower than ideal. Others defend the licensing process due to the environmental and other statutes with which agencies must comply. Legislation related to hydropower development was enacted in the 113th Congress, including P.L. 113-23 and P.L. 113-24. P.L. 113-23, the Hydropower Regulatory Efficiency Act of 2013, grants small hydropower projects with a capacity of 10 megawatts or less an exemption from FERC licensing requirements, promotes conduit hydropower projects, and requires FERC to examine the feasibility of a two-year licensing process to promote hydropower development at nonpowered dams and closed-loop pumped storage projects, among other things. P.L. 113-24, the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act, authorizes nonfederal hydropower development at all Reclamation projects, provides for the preference of existing project sponsors in developing this power, and makes Reclamation the lead agency in implementing this authority. Other legislation related to hydropower enacted in the 113th Congress included the Water Resources Reform and Development Act of 2014 (P.L. 113-121), part of which expedites the approval and development of nonfederal Corps hydropower projects and orders a report on the status and funding of nonfederal hydropower projects as well as a study on the implications of issuing federally tax-exempt bonds from the Inland Waterways Trust Fund to hydropower facilities. Additionally, P.L. 113-76, the Consolidated Appropriations Act of 2014, provided new funding to the Department of Energy (DOE) for the expansion of hydropower development at existing dams, as authorized under the Energy Policy Act of 2005 (P.L. 109-58).
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With an estimated population of 240.3 million, Indonesia is the world's most populous Muslim nation and is the world's fourth-most populated nation overall after China, India, and the United States. Its population is growing by approximately 3 million people a year. It has extensive natural resources. A large percentage of world trade transits the strategically important straits of Malacca that link the Indian Ocean littoral to the South China Sea and the larger Pacific Ocean basin. Indonesia is also perceived by many as the geopolitical center of the Association of Southeast Asian Nations (ASEAN), which is a key actor in the geopolitical dynamics of the larger Asia-Pacific region. Indonesia continues to emerge from a period of authoritarian rule and is consolidating its status as one of the world's largest democracies. Some 86% of Indonesians are Muslim, and the overwhelming majority subscribe to a moderate form of the religion, giving Indonesia the potential to act as a counterbalance to more extreme expressions of Islam. Despite this, radical Islamists and terrorist cells have operated in the country. Internal strife and social dislocation stemming from inter-communal discord, autonomous and secessionist movements, political machinations among elites, Islamist extremism, government corruption, and economic uncertainty have all undermined stability in Indonesia in the past. More recently, Indonesia has been conducting elections widely considered free and fair and building a more robust civil society. While Indonesia's economy suffered major setbacks during the Asian financial crisis of 1997/98, it has weathered the recent global economic downturn relatively well. The key challenge for the United States and Indonesia is now how to build on recent progress in the relationship and deliver demonstrable results in developing the comprehensive partnership between the two countries that can further shared interests. Specific areas of Congressional interest include democracy promotion, security and counterterrorism cooperation, human rights, fostering liberal trade and investment policies, securing Indonesian cooperation on regional issues and global ones such as climate change. The military-to-military relationship has been a key test of enhanced bilateral cooperation. In 2005, the Administration of President George Bush moved to remove restrictions on International Military and Education and Training (IMET), Foreign Military Financing (FMF), and Foreign Military Sales (FMS) programs for Indonesia. This was viewed by many as a first step toward normalizing the military-to-military relationship. Indonesia has been a key player in the war against terror in Southeast Asia and an increasingly important geopolitical actor in the Asia-Pacific region. Despite these developments, many continue to have concern over human rights abuses in Indonesia. Other members of Congress, however, have emphasized the progress Indonesia has made in several areas. An example of military cooperation with Indonesia is the Tri-border initiative that involves radar and maritime operations in the Makassar Strait to monitor possible terrorist or pirate activity. Other examples include U.S. assistance to Indonesia's new defense university and U.S. assistance with the procurement of C-130 Hercules transport aircraft, which, according to Defense Minister Juwono Sudarsono, will take advantage of U.S. discount pricing and foreign military financing. U.S. Secretary of Defense Robert Gates announced in Jakarta in July 2010 that the United States would resume a "measured and gradual program of security cooperation" with Kopassus forces. During the Cold War, the United States was primarily concerned about communist influence in Indonesia. After the Cold War, congressional views on Indonesia were more influenced by ongoing concerns over alleged human rights abuses by the Indonesian National Defense Forces (TNI). The events of 9/11 added the concern of how best to pursue the war against terror in Southeast Asia. Some members of Congress remain dissatisfied with progress on bringing to justice Indonesian military personnel and police responsible for past human rights abuses in East Timor and West Papua. The January 2006 arrest of Anthonius Wamang, who is thought to have led an attack near the town of Timika in Papua that killed two Americans, did much to resolve what had been an obstacle to developing the relationship. As the United States moved from the post-Cold War world to the war against terror, human rights concerns have increasingly been balanced against American security interests, and particularly the need to develop effective counterterror cooperation with Indonesia to combat radical Islamic groups. Over the same period, the human rights record of the TNI is generally perceived to have improved. There is also increasing appreciation of Indonesia's geopolitical position within Southeast Asia and the larger East Asia region among American decision-makers. Some analysts have argued that the need to obtain effective counterterror cooperation and to secure American strategic interests in the region necessitates a working relationship with Indonesia and its key institutions, such as the military. Other observers take the view that the promotion of American values, such as human rights and religious freedom, should be preeminent in guiding U.S. relations with Indonesia. President Obama's much anticipated November 2010 visit to Indonesia was, in the view of most, a success. The visit was postponed twice earlier in the year due to health care legislation and the environmental disaster in the Gulf of Mexico. President Obama's efforts build on those of his predecessor President George Bush and have now positioned the bilateral relationship between Indonesia and the United States to develop further. This is of strategic interest to the United States as it seeks to shape the evolving geostrategic environment in Asia relative to the rise of China. The Comprehensive Partnership Agreement signed during the visit is seen as facilitating a broadening of the relationship as well as continued collaboration with Indonesia in the struggle against Islamist extremists. Some analysts believe a strengthened relationship will likely help the U.S. engage the moderate Muslim world. President Obama's initiative also offers the prospect of developing deeper trade and investment ties with Indonesia. During his visit, President Obama told an audience at the University of Indonesia in Jakarta " Pulang kampong nih " [I have come home]. In this way, President Obama marked his connection to Indonesia and signaled his personal interest in the country. President Obama's return earned him a welcome "fit for a rock star" as "throngs of office workers braved city streets in the rain or peered from high rise office blocks for a glimpse of the president" while "countless others gathered around televisions screens" to watch the former resident of the Jakarta district called Menteng return. President Obama's mother's second husband was an Indonesian, and she had a life-long interest in the country. During his visit, President Obama made a pledge to return to Indonesia in 2011 to attend the East Asia Summit (EAS). Such a follow-up presidential visit would likely help maintain momentum in the relationship. President Obama was generally judged to have had a successful visit despite only being in country for less than 24 hours. The key events of President Obama's visit to Indonesia were the arrival ceremony, a bilateral meeting with President Susilo Bamabang Yudhoyono, a joint press conference with President Yudhoyono, a state dinner with the president at the Istana Negara State palace complex, followed the next day with a visit to the Istiqlal Mosque and a speech at the University of Indonesia. President Yudhoyono indicated that he and President Obama discussed a range of topics including trade and investment, energy, climate change, education, counterterrorism, global and regional issues, the G-20, Myanmar [Burma], and the situation in the Middle East. President Obama's speech at the University of Indonesia had a personal tone and focused on the three themes of development, democracy, and religious faith. At the joint press conference with President Yudhoyono, President Obama focused on trade and investment, forging new ties to address common challenges, and deepening political and security cooperation. He also made the following statement: [T]he United States is leading again in Asia. We are strengthening our alliances. We're deepening relationships, as we're doing with China. We're reengaging with ASEAN [the Association of Southeast Asian Nations] and joining the East Asia Summit, and we're forging new partnerships with emerging powers like Indonesia. So our Comprehensive Partnership is bringing our countries closer together. President Obama's visit is thought to mark a significant broadening of the relationship. While there has been increasing appreciation for Indonesia as a partner in the struggle against Islamist militants and as a key geopolitical actor positioned astride the strategic sea lanes in the previous administration, Obama's visit and the signing of the Comprehensive Partnership Agreement mark a broadening of that relationship with an expectation that more will be done on a range of issues in the future. Strengthening ties with Indonesia will also likely help Washington strengthen its ties to the Association of South East Asian Nations (ASEAN) as a whole. There will continue to be constraints on the relationship despite the visit having moved the relationship forward. Washington will continue to have its attention drawn in many other directions and Indonesia will likely continue to seek to hedge its growing relationship with the United States possibly with ties to China, Russia, or others. Indonesians' concerns with U.S. support for Israel and the United States involvement in Afghanistan and Iraq may also limit the broad-based appeal of the United States in Indonesia. Those concerned with human rights issues may be disappointed by the lack of emphasis during the visit on past human rights abuses by the Indonesian military. The issue of Papua was also not highlighted during the visit. The key outcome of the trip came with the signing of the Comprehensive Partnership Agreement which brings the bilateral relationship to a new level. This effort had been underway for some time. In September 2010, Secretary of State Hillary Clinton and Foreign Minister Marty Natalegawa held the inaugural meeting of the U.S.-Indonesia Joint Commission where they affirmed a plan of action for the U.S.-Indonesia Comprehensive Partnership. The plan of action has 54 detailed items under the following three subheadings: A. Political and Security Cooperation (12), B. Economic and Development Cooperation (27), and C. Socio-cultural, educational, science and technology, and other cooperation (15). With the agreement now formally signed, the stage is set for further developments in the relationship. The Comprehensive Partnership has several specific priority areas. 1. Trade and investment 2. Education 3. Energy 4. Climate change & the environment 5. Security 6. Democracy and civil society The development of the partnership has already led to several significant initiatives. In 2010, a $165 million U.S. education initiative over five years was launched, as was a plan for U.S.-Indonesia collaboration in science and technology. It has also been reported that the United States is offering Indonesia 24 F-16 aircraft. The importance of trade and investment was highlighted at the two leaders' joint press conference. Asia is a key source of economic growth which is vital to facilitate a sustained U.S. economic recovery. The sluggish U.S. economy places particular importance for President Obama on developing economic opportunities for U.S. exports. Only 7.3% of Indonesian imports come from the United States while 14.5% come from China. China, with 9.9% of Indonesian exports as compared to the U.S. share of 9.3%, also outweighs the United States in importance as a destination for Indonesian exports. The United States is Indonesia's third largest trade and investment partner. China-Indonesia trade grew 44% last year and China reportedly is seeking to double its trade with Indonesia by 2014. Indonesia's economy has performed solidly during the recent economic crisis with an expected 5.9% growth rate projected for 2010. One of Obama's key objectives for his Indonesia visit was to strengthen strategic ties with the world's largest Muslim population which is also one of the fastest growing economies in Asia and the largest democracy in Southeast Asia. In one view, Indonesia represents the "biggest prize in a region caught uneasily between China's rise and the United States renewed engagement" Some analysts believe the attention that President Obama has now given to Indonesia, as well as India, Japan, and Korea, may send a message to China and the region that America is focused on re-engaging with the Asia-Pacific as a whole and with key democratic states in the region in particular. Indonesia has a strong tradition of Non-Alignment and will not wish to be caught up in Sino-U.S. rivalry. During their joint press conference President Obama and President Yudhoyono responded to the question should U.S. "renewed engagement be seen in any way as a counter balance to a rising China?" President Obama responded that "… we think China being prosperous and secure is a positive. And we're not interested in containing that process. We want China to continue to achieve its development goals." President Yudhoyono responded "… it is Indonesia's hope that China and the U.S. relations will continue to flow well because if something happens between those two states, it will have severe impacts to not only countries in the region, in Asia, but also to the world." Developing ties with Indonesia is a key priority for the Obama Administration as it seeks to shape regional security and economic architectures for the Asia-Pacific. Many analysts view U.S.-Indonesia collaboration on developing new strategic and economic architectures that can facilitate the peaceful rise of China for the Asia-Pacific as a key goal of the new Comprehensive Partnership. According to President Obama, he and President Yudhoyono "spent a lot of time discussing" the "U.S. role in the configuration of the Asia-Pacific." The Obama vision is for the EAS to take the lead on political security issues. As Chair of ASEAN and host of the EAS next year, Indonesia will be in a key position to help shape the EAS's role in this regard. President Obama's visit to Indonesia, which included a visit to the Istiqlal Mosque and a speech at the University of Indonesia where he was enthusiastically welcomed, can also be viewed as part of his ongoing efforts to reach out to the Muslim world. It can also be viewed as an effort to build on his Cairo speech given in June 2009. Obama sent the message to Indonesia that the United States respects Islam despite the cultural difference between the two countries. Indonesia's moderate Islamic character and size make it a strong setting for sending such a message though there are limits to which any message sent from a non-Arab nation can influence the Arab core of Islam. Modern Indonesia has been shaped by the dynamic interaction of indigenous cultures with external influences—especially the succession of influences of Hinduism, Buddhism, Islam, Dutch colonial rule, and a powerful and nationalistic independence movement. The geographic definition of modern Indonesia began to take shape under Dutch direct colonial rule, which began in 1799. The Dutch East Indies were occupied by Japan during World War II. Following the Japanese surrender in 1945, independence was declared by nationalist leader Sukarno. After a four-year anti-colonial insurrection, the Republic of Indonesia gained its independence from the Dutch in 1949. The Dutch retained control of the present-day territory of Papua and West Papua, collectively known to many as West Papua, until the transition period 1963-1969. Indonesian independence was followed by a period of parliamentary democracy, which was replaced in 1959 by President Sukarno's "Guided Democracy" that lasted until 1965. In the late 1950s the United States provided clandestine assistance to military rebellions in outlying provinces of Indonesia out of fear that the Communist Party of Indonesia (PKI) was gaining control of the country. On September 30, 1965, the military, under General Suharto, marginalized Sukarno. One interpretation of events is that the military stepped in to avert a communist coup. Another is that Suharto and officers loyal to him engineered a crisis that allowed him to consolidate power over first the army and then the state. In the aftermath, an estimated 500,000 or more Indonesians lost their lives in riots and purges that were characterized as "anti-communist." President Suharto ruled Indonesia until 1998. During this 32-year period, his authoritarian "New Order" regime provided the political stability thought necessary by his supporters for fast-paced economic growth. Indonesia's economy grew at an average annual rate of almost 7% from 1987 to 1997. Suharto's death in January 2008 served as a point of reflection on his rule, during which economic development and political stability came at the price of corruption and repression. A period of reform, or " reformasi, " followed Suharto's fall. Suharto was succeeded by B.J. Habibie (1998-99), Abdurrahman Wahid (1999-2001), the daughter of former President Sukarno, Megawati Sukarnoputri (2001-2004), and Susilo Bambang Yudhoyono (2004-present). Despite the political instability during this period, a number of key reforms designed to enhance good governance and expand democracy were implemented. Particularly important was a 1999 law that transferred enormous authority from the central government to provincial and district-level government. However, by 2003, the momentum for reform appeared to be faltering. President Yudhoyono is thought to have moved the reform agenda forward but only to a limited extent. The source of legitimacy, or lack thereof, for government has changed for the Indonesian people over time. The Dutch colonial administration was viewed as illegitimate. The Sukarno Presidency sought to base its rule on moral concepts but it did not provide sufficient economic development. This was subsequently provided by President Suharto until 1997, when the Asian financial crisis undermined his ability to do so. At that point, with economic growth declining, Indonesians were no longer prepared to accept what was increasingly viewed as a corrupt and authoritarian regime. This brought on the era of democratic reform whose energy, prior to 2004, had appeared to be dissipating before fully completing its goal of instituting representative government. Many analysts believe Indonesia's next challenge is to build government institutions that are effective and responsive, so as to consolidate the legitimacy of democratic government. Indonesia has made significant progress toward institutionalizing its democracy and more firmly establishing civil society. Since the Suharto era, which ended abruptly amid mass protests in 1998, civil society has expanded, and a vigorous and open media has emerged. In addition to the direct election of the president, the military no longer has seats in parliament and the police have been separated from the military. Indonesia's parliamentary elections in April 2004, and the Presidential elections of July and September 2004, were deemed by international observers to be free and fair, and they did much to instill confidence in Indonesia's democratic process. The parliamentary and presidential elections of 2009 further consolidated the democratic process in Indonesia. Indonesia's national legislative structure consists of three separate bodies. First is a House of Representatives (DPR) of 550 members elected from party lists in multi-seat districts. The DPR has the primary role in passing laws. Second is a 132-seat Regional Representative Council (DPD) whose members are elected directly. Third is the People's Consultative Assembly (MPR), which is composed of members of both the DPR and the DPD. It is responsible for passing constitutional amendments and conducting presidential impeachments. Decentralization in recent years has placed increased importance on government at the local level. Although President Yudhoyono came to his second term in office in 2009 with a strong mandate, that support has begun to erode. Despite strong economic indicators, Yudhoyono's approval rating dropped from 85% after his reelection to 66% by October 2010. Some have attributed this decline to controversy about a government bailout of Bank Century, a mid-sized Indonesian Bank, and the departure of reformist Finance Minister Sri Mulyani Indrawati, which damaged SBY's reformist credentials with voters. Observers believe that Aburizal Bakrie, a tycoon who heads Golkar, a key coalition partner to SBY's democratic party, benefits politically from Indrawati's departure and enhances his chances to position himself for a possible presidential run in 2014. On April 9, 2009, Indonesians went to the polls in the third parliamentary election held since Indonesia's transition from the authoritarian New Order era of former President Suharto. The 2009 parliamentary elections followed elections held in 1999 and 2004 and proved a robust endorsement of President Susilo Bambang Yudhoyono (SBY) and his Democrat Party, and a strong and increasing preference for secular-nationalist parties over Islamic or Islamist parties. The President's Democratic Party, Partai Demokrat (PD), is now the single largest political party in Indonesia. The Indonesian Parliament is elected separately from the executive. In 2004, 84% of the 148 million registered voters cast votes. This was a lower percentage turn out from the 93% of the 118 million voters that cast ballots in the 1999 parliamentary elections. Several factors appear to have contributed to the Democrat Party's victory in the April 2009 parliamentary elections. Declining food and fuel prices as well as programs for the poor improved Yudhoyono's and his Party's standing. According to Marcus Mietzner of the Lowy Institute in Sydney, Australia: "It was the introduction of massive cash programs for the poor that triggered Yudhoyono's meteoric rise from electoral underdog to almost unassailable front runner.... The government spent approximately $2 billion on compensation payments." A related factor in the election appears to have been shifting Indonesian perceptions of the economy from 2005 to 2009. More Indonesians generally felt that the national economic condition was worsening, but by early 2009, this negative perception changed as more Indonesians came to believe that the national economic condition was now better than the previous year. In February 2009, 37% believed that the economy was better while 31% believed it was worse. While his popularity and reformist credentials have dropped in public perceptions over the last year, 80% of Indonesians polled in 2009 believed that SBY was good, or very good, in fighting corruption. Indonesian voters also believed that the Democrat Party was the least corrupt of the political parties by an increasing margin in the lead-up to the April 2009 parliamentary election. That said, Indonesians believe that the parliament and the judiciary are the two most corrupt institutions in Indonesia. Indonesians have a consistently negative perception of the legislative branch. The apparent lack of resonance of Islamist messages with Indonesian voters appears to have been a key factor in the parliamentary election results. Vote tallies for Islamic parties declined from 38.1% of the vote in the 2004 election to 27.8% of the vote in 2009. Indonesian Islamic parties received 44% of the vote in the 1955 election and 37.59% in 1999. Some have cautioned that the fortunes of the Prosperous Justice Party (PKS), the United Development Party (PPP), the National Mandate Party (PAN), the National Awakening Party (PKB), and other Islamic or Islamist parties that did not make the representative threshold of 2.5% had stable or declining performance more because of internal divisions and political stagnation than as a result of a major shift in voter attitudes. Others also point to the inability of Islamic parties to "translate ideological identity into concrete programs." A politically significant outcome of the parliamentary election is that the Democrat Party attained sufficient votes and seats to be allowed to nominate its own presidential candidate. Indonesian election law requires parties to attain 20% of the seats in the 560 Member House of People's Representatives (DPR) or 25% of the national vote to be able to nominate a presidential candidate. The Democrats' strong performance in the parliamentary election, by nearly tripling their vote from their 2004 electoral performance and crossing the 20% nomination threshold with 20.9% of the vote, meant that President Yudhoyono was in a stronger position on the issue of coalition partners and the selection of his vice presidential running mate. The Indonesian elections in 2009 led some to conclude that conventional wisdom on Indonesia appears to have overestimated the importance of religion, and civil-military relations. It now appears to some analysts that religion and civil-military issues are not as salient as they once were in Indonesian politics. Although political stability is enhanced by the decline of divisive issues in the political milieu, the apparent move toward personality politics may not be stabilizing in the long run. In the view of many, the Democrat Party lacks structure or strong broad-based ideological foundations and is driven by its members' support for Yudhoyono as an individual. The Indonesian president is directly elected in a separate presidential election that is held after the parliamentary elections. Under Indonesian law presidential candidates run with their choice of vice presidential candidates. The presidential election of July 8, 2009, gave President Yudhoyono 60% of the vote while Megawati Sukarnoputri of PDI-P received 26% of the vote and Jusuf Kalla of Golkar received 12%. If one candidate for president in Indonesia receives over 50% of the vote in the first round that candidate becomes president. If no single candidate receives over 50% then a subsequent runoff election is held between the two leading candidates. No second round was necessary in the 2009 presidential election. There were three pairs of presidential and vice presidential candidates in the 2009 presidential election. President Yudhoyono, who has been described as a moderate, cautious, and intelligent man of common sense, picked Boediono as his vice presidential running mate. Some have observed that Yudhoyono chose Boediono for his abilities rather than for his political standing. Boediono was Governor of Bank Indonesia, the central bank, and did not bring with him a vote block in parliament. That said, he has a doctorate from the Wharton School at the University of Pennsylvania and was Coordinating Minister for Economic Affairs before taking his post at the Central Bank. He is credited with devising the government initiative to disperse cash to Indonesia's poorest 19 million families and is thought to be a key architect of Yudhoyono's economic policies. Yudhoyono's former vice president from the Golkar Party, Jusuf Kalla, ran against Yudhoyono with former General Wiranto of the Hanura Party. Wiranto was accused of human rights abuses in East Timor by a U.N.-backed Special Tribunal. Former President Megawati Sukarnoputri of PDI-P ran for president with vice presidential running mate Probowo Subianto. Probowo is leader of the political party Gerindra, a former Kopassus [Special Forces] Commander, and the former son-in-law to former President Suharto. Probowo's critics believe he was responsible for violence towards anti-Suharto intellectuals and students, as well as against the ethnic Chinese community in Jakarta, during Indonesia's transition from Suhato's authoritarian New Order to reformasi and more open government in 1998. The outcome of the presidential election of 2009, with its strong mandate to return President Yudhoyono to the office of the presidency, is important for several reasons. The elections marked the continued development of Indonesia's democracy and civil society and move away from past authoritarian government. Indonesian voters continued to prefer national, secular, and democratic leaders who are likely to continue to pursue reformasi policies. The vote was also an endorsement of SBY's handling of the economy under his first watch. This will likely make further economic development and investment a priority in SBY's second term. The Indonesian National Defense Force (TNI) is generally regarded as the strongest institution in Indonesia. Its origins date to the struggle for independence. The TNI traditionally has been internally focused, playing a key role in Indonesian politics and preserving the territorial integrity of the nation—largely from internal threats—rather than focusing on external security concerns. Its strong tradition of secular nationalism has acted to help integrate the nation. The key elements of the military in Indonesia are the Army Strategic Reserve Command, the Army Special Forces Command, other special forces, and the Military Regional Commands. There are also Air Force and Naval commands. While the military now has a less formal role in the politics of the nation than it had in the Suharto era, it remains a key actor behind the scenes. Some observers are concerned about its indirect influence over politics. The Indonesian military has attracted negative attention through its past involvement with human rights abuses in East Timor, Aceh, Papua, and Maluku, although current problems appear largely limited to Papua and West Papua. During the initial period of reform, the TNI officially abandoned the doctrine of dwifungsi , or dual function, which gave it an official role in the politics of the nation. Appointed members to the legislative bodies from the military were removed, while the police were separated from the TNI. Efforts were also begun to more firmly establish civilian control of the armed forces. Supporters of the reform agenda in Indonesia would like to see additional measures taken, including reform of the army's territorial structure, a full withdrawal of the military from business activities, and improving the military's sensitivity to human rights. The TNI budget is thought to be to a large extent self-generated. This part of the TNI budget is largely outside governmental control. The TNI will likely continue to play a key role in the evolution of the Indonesian polity in the years ahead. It will also likely seek to preserve its prominent place in Indonesian society. While slowed, there are still signs that the reform process continues in Indonesia. Deputy Assistant Secretary of Defense Robert Scher has stated that the TNI "continues to shift its mission away from internal security." There is increased focus on more traditional and professional roles for the military, such as guaranteeing sovereignty and external security, and relatively less focus on the political role of the TNI within Indonesia. Proponents of TNI reform have called for developing military capability and developing responsibility of military actions. Admiral Agus Suhartono is the current head of the TNI. The Indonesian parliament has called on the new TNI chief to complete the process of internal reform of the TNI, maintain the Army's neutrality in politics and strengthen security in border areas. TNI Commander Suhartono has stated that he will carry on the effort to terminate the TNI's role in business. One proposal for how Indonesia could address some of its military budget shortfall involves a continuation of the reform process. Some have put forward the idea that by dismantling the territorial command structure, which is a legacy of the former dwifungsi role of the New Order military, Indonesia could save money that could be redirected to the air force or navy which are focused on more conventional military roles and are arguably underfunded given the vast sea and air space encompassed by the Indonesian archipelago. Center-periphery tensions between the dominant Javanese culture and minority groups in outlying regions have been sources of political instability and strife for the Indonesian state. Indonesia has in recent years adapted its approach to such strife and done much to alleviate autonomous or secessionist tensions. This relatively more moderate approach has reached accommodation where other efforts to quell Indonesia's centrifugal tendencies have failed. The primary security threats to Indonesia are generally thought to come from within. The political center of the Indonesian archipelago is located in Jakarta on Java, the densely populated island where 60% of Indonesia's population lives. Traditionally, power has extended from Java out to the outlying areas of Indonesia. This has been true both under Dutch rule, when Jakarta was known as Batavia, and with the modern Indonesian state. Throughout its history there has been resistance in peripheral areas to this centralized control. This manifested itself in the predominantly Catholic former Indonesian province of East Timor, which is now an independent state, as well as in the far west of Indonesia, in Aceh, and in the far eastern part of the nation, in Papua and West Papua. Each of these regions has strong ethnic, cultural, and/or religious identities very different from those of Java. Such diversity has led to debate about whether Indonesia is an organic state or an artificial creation of Dutch colonial rule. Analysis of early Indonesian history reveals a level of integration in terms of economics and trade, if not extensive political unity. While early indigenous empires were precursors of the Indonesian state, political unity is generally considered to have been a product of Dutch colonial rule, including a series of lengthy wars to subdue outlying islands and independent political units. It has been suggested that a key lesson of Indonesian history is that "unifying the archipelago administratively can only be done by the use of force." Forces of economic integration, or the creation of a national identity stemming from the nationalist movement which started in Java in 1908, could be viewed as other integrative forces. The Portuguese, whose influence in Timor-Leste dates to the 1600s, gave up control of the island in 1975. With the Portuguese departure, three main parties emerged. Of these, Frente Revolucionaria do Timor Leste Independente (Fretelin), a leftist leaning group, soon emerged as the dominant party. On December 7, 1975, Indonesia invaded East Timor with the then tacit compliance of the United States and Australia. Indonesia, Australia, and the United States are thought to have been concerned that East Timor would turn into another Soviet satellite state similar to Cuba. A third of the population of East Timor is thought to have died as a result of fighting or war-induced famine during the subsequent guerilla war fought by Fretelin against Indonesia's occupation. On August 30, 1999, East Timorese voted overwhelmingly to become an independent nation. 98.6% of those registered to vote in the referendum voted, with 78.5% rejecting integration with Indonesia. In the wake of the vote, pro-integrationist militias attacked pro-independence East Timorese and destroyed much of East Timor's infrastructure. More than 7,000 East Timorese were killed and another 300,000, out of a total population of 850,000, were displaced, many to West Timor. Hard-line elements of TNI formed pro-integrationist militias in East Timor. These groups sought to intimidate the East Timorese into voting to remain integrated with Indonesia under an autonomy package being offered by then President Habibie. It is thought that the TNI had two key reasons for trying to forestall an independent East Timor. First, there was an attachment to the territory after having fought to keep it as a part of Indonesia. Second, was the fear that East Timorese independence would act as a catalyst for further secession in Aceh and Papua. The subsequent devastation of East Timor may have been meant as a warning to others who might seek to follow its secessionist example. Some believe that TNI involvement in the violence stemmed largely from local "rogue" elements. Others believe that it was orchestrated higher up in the military command structure. East Timor gained independence in 2002. Since that time, Indonesia and East Timor have worked to develop good relations. The Joint Commission of Truth and Friendship was established to deal with past crimes. A 2,500-page report issued in early 2006 by the East Timorese Commission for Reception, Truth and Reconciliation (CAVR), which was given to United Nations General Secretary, found Indonesia responsible for abuses of East Timorese during its period of rule over East Timor. The report reportedly found that up to 180,000 East Timorese died as a result of Indonesian rule. This created tension in the bilateral relationship between Indonesia and East Timor and dilemmas for the U.N. Nevertheless, then East Timorese President Xanana Gusmao and President Yudhoyono reaffirmed their commitment to continue to work to resolve differences between the two countries. More recently, the new President Ramos-Horta called on the people of Timor-Leste to accept that Indonesians who committed human rights abuses in East Timor would never be brought to justice so that East Timor could move forward. The United Nations tribunal, which included the Serious Crimes Investigation Unit, shut down in May 2005. During its six-year operation, the tribunal convicted some East Timorese militia members for their role in the atrocities of 1999, but was unable to extradite any indictees from Indonesia. A parallel Indonesian investigation ended in acquittals for all Indonesians. A 2005 U.N. Commission of Experts found the Jakarta trials for crimes committed in 1999 to be "manifestly inadequate." Aceh is located at the extreme northwestern tip of the Indonesian archipelago on the island of Sumatra. The 4.4 million Acehenese have strong Muslim beliefs as well as an independent ethnic identity. Many Acehenese have in the past viewed Indonesia as an artificial construct that is no more than "a Javanese colonial empire enslaving the different peoples of the archipelago whose only common denominator was that they all had been colonized by the Dutch." The Acehenese fought the Portuguese in the 1520s as well as the Dutch in later years. The Dutch Aceh War lasted from 1873 to 1913; making it possibly the longest continuous colonial war in history. As a result of their resistance and independence, Aceh was one of the last areas to come under Dutch control. Its struggle for independence from Indonesia was once again taken up by the group Gerakan Aceh Merdeka (GAM) until a peace agreement was reached in the wake of the December 2004 tsunami which killed over 130,000 people and devastated much of Aceh. The peace agreement signed by GAM and the government of Indonesia in Helsinki in August of 2005 brought an end to a conflict that claimed an estimated 15,000 lives. Under the agreement, partial autonomy was granted to Aceh as was the right to retain 70% of the provinces considerable oil and gas revenue. The recently resolved struggle dates to 1976. In the late 1980s, many of GAM's fighters received training in Libya. GAM then began to reemerge in Aceh. This triggered suppression by the TNI from which GAM eventually rebounded. Former President Megawati then called on the military to once again suppress the Free Aceh Movement. This was the largest military operation for the TNI since East Timor. The decision to take a hard-line, nationalist stance on Aceh was popular at the time among Indonesian voters outside of Aceh. Under the leadership of President Yudhoyono, Indonesia leveraged the opportunity presented by the 2004 tsunami and achieved a peace settlement where previous peace efforts had come unraveled. Under the agreement, the Free Aceh Movement (GAM) disarmed in December 2005 as the Indonesian Military TNI dramatically reduced its presence in Aceh. The ongoing conflict in West Papua between the indigenous Melanesian people of the region and the security forces of the central government of Indonesia, which is overwhelmingly ethnically Malay, presents Congressional decision-makers with a difficult situation where human rights and geopolitical interest collide. On the one hand, the historical background and ongoing situation indicates that the indigenous people of West Papua have suffered great injustices and deprivation at the hand of Indonesia, which some have described as genocide. (See the " Human Rights and Religious Freedom " section for more discussion of this point.) West Papua is ethnically, culturally and linguistically distinct from the rest of Indonesia. On the other hand, the United States has a strong interest in reaching out to the Islamic world, and is working with a now democratic Indonesia as a partner in the struggle against Islamist militancy and developing a Comprehensive Partnership with Indonesia that can further U.S. geopolitical interests. Separatist sentiment and human rights concerns in West Papua are important not only in their own right but also because they have the potential to limit the growing partnership between the U.S. and Indonesia. It appears that various Papuan separatist groups have come to the view that peaceful means will not lead to a referendum on Indonesian rule of Papua and West Papua and that they must internationalize the conflict to affect change. Some also believe that violence that would provoke a harsh response by Indonesian security forces is the best way to gain international attention to their cause. This is apparently inspired at least in part from the experience of Timor-Leste. Central to the conflict in Papua is its vast natural wealth, most of which stems from resource extraction industry, particularly mining, logging and off-shore natural gas drilling. Fisheries resources are another potentially valuable resource. Economic activity in built-up areas is dominated by migrants from elsewhere in Indonesia. Papua and West Papua are two of Indonesia's poorest provinces despite their extensive natural resource wealth. Under the Special Autonomy Law for Papua of 2001, 70% of oil and gas royalties and 80% of mining, forestry and fisheries royalties are supposed to go to the province. The Grasberg Mine operated by Freeport Indonesia, a subsidiary of Louisiana-based Freeport McMoran, is the world's largest gold mine and is one of the largest copper mines in the world. In the highlands above Timika, Papua it accounts for 90% of the province's exports and 50% of the province's GDP. The Freeport mine, which was first exploited in the 1960s, has been subject to enormous controversy over the treatment of indigenous people displaced or affected by the enormous project. Social indicators for West Papua are not good. Papuans have extremely high HIV/AIDS rates. It is reported that residents of West Papua account for 40% of documented cases in Indonesia and that 74% of cases in West Papua are indigenous Papuans. Infant mortality is also extremely high in Papua and West Papua at two to six times higher the Indonesian national average. An estimated 36% of the people do not have access to health facilities. Poverty in Papua and West Papua is reportedly twice the national average. A March 2010 International Crisis Group (ICG) report has highlighted three key components that in its view need to be addressed by the government of Indonesia with credible Papuan leaders in order for the current impasse to be overcome. They are as follows: Explore how political autonomy can be expanded Strengthen affirmative action policies for Papuans across sectors Substantively address Papuan fears of in-migration of non-Papuans from elsewhere in Indonesia The ICG report states that the current impasse is unlikely to be broken and that "increased radicalization is likely" if these key issues are not addressed. Migration by non-Melanesian Indonesians from elsewhere in the nation appears to be a critical part of the mounting tensions. By some accounts, Melanesian Papuans will be in the minority in their homeland by 2015. Other accounts suggest they may already be in the minority. Preliminary data from the 2010 census indicates a huge increase in population in the states of Papua and West Papua, to 2.9 million and 761,000 respectively from a combined total of 2.2 million people in the 2002 census. Much of the increase is thought to be due to massive migration to the region. Some research has indicated that the process of modernization and integration pursued by the government of Indonesia that led to a great influx of non-Papuan trans-migrants into West Papua and Papua has led to the displacement, dislocation, alienation, and marginalization of local Papuans that has in turn fueled Papuan's resentment and demands for autonomy or independence. This ongoing dynamic has "… given rise to a collective sense among Papuans that they are facing a serious threat to their demographic and cultural survival." There is reportedly a widespread view among Papuans that Special Autonomy as currently administered has failed. In June 2010, the Papuan People's Assembly voted to reject special autonomy status that was introduced in 2001 asserting it was failing indigenous Papuans. In Jayapura, Papua's capital, a protest group of an estimated 1,000 Papuans marched to symbolically hand back autonomy to the central government. Some protestors called for a referendum and independence and urged a rejection of special autonomy. Papuans feel the autonomy funds are going to non-Melanesians through corruption and the creation of new bureaucracies when the funds should be used for community level health, education, or job creation. By some estimates 95% of autonomy funds are spent outside the two provinces. There are also calls for international mediation of the dispute. The Free Papua Movement (OPM) has reportedly stated that it would welcome dialogue with Jakarta as long as an international organization, preferably the United Nations, acted as mediator. At the international level, Vanuatu, a Melanesian Pacific island nation, has stated that it will raise the issue of West Papua at the United Nations. Papuans are a Melanesian people like the people of Papua New Guinea (PNG) which is situated on the eastern half of the island of New Guinea. The indigenous Melanesian people of Papua have a culture dating back, by some estimates, 40,000 years. This background differs significantly from the Malay character of the rest of the Indonesian archipelago. The Spanish were the first Europeans to discover the islands that make up present-day Indonesia, in 1546. The Dutch laid claim to Papua in 1828, and by 1910 they had an agreement with Britain and Germany (who controlled the southeast and northeastern parts of New Guinea, respectively) which recognized Dutch control over the western half of New Guinea. Like Indonesia, Papua was a Dutch colonial possession. Unlike Indonesia, it did not become a part of newly independent Indonesia at the time of Indonesia's independence in 1949. The Dutch argued that its ethnic and cultural difference justified Dutch control until a later date. Under former President Sukarno, Indonesia began mounting military pressure on Dutch West Papua in 1961. As outlined in a report by the Council on Foreign Relations, in 1962 the United States pressured the Dutch to turn over control of West Papua to the United Nations. Under the U.S.-brokered New York Agreement of 1962, Indonesia was to "make arrangements with the assistance and participation of the United Nations" to give Papuans an opportunity to determine whether they wished to become part of Indonesia or not. Indonesia assumed control over Papua in 1963. In the "Act of Free Choice," carried out in 1969, selected delegates decided to join Indonesia. The Act of Free Choice is generally not considered to have been representative of the will of most Papuans. A broad-based referendum on Indonesian control over West Papua was not held. Instead, a selected group of 1,025 local officials voted in favor of merging with Indonesia. As a result, the U.N. is generally considered to have failed in its mission to give the people of Papua an opportunity for self determination. To some, "while Western colonial policy was coming to an end—a new chapter of Asiatic colonial policy was opening." The pro-independence Free Papua Movement emerged as these events were unfolding. Human rights advocate groups estimate that 100,000 Papuans have died as the result of Indonesian control in Papua due to military action and population displacement, though others have challenged the scale of this figure. Declassified documents released in July 2004 indicate that the United States supported Indonesia's take over of Papua in the lead up to the 1969 Act of Free Choice even as it was understood that such a move was likely unpopular with Papuans. The documents reportedly indicate that the United States estimated that between 85% and 90% of Papuans were opposed to Indonesian rule and that as a result the Indonesians were incapable of winning an open referendum at the time of Papua's transition from Dutch colonial rule. Such steps were evidently considered necessary to maintain the support of Suharto's Indonesia during the Cold War. A similar view was taken towards Timor-Leste. President Yudhoyono has ruled out independence for Papua but has at times appeared open to some degree of autonomy for the province. In August 2010, Yudhoyono called for an audit of Special Autonomy programs for Papua and West Papua. Yudhoyono is opposed to the internationalization of the conflict and views it as an internal affair for Indonesia. In 2005, the year Indonesia concluded a peace-and-regional-autonomy agreement with separatist groups in the province of Aceh, then-Communications and Information Minister Sofyan Djalil, a key government player in the deal, stated before a working group of the DPD, or Regional Representatives Council, that the government of Indonesia viewed Papua as a different situation from Aceh and as such would not involve the international community in the settlement of the dispute there. President Yudhoyono has stated that "the government wishes to solve the issue in Papua in a peaceful, just, and dignified manner by emphasizing dialogue and persuasive approach." He added that "we decline foreign interference in settling this issue." A measure of openness in government led to moves towards autonomy for Papua in the reformasi period following the end of President Suharto's authoritarian rule. This led President B.J. Habibie in 1999 to enact laws to allow Papua to keep an increased share of locally generated wealth. The Indonesian People's Legislative Council (DPR) also passed legislation granting Special Autonomy for Papua which called for the establishment of a Papua People's Council and reaffirmed customary law. This period of openness to local autonomy lost momentum and its provisions were never fully implemented. Subsequently in January 2003, then-President Megawati Sukarnoputri moved to divide the province into three provinces, an action viewed by many Papuans as designed to undermine and divide their cause. It was reported in March 2010 that the military was considering basing a new infantry division in Papua. In April 2010, Major General Hotma Marbun, a former Kopassus special forces officer who was appointed regional military commander for Papua and West Papua in January 2010, stated that the reportedly 10,000 strong infantry brigade unit, which includes naval and air forces in Papua, was sufficient to carry out its duties in Papua and West Papua. While the vast majority of Indonesians practice a moderate form of Islam, a very small radical minority have sought to establish an Islamic state. Some extremists are hostile to the Christian minority and an even smaller group would use violence to establish an Islamic Khalifate throughout the Muslim areas of Southeast Asia. While they represent an extremely small percentage of the population, such groups have created much internal turmoil in Indonesia. A distinction can be drawn between groups such as the now disbanded Lashkar Jihad that focused on Indonesian inter-communal conflict between Muslims and Christians in Maluku, and factions of Jemaah Islamiya (JI), which have used terrorist methods to promote an extreme Islamist agenda with linkages to al Qaeda. There have also been allegations that Lashkar Jihad was a tool of hard-liners within the military that opposed the reform movement and who allowed, or possibly even assisted, Lashkar Jihad activities that destabilized the nation, thereby highlighting the need for a strong military that could impose order. There has also been inter-group conflict elsewhere in Indonesia such as between Muslims and Christians in Sulawesi and the Maluku, and between local Dayaks and internal Madurese migrants in Kalimantan. Much attention has been focused on the potential rise of Islamic sentiment in Indonesia in recent years. This was most notable in a political context with the rise of the Islamist PKS Justice Party in the 2004 election. In that election, the PKS increased its seats to 45 from 7 (out of 550) following the 1999 parliamentary election. Many attributed the success of the PKS in parliamentary elections in 2004 to its campaign platform of good governance and its party organization rather than to its Islamist character. The PKS is not the largest Muslim party and does not represent the large Muslim mainstream groups. Some 90.4% of Indonesians believe religious affairs should be within the framework of the state ideology of Pancasila, which encompasses five key guiding principles for the state, and the constitution. Some 91.6% of Indonesians believe that Indonesia's state ideology is correctly based on Pancasila. The lack of further success by Islamic political parties in the 2009 election allayed concerns that political Islam would radicalize Indonesia. Despite the success of the national-secular political parties, there have been challenges to the secular nature of the Indonesian state over cultural and moral issues. Not only the strictly fundamentalist Muslims but also more traditional Muslims protest the influence of Western cultural and moral values in Indonesian society. The challenge has four components. First is the direct action by radical Muslim groups against businesses and institutions which they accuse of representing Western cultural and moral values. The most widely publicized group is the Islamic Defenders Front (FPI). The FPI targets such businesses for direct, violent action. Squads of FPI cadre have forcibly shut down gambling dens, discos, nightclubs and bars that serve alcoholic beverages, and brothels. The FPI also has targeted Christian churches. Attacks by the FPI and like-minded Muslim groups have forced the closure of upwards of 100 Christian churches since September 2004, including more than 30 in West Java alone. The FPI is estimated to have supporters in the tens of thousands at most. It and similar groups receive financial backing from Saudi Arabia. Its influence is felt widely partly because police and law enforcement authorities have adopted a permissive attitude toward its activities. Arrests of FPI members are few and infrequent despite the government's revisions of public assembly laws to make it easier to disband violence-prone groups. Despite some ongoing activity it appears that this type of militant action is less intense than in years past. The second component is pressure by Muslim groups on authorities to establish Islamic Sharia law. This is felt primarily on the provincial and local levels. The State Department's human rights report for 2006 cited an estimate that more than 56 Sharia-based local laws have been issued throughout Indonesia. These laws often require that women wear head scarves, require that officials read the Koran in Arabic, segregate men and women in public places, and prohibit alcohol and gambling. So far, the central government have not challenged the constitutionality of such laws. The third component is judicial action against non-Muslims or Indonesians who are accused of insulting Muslim beliefs. The fact that the Indonesian government prosecuted the editor of Playboy Indonesia for breaching the country's indecency laws after mounting protest against the magazine by fundamentalist Muslim groups is one example. The fourth component is in education, particularly in the thousands of "pesantren" Islamic boarding schools in Indonesia. Observers warn that the instruction in these schools increasingly is of a fundamentalist nature that emphasizes intolerance of other religions and non-Muslim, secular practices. Former Indonesian President Abdurrahman Wahid warned in April 2007 that the teaching of fundamentalist Islam in the pesantren schools is an acute problem and that the problem is spreading into Indonesian universities. There are other areas of inter-communal strife in Indonesia. Two ethnic groups in East Kalimantan, the Bugis and the Tidung who are the indigenous people of Tarakan, have clashed over the years. Tensions appeared to be mounting between these two groups in the fall of 2010 as a inter-communal riot broke out between these two groups in September 2010. In 2000, in what is known as the Sampit incident of central Kalimantan, over 500 were killed and 100,000 displaced as a result of such clashes. Elements of the Air Force Special Troops Corps were deployed to quell the violence in Tandung in 2010. The United States and Indonesia have a common interest in addressing the threat of militant Islamists in Indonesia and Southeast Asia. The syncretic nature of Islam in Indonesia, which has overlaid earlier animist, Buddhist, and Hindu traditions, is more moderate in character than Islam is in the Middle East or Pakistan. Further, the main political parties in Indonesia are secular-nationalist in their outlook. However, radical or militant Islamists are a threat to the largely secular state and moderate Muslim society of Indonesia. Terrorist activity is not limited to attacking Western targets in Indonesia. In June 2010, one militant was sentenced for his role in a plan to assassinate President Yudhoyono as well as for his involvement in two hotel bombings in Jakarta in 2009. Indonesian views of the nature of the threat from militant Islamists have evolved over time. Islamists were generally suppressed under the New Order regime of former President Suharto. The reformasi period that followed Suharto's fall allowed an opening up of society that gave such views space that was absent under the New Order. After the 2002 Bali bombing that killed over 200 people, Indonesia moved from seeing local militant Islamist groups, such as Jemaah Islamiya (JI), as threats not only to Western and American interests in Indonesia but also as direct threats to the Indonesian government and the Indonesian people. (For background information on JI and militant Islam in Indonesia see CRS Report RL34194, Terrorism in Southeast Asia , coordinated by [author name scrubbed].) Key terrorist attacks in Indonesia include the Bali bombing of 2002, the 2003 bombing of the Marriott Hotel in Jakarta, the 2004 bombing of the Australian Embassy, and bombing attacks against Western hotels in Jakarta in 2009. While for most of the 2000s, JI was the key terrorist organization in Indonesia, this now appears to be shifting. According to Sidney Jones of the International Crisis Group, it now appears that militant Islamists can be identified with one of three groups: JI; the remaining members of the network of Noordin Top, a militant killed in 2009; and a new alliance of various Jihadists that had set up a training camp in Aceh. JI is evidently now focused on rebuilding its organization after having been effectively pursued by the Indonesian government. JI is also focused on establishing an Islamist state in Indonesia and possibly the region, as opposed to the Noordin Top network that is more focused on attacking Western targets in Indonesia. The raid on the new alliance of Jihadists in Aceh, which began on February 22, 2010, has uncovered a group which according to Sydney Jones "… is a composite of people from a number of different militant groups like Jemaah Islamiya, Kompak and Darul Islam, who are frustrated with what they see as a lack of action within these groups. They're more radical, and apparently see themselves as Indonesia's al-Qaeda." The February Aceh raid apparently led to the March 2010 raid that killed a militant named Dulmatin, who is thought to be one of the planners and executers of the 2002 Bali bombing. It is thought that a militant named Saptono took over the Aceh cell after Dulmatin was killed. Saptono was in turn killed during a raid in May 2010. Some experts have observed that the capture, rather than the killing, of such leaders could yield valuable intelligence. In May 2010, it was reported that a plot to assassinate President Yudhoyono and other national leaders in a rifle/grenade attack on Indonesia's Independence day (August 17, 2010) was disrupted. It was also reported that the plotters were considering moving the attack up to coincide with President Obama's now canceled June 2010 visit. A leader of the Aceh cell that was reportedly planning to assassinate President Yudhoyono, Abdullah Sunata, was captured in June, 2010. He was previously released from prison after having been imprisoned for his role in the Australian embassy bombing. The government's response to militant Islamists has been largely effective, though there are some problem areas. Rivalry between the Indonesian military (TNI), the police, and the state intelligence agency BIN probably keeps the state's response from being as effective as it could be. Lax standards at prisons have reportedly allowed militants to communicate with their organizations while in prison. Government-run deradicalization programs, which are more cooptative than ideological in nature, have reportedly allowed some militants to rejoin their organizations after their release from prison. Indonesia has reportedly arrested 400 terror suspects and released 242. In September 2010, General Ansyaad Mbai was appointed head of Indonesia's new National Counter Terrorism Agency (BNPT) that was formed by presidential decree. The BNPT will carry out its functions under the Coordinating Minister of Security, Political, and Legal Affairs and is tasked with formulating policies and programmes and coordinating the implementation of policies. Some fears have been voiced that the BNPT will act in ways similar to former President Suharto's New Order regime. Others are concerned that BNPT may find it difficult to effectively coordinate the counterterror efforts of the police, TNI, and BIN. Security Affairs Minister Djoko Suyanto stated that there was no room for complacency during his remarks to a BNPT-organized conference on counterterrorism in October 2010. Another new development in Indonesia's counter-terror operations in 2010 includes the use of TNI troops, particularly Kopassus troops, in counter-terror operations. There reportedly was an increase in low-level terrorism activity in Indonesia in 2010 which appears to be aimed at building up terrorist groups financial resources. In the fall of 2010 there were a number of robberies that were believed to be linked to efforts to fund radical organizations. Three policemen were killed at the Hamparan Perak police station a few days after police arrested robbers of a bank in Medan. Police killed three who robbed a bank in Padang. The Indonesian police reportedly believe that Abu Bakar Ba'asyir delivered sermons in Medan which motivated the attacks on the Hamparan police station and the robbery of the Bank in Medan. Indonesia has weathered the recent global economic downturn comparatively well. While GNP growth dipped from 6% in 2008 to 4.5% in 2009, it is expected to increase to 5.9% in 2010 and 6% in 2011. The dip was less of a downturn than was expected. Projected growth in 2010 and 2011 is thought to be driven largely by private consumption and investment. Indonesia's relative lack of exposure to export markets in the United States and Europe have helped, as has its deep resource base and very favorable demographics. Indonesia benefited from inflows of capital in 2010. An estimated $9 billion flowed into the Rupiah bond market and an additional $2.5 billion into local stocks while Indonesia reportedly received $8 billion in foreign direct investment and further significant investment in infrastructure and real estate. Listed companies reportedly attained strong earnings growth of 36.9% year on year in August 2010 and the Jakarta composite index rose 22% from January 1 to August 13, 2010. The relatively good performance of the Indonesian economy was thought to be at least partially responsible for the electorate's support for President SBY and his Democrat Party in the 2009 elections. Poverty alleviation, social welfare, and jobs were central issues in those elections. For this reason economic growth will likely continue to be a priority for the Democrat Party. Even as the economy is performing well and attracting investment, Indonesia continues to struggle to lift masses out of poverty while developing its infrastructure. The World Bank Country P artnership Strategy (2009-12): Investing in Indonesia' s Institutions stated that in 2007 nearly half of Indonesia's population was living below or just above the poverty line, that job creation was growing at a slower rate than the rate of population growth, that parts of eastern Indonesia remained underdeveloped, and that Indonesia received low marks in certain health and infrastructure indicators. Despite having long been a key oil exporter, Indonesia has in recent years become a net oil importer. Indonesia's oil production peaked at 1.6 million barrels per day (bpd) in 1995. Observers note that Indonesia will need foreign investment to help it boost production in its aging oil fields. It is, however, the world's second largest producer of liquefied natural gas (LNG). Indonesia is thought to have an estimated 8.6 billion barrels of oil and 182 trillion cubic feet of natural gas in reserves. As the world's third largest contributor to rising greenhouse gasses, largely due to deforestation, Indonesia has the potential to play a key role in mitigating climate change. Much of Indonesia's logging is illegal. President Yudhoyono has pledged to cut Indonesia's carbon emissions by 26% by 2020. As part of this agenda Indonesia and Norway have agreed to a $1 billion deal to preserve Indonesian natural forests and peatlands. This led Yudhoyono to announce a two-year moratorium on the clearing of natural forests. Approximately 85% of Indonesian emissions are from deforestation. Indonesian efforts to preserve its and the region's maritime environment can also play a positive role in promoting Pacific tuna and other fish stocks. President Yudhoyono has raised Indonesia's profile on environmental issues in recent years, and the United States and Indonesia have begun to cooperate in the area. In June 2010, the U.S. and Indonesia announced the establishment of a center to focus on linking science and policy including public-private partnerships in the area of climate change. In 2009 President Yudhoyono made a pledge to reduce Indonesia's carbon emissions by up to 41% below business-as-usual levels by 2020. Indonesia hosted the 13 th Conference of the Parties of the United Nations Framework Convention on Climate Change in December 2007 and the World Ocean Conference in May 2009. Deforestation is the main contributor to Indonesia's carbon emissions, which are the third highest in the world after the United States and China when deforestation effects are taken into account. Indonesia has immense biological diversity in its tropical rainforests and in its archipelagic marine environment. This is under threat from various pressures including, logging, climate change, and pollution. The logging of Indonesia's forests, both legal and illegal, is an issue of increasing concern to many. Indonesia has the world's third-largest tropical forests and the world's largest timber trade. Rain forests are thought to be an important sink for global atmospheric carbon and play a vital role in climate. Rain forests contain an estimated two-thirds of the planet's plant and animal species. It is estimated that logging and other clearing of rain forests has reduced their extent from 14% of the earth's surface to 6%. A special report by The Economist estimated that about 2 million hectares of Indonesian forest, an area the size of Massachusetts, are logged each year. In the 15 years leading up to 2006, Indonesia lost one quarter of its forests. One 2006 estimate projected that at current rates of logging Indonesia's forests would be logged out in 10 years. The destruction of Indonesia's forests would likely lead to widespread species extinction. It is estimated that illegal logging deprives Indonesia of some $3 billion annually. Burning of logged land to clear it for palm plantations and other uses in Southeast Asia led to widespread haze over the region in 1997, which accounted for an estimated 8% of greenhouse gasses emitted worldwide in that year. In the years since, Indonesian fires have contributed to haze in the region, including 2010 when Singapore and parts of Malaysia were clocked in such pollutants. From 1998 to 2010 it is estimated that about quarter of West Papua's forests have disappeared due to logging and clearing. The United States and Indonesia moved to begin to address the problem of illegal logging in April 2006. Bilateral talks were initiated to reach an agreement to deal with the problem of illegal logging in Indonesia which is estimated to account for 80% of all logging in Indonesia. The United States and Indonesia signed a bilateral agreement to combat illegal logging and associated trade in November 2006. The United States initially committed $1 million to fund remote sensing of illegal logging and to develop partnerships with non-governmental organizations and the private sector. The agreement established a working group under the U.S.-Indonesia Trade and Investment Framework Agreement. Indonesia has been working with Norway to develop and implement a national Reduce Emissions from Deforestation and Degradation (REDD) program. Norway has pledged 1 billion dollars for the purpose. In October 2010 Indonesia asked Norway to postpone disbursement of funds under its climate partnership deal as Indonesia had yet to complete preparatory steps to implement the project. Concerns remain that corruption in the forestry sector may thwart efforts to reduce carbon emissions in this area. Indonesia has the most threatened species of mammals in the world. Poaching, deforestation, and illegal logging continue to threaten the existence of orangutans, the Sumatran Tiger, and the Javan Rhino. Ninety percent of the orangutan's habitat has been destroyed as land is cleared with fire by illegal logging, plantation companies, and farmers. It is thought that orangutans will disappear in the wild in Indonesia if present deforestation trends continue. The Javanese Tiger and the Balinese Tiger became extinct in the 1970s. Only about 400 Sumatran Tigers are thought to remain alive. This is a dramatic decrease from an estimated 1,000 Sumatran Tigers in the 1970s. Their decrease is similarly attributed to a combination of deforestation, illegal logging, and poaching. Effective control of the illegal trade in wild animal parts is thought to be essential for the species survival. The Javanese Rhino is similarly threatened with only 60 thought to remain in the wild. Indonesia hosted the World Ocean Conference in May 2009 where Indonesia, Malaysia, Timor-Leste, Papua New Guinea, the Solomon Islands, and the Philippines met and adopted a 10-year action plan to address threats to the maritime environment, particularly with coral reefs, fish, and mangroves. The agreement, the Coral Triangle Initiative on Coral Reefs, Fisheries and Food Security, is not legally binding but covers some 6 million square-kilometers of ocean. Climate change is particularly threatening to Indonesia as sea level rise would adversely affect many of Indonesia's low-lying coastal areas. Much attention in the United States has been focused on human rights in Indonesia. The State Department's annual human rights report states that the Indonesian government "generally respected the human rights of its citizens and upheld civil liberties." The report noted that problems remain, including "killings by security forces; vigilantism; harsh prison conditions; impunity for prison authorities and some other officials; corruption in the judicial system; limitations on free speech; societal abuse and discrimination against religious groups" among other concerns. The report also noted that civilian control of the military was weakened by the partially self-financed nature of the TNI and that Indonesia continued to make progress in strengthening and consolidating its democracy. The West Papua Advocacy Team stated that the State Department report "pulled its punches" when describing Indonesian human rights violations and stated that security forces "remain largely unaccountable to a judicial system that is deeply corrupt and cowed by the power of the security forces." Human Rights Watch observed in its 2009 World Report that Indonesia "saw little human rights progress." The report was critical of Indonesia for a general lack of effort to "pursue accountability" for past abuses and observed that "endemic police torture also routinely goes unpunished." The report also criticized the government for bowing to pressure from Islamic hard-line groups on the Ahmadiyya and stated that "deeply rooted distrust of Jakarta [in Papua] is still a time bomb; failure to address human rights—including security force abuse—is one important reason the distrust has not been dispelled." Others have pointed to the candidacy of former General Wiranto and General Prabowo Subianto, both of whom are suspected of Suharto-era human rights abuses, as vice presidential candidates in the July 2009 presidential election as evidence of a lack of forward progress on human rights in Indonesia. Key decision makers and observers of the conflict in West Papua have expressed their concern that "there is strong indication that the Indonesian government has committed genocide against the Papuans." Fifty members of Congress signed a letter to President Obama in August 2010 stating that there are strong indications that the government of Indonesia has committed genocide. Among others, Indonesian journalist Andreas Harsono, who is also reportedly a consultant to Human Rights Watch, stated that political repression and genocide are occurring in West Papua. Recent reports appear to indicate that abuses continue. It has been reported that a Papuan journalist was recently found dead with signs of torture. A video of a wounded Papuan separatist being tortured while he was questioned by uniformed personnel on YouTube also raises concerns over ongoing abuse. Webster's dictionary defines genocide as the "the deliberate and systemic destruction of a racial, political, or cultural group." There is widespread concern over the survival of the indigenous Melanesian people and their culture in West Papua. While actions by Indonesian security forces and the government of Indonesia are cited as being responsible for widespread human rights abuses of Papuan people over many years, leading to the death of a significant proportion of the Papuan population, there is less agreement that this has been done in a deliberate and systemic way by the central government in Jakarta. While noting that Indonesia generally "respected the human rights of its citizens" the United States Department of State Country Report on Human Rights Practices of 2009, which was released in March 2010, states that "there were problems during the year in the following areas: killings by security forces…." The report also noted that "violence affected the provinces of Papua and West Papua." In August 2005, the Centre for Peace and Conflict Studies at the University of Sydney in New South Wales, Australia, published a report, Genocide in West Papua , which assesses the treatment of Papuans by the TNI. The report details a series of concerns which, if not acted upon, may pose serious threats to the survival of the indigenous people of the Indonesian province of Papua. It covers the threats posed by the Indonesian military to the province's stability, the recent increase in large scale military campaigns which are decimating highland tribal communities, the HIV/AIDS explosion and persistent Papuan underdevelopment in the face of rapid and threatening demographic transition in which the Papuans face becoming a minority in their own land. The report also states that "a culture of impunity exists in Indonesia which sees its highest manifestation currently in Papua ... military operations have led to thousands of deaths in Papua ... the Republic's armed forces act as a law unto themselves." The report cites eyewitness accounts of Indonesian "military involvement in acts of arson, theft, rape, and torture." Other groups have similarly asserted evidence of repression. A 2004 report by the East-West Center on the conflict in Papua found that the Indonesian government's approach to Papua has ranged from "the overtly repressive to the occasionally accommodative" and observed that "the cycles of repression and alienation simply consolidate Papuan identity and support for independence." Human Rights Watch (HRW) has described the TNI's actions in Papua as responding to the OPM with "disproportionate force" adding that "unarmed civilians continue to be among those injured or killed in military reprisals. Arbitrary detention, torture, disappearances, and arson are widespread in this vast and isolated region of Indonesia." HRW has also pointed to the influx of non-Melanesian Indonesians, who remain largely in the towns and are mostly Malay Muslims as opposed to the more rural and Christian native Melanesian Papuans. This division presents a "volatile mix susceptible to manipulation by unscrupulous political leaders." While the 2004 report Indonesian Human Rights Abuses in West Papua , by the Allard K. Lowenstein International Human Rights Clinic at Yale University Law School did "not offer a definitive conclusion about whether genocide has occurred [in Papua] it finds in the available evidence a strong indication that the Indonesia government has committed genocide against the West Papuans." It goes on to state that even if the violence committed against Papuans were not committed with the intent to destroy the Papuans as a group "many of these acts clearly constitute crime against humanity." An international dimension to the conflict arose in January 2006 when a group of 43 Papuans fled to Australia in an outrigger canoe and asked for political asylum. Though Indonesia is overwhelmingly Muslim, its constitution protects religious minority groups. Non-Muslims generally enjoy a general level of freedom in their beliefs within Indonesian society. That said, inter-communal strife has boiled over into violence in places such as Poso and Ambon. A government panel recommended in April 2008 that the Ahmadiyya group, a Muslim sect, be banned. This decision followed a January 2008 fatwa by Indonesia's highest religious authority, the Indonesian Ulama Council, to ban the sect for its deviance. The Ulama Council shortly thereafter submitted its fatwa to the Indonesian Attorney General's Office. The Ahmadiyya of Indonesia, like other Ahmadiyya around the world, believe that their founder Mirza Ghulam Ahmad, who founded the religion in 1889 in the Punjab in British India, was a prophet. The Ahmadiyya belief was first brought to Indonesia from India in 1925. Their views place them at odds with more mainstream Muslims who believe that The Prophet Mohammad was the last prophet. Ahmadiyya do accept Mohammad as a prophet and one of God's messengers. As a result of their differences, many in Muslim society, including in Indonesia, do not view Ahmadiyya as true Muslims. It is reported that they have no open supporters among Indonesia's elite. Some Indonesians have been calling for the Ahmadiyya to be banned and driven out of Indonesia. It is estimated that there are some 200,000 to 500,000 Ahmadiyya in Indonesia. Attacks against Ahmadiyya and their Mosques have grown in recent years. The extremist Komando Laskar Islam, thought to be affiliated with the Islamic Defenders Front (FPI), attacked an alliance of moderate groups, known as the National Alliance for Freedom of Religion and Faith, that was demonstrating peacefully in support of religious freedom on June 1, 2008, at the Indonesian National Monument Square (Monas) in Jakarta. The FPI has in the past been involved with demonstrations against the U.S. Embassy and the offices of Playboy magazine. According to one report, the government of Indonesia through the Attorney General's Office has banned the group from practicing in Indonesia due to its view that the Ahmadiyya are a deviant sect and because they are causing restlessness in the Muslim community in Indonesia. On April 18, 2008, the day following reports that the group had been banned, Indonesian Vice President Jusuf Kalla stated that there would be no detention of Ahmadis. The Ulama Council subsequently felt that the government did not go far enough in its actions. On April 20 th thousands of Muslim hard-liners protested to demand the active disbanding of the Ahmadiyya. It is thought that Muslim extremists would go beyond banning of the practicing of the Ahmadiyya belief and would favor adopting further measures that would actively seek to disband and/or drive the group out of Indonesia. Some outside commentators view the decision to crackdown on the Ahmadiyya as pandering to Islamic extremism. This placed the government of Susilo Bambang Yudhoyono in a difficult position in the lead-up to elections scheduled for April 2009. The government's response in 2008 appeared to seek to avoid alienating both religious extremists and moderates in the period leading up to elections in 2009. On the one hand, the government issued a decree banning the sect from spreading its message. On the other hand, it pledged not to persecute Ahmadiyya. Its move to arrest those extremists that used violence against moderates demonstrating in support of religious tolerance in 2008 also demonstrates the government's desire to place limits on how far the extremists can go. The State Department International Religious Freedom Report 2008 stated that "recommendations by government appointed bodies and a subsequent government decree restricting the ability of the Ahmediya to practice freely were significant exceptions" to the general practice of respecting religious freedom in Indonesia. The report also noted the use by some groups of "violence and intimidation to force at least 12 churches and 21 Ahmadiya mosques to close." Indonesian foreign policy has been shaped largely by two men, Presidents Sukarno and Suharto, although more recent presidents, particularly Yudhoyono, have sought to increase the nation's presence on the world stage. Once a leading force in the Non-Aligned Movement (NAM) of the early Cold War era, Indonesia has traditionally sought to remain largely independent from great power conflict and entangling alliances. Sukarno's world view divided the world into new emerging forces and old established forces. Sukarno sought to fight the forces of neo-colonialism, colonialism, and imperialism, which brought his government closer to China in 1964-65. By contrast, Suharto's New Order lessened Sukarno's anti-western rhetoric and focused on better relations with other Southeast Asian nations. Under Suharto, Indonesia was one of the founding members of the Association of Southeast Asian States (ASEAN) in 1967 and played a key leadership role in the organization. Indonesia's internal problems since 1998 have kept it largely internally focused. As a result, it has not played as active a role in the organization as in past years. Indonesia exerts a moderate voice in the Organization of Islamic Conference (OIC) and is a member of Asia-Pacific Economic Cooperation (APEC). In recent years, Indonesia has done more to project itself as a moderating force in the Muslim world, positioning itself as a potential bridge between Islam and the West. Democracy is increasingly a component of Indonesia's engagement with its external environment. Indonesia launched the Bali Democracy Forum in November 2008 with the aim of "promoting regional and international cooperation in the field of democracy." The Bali Forum is taking an inclusive approach that brings together democracies as well as those "aspiring to be more democratic." The forum is to act as a platform for countries to "exchange ideas and knowledge and share experience and best practices." Indonesia also established the Institute for Peace and Democracy at the University of Udayana on Bali to support the initiative. Indonesia has also supported the new ASEAN Charter, which is supportive of democratic development and human rights. Indonesia's large population of 240 million, its strategic location, and its political leadership have established its central place in Southeast Asia. The strategically vital Straits of Malacca are located to the north and east of the Indonesian island of Sumatra. Indonesia has been playing a larger strategic role in the region under the leadership of President Yudhoyono. While Indonesia plays a key role within ASEAN, ASEAN as a group continues to seek a central role in shaping the evolving strategic and economic architectures of Asia through such groups as the East Asian Summit. Some have speculated that Indonesia may be reaching a point in its development where it will begin to look beyond ASEAN in formulating its foreign policy stance. Indonesia is increasingly active in multilateral fora such as the OIC and the G-20. Indonesia's geographic proximity to Australia makes its bilateral relationship with Australia a key one for Indonesia. Indonesia signed the Timor Gap Treaty with Australia in 1991. The treaty provided for a mutual sharing of resources located in the seabed between Australia and the then-Indonesian province of East Timor. This lapsed with the independence of East Timor. Australia and Indonesia also signed a security agreement in 1995 that fell short of an alliance but called for mutual consultations on security matters. Indonesian displeasure with Australia's support of East Timor independence in 1999 led Indonesia to renounce the agreement. Indonesian ties with Australia have at times been strained over alleged human rights abuses by the TNI. Indonesia and Australia have cooperated in the area of counterterrorism in recent years. Indonesia and Australia signed a new security pact in 2006, known as the Lombok Treaty, which came into force in 2008. In 1990 Indonesia and China normalized ties, which had been strained since the alleged abortive coup by the Indonesian Communist Party (PKI) in 1965. China's claim to the South China Sea (SCS) extends to the southern reach of the SCS near Indonesia's the Natuna Islands. President Yudhoyono traveled to Beijing in 2005 and signed a strategic agreement with Chinese President Hu Jintao. In June 2008, Zhou Yongkang, a member of the Standing Committee of the Political Bureau of the Communist Party of China Central Committee stated that China wanted to push forward the strategic partnership with Indonesia and further promote the growth of bilateral relations between Indonesia and China while he was visiting Jakarta. Chinese investments in Indonesia, particularly in the energy and mineral realms, have grown markedly in recent years. In 2010, ties between China and Southeast Asia, including Indonesia, appeared to cool somewhat as compared to the earlier period of China's 'charm offensive' with the region. Security and economic ties between Indonesia and China are developing. While there have been historical tensions and mistrust, Indonesia's development of military to military relations with China appears to have been motivated by a desire to diversify its defense and arms procurement relationships at a time when the United States was sanctioning Indonesia for past human rights abuses by the Indonesian military. Indonesia's enthusiasm for developing ties with China has apparently lessened somewhat as confidence in the relationship with the United States has improved. Nevertheless, Indonesia will likely seek to maintain a diversified set of defense and arms relationships that may continue to include China, as well as Russia and other Western states. Trade and investment between Indonesia and China has increased substantially in recent years. China recently pledged to increase direct foreign investment and to increase trade with Indonesia to $50 billion by 2014. Bilateral trade between the two states was $25.5 billion in 2009. Direct investment over the past four years by China has totaled $265.5 million. Indonesia's and Malaysia's key recent border disputes have been largely maritime in nature. Both claimed Sipadan and Ligitan Islands in the Celebes Sea which the International Court of Justice ruled in Malaysia's favor. Dispute continues over the Ambalat sea bloc also in the Celebes Sea. Tensions between Indonesia and Malaysia flared in May 2009 over conflicting maritime claims to the oil-rich waters near their border between Kalimantan and Sabah in the Celebes Sea. A Naval confrontation occurred in May 2009. The two nations had a similar naval confrontation in March 2005 over the area. Both Indonesia and Malaysia have granted concessions to Shell, Unocal, and the Italian oil and gas firm ENI SPA in the disputed region. Indonesia deployed troops to the border in September, 2010, and later announced plans to deploy a tank battalion to the Malaysian border in response to tensions in 2010. Indonesia will reinforce its military assets in the border region of Kodam XII in Bengkayang District, considered to be a pivotal point in West Kalimantan. The Malacca, Sunda, and Lombok straits are some of the world's most important strategic sea lanes. Close to half of the total global merchant fleet capacity transits the straits around Indonesia. A significant proportion of Northeast Asia's energy resources transit these straits. The United States continues to have both economic and military interest in keeping the sea lanes of communication open. The waters around Indonesia have had some of the highest incidents of piracy in the world. Further energy deposits may also be found in the waters of Southeast Asia. China's relations with Indonesia and Southeast Asia have shifted over the years. China was perceived as being assertive in the 1990s, for example, by fortifying a disputed shoal in the South China Sea known as Mischief Reef. China however subsequently developed a more accommodative approach to Southeast Asia known to many as its "charm offensive" and agreed to a regional code of conduct in the South China Sea in 2002. China also signed a Joint Declaration on Strategic Partnership with ASEAN in October 2003 and initiated a China-ASEAN Free Trade Agreement to augment its existing bilateral trade agreements with many ASEAN members. More recently, China's relations with Indonesia and the region appear to have reached limits as regional states now appear to have concerns over what some see as increased assertiveness by China, and Indonesia in particular has voiced worries about the impact of Chinese competition on many of its domestic industries. China is also expanding its naval capability which is of concern to some. The bilateral comprehensive partnership between the United States and Indonesia provides a framework for the U.S. assistance program for Indonesia. U.S. assistance is focused on several key areas including "basic and higher education; forestry; marine and fisheries management; clean energy and climate change; regional security and stability; government service delivery; health services; and employment." Other priorities of U.S. assistance include support for the further development of democracy in Indonesia, support for the rule of law and human rights, maternal and child health, and support for economic growth through the development of trade, investment, and infrastructure. The State Department FY2011 Budget Justification for Foreign Operations anticipates continued support to Indonesia with counterterrorism including developing Detachment 88 counterterrorism skills and points out that U.S. assistance will also "strengthen Indonesia's leading role in regional peace and security." Indonesia has participated in the Regional Defense Counter Terrorism Fellowship Program, which includes intelligence cooperation, civil-military cooperation in combating terrorism and maritime security. Indonesia has also participated in the Theater Security Cooperation Program with the U.S. Pacific Command. This has involved Indonesia in counterterrorism seminars promoting cooperation on security as well as subject matter expert exchanges. Military-to-military ties between the United States and Indonesia have ebbed and flowed since the 1950s. This has been conditioned by both the disposition of the regime in Jakarta to the United States and by U.S. perceptions of the TNI's record on human rights. A significant relationship was established by the 1960s. This was expanded in the wake of Sukarno's demise. The Administration's policy on assistance to Indonesia is informed by the role that Indonesia plays in the war against terror in Southeast Asia. U.S.-Indonesian counterterror capacity building programs have included funds for the establishment of a national police counterterrorism unit and for counterterrorism training for police and security officials. Such assistance has also included financial intelligence unit training to strengthen anti-money laundering, counterterror intelligence analysts training, an analyst exchange program with the Treasury Department, and training and assistance to establish a border security system as part of the Terrorist Interdiction Program. A major accomplishment of these programs is the increasing capabilities of Detachment 88, an elite counterterrorism unit that has received assistance from the United States and Australia. Detachment 88 has been responsible for tracking down scores of JI cadre, including Azahari bin Husin, Zarkasih, and Abu Dujana. The United States is promoting counterterrorism in Southeast Asia on a regional and multilateral basis as well as on a bilateral basis with Indonesia. Such an approach is viewed as complementing and promoting bilateral assistance and focuses on diplomatic, financial, law enforcement, intelligence and military tools. Two key objectives of the U.S. government are to build the capacity and will of regional states to fight terror. These objectives are pursued through a number of programs. The United States-ASEAN Work Plan for Counter-Terrorism has identified information sharing, enhancing liaison relationships, capacity building through training and education, transportation, maritime security, border and immigration controls, and compliance with United Nations and international conventions, as goals for enhanced regional anti-terrorism cooperation. The Anti-Terrorism Assistance Program, directed at law enforcement training and associated hardware, has aided Indonesia, among others. In addition, Financial Systems Assessment Teams and the Terrorist Interdiction Program (which focuses on border controls) have also assisted Indonesia. The United States has also supported the Southeast Asian Regional Center for Counter-terrorism in Kuala Lumpur. Foreign Emergency Support Teams are designed for rapid deployment in response to a terrorist related event while Technical Support Working Groups work with regional partners to find technical solutions to problems such as bio-terrorism warning sensors. Many observers believe the present offers a unique moment for a significant expansion and deepening of bilateral relations with Indonesia that could have broader implications for the evolving correlates of power in Asia as well as for U.S. engagement with ASEAN and with Muslim nations. Such observers often argue that Indonesia has since 2004 made dramatic progress in developing its democracy and civil society even as some reform issues remain to be resolved. Others remain focused on human rights abuses by the Indonesian military. Although most of these date back to 1999 or before, concern remains over Indonesian security forces conduct in West Papua. In this way, decision makers' approaches to Indonesia will likely involve a consideration of a mix of U.S. foreign and strategic policy interests with regard to Indonesia. These may include consideration of possible tradeoffs between a foreign policy approach that stresses the promotion of human rights and those that seeks to strengthen bilateral ties in order to assist in the struggle against violent Islamist extremists and to promote U.S. geopolitical interests.
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With a population of 240 million, Indonesia is the largest country in Southeast Asia and the most populous Muslim-majority nation in the world. Its size, its emerging democracy and economic vibrancy, and its strategic position across critical sea lanes linking the Middle East with East Asia have led many to consider it an emerging middle-tier power. The U.S. maintains close relations with Indonesia, with considerable security, economic, and trade ties, although human rights concerns about the Indonesian armed forces have long been a thorn in the relationship. In the 12 years since a catastrophic economic crisis led to the fall of longtime President Suharto, Indonesia has undergone a remarkable transformation. It has held two successful direct Presidential elections, both of which were considered largely free and fair, and conducts dozens of actively contested provincial and local elections each year. Its economy regularly posts growth of better than 6% annually, although poverty remains considerable and corruption widespread. Discussion of Indonesia has shifted from speculation about its possible breakup due to separatist sentiments in places such as Aceh, the Malukus, West Papua, and the now independent state of Timor Leste to admiration of its democratic transformation, its relatively strong performance in the recent global economic crisis, its cooperation in efforts to combat terrorism, and its growing role in regional diplomatic institutions, international efforts to combat climate change, and its membership in the G-20. In recent years, U.S. policy towards Indonesia has focused on cementing ties with a geopolitically important state that can play an active role in regional diplomatic institutions, and encouraging Indonesia to combat terrorism and effectively counter the rise of violent Islamic militancy. The United States has also sought to promote democracy, the rule of law and human rights, and to further American trade and investment interests in Indonesia. The election of President Barack Obama, who spent part of his childhood in Indonesia, did much to spur expectations in Indonesia that the U.S.-Indonesia bilateral relationship would be enhanced. President Obama's visit to Indonesia in November 2010, with the signing of a Comprehensive Partnership Agreement with Indonesian President Susilo Bambang Yudhoyono (SBY), did much to meet these expectations. The agreement covers a range of issues including trade and investment, food security, science and technology, educational exchanges, and military cooperation. Congressional concerns have included oversight of the Obama Administration's policies towards Indonesia, including the Comprehensive Partnership, Indonesia's role in regional diplomacy, the restarting of comprehensive military-military relations, and policies to encourage human rights performance, particularly in restive West Papua.
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There is increasing concern both in the United States and globally about whether a "pollinator crisis" has been occurring in recent decades. Reports worldwide indicate that populations of managed honey bees, wild bees, and native bees have been declining, with colony losses in some cases described as severe or unusual. Other reports indicate that many insect pollinator species may be becoming rarer, which some say may be a sign of an overall global biodiversity decline. Many reasons are cited for bee population declines, including bee pests and diseases, diet and nutrition, genetics, habitat loss, agricultural pesticides, and beekeeping management. Because pesticides have been the focus of concerns in Europe and in the United States, this CRS report briefly describes recent scientific research and analysis regarding the potential role of pesticides among the factors affecting the health and well-being of bees. The report concludes with a summary of recent regulatory activity regarding neonicotinoids, a type of pesticide, and also provides the statutory authority and regulatory activities related to pesticide use at the U.S. Environmental Protection Agency (EPA), the federal agency charged with assessing risks and regulating U.S. sale and use of pesticides. The focus of this report on bee exposure to pesticides is not intended to imply that pesticides are any more or less important in influencing the health and wellness of bees than any of the other identified factors influencing bee health. In the United States, honey bee colony losses due to bee pests, parasites, pathogens, and disease are not uncommon. However, in late 2006, concerns about honey bees gained heightened attention when commercial beekeepers along the East Coast began reporting sharp declines in their bee colonies. Because of the severity and unusual circumstances of these colony declines, scientists named this phenomenon colony collapse disorder (CCD). This issue was legislatively active in the 110 th Congress and resulted in increased funding for honey bee research, among other types of farm program support to protect pollinators, as part of the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ). The 2014 farm bill ( P.L. 113-79 ) reauthorized and expanded upon many of these provisions. The U.S. Department of Agriculture (USDA) reports that U.S. beekeepers continue to lose colonies each year. Since 2006, USDA estimates that overwinter bee colony losses have averaged nearly 30% annually. However, USDA reports that in 2012/2013, "there were more colonies that dwindled away" rather than suffering from CCD, which is characterized by a sudden loss in bee colony populations and the absence of dead bees. USDA also claims that "beekeepers did not report CCD as a major cause of colony loss" for overwinter losses reported in its 2012-2013 and 2011-2012 surveys. These data are tracked for managed honey bees only. Comparable data and information is not collected available for native or wild bee species. Such data collection is complicated by sheer number and solitary nature of native and wild bee species. To date, the precise reasons for honey bee colony losses are still unknown. USDA and most scientists working on the subject seem to agree that none of the research conclusively points to one single cause for the large-scale number of honey bee deaths. This general conclusion was reconfirmed in a May 2013 report by USDA and the U.S. Environmental Protection Agency (EPA), National Stakeholders Conference on Honey Bee Health (commonly referred to as the "USDA-EPA joint report"). A 2007 study by the National Research Council (NRC) of the National Academy of Sciences, Status of Pollinators in North America (referred to here as the 2007 NRC study), also provides a detailed scientific context for bee health. A series of other reports documenting the findings of USDA's ongoing research also describes the many factors affecting honey bees. See Figure 1 . Reasons cited for bee population declines include a wide range of possible factors. Potential identified causes include bee pests and diseases, diet and nutrition, genetics, habitat loss and other environmental stressors, agricultural pesticides, and beekeeping management issues, as well as the possibility that bees are being harmed by cumulative, multiple exposures and/or the interactive effects of each of these factors. One issue widely reported in the media is the potential role that pesticides—in particular, neonicotinoid pesticides—might play in overall bee health. As one of the potential causes of honey bee colony declines, this report addresses what role, if any, pesticides play in influencing the health and wellness of bees. Regarding honey bee health, the current state of knowledge of pesticides was summarized in a 2013 report by USDA and EPA: There is broad consensus among all stakeholders that pesticide use should not affect honey bees in such a way that (1) honey production is reduced or (2) pollination services provided by bees are threatened.... However, it is not clear, based on current research, whether pesticide exposure is a major factor associated with U.S. honey bee health declines in general, or specifically affects production of honey or delivery of pollination services. It is clear, however, that in some instances honey bee colonies can be severely harmed by exposure to high doses of insecticides when these compounds are used on crops, or via drift onto flowers in areas adjacent to crops that are attractive to bees. This report examines in greater detail the role of pesticides, providing a summary of selected scientific literature. The relative importance of pesticides in U.S. or global bee health is a subject of numerous research projects, some of which are discussed in this report. Some groups have expressed concern about the assessment of most experts that the causes of pollinator health concerns are multifaceted and may involve the interaction of multiple factors, since this may deflect attention from the potential role of exposure to pesticides. On the other hand, some groups appear unwilling to acknowledge that pesticide exposure may play an important role in pollinator health concerns, especially if this acknowledgment leads to restrictions or reductions in the use of certain pesticides or related crop pest controls. This report provides information regarding the potential role of pesticides in the health of bee colonies, and also the importance of pesticides relative to other influences on bee health. The report provides general information about the nature of pesticides, pesticide uses, and pesticide regulation in the United States, as well as more specific information about the registration status of a class of pesticides known as neonicotinoids, which have been implicated in some studies concerning honey bee colony declines. This report also describes a range of options to address pesticide exposure by bees, including implementing crop- and/or product-specific best management practices (BMPs) regarding pesticide use and applications. Some U.S. cities as well as some other countries, including Canada and those in Europe, have opted to institute restrictions on the use of certain pesticides. Congress has introduced similar legislation, but has also considered alternative policy options to address this issue. Pesticides are broadly defined in U.S. law as chemicals and other products used to kill, repel, or control pests. Familiar examples include pesticides used to kill insects (insecticides) and weeds (herbicides) that can reduce the yield, and sometimes harm the quality, of agricultural crops, ornamental plants, forests, and pastures, or wooden structures (e.g., through termite damage). But the broad legal definition of "pesticide" also applies to products with less familiar "pesticidal uses." For example, substances are pesticides when used to control mites, mold, mildew, and other nuisance growths in hives or on equipment. The term also applies to disinfectants and sterilizing agents, animal repellents, rat poison, and many other substances. An estimated 18,000 pesticide products are currently in use in the United States. Pesticides vary greatly in toxicity, persistence in the environment, and ability to bioaccumulate up the food chain, as well as in the range of plants and animals that are likely to be affected in the event of exposure. Some are nearly nontoxic to some species but exquisitely toxic to other species. All pesticides are regulated by EPA under the authority of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and approximately 5,800 pesticide products used in food production also are regulated under the Federal Food, Drug, and Cosmetic Act (FFDCA). FIFRA requires EPA to regulate the sale and use of pesticides in the United States through product registration and labeling so as to prevent unreasonable adverse effects on people and the environment, taking into account the costs and benefits of various pesticide uses. FIFRA prohibits the sale of any pesticide in the United States unless it is registered (licensed) and labeled to indicate approved uses and restrictions. It is a violation of the law to use a pesticide in a manner that is inconsistent with the label instructions. EPA registers each pesticide product for each approved use. For example, a product may be registered for use on bee hives to control mites or as a seed treatment for corn. In addition, FIFRA requires EPA to reregister pesticides first registered prior to 1984 and to review all registered pesticides periodically on a 15-year cycle, based on new data that meet current regulatory and scientific standards. For the 600 or more active ingredients in pesticide products that are registered for use in food production, Section 408 of the FFDCA authorizes EPA to establish maximum allowable residue levels (also known as "tolerances") to ensure that human exposure to the pesticide ingredients in food and animal feed will be "safe." A "safe" tolerance is defined in the law as a level at which there is "a reasonable certainty of no harm" from the exposure, even when considering total cumulative and aggregate pesticide exposure of children. Under the FFDCA, foods (or animal feeds) with a residue of a pesticide ingredient for which there is no tolerance established, or with a residue level exceeding an established tolerance limit, are declared "unsafe" and "adulterated"; such foods cannot be sold in interstate commerce or imported to the United States. Pesticides may not be registered under FIFRA for use on food crops unless tolerances (or exemptions) have been established under the FFDCA. When pesticide manufacturers apply to register an active ingredient for a pesticide, a commercial pesticide product, or a new use of a pesticide registered under FIFRA Section 3, EPA requires them to submit scientific data on toxicity and behavior in the environment. In evaluating a pesticide registration application, EPA assesses a range of potential human health and environmental effects associated with use of the product. EPA's process of registering a pesticide comprises a scientific, legal, and administrative procedure involving the ingredients of the pesticide; the particular site or crop where it is to be used; the amount, frequency, and timing of its use; and storage and disposal practices. EPA may require data from any combination of more than 100 different tests, depending on the potential toxicity of active and inert ingredients and degree of exposure. To register a pesticide for use on food, EPA also requires applicants to determine the amount of residue that could remain on crops, as well as on (or in) food products (such as corn syrup), assuming that the pesticide product is applied according to the manufacturers' recommended rates and methods. Based on the data submitted, EPA determines whether and under what conditions a proposed pesticide use would present an unreasonable risk to human health or the environment, and, for a food or residential use, whether its use would be safe. Some features of pesticides that might affect registration decisions include the specificity of the pesticide for the targeted pest, its toxicity to people who apply it, its tendency to persist in the environment over time, and its ability to bioaccumulate in animals higher in the food chain. EPA specifically takes into account unintended harm to bees and available information for other nontargeted insects in its registration decisions. EPA requires studies to determine acute (short-term) toxicity of a pesticide on individual bees when they come into body contact with pesticide residue. EPA also collects reports on bee-kill incidents. If a pesticide appears to be very toxic to bees, EPA may require long-term studies of its effects. If the risk is determined to be unreasonable or unsafe, EPA attempts to mitigate the risk by adjusting requirements on the label (for example, requiring a buffer zone around lakes and streams or requiring personal protective equipment for pesticide handlers). If the risk remains unreasonable or unsafe, EPA will refuse to register the pesticide. If the risk is determined to be reasonable and safe, registration is granted, and the agency specifies the approved uses and conditions of use, including safe methods of pesticide storage and disposal, which the registrant must explain on the product label. EPA can and often does require specific application methods to be printed on the product label to minimize environmental damage. For example, the label sometimes requires that application of certain pesticides occur only when bees are not foraging, when there is little wind, or in a granular form or as a seed coating rather than aerially, in order to minimize spray drift off property. Pesticide registrations are reviewed at least once every 15 years to consider new scientific information and may be reviewed at any time in response to reports of adverse effects and possible unreasonable risks from use of particular pesticides. Neonicotinoids are a relatively new major class of insecticides and among the fastest-growing class of insecticides in modern crop protection. Developed in the 1980s, some products such as imidacloprid were first introduced in the early to mid-1990s, but not widely marketed until the mid-2000s. Neonicotinoids are systemic pesticides that, regardless of application method (spray, drip irrigation, granular spreading, or seed coating), once taken into the plant, migrate into all parts, including flowers, pollen, and nectar. Neonicotinoids are related to nicotine and were developed as an alternative to highly toxic (to humans) organophosphate insecticides such as methyl parathion. Active ingredients of some of the most commonly applied neonicotinoids include imidacloprid, clothianidin, and thiamethoxam. Others include acetamiprid, dinotefuran, nitenpyram, and thiacloprid. (See text box below.) Neonicotinoids are generally considered to be reduced-risk compared to some other types of pesticides, and have low toxicity to mammals, birds, and fish compared to some other types of pesticides. However, as their use has increased, so have concerns about their potential harm to birds, earthworms, aquatic insects, and insect pollinators, including bees. They comprise a class of active ingredients that have come under considerable scrutiny with respect to their potential effects on bee health. The attention is partly due to an incident of misuse (that is, use not in accord with the pesticide label) of one neonicotinoid, imidacloprid, in Germany that resulted in a large bee kill, as well as widespread beekeeper concerns about use of another neonicotinoid, clothianidin, and its impact on bees in France. Neonicotinoids are insect neurotoxins that vary in strength of their effect on honey bees. The scientific evidence to date indicates that although neonicotinoids are highly toxic to bees exposed to relatively high levels, individual pesticides in this class are not the only cause of declining bee health, and pyrethroid exposures may be more significant. Although neonicotinoids have been a focus of scientific, public, and political interest, they have not been proven to be the primary cause of declines in bee health. Some experts, however, emphasize that research studies support the hypothesis that "total pesticide load" is an important influence on honey bee health, probably in combination with mite infestation, poor nutrition, viruses, and perhaps other stressors. Bees can be exposed to numerous different types of pesticides applied to field crops and other types of plants in areas where they forage or maintain their hive. In addition, beekeepers may also use pesticides registered for the control of bacteria, fungi, mites, and other bee pests. These pesticides are applied within and in the vicinity of hives. Besides the active ingredients, pesticide products include other ingredients, such as "inerts" or adjuvants that are intended to improve delivery of the active ingredient to the target pest. Others are used to increase the toxicity of a pesticide, for example, by inhibiting breakdown of a pesticide by insets. Studies have shown that bees are exposed to pesticides in many ways throughout the foraging period: from planter exhaust material produced during the planting of treated seed; from the soil of both planted and unplanted fields; in flowers growing near these fields; as well as applications in or near bee hives. Bees also sometimes are exposed to pesticides accidentally, either when pesticides are misused or misapplied or when they are used according to label directions to control pests in areas frequented by bees—for example, alongside roads or rights of way for the control of weeds, trees, or other pests; on or near commercial farm crops; or on or near fields, lawns, and gardens to control fleas, ticks, weeds, grubs, mosquitos, or other adult insects. Figure 2 illustrates some significant paths of bee exposure to pesticides applied as a spray or as a soil or seed treatment (systemic). If bees happen to fly through a newly treated field or dust clouds from planting of seeds coated with pesticide or are orally exposed to pesticide in food or water, and if exposure is high enough, bees may be sickened or die from pesticide exposure. With respect to the role of pesticides in honey bee health, "[t]he most pressing research questions lie in determining the true pesticide exposure that bees receive and the effect, if any, that pervasive exposure to multiple pesticides have [sic] on the health and productivity of whole honey bee colonies." Pesticides are reported to have adverse local impacts on honey bees and some native bees. Widespread use of herbicides reduces habitat available to bees; many pesticides are known to be lethal to bees, given sufficient levels of exposure; and some reports of local bee kill incidents have been well documented. Effects on individual bees may be lethal or sublethal depending on dose and other conditions of exposure. A summary of the types of sublethal effects reported in bees exposed to pesticides includes decreased navigation, orientation, and communication abilities; altered foraging behavior and motor activity; short- and long-term memory loss; impaired learning behavior and sensory detection; compromised immune functioning; increased susceptibility to diseases and pests; reduced fecundity (fertility and reproduction); and impaired reproduction and development. Although pesticides have been shown to damage bee health, it is unclear whether the level of harm is sufficient to attribute pesticides as the single or as the major cause of honey bee population declines. The Appendix provides a summary of selected scientific literature based largely on publications in peer-reviewed journals. In addition, a number of industry and advocacy groups have compiled literature reviews regarding pesticide effects on bees, not all of which are specifically discussed in this report. In general, studies looking at impacts of pesticides on other animal species, such as birds, are also not addressed. Best management practices (BMPs) are available for beekeepers, crop producers, and pesticide applicators and include environmentally responsible pest management practices to reduce risk and minimize pesticide exposure in bees. A number of states have also developed guidance to protect pollinators. Some of these resources are listed on the Pesticide Environmental Stewardship (PES) website and on EPA's website. For beekeepers, guidance by apiculturists and university extension services emphasizes the importance of reducing the exposure of bees to insecticides with high toxicity, recommending that if such chemicals are used in an area where bees are foraging, steps may be necessary to reduce risk of poisoning. This involves both selecting a site for an apiary in an area with low pesticide risk and notifying "growers and applicators in the area, the county agent, and the State Apiary Inspector of the location of your hives.... If the insecticide to be used has a long residual life and is being applied to a plant where bees are foraging, it may be best to move your bees out of the area." For growers, recommendations involve reducing the hazards associated with insecticides, including avoiding the use of dusts, such as those from treated seeds, and using chemicals with reduced risk to bees whenever possible. Other recommendations include applying insecticides "in the late evening, night, or early morning when fewer bees will be foraging, and when spray drift and volatilization due to extreme heat are at a minimum"; not spraying "when winds favor drifting, and us[ing] ground applications instead of air where possible"; and avoiding "spraying when the crop or other plants in the field or nearby (including weeds) are in bloom." Some agricultural groups provide such guidance to their growers. For example, the Almond Board of California recommends that growers avoid applying insecticides when plants are in bloom or when pollen is available and honey bees are feeding. Additional grower BMPs are listed in the text box below. Pesticide applicator BMPs recommend avoiding pesticide use when crops are blooming and applying pesticides to blooming crops only after bees are done foraging for the day and preferably at night. Bayer Crop Science notes the importance of following pesticide label recommendations as "naturally beneficial to bees' safety," as well as cooperation between farmers and beekeepers "to optimize spray times and minimize exposure to foraging bees." Such BMP guidance is generally voluntary. Several studies suggest, in general, adoption of voluntary BMPs is characterized by both slow adoption rates (i.e., long lead times) and long lag times between BMP adoption and observed effects; also BMP implementation tends to be mostly self-funded. Some claim therefore that reliance on voluntary agricultural BMPs regarding pesticide use and potential pollinator impacts is unlikely to produce timely behavioral changes and BMP adoption, even with a broad outreach and education program. In response to recent bee die-offs in Canada, federal agencies there have instituted additional protective requirements when using treated seed in corn and soybean production. These include required use of safer dust-reducing seed flow lubricants; adherence to safer seed planting practices; pesticide and seed package labels with enhanced warnings; and evaluation of the need for neonicotinoid treatment on certain commercial crops. (More information on Canada's requirements is discussed in " Restrictions in Canada .") Agro-chemical industry representatives maintain that unwanted pesticide exposure is best addressed through "effective product labeling and the implementation of meaningful stewardship actions that help minimize harmful interactions," along with "crop- and product-specific integrated pest management (IPM) practices and messaging to improve bee and pollinator safety." However, some claim that because the use of systemic insecticides applied via seed coatings is mostly "prophylactic" (i.e., applied regardless of actual pest pressure) the use of such insecticides violates basic IPM principles, which recommend minimizing use of chemical pesticides through pest monitoring, maximizing the use of biological and cultural controls, applying chemical pesticides only when needed, and avoiding broad-spectrum, persistent compounds. The text box below provides additional information on IPM practices. Other guidance by apiculturists and university extension focuses on providing recommendations to private landowners and homeowners for proper use of pest control products on ornamental plants. One recommendation is to avoid applying any pesticides, including insecticides and fungicides, during bloom of ornamental plants that attract bees (e.g., heather, lavender, linden, rhododendron, and rose). It is also recommended that any pesticides be applied "only after flower petals have fallen, when ornamental plants are less attractive to bees," and that all specific requirements to protect bees on the pesticide label be strictly followed. If pesticides are used when plants are in bloom, those that are less toxic to bees are recommended. Some recommend using certain pesticides—including products containing clothianidin, dinotefuran, imidacloprid, and thiamethoxam—only after flower petals have fallen, and avoiding soil drench or tree injection methods when using these products for plants known to attract bees because "these methods may contaminate nectar and pollen for up to several years after the insecticide is applied," or, alternatively, recommend against buying plants treated with insecticides containing these ingredients. Consumer campaigns have been initiated to encourage businesses and home gardening centers to stop selling certain pesticides or plants treated with these products because of concerns about the effects on bees and other pollinators. A consumer campaign initiated by the Center for Food Safety highlights that more than 60 commonly used home and garden products contain neonicotinoid pesticides and recommends that homeowners avoid certain commonly used pesticide products. In addition, concerns have been raised about the use of mosquito control services by some homeowners, because of potential adverse effects to bees and other beneficial insects that might feed on plants or be exposed to pesticides within the sprayed areas, as well as effects to species on adjacent or nearby property due to drift. In June 2014, the Obama Administration issued its Presidential Memorandum, "Creating a Federal Strategy to Promote the Health of Honey Bees and Other Pollinators," directing federal agencies to take steps to protect and restore domestic populations of pollinators. It established a "Pollinator Health Task Force," co-chaired by USDA and EPA, with representatives of the Departments of State, Defense, the Interior, Housing and Urban Development, Transportation, Energy, and Education; among other agencies and offices. The task force is directed to develop a National Pollinator Health Strategy, which is to include a Pollinator Research Action Plan to "focus federal efforts on understanding, preventing, and recovering from pollinator losses." Among the many activities expected to inform the action plan is "identification of existing and new methods and best practices to reduce pollinator exposure to pesticides, and new cost-effective ways to control bee pests and diseases." Task force member agencies will develop plans to increase and improve pollinator habitat. These plans may include "use of integrated vegetation and pest management," among other actions. Member agencies will also "make any necessary and appropriate changes to enhance pollinator habitat on federal lands through the use of integrated vegetation and pest management and pollinator-friendly best management practices." The task force is expected to release its National Pollinator Health Strategy in spring 2015. In November 2014, USDA and EPA held a number of public listening sessions to inform the task force members. Concerns about pesticide use were among the major discussion points. Commercial beekeepers, environmental groups, and some food businesses continue to push for restrictions on pesticide use and question whether other factors, such as parasitic mites, are the primary driver behind bee declines. Most pesticide industry groups and commercial growers continue to encourage broader consideration beyond pesticides and claim that some alternative pesticides are more toxic than neonicotinoids. Currently, at EPA, the agency's pollinator strategic plan outlines efforts to advance scientific knowledge and assessment of pesticide risks to pollinators; improve management tools for mitigating risks to pollinators; and increase and broaden communication and public outreach. In 2013, USDA and EPA published a joint report, National Stakeholders Conference on Honey Bee Health . Among the goals of the conference were to "synthesize the current state of knowledge regarding CCD, bee pests, pathogens, and nutrition, potential pesticide effects on bees, and bee biology, genetics and breeding." The report's key findings include recommendations to address risks to honey bees from parasites and disease; increase the genetic diversity in bee colonies; and improve nutrition for honey bees. In addition, regarding pesticides, the report acknowledged the following needs: Collaboration and Information Sharing. Best management practices (BMPs) associated with pesticide use and bees are known but are not widely or systematically followed by U.S. crop producers. "Informed and coordinated communication between growers and beekeepers" is needed, along with "effective collaboration between stakeholders on practices to protect bees from pesticides." Beekeepers have identified the need for "accurate and timely bee kill incident reporting, monitoring, and enforcement." Additional Pesticide Research. According to EPA, "[t]he most pressing pesticide research questions relate to determining actual pesticide exposures and effects of pesticides on bees in the field and the potential for impacts on bee health and productivity of whole honey bee colonies." The National Honey Bee Health Stakeholder Conference Steering Committee is made up of representatives from Pennsylvania State University; from USDA's Office of Pest Management Policy (OPMP), National Institute of Food and Agriculture (NIFA), Agricultural Research Service (ARS), Animal and Plant Health Inspection Service (APHIS), Natural Resources Conservation Service (NRCS), and National Agricultural Statistics Service (NASS); and from EPA's Office of Pesticide Programs (OPP). Much of the current research on bee health is being conducted by scientists at USDA and its Beltsville bee laboratory, by the USDA-supported Bee Informed Partnership, and by scientists at many of the land-grant universities nationwide. Neonicotinoid pesticide registrations are being reviewed by EPA. According to EPA: Some uncertainties have been identified since their initial registration regarding the potential environmental fate and effects of neonicotinoid pesticides, particularly as they relate to pollinators. Data suggest that neonicotinic residues can accumulate in pollen and nectar of treated plants and may represent a potential exposure to pollinators. Adverse effects data as well as beekill incidents have been reported, highlighting the potential direct and/or indirect effects of neonicotinic pesticides. Therefore, among other refinements to ecological risk assessment during registration review, we will consider potential effects of the neonicotinoids to honeybees and other pollinating insects. Review of several neonicotinoid pesticide registrations began December 2011, with review of imidacloprid starting a few years earlier, in December 2008 ( Table 1 ). EPA aims to review all neonicotinoids as a group. In July 2014, the Natural Resources Defense Council (NRDC) petitioned EPA to conduct an emergency review of the impacts of neonicotinoid pesticides on bees and to complete its review within one year. At an October 2014 meeting, an EPA official indicated that the agency would move up its dates for its review of neonicotinoid pesticides from 2018-2019 to 2016-2017. Currently, among the neonicotinoid pesticides under review, some products are being used under a "conditional" registration, while some products are being used under an "unconditional" registration. FIFRA provides that EPA register a pesticide if, among other findings, it meets the statutory standard, namely: (1) the pesticide will perform its intended function without unreasonable adverse effects on human health and the environment, and (2) the pesticide will not generally cause unreasonable adverse effects on human health and the environment when used in accordance with widespread and commonly recognized practice. Under an unconditional registration, after reviewing the data and information submitted to support an applicant/registrant's pesticide product application under consideration, if EPA determines that the pesticide meets the statutory standard and there are no outstanding data requirements, the agency may approve an "unconditional" registration. If, however, EPA finds that the pesticide meets the standard for registration, but there are outstanding data requirements, the agency may, under certain circumstances, grant a "conditional" registration. Before granting a conditional registration, EPA must determine that, although an application lacks some of the necessary data, use of the pesticide would not significantly increase the risk of unreasonable adverse effects on the environment during the time needed to generate the necessary data. A product's "conditional" or "unconditional" status is determined on a product registration by product registration basis, and not for the pesticide's active ingredient as a whole. An indication of a product's current status can be found at EPA's searchable label database. The U.S. Government Accountability Office (GAO) has conducted studies that are critical of EPA's pesticide registration process, particularly regarding the program's conditional registrations. Environmental and other groups argue that conditional registrations are a loophole in EPA's requirements, allowing pesticides onto the market that might not otherwise be allowed under a thorough agency review. These groups further claim that EPA has overused conditional registrations and that the agency does not have a reliable data-gathering system to track conditional registrations. GAO's 2013 report states that "the total number of conditional registrations granted is unclear" due to database inaccuracies and confusion in EPA's recordkeeping system for tracking pesticides. In the process of reviewing registrations for neonicotinoids, EPA has revised its risk assessment process "to reflect advancements in the state of the science that underlie bee exposure and effects assessments." The draft risk assessment policy was released to the public, and materials were distributed and discussed at a FIFRA Scientific Advisory Panel (SAP) meeting in September 2012. The final risk assessment guidance was released in June 2014. The guidance is founded on EPA's ecological risk assessment framework, integrates an analysis of honey bees and other pollinators within the agency's broader components of ecological risk assessment, and was prepared in collaboration with Health Canada's Pesticide Management Regulatory Authority and California's Department of Pesticide Regulation. The guidance describes the basic framework of the risk assessment process and the data used to support risk management decisions, and includes a process to assess both foliar spray applications and soil/seed treatment applications. Some groups argue that EPA does not take into account chronic, sub-lethal effects in its risk assessments, nor synergistic effects with other compounds used in real field settings, such as fungicides, adjuvants, and inerts. These groups also claim native and wild bee species are generally not addressed as part of EPA's risk assessment. Since most native bee species (about 70%) are ground nesting, these groups further claim that the use of systemic insecticides poses risks to native bees from exposure through their habitats in the ground. Native and wild bee species are also generally not addressed as part of EPA's pesticide labeling approach (discussed in " EPA's New "Bee Advisory" Labeling Requirements "). As part of EPA's overall review, the agency has conducted a study of the benefits of neonicotinoid seed treatments for insect control in U.S. soybean production. EPA's analysis concluded: "these seed treatments provide little or no overall benefits to soybean production in most situations. Published data indicate that in most cases there is no difference in soybean yield when soybean seed was treated with neonicotinoids versus not receiving any insect control treatment." Reportedly, EPA also studied the potential benefits of neonicotinoid seed treatments to corn production but has not published those findings. In 2013, EPA and USDA conducted a summit with stakeholders on reducing exposure to dust from treated seed and potential acute exposure of honey bees and pollinators to pesticides. Information and stakeholder presentations from the summit are at EPA's website. In September 2014, EPA announced that it had received "several initial filings of pesticide petitions requesting the establishment or modification of regulations for residues of pesticide chemicals in or on various commodities," including a petition by Syngenta that EPA increase the allowable threshold for residues of thiamethoxam. Syngenta's petition would apply to alfalfa, barley, corn and wheat, both the crop itself and the straw and stover left over after cultivation. According to some reports, the petition seeks to increase the tolerance levels ranging from about 1.5 times current levels for stover from sweet corn to about 400 times current levels for hay from wheat. EPA's review of this request is still pending. Thiamethoxam is one of the neonicotinoid pesticides banned for use in the European Union. In August 2013, EPA announced that it had developed new pesticide labels that prohibit use of some neonicotinoid pesticide products where bees are present. The new requirements apply to foliar applications of products containing imidacloprid, dinotefuran, clothianidin, thiamethoxam, tolfenpyrad, and cyantraniliprole. Exceptions apply under certain conditions for agricultural crops and commercially grown ornamental plants. The new labels require a "Pollinator Protection Box" (or "bee advisory," Figure 3 ) and bee icon with information on routes of exposure and spray drift precautions, as well as new language added under "Directions for Use." The bee advisory will, among other things, alert pesticide applicators to restrictions regarding certain pesticides when bees are present; clarify that pesticides cannot be applied until all petals have fallen; and emphasize the importance of avoiding pesticide drift (for example, due to wind) to other areas where bees may be present. The new bee icon will signal the pesticide's potential hazard to bees, and warns that direct contact and ingestion can harm pollinators. Information is at EPA's website. EPA's new labeling requirements have received mixed reviews from beekeepers, who argue that the new labels are inadequate and include exceptions that may make them less protective for bees and other pollinators. Groups, such as the Pollinator Stewardship Council, have expressed concerns about EPA's label as well as concerns about the conditions under pesticide applications would be allowed. Figure 4 shows some of this group's concern with EPA's label, including concerns that none of the terms in the label is defined and many are ambiguous (which they claim makes the requirements unenforceable), as well as the concern that the label refers applicators to a pesticide industry website, among several other issues. Some groups, including the Pollinator Stewardship Council, have voiced concerns about EPA's exceptions to the new labeling requirements, which would allow application under certain conditions. Exceptions to the labeling requirements are as follows. For " Crops Grown Under Contracted Pollination Services ," the label for some neonicotinoid pesticide products states: "Do not apply this product while bees are foraging" or "until flowering is complete and all petals have fallen." Exceptions are allowed for in cases where "an application must be made when managed bees are at the treatment site, the beekeeper providing the pollination services must be notified no less than 48 hours prior to the time of the planned application so that the bees can be removed, covered or otherwise protected prior to spraying." For " Food Crops and Commercially Grown Ornamentals not Under Contract for Pollination Services But Attractive to Pollinators ," the label for some products also states: "Do not apply this product while bees are foraging" or "until flowering is complete and all petals have fallen." Exceptions are allowed for in cases where: The application is made to the target site after sunset. The application is made to the target site when temperatures are below 55˚F. The application is made in accordance with a government-initiated public health response. The application is made in accordance with an active state-administered apiary registry program where beekeepers are notified no less than 48 hours prior to the time of the planned application so that the bees can be removed, covered, or otherwise protected prior to spraying. The application is made due to an imminent threat of significant crop loss, and a documented determination consistent with an IPM plan or predetermined economic threshold is met. Every effort should be made to notify beekeepers no less than 48 hours prior to the time of the planned application so that the bees can be removed, covered, or otherwise protected prior to spraying. Among the expressed concerns regarding EPA's exceptions to its label advisory are: harm caused by foliar application of the affected pesticides will be the responsibility of the beekeeper, including damage or die-off from applications allowed for under the labels exceptions; uncertainty about what constitutes notifying a beekeeper to move their bees, and concern that native bees will be harmed since they are not similarly managed; foliar application of adjacent or nearby sites may affect bees since they have a 3-mile to 7-mile forage range; exceptions to applications made when temperatures are below 55˚F may affect bees that forage at temperatures as low as 45˚F; and other labeling issues, including who decides when foliar treatments are needed, what are the criteria for determining whether treatment are needed, where should beekeepers transport bees during applications, and who determines what mitigation measures are appropriate. Exceptions do not apply to non-agricultural crops, such as ornamental crops grown by homeowners, and the pesticide label requires that the product not be applied while bees are foraging or when plants are flowering. EPA is working with states to draft guidance on the development of EPA-approved, state-managed pollinator protection plans. Guidance is being developed by EPA's State FIFRA Research and Evaluation Group (SFIREG), and will outline a process for reviewing and accepting state pollinator protection plans as part of EPA's broader pollinator protection efforts related to pesticides. The draft guidance was presented at a December 2014 meeting of the Association of American Pesticide Control Officials (AAPCO), and contained information on the core elements for EPA-approved state pollinator plans, the process for EPA review and updating of state plans, how to reference state plans through labeling requirements, and how to access recommended best management practices. Pollinator protection plans are in place in several states, including California, Colorado, Florida, Mississippi, and North Dakota. Other states are considering similar initiatives. In October 2014, EPA announced a new voluntary Drift Reduction Technology (DRT) program to encourage the use of verified, safer pesticide spray products to reduce exposure and pesticide movement, and also to reduce costs to farmers from pesticide loss. EPA defines pesticide spray drift as the "movement of pesticide dust or droplets through the air at the time of application or soon after, to any site other than the area intended." More information is at EPA's website. A similar effort—the DriftWatch Specialty Crop Site Registry—provides for a voluntary communication tool between crop producers, beekeepers, and pesticide applicators, and is intended to protect high-value, pesticide-sensitive crops and commodities before applying pesticides. The program is currently in use in many midwestern and mid-Atlantic states. In July 2014, the U.S. Fish and Wildlife Service (FWS) in the Department of the Interior announced that it would phase out the feeding of genetically engineered crops to wildlife and the use of neonicotinoid pesticides in all of its wildlife refuges by January 2016. Initially this decision was meant to phase out the use of neonicotinoids in Region 1 only, which covers Oregon, Washington, Idaho, Hawaii, and the Pacific Islands. Under the guidelines, refuge managers will also need to comply with new mandatory requirements for all chemically treated seeds on refuge lands. In early 2013, Representative Austin Scott, chairman of a House Agriculture subcommittee, indicated that the committee would direct FWS to undergo "a uniform risk assessment process ... when making decisions on products already approved" under FIFRA and/or the Plant Protection Act. To date, no such action has been untaken. A number of cities and counties, among other local jurisdictions, have instituted restrictions on the use of neonicotinoid pesticides in an effort to protect pollinators. In March 2014, Eugene, Oregon, became the first U.S. city to restrict neonicotinoid use. (Despite the ban, a mass die-off of bees was reported in June 2014 at an apartment complex in northwest Eugene. It was attributed to insecticide sprayed on blooming linden trees.) Since then other cities have also instituted bans, including Seattle and Spokane in Washington; Shoreline, Minnesota; and Skagway, Alaska. Other cities and counties, such as Tucson and Pima County in Arizona, and Boulder County in Colorado, also are considering restrictions. Some state legislatures, including Alaska, California, Maryland, Minnesota, New York, New Jersey, Oregon, and Vermont, have considered legislation to further study and/or restrict neonicotinoid use. Some localities also have instituted other types of pesticide restrictions, such as with disclosure laws in the county of Kauaˋi in Hawaii. Other localities have implemented programs to encourage households and municipalities to pledge to create "pollinator-friendly, toxin-free ecosystem habitats," such as in the city and county of Denver, Colorado. Some state agencies are actively studying the issue. In addition, several states—California, Colorado, Florida, Mississippi, and North Dakota—have state pollinator protection plans in place, and other states are considering similar initiatives. (For information, see " EPA Support of State Pollinator Protection Plans ") Like the rest of the world, the countries of the EU have experienced overwinter honey bee colony losses. As reported by the nonprofit honey bee research association, COLOSS, overwinter colony losses averaged 9% in 2013/2014, the lowest since the group began collecting such data in 2007. Across countries, losses ranged from 6% to 12%. This is lower than results reported for 2012/2013, when overwinter losses ranged from 6% to a high of 37% across all reporting countries. Another report commissioned by the European Commission and EU member states concluded honey bee colony mortalities were "better than previously expected" and "higher than normal in certain countries, with significant regional (and possibly temporal) differences." In response to concerns about declining bee populations, in May 2013, the European Commission (EC) adopted Regulation No 485/2013 banning the use of certain neonicotinoid pesticides for a period of two years, among other proposed limits on the use of other pesticides. The regulation includes the following provisions: use of three neonicotinoid pesticides—clothianidin, imidacloprid, and thiamethoxam—is restricted for seed treatment, soil application (granules), and foliar treatment on bee attractive plants and cereals; any authorized uses are available to professionals only; any exceptions to these restrictions are limited to treating bee-attractive crops in greenhouses or in open-air fields after flowering; and restrictions are to be maintained for two years, effective December 1, 2013. As new information becomes available, the EC will review the approval conditions for these three pesticides and take into account relevant scientific and technical developments. Previous mitigation measures (EC Regulation No 1107/2009) restricted spraying of insecticides on bee-attractive flowering crops. The EC's 2013 regulatory action was in response to the European Food Safety Authority's (EFSA) scientific assessment that identified "high risks for bees for some uses of three neonicotinoids (imidacloprid, clothianidin and thiamethoxam) and fipronil," such that "the approval criteria of these pesticides were no longer satisfied." Regarding the three restricted pesticides, EFSA identified "high acute risks" for bees from exposure to pesticides associated with the production of several crops such as corn, grains, and sunflower, as well as exposure to residue in pollen and nectar in certain crops. The EU Commission has further proposed to restrict the use of fipronil, an insecticide which EFSA has identified as posing an acute risk to Europe's honey bees when they are exposed to seeds treated with the chemical. Other reports, such as a study published by the United Kingdom's Department for Environment, Food and Rural Affairs (DEFRA), dispute some of the findings linking bee health and exposure to neonicotinoids. Other studies also highlight the likely multifaceted nature of possible factors contributing to pollinator declines. Researchers in Europe continue to study this issue and reportedly are in the process of completing a large-scale study reviewing the landscape-scale effects of neonicotinoid use on crops. Some member state officials are also questioning the ban and its possible effects on agricultural production. In Canada, the Canadian Association of Professional Apiculturists (CAPA) reports that overwinter honey bee colony losses in 2013/2014 averaged 25% across Canada, but some provinces, such as Ontario, reported wintering losses of 58% . In addition, in 2012, Health Canada's Pest Management Regulatory Agency (PMRA) began reporting higher bee mortalities associated with pesticide applications in some areas as part of its pesticide incidents reporting. In April 2012, PMRA reported a "significant number of honey bee mortality reports" in the provinces of Alberta, Manitoba, Saskatchewan, Nova Scotia, Quebec, and Ontario. Most reports were from southern Ontario, involving more than 40 beekeepers and 240 different locations, with also one report from Quebec involving eight bee yards. Health Canada concluded "an unusually high number of reports of honey bee mortalities were received from beekeepers in corn growing regions of Ontario and Quebec.... Timing and location of these honey bee mortalities appeared to coincide with planting corn seed treated with insecticides." PMRA's preliminary findings conclude "there is an indication that pesticides used on treated corn seeds may have contributed to at least some of the 2012 spring bee losses that occurred in Ontario." The agency continued to "receive a significant number of pollinator mortality reports from both corn and soybean growing regions of Ontario and Quebec, as well as Manitoba" in spring 2013. A 2013 field study by researchers at the University of Guelph reported no link between bee health and pesticide applications. Following this investigation, PMRA determined that "current agricultural practices related to the use of neonicotinoid treated corn and soybean seed are affecting the environment due to their impacts on bees and other pollinators." The agency implemented measures to reduce honey bee exposure to dust generated during planting of treated corn seed, including "communication of best practices to reduce the exposure of honey bees, labelling of treated seed, a treated seed dust standard, and development of technical solutions to reduce dust, including developments in the areas of seed coating quality, seed flow lubricants, planting equipment, and disposal of treated seed bags." For the 2014 planting season, PMRA issued additional protective measures for corn and soybean production. PMRA has continued to re-evaluate nitro-guanidine neonicotinoids to determine if further regulatory action was needed. PMRA is reportedly also planning to implement label changes similar to those being considered by EPA in the United States (see " EPA's New "Bee Advisory" Labeling Requirements "). In November 2014, the province of Ontario announced a proposal to reduce the use of neonicotinoid-treated corn and soybean seed (based on acreage of treated seeds planted) by 80%. If approved, the new regulations would go into effect by July 1, 2015, prior to the 2016 planting season. Manufacturers of the chemicals claim the decision is not supported by science. The Canadian industry association, CropLife Canada, is also urging the Canadian government to broaden its examination of bee population declines beyond pesticides and neonicotinoids. The Canadian government continues to study this issue. In September 2014, two large beekeeping operations filed a class-action lawsuit on behalf of Canadian beekeepers against several chemical manufacturers, claiming thiamethoxam (and its predecessor, imidacloprid) and its breakdown product clothianidin led to more than C$450 million (about US$410 million) in total damages from 2006 to 2013. The alleged chronic effects of the use of these pesticides include "bee deaths; impaired reproduction; immune suppression; behavioral abnormalities resulting in hive loss; reduced honey production; impacts on the quality of honey; contamination of hive equipment; loss of queen bees; breeding stock; and difficulties fulfilling honey product or pollination contracts." The lawsuit alleges that Bayer and Syngenta were "negligent in their design and development of the neonicotinoid pesticides," and were and continue to be "negligent in their distribution and sale of the neonicotinoid pesticides," as well as "negligent in permitting or failing to prevent the damages caused by the neonicotinoids to the beekeepers." The plaintiffs further claim that Bayer and Syngenta "knew or ought to have known that the neonicotinoids would cause damage to the property" of beekeepers, since they allege that the harm to the beekeepers was "reasonably foreseeable." A number of environmental and food safety advocacy groups, along with individual beekeepers, have remained active in pressing federal and state authorities on policies and issues pertaining to the approval and use of neonicotinoid pesticides, among other agrochemicals. Among these are the Center for Food Safety (CFS); Earthjustice; Pesticide Action Network North America (PANNA); Beyond Pesticides; Friends of the Earth; Sierra Club; and the Center for Environmental Health. These groups have published a series of widely available reports supporting their policy positions and/or have posted literature reviews on their organization's websites, and also have undertaken a series of legal challenges in these matters. In March 2013, CFS and a coalition of four beekeepers and five environmental and consumer groups filed a lawsuit against the EPA to stop the use of pesticides containing clothianidin and thiamethoxam, which beekeepers in the case claim is damaging the central nervous system of their bees. The lawsuit also challenges EPA's risk assessment framework for determining whether pesticides harm pollinators and questions EPA's approval of certain neonicotinoids. An opening brief was filed in December 2013 further challenging EPA's risk assessment framework and requesting that the court reverse EPA's decision to register sulfoxaflor. In July 2014, CFS, Earthjustice, PANNA, and Beyond Pesticides challenged California's approval of new agricultural uses for two neonicotinoid pesticides, Venom Insecticide and Dinotefuran 20SG. Previously, in 2005, two beekeepers residing in Minnesota sued the state's Department of Natural Resources for losses incurred from spraying of a pesticide, carbaryl. In that case, the pesticide users reportedly offered to settle, and the state's Department of Natural Resources stopped using the pesticide. These legal challenges follow previous requests for EPA to restrict the use of certain pesticides. In a March 2012 citizen petition, CFS and a coalition of beekeepers along with PANNA filed an "Emergency Petition" with EPA asking for a suspension of the use of clothianidin until it is proven safe to pollinators and the environment. EPA responded in part to the petition in July 2012. A few weeks later, EPA announced that it was denying the request to suspend registrations "to prevent imminent harm" because the petitioners did not meet the burden of proof for registration suspension. However, EPA received public comments on this decision and may revisit its decision as it reviews neonicotinoid registrations. Again, in July 2014, NRDC petitioned EPA to conduct an emergency review of the impacts of neonicotinoid pesticides on bees, and to complete its review within one year. For more information, see " EPA's Pesticide Registration Review of Neonicotinoid Pesticides ." In June 2013, a coalition of advocacy groups, including CFS, sent a letter to President Obama asking him to order EPA to ban use of neonicotinoid insecticides for at least two years. The letter asserts that the registration process lacks consideration of pesticide effects on colonies and focuses exclusively on acute mortality, rather than on sublethal effects of repeated exposure. Another letter followed in January 2015 from commercial beekeepers, environmental groups, and some food businesses, who continue to push for restrictions on pesticide use. Some major agrochemical companies—in particular, Syngenta AG (a global Swiss agribusiness company) and Bayer AG (a global German company)—have been actively engaged in defending the use of neonicotinoid pesticides, among other agrochemicals, and claim there is no evidence to support a systematic correlation between honey bee colony mortality and the use of neonicotinoids. Bayer's bee care pamphlet claims "poor bee health is correlated with the presence of Varroa , a parasitic mite, viruses and many other factors, but not with the use of insecticides." These companies and other industry groups, as well as the trade association CropLife Amercia, have published commissioned reports supporting their policy positions, and have supported various pollinator health as well as lobbying efforts. According to news reports, both Syngenta and Bayer are legally challenging the EU's neonicotinoid ban. Syngenta claims these pesticides are not responsible for the pollinator population declines, which they claim are instead the result of disease, viruses, habitat loss, and poor nutrition. According to reports, Syngenta wants to reverse the EU ban but also wants to be compensated for damages and "defend our reputation which has been significantly damaged." Syngenta claims the EU's decision to ban the pesticides is based on "a flawed process, an inaccurate and incomplete assessment by the European Food Safety Authority and without the full support of EU Member States." Syngenta also has petitioned EPA to increase the allowable threshold for residues of thiamethoxam. EPA published its proposal in September 2014. Given continued concerns about the health and well-being of honey bees and other pollinators, this issue has continued to be legislatively active. The 2014 farm bill ( P.L. 113-79 ) reauthorized and expanded provisions supporting research on honey bees and other pollinators that were enacted in the 2008 farm bill. In previous Congresses, bills were introduced to promote and improve habitat for honey bees and wild bees, among other pollinators. Still other introduced legislation would address a range of pesticide issues affecting pollinators. Over the past few years, Congress has conducted hearings on this issue and hosted a series of congressional briefings to discuss these and related issues representing a broad range of interested groups. For the 114 th Congress, Representative Rodney Davis, the incoming chairman of the House Agriculture Subcommittee on Biotechnology, Horticulture, and Research, is quoted as saying that bee health will be a top issue for his subcommittee. In the 113 th Congress, Representatives Earl Blumenauer and John Conyers Jr. introduced H.R. 2692 , the Saving America's Pollinators Act of 2013. The bill would have suspended registrations of neonicotinoids and banned new registrations of any pesticide for use on "bee attractive plants, trees, and cereals." This bill was initially introduced, in part, as a response to reports that 50,000 bees were found dead in a suburban shopping-center parking lot in Wilsonville, Oregon, in June 2013, reportedly due to exposure to pesticides used on trees near the parking lot to control aphids. Specifically, the bill would have required EPA to "suspend the registration of imidacloprid, clothianidin, thiamethoxam, dinotafuran, and any other members of the nitro group of neonicotinoid insecticides to the extent such insecticide is registered, conditionally or otherwise," under FIFRA (7 U.S.C. 136 et seq.) "for use in seed treatment, soil application, or foliar treatment on bee attractive plants, trees, and cereals." These suspensions on existing registrations and restrictions on new registrations would remain until more research is conducted and EPA determines that the insecticide will not cause "unreasonable adverse effects" on pollinators, including honey bees, native bees, and other pollinators. Such an assessment would be based on an evaluation of the published and peer-reviewed scientific evidence and a completed field study. The bill also would have required the Department of the Interior to coordinate with EPA in monitoring the health and populations of native bees, and annually report to Congress on their health and population status. H.R. 2692 was similar to proposals being implemented or considered in the EU and Canada. In particular, the bill's language regarding "bee attractive plants, trees, and cereals" is similar to that under the EU's ban of the use of three neonicotinoid pesticides—clothianidin, imidacloprid and thiamethoxam—for "seed treatment, soil application (granules) and foliar treatment on bee attractive plants and cereals." However, the EU's restrictions provide for certain exceptions (such as greenhouses and open-air fields after flowering), which are not provided for in H.R. 2692 . (See " Restrictions in the European Union " for additional information on the EU's ban.) In September 2014, the sponsors of H.R. 2692 , along with 58 other Members of the U.S. House of Representatives, sent a letter to EPA urging the agency to "restrict and/or suspend the use of neonicotinoids on bee-attractive crops and ornamental application," including restricting the "times, methods of application, and location" for use of these pesticides, as well as urging EPA to review its policies related to EPA's pesticide registration, among other recommendations. EPA received a similar letter from many environmental and sustainable agriculture organizations, including CFS, Friends of the Earth, Food and Water Watch, and other groups. Groups opposed to restrictions on pesticide use contend that comprehensive studies "challenge unsubstantiated claims against pesticides as a significant cause of colony decline" and note that "infrequent accidental exposures are not indicative of the general health of honey bee colonies." Some further claim "there is no evidence linking neonicotinoids to bee declines" or to adverse health effects on bees. They generally challenge studies that target neonicotinoids as the sole factor contributing to pollinator declines, and further maintain that unwanted pesticide exposure may be best addressed through "effective product labeling and the implementation of meaningful stewardship actions that help minimize harmful interactions." Others question whether crop-applied pesticides pose a major risk to bees, given current approved uses and beekeeping practices. In the 113 th Congress, Representative Austin Scott introduced H.R. 5447 , which would have amended U.S. pesticide laws (FIFRA; 7 U.S.C. 136a(c)(10)) to provide for expedited registration of pesticides that "improve managed pollinator bee health, including managing resistance to parasitic pests" and for expedited review of a pesticide registration that is "reasonably expected to improve the health of managed pollinator bees, including managing resistance to parasitic pests of managed pollinator bees," such as miticides. H.R. 5447 would have also required reports to Congress from both USDA and EPA. The report required from USDA would address the "extent and scope of the threat to the health of managed pollinator bees" from pathological factors (such as the parasitic mite, Varroa destructor ; other arthropod pests; and fungal, microbial, and viral diseases) and from environmental factors (including habitat, forage, beekeeper practices and husbandry, and nutritional needs of managed bees). The report required by EPA would address the availability of pesticides to manage parasites and also EPA's efforts to expedite approvals of new products to control parasites of managed bees. The bill would have defined "managed pollinator bee" to mean "any bee that is raised and housed in a managed hive or other appropriate housing and used for honey production, managed pollination of crops, or breeding for commercial purposes." The bill was supported by some U.S. crop producers and other industry groups. Some advocacy groups were opposed to H.R. 5447 and contend that "fast-tracking pesticide approvals" has contributed to current concerns involving bees and pesticides. They further complain that focusing attention on other factors contributing to bee declines (such as mites) tends to shift attention away from remedies that could address beekeeper concerns about pesticide exposure, such as instituting agricultural best management practices (BMPs) that might avoid application of insecticides during bloom, and minimize exposure to bees by avoiding applications when pollen is available and bees are feeding. In February 2015, EPA announced its intentions to fast track approval of oxalic acid dihydrate for use as a miticide in beehives. Oxalic acid has been used against varroa mites and is generally considered more safe compared to other higher risk chemicals. It has been approved for use in Canada since 2010, where a government analysis there claims: "An evaluation of available scientific information found that under the approved conditions of use the product has value and does not present an unacceptable risk to human health or the environment." Following is a summary of selected scientific literature based largely on publications in peer-reviewed journals. Bee Exposure to Pesticides Researchers at USDA and others found that "high levels" of fungicides were present in both crop and non-crop pollen collected by bees, and that "real world pollen-pesticide blends affect honey bee health." These scientists found very high levels of the fungicide chlorothalonil in pollen and wax, and found high levels of at least four insecticides, three other fungicides, and an herbicide. Chlorothalonil and the two miticides, fluvalinate and coumaphos, were most frequently detected in pollen and wax. A 2010 study tested samples of beebread, trapped pollen, brood nest wax, beeswax foundation, and adult bees and brood and found a broad range of pesticides, including acaricides (which kill arachnids like spiders, ticks, and mites), fungicides, insecticides, and herbicides. Bees can be exposed to neonicotinoids in many ways. One study identified multiple routes of exposure to low levels of neonicotinoids for honey bees living and foraging near agricultural fields planted with corn or soybeans. The highest potential exposure to the pesticides appeared to occur during planting season, when bee mortality was also high. Clothianidin was found in about half the bee-collected pollen sampled, thiamethoxam (which is quickly metabolized to become clothianidin) in 3 of 20 samples, and fungicides in all pollen samples. Levels of clothianidin in some pollen were high enough to kill bees. Clothianidin was detected in all dead and dying bees but in no healthy bees. Although corn is not an insect-pollinated crop, this research demonstrated that bees forage for corn pollen and take it back to the hive. About half the hive pollen sampled came from corn in this study. In addition, the study documented high levels of pesticide in exhaust material from mechanical planters when pesticides and talc were used to coat seeds, and found clothianidin in soil samples from planted and unplanted fields. Other studies have measured neonicotinoids in pollen and nectar of canola (rape seed), corn, and sunflowers grown from seed coated with pesticides. Levels found were below those known to be acutely toxic. Other studies have found that imidacloprid and thiamethoxam concentrations in nectar were greater in squash and pumpkin flowers when insecticide was applied to the soil than they were in canola and sunflowers grown from seed treated with neonicotinoids. Researchers also found metabolites of imidacloprid and thiamethoxam (clothianidin) in all parts of squash plants, along with the parent compound. A 2012 study found levels of neonicotinoids in bee-collected corn pollen that were similar to levels of imidacloprid determined by other scientists to have sublethal effects potentially affecting colony health. Similarly, a subsequent study in 2013 found that imidacloprid levels in pollen gathered from bees in the field were high enough to cause sublethal effects on honey bees and bumble bees, based on laboratory research. A 2013 study by the European Food Safety Agency (EFSA) of three neonicotinoid pesticides—imidacloprid, clothianidin, and thiamethoxam—determined that bees faced several risks including exposure to pollen and nectar, dust, and guttation fluid from maize. Another potential source of exposure was suggested by another 2012 study, showing that bees might be exposed to neonicotinoids in the corn syrup they are sometimes fed during the winter by beekeepers. However, the researchers did not sample corn syrup actually fed to bees, but rather showed that bees would consume sufficient imidacloprid to produce toxic sublethal effects if they were provided contaminated corn syrup in the hive. Other research found no pesticides in samples of high-fructose corn syrup obtained from three major suppliers. Pesticide Effects on Bee Health According to research cited in a 2007 study by the National Research Council (NRC), "the application of pesticides, especially insecticides used to control crop pests, kills or weakens thousands of honey bee colonies in the United States each year." Nevertheless, the study concluded that local bee kills "likely have not contributed significantly to the recent national decline in colony populations" [emphasis added]. Recent studies have begun to identify mechanisms by which some chemical interactions occur. For example, some fungicides may inhibit an enzyme that bees need to detoxify miticides. However, further research is needed since measurement difficulties continue to complicate study of this issue, including difficulty testing the in-field or field-realistic doses; effects at different life stages; how to account for cases of accidental exposure or exposure to multiple different types of pesticides; and how to account for species diversity (e.g., between honey bees and native bees), differences in nutritional needs/access and nesting sites, biological organization, and floral specialization. Generalizations about the relative importance of pesticides for global bee health cannot be drawn from available data, given the disparate study designs and results. Moreover, research has been and continues to be conducted, with most scientists focusing on a single pesticide or pathogen at a time. Consideration of interactions has been minimal—whether exposure from different types of chemicals or exposure from chemicals in combination with other factors. One study explains: Attempts to correlate global bee declines or CCD with increased pesticide exposures alone, have not been successful to date.… Pesticide interactions among various mixtures as well as with other stressors including Varroa and Nosema , IAPV, beneficial hive microbes, and impacts on bee immune systems all require further study. It seems to us that it is far too early to attempt to link or to dismiss pesticide impacts with CCD. The study noted that the doses of individual pesticides found in bees were not concentrated enough to be lethal, but the authors remained concerned about possible chronic problems caused by long-term exposure and possible additive or synergistic effects of exposure to the combinations of pesticides found. For example, numerous pesticides classified as pyrethroids that were found in the field have been shown to cause disorientation in honey bees. It is important to note that virtually all information about pesticide risks to bees derives from studies in cultivated fields or laboratories. There is little or no information about the possible impacts on bee populations of pesticides applied by homeowners (for example, to control mosquitos) or to ornamental plantings. Nevertheless, a sizeable and growing body of scientific research presents compelling evidence suggesting that pesticide exposure may be harmful to bees and other animal species. For example, a 2014 meta-analysis covering 800 peer-reviewed reports over two decades examined the reported effects of systemic pesticides on ecosystems and a range of animal species—terrestrial invertebrates, including insect pollinators; aquatic invertebrates; and birds. The analysis, conducted by entomologists and ornithologists based in Europe, concluded that neonicotinoid pesticides "pose a serious risk to honeybees and other pollinators such as butterflies and to a wide range of other invertebrates such as earthworms and vertebrates including birds." In response to reports that honey bees are disappearing and causing hives to collapse, recent studies of the impacts of exposure to imidacloprid and other neonicotinoids have focused more on their potential to affect complex behaviors in insects, including flight, navigation, olfactory memory, recruitment, foraging, and coordination. One study reported sublethal effects of neonicotinoid pesticides on honey bee foraging behavior that may impair the navigational and foraging abilities of honey bees. Another study found a reduction of foraging activity and homing behavior of honey bees exposed to treated crops at certain exposure levels of neonicotinoids. Scientists at Bayer Crop Science argue with the findings of these and other studies, claiming that the dose of pesticide delivered to bees in some studies is not "field-relevant," resulting in findings obtained "under artificial conditions" and "in conflict with" earlier studies. Some of the statements made in the 2012 Bayer Crop Science review of the scientific literature have been rebutted by researchers at Purdue University and Pennsylvania State University, based on comments submitted by the Center for Food Safety as part of EPA's public rulemaking docket. Among a list of concerns regarding various statements in the Bayer Crop Science report, Professor Frazier from Pennsylvania State University states: "To object to a specific dose on the basis of an estimated level without giving the reader the actual basis for this neglects not only good science protocol, but also obfuscates any arguments." Among other comments, Professor Krupke from Purdue University further acknowledges: "These data suggest that there is a strong likelihood that the neonicotinoids thiamethoxam and/or clothianidin were responsible for the bee kills we investigated." EPA has determined that clothianidin "has the potential to be highly toxic on both a contact and an oral basis" to honey bees. EPA also has reported that one honey bee field study submitted to the agency indicates that "mortality, pollen foraging activity, and honey yield were negatively affected by residues of clothianidin," but the residue levels causing the effect were not reported. Acute effects also have been demonstrated in another field study. It showed that honey bees can be killed by exposure to pesticide-contaminated talc if they fly through dust clouds associated with planting, but mortality appears to depend on high levels of humidity. Health Canada has concluded that corn planting also was implicated in bee mortalities in Ontario during the spring planting season in 2012. Research has shown that honey bee exposure to sublethal levels of pesticides, including neonicotinoids, exhibit impaired brood development, impaired olfactory associative behavior, and impaired homing ability. Exposure to sublethal levels of neonicotinoid has also been associated with higher rates of Nosema infection, and also reduced immune functioning in those bees infected, making bees more susceptible to viral infections. In another study, responsiveness to sucrose and the bee's "waggle dancing" abilities were adversely affected when honey bees ingested imidacloprid. Another study alternatively fed honey bee hives corn syrup treated with imidacloprid, while other hives were fed untreated corn syrup. After 6 months, nearly all the treated hives collapsed, while the untreated control hives remained healthy. Another study showed that imidacloprid ingestion by larvae of the stingless bee ( Melipona quadrifasciata anthidioidides ) resulted in decreased survival rates, negatively affected development of a specific region of the bee brain, and impaired walking behavior of newly emerged adult worker bees. A 2013 study found that exposure to a combination of an insecticide (imidacloprid) and a miticide (coumaphos) impaired learning and memory formation, important behaviors involved in foraging, in honey bees exposed under "field-realistic concentrations." A similar study also showed cognitive impairments from exposure to these same pesticides. Studies also have found increased honey bee susceptibility to and mortality from Nosema after exposure to sublethal concentrations of some pesticides (fipronil, amitraz, fluvalinate, chlorothalonil, pyraclostrobin, and imidacloprid). Another study concluded that high levels of the fungicide chlorothalonil in pollen and wax may be associated with entombing behavior, a sign that a hive has been poisoned. These and other pesticides commonly used to control mites have also been shown to have toxic effects on developing honey bee larvae at levels currently found in hives. A 2014 study reported linkages between CCD and sublethal exposure of neonicotinoid pesticides—imidacloprid and clothianidin—which affected the winterization of the bees, comparing exposed bee colonies to a control of non-exposed bee colonies. In the study, one-half the bee colonies exposed to neonicotinoids exhibited symptoms resembling CCD and had abandoned their hives during the winter, whereas one-sixth of the control colonies were lost exhibiting Nosema ceranae symptoms. The control colonies did not abandon their hives but re-populated quickly; the surviving exposed colonies were small and either without queen bees or had no brood, according to the study. Some have criticized this study for its small sample size, lack of replication at each location, and the use of pesticide doses that may not reflect realistic field conditions. Researchers at USDA and affiliated bee laboratories at land grant universities throughout the United States continue to study the effects of neonicotinoids and other pesticides, including the effects of interactions between pesticides and other stressors. Some of these studies demonstrate that exposure by bees to certain pesticides and/or combinations of insecticides (e.g., neonicotinoids with miticides) may affect the bee's overall energy budget, including its metabolism, physical activity, digestion, and immunity; cause other types of physiological effects; and affect different parts of the bee's nervous system, depending on the type or combination of insecticides studied among other variables, including diet and nutrition. A few studies have examined the effects of pesticides on various species of bumble bees. One study found that bumble bee exposure to imidacloprid may affect bee brain functioning, as well as colony growth and nest conditions. Another study found that bumble bee colonies exposed in a laboratory to low levels of imidacloprid had a significantly reduced growth rate and an 85% reduction in queen production relative to untreated colonies. Other studies have found that exposure of neonicotinoids could adversely affect foraging behavior, reproductive success, and locomotor behavior. Another study showed effects following direct contact with a range of pesticides, including shortened life spans and inability to produce brood in worker bees; however, some pesticides and all fungicides tested reportedly did not result in sublethal effects. Yet another study reported no adverse impacts on brood production or other sublethal effects on bumble bees from exposure to the neonicotinoid thiamethoxam. One study showed that chronic exposure to two pesticides, one a neonicotinoid, at concentrations close to those found in fields "impairs natural foraging behavior and increases worker mortality leading to significant reductions in bumblebee brood development and colony success." Bayer Crop Science argues that the results of some of these studies were also obtained "under artificial conditions and are in conflict with" earlier studies. A 2013 study examining the health of bumble bee colonies placed near crops treated with neonicotinoids were inconclusive due to weather and insufficient data, underlining the need to conduct further field studies that complement laboratory studies. Some cite this study as evidence against the need to impose restrictions on the use of neonicotinoid pesticides, while others criticize some of the study's published sources and research methodologies.
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Over the past few decades there has been heightened concern about the plight of honey bees as well as other bee species. Given the importance of honey bees and other bee species to food production, many have expressed concern about whether a "pollinator crisis" has been occurring in recent decades. Although honey bee colony losses due to bee pests, parasites, pathogens, and disease are not uncommon, there is the perception that bee health has been declining more rapidly than in prior years, both in the United States and globally. This situation gained increased attention in 2006 as some commercial beekeepers began reporting sharp declines in their honey bee colonies. Because of the severity and unusual circumstances of these colony declines, scientists named this phenomenon colony collapse disorder (CCD). Since then, honey bee colonies have continued to dwindle each year, for reasons not solely attributable to CCD. The U.S. Department of Agriculture (USDA) reports that CCD may not be the only or even the major cause of bee colony losses in recent years. In the United States, USDA estimates of overwinter colony losses from all causes have averaged nearly 30% annually since 2006. The precise reasons for honey bee losses are not yet known. USDA and most scientists working on the subject seem to agree that no research conclusively points to one single cause for the large number of honey bee deaths. This general conclusion was reconfirmed in a 2013 joint report by USDA and the U.S. Environmental Protection Agency (EPA). Reasons cited for bee declines include a wide range of possible factors thought to be negatively affecting pollinator species. However, one issue widely noted is the role that pesticides—in particular, neonicotinoid pesticides—might play in overall bee health. Pesticides are the focus of this report. Pesticides are among many identified factors known to affect bee health, including pests and diseases, diet and nutrition, genetics, habitat loss and other environmental stressors, and beekeeping management issues, as well as the possibility that bees are being negatively affected by cumulative, multiple exposures and/or the interactive effects of several of these factors. The focus of this report on bee exposure to pesticides is not intended to imply that pesticides are any more important in influencing the health and wellness of bees than other identified factors influencing bee health. Pesticides are one of many influences on bee health. The current state of knowledge on pesticides and bee health is summarized in the USDA-EPA report: it is not clear, based on current research, whether pesticide exposure is a major factor associated with U.S. honey bee health declines in general, or specifically affects production of honey or delivery of pollination services. It is clear, however, that in some instances honey bee colonies can be severely harmed by exposure to high doses of insecticides when these compounds are used on crops, or via drift onto flowers in areas adjacent to crops that are attractive to bees. Some experts emphasize research supporting the hypothesis that "total pesticide load" is an important influence on honey bee health, probably in combination with mite infestation, poor nutrition, viruses, and perhaps other stressors. The past two farm bills (P.L. 110-246, P.L. 113-79) provided for increased funding for bee research, among other types of support to protect pollinators. Other bills in the 113th Congress addressed pesticide issues more directly. H.R. 2692 would have suspended registrations of neonicotinoids and banned new registrations of any pesticide in some cases. Another bill, H.R. 5447, would have amended U.S. pesticide laws to expedite the review and approval of products to control "parasitic pests" in managed commercial bee colonies, and would have required USDA and EPA to evaluate threats to pollinators and the availability of pesticides to manage bee pests.
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This report provides an overview of the Family Educational Rights and Privacy Act (FERPA), as well as a discussion of several court cases that have clarified the statute's requirements. Under FERPA, educational agencies and institutions that receive federal funds must provide parents with access to the educational records of their children. Access must be provided within a reasonable time, but no later than forty-five days after a request to access education records has been made. In addition, the statute provides parents with an opportunity to challenge the content of their children's education records in order to ensure that the records are not inaccurate, misleading, or otherwise in violation of a student's privacy rights. Under the statute, education records are defined to include those records, files, documents, and other materials that contain information directly related to a student and that are maintained by an educational agency or institution or by a person acting for such agency or institution. Education records may also include videotape and products of other media. However, education records do not include any of the following: (1) records of educational personnel that are in the sole possession of the maker and not accessible to anyone other than a substitute; (2) records maintained by a law enforcement unit of an educational agency or institution for purposes of law enforcement; (3) employment records; or (4) medical records for students who are age eighteen or older. The parents of a student may exercise rights granted by FERPA until the student reaches the age of eighteen or attends an institution of postsecondary education. At that point, the rights defined by FERPA are transferred from the parents to the student. However, FERPA provides that certain types of information shall not be available to students in institutions of postsecondary education. Such students shall not have access to their parents' financial records. Letters and statements of recommendation submitted prior to the enactment of FERPA must also remain confidential if the letters are not used for other purposes. Finally, recommendations regarding admission to any educational agency or institution, employment application, and the receipt of an honor must remain confidential if the student has signed a waiver of his right of access. In addition to requirements regarding access to educational records, FERPA prohibits educational agencies or institutions that receive federal funds from having a policy or practice of releasing the education records of a student without the written consent of his parents. In addition, each educational agency or institution must maintain a record that identifies those individuals, agencies, or organizations that have requested or obtained access to a student's education records. It is important to note that consent is not required for the release of education records to certain individuals and organizations. These exceptions to FERPA's general prohibition against nonconsensual disclosure of educational records are described in detail below, as are controversial 2011 regulations that, among other things, permit educational agencies and institutions to disclose personally identifiable information to third parties under limited circumstances. Under FERPA, education records may be released without consent to certain school or government officials, including the following: school officials with a legitimate educational interest in the records; school officials at a school to which a student intends to transfer, as long as the parents are notified of the transfer; authorized representatives of the Comptroller General of the United States, the Secretary of Education, or state educational authorities in connection with an audit and evaluation of federally supported education programs or in connection with the enforcement of federal requirements that relate to such programs; authorized representatives of the Attorney General for law enforcement purposes; in connection with a student's application for, or receipt of, financial aid; state and local officials pursuant to a state statute that requires disclosure concerning the juvenile justice system and the system's ability to effectively serve the student whose records are released; and persons designated in a federal grand jury subpoena or any other subpoena issued for a law enforcement purpose. In addition, a new exception was added in 2013 to allow nonconsensual disclosure to a caseworker or other state, local, or tribal child welfare agency official with legal responsibility for the care or protection of the student. Education records may also be released without consent to certain third parties other than school or government officials. For example, education records may also be released to accrediting organizations to carry out their accrediting functions, and to the parents of a dependent student. Organizations conducting studies for the purpose of developing, validating, or administering predictive tests, administering student aid programs, and improving instruction may also access education records. However, such studies must be conducted in a manner that does not reveal the personal identification of students and their parents, and the education records must be destroyed when they are no longer needed. In 2001, the definition of "education records" and the requirements related to the release of such records was the subject of review in a Supreme Court case, Owasso Independent School District v. Falvo , that considered whether peer grading and the practice of calling out grades in class resulted in an impermissible release of education records. The plaintiff argued that the grades on student-graded assignments were education records maintained by students acting for an educational institution and that students should not be allowed to call out the grades they recorded in class because education records may not be released without consent. The school district, on the other hand, maintained that FERPA's definition of "education records" covered only institutional records or materials maintained in a permanent file, such as final course grades, standardized test scores, attendance records, and similar information, but not student homework or classroom work. Ultimately, the Court concluded that the grades on peer-graded student assignments were not education records, identifying two statutory explanations for its decision. First, the Court determined that student assignments are not "maintained" within the meaning of FERPA's definition of "education records" because neither the teacher nor the students maintain the grades of a recently corrected assignment in a manner that reflected a common understanding of when something is "maintained." As the Court observed, the word "maintain" suggests records that "will be kept in a filing cabinet in a records room at the school or on a permanent secure database.... " Second, the Court concluded that student graders are not "person[s] acting for" an educational institution for purposes of FERPA's definition of "education records." The Court found that the phrase "acting for" does not suggest students, but rather connotes agents of the school, such as teachers, administrators, and other school employees. Moreover, the Court maintained that correcting a classmate's work could be viewed as being part of an assignment: "It is a way to teach material again in a new context, and it helps show students how to assist and respect fellow pupils." The Court did not interpret FERPA to prohibit such educational techniques, and noted that the logical consequences of finding peer-graded assignments to be education records would seem unbounded. Absent prior notice from a parent, an educational agency or institution may release directory information without consent. FERPA defines directory information to include the following: "the student's name, address, telephone listing, date and place of birth, major field of study, participation in officially recognized activities and sports, weight and height of members of athletic teams, dates of attendance, degrees and awards received, and the most recent previous educational agency or institution attended by the student." An agency or institution compiling directory information must give public notice of the categories of information it has designated as "directory information," and must allow a reasonable period of time after the issuance of such notice to permit a parent to inform the agency or institution that parental consent must be given before the release of any or all of the directory information. In 2011, the Department of Education (ED) issued new regulations that expanded the definition of directory information to include a student identification number displayed on a student identification card or badge. Under the new regulations, parents may not opt out or otherwise prevent an educational agency or institution from requiring students to wear badges or cards that are designated as directory information. Under another important exception to the general prohibition against nonconsensual release of educational records, such records may be released in connection with an emergency if the records are necessary to protect the health or safety of the student or other persons. In the wake of the shootings at Virginia Tech, there have been several attempts to clarify FERPA's health or safety exception. For example, under amendments to the Higher Education Act made in 2008, ED is required to provide guidance clarifying rules regarding disclosure when a "student poses a significant risk of harm to himself or herself or to others, including a significant risk of suicide, homicide, or assault." Such guidance must clarify that institutions that disclose such information in good faith are not liable for the disclosure. In addition, ED issued regulations that contain similar clarifications regarding disclosure requirements in the event of a threat to health or safety. FERPA does not restrict postsecondary institutions from disclosing certain information about student misconduct and from identifying student drug and alcohol violations. For example, a postsecondary institution may disclose to an alleged victim of any crime of violence or nonforcible sex offense the final results of any disciplinary proceeding conducted by the institution against the alleged perpetrator. Likewise, an institution may disclose to anyone the final results of any disciplinary proceeding conducted against a student who is an alleged perpetrator of any crime of violence or nonforcible sex offense if the institution determines as a result of the proceeding that the student committed a violation of the institution's rules or policies with respect to such crime or offense. It is important to note that amendments made to the Higher Education Act in 2008 essentially override FERPA's optional disclosure rule by requiring institutions of higher education to disclose to the alleged victim of any crime of violence or a nonforcible sex offense the results of any disciplinary proceeding conducted by the institution against a student who is the alleged perpetrator of such a crime or offense. If the alleged victim is deceased as a result of such crime or offense, the next of kin of such victim shall be treated as the alleged victim for purposes of disclosure. In addition, FERPA permits a postsecondary institution to disclose to a parent or legal guardian of a student information regarding any violation of any federal, state, or local law, or any rule or policy of the institution, governing the use or possession of alcohol or a controlled substance. However, disclosure is permitted only when the student is under the age of twenty-one and the institution determines that the student committed a disciplinary violation with respect to the use or possession of alcohol or a controlled substance. In 2001, FERPA was amended to allow the Attorney General (AG) or certain employees designated by the AG to seek access to education records that are relevant to an authorized investigation or prosecution of a terrorism-related offense or an act of domestic or international terrorism. These records may be disseminated and used as evidence in an administrative or judicial proceeding. To obtain access to the records, the AG or his designee must submit a written application to a court for an order requiring an educational agency or institution to release the records. The application must certify that there are specific facts that give reason to believe that the education records are likely to contain relevant information, and the court shall issue the order if it finds that the application includes this certification. Education records disclosed pursuant to a court order are not subject to FERPA's requirement that educational agencies and institutions maintain records identifying entities that have requested or obtained access to a student's education records. In 2011, ED issued a final rule amending the FERPA regulations. Designed to allow increased data sharing, the rule was intended, in part, to facilitate the development of statewide longitudinal data systems (SLDS). According to ED, "Improved access to data will facilitate States' ability to evaluate education programs, to ensure limited resources are invested effectively, to build upon what works and discard what does not, to increase accountability and transparency, and to contribute to a culture of innovation and continuous improvement in education." The new regulations make a number of changes, including, but not limited to permitting educational agencies and institutions to disclose personally identifiable information to authorized third parties for purposes of conducting audits or evaluations of federal- or state-supported education programs or enforcing compliance with federal requirements related to such programs; allowing student identification numbers to be designated as directory information for purposes of display on a student identification card or badge; and adding new enforcement mechanisms for violations of the act. The changes regarding release of personally identifiable information and directory information have proved to be somewhat controversial. Indeed, privacy advocates have raised concerns, noting that the changes may pose increased risks to student privacy, and one organization—the Electronic Privacy Information Center (EPIC)—filed a lawsuit alleging that the regulations exceed the agency's statutory authority and are contrary to existing law. Although the lawsuit was recently dismissed for procedural reasons, other legal challenges to the rules may emerge in the future. Under FERPA, educational agencies and institutions found to have a policy of denying parental access to a student's education records or releasing a student's education records without written consent may be denied federal funds. The Secretary of Education is authorized to deal with violations of the act and to establish or designate a review board for investigating and adjudicating FERPA violations. The Family Policy Compliance Office (FPCO), which acts as a review board, permits students and parents who suspect a violation to file individual written complaints. If a violation is found after investigation, the FPCO will notify the complainant and the educational agency or institution of its findings and identify the specific steps that the agency or institution must take to comply with FERPA. If the agency or institution fails to comply within a reasonable period of time, the Secretary may either withhold further payments under any applicable program, issue a complaint to compel compliance through a cease-and-desist order, or terminate eligibility to receive funding. In Gonzaga University v. Doe , the Court considered whether a student could enforce the provisions of FERPA by suing an institution for damages under 42 U.S.C. Section 1983, which provides a remedy for violations of federally conferred rights. The respondent, a former student at Gonzaga, planned to teach in the Washington state public school system after graduation. Washington required new teachers to obtain an affidavit of good moral character from a dean of their graduating college or university, but the respondent was denied such an affidavit after Gonzaga's teacher certification specialist informed the state agency responsible for teacher certification of allegations involving sexual misconduct by the respondent. The respondent sued Gonzaga, alleging a violation of section 1983 for the impermissible release of personal information to an unauthorized person under FERPA. The Court found that FERPA creates no personal rights that may be enforced under section 1983. The Court noted that unless Congress expresses an unambiguous intent to confer individual rights, federal funding provisions, like those included in FERPA, provide no basis for private enforcement under section 1983. The respondent had argued that as long as Congress intended for a statute to "benefit" putative plaintiffs, the statute could be found to confer rights enforceable under section 1983. The Court disagreed: "it is the rights, not the broader or vaguer 'benefits' or 'interests,' that may be enforced under the authority of that section." The Court also observed that FERPA's nondisclosure provisions had an aggregate focus and were not concerned with the needs of any particular person. By having such a focus, the provisions could not be understood to give rise to individual rights.
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The Family Educational Rights and Privacy Act (FERPA) of 1974 guarantees parental access to student education records, while limiting the disclosure of those records to third parties. The act, sometimes referred to as the Buckley Amendment, was designed to address parents' growing concerns over privacy and the belief that parents should have the right to learn about the information schools were using to make decisions concerning their children. No substantial legislative changes have been made to FERPA since 2001, but in 2011, the Department of Education (ED) issued controversial new regulations that, among other things, permit educational agencies and institutions to disclose personally identifiable information to third parties for purposes of conducting audits or evaluations of federal- or state-supported education programs. These regulations are discussed below, as is a recently dismissed lawsuit challenging ED's new rules.
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In recent years, a number of observers have suggested that United States Special Operations Command (SOCOM) is generally more effective at acquisitions than the U.S. military departments, in part because of the perception that SOCOM has unique acquisition authorities. This report describes SOCOM's acquisition authorities for unclassified acquisition programs and compares these authorities to those granted to the military departments. It also compares the military departments' and SOCOM's chains of command, and the scope of acquisition activity and program oversight for those organizations. Finally, the report explores whether SOCOM has unique characteristics that influence how it conducts acquisition. The Goldwater-Nichols Department of Defense Reorganization Act of 1986 ( P.L. 99-433 ) reorganized DOD's command and control structure, in part by establishing the current construct and authorities of combatant commands. There are 10 combatant commands: 6 geographic and 4 functional commands. SOCOM possesses unique acquisition authorities when compared with other combatant commands. SOCOM was established and granted its own acquisition responsibilities in the Fiscal Year (FY) 1987 National Defense Authorization Act (NDAA) ( P.L. 99-661 ). SOCOM was the first combatant command endowed with acquisition authority and its own budget line for training and equipping its forces. The FY2016 NDAA ( P.L. 114-92 ) granted limited acquisition authority to the U.S. Cyber Command, making CYBERCOM the second command to have current independent acquisition authority. However, SOCOM's acquisition authority is more expansive. Title 10 U.S.C. Section 164(c) grants SOCOM authority to validate and establish priorities for requirements; ensure combat readiness; develop and acquire special operations-peculiar equipment and acquire special operations-peculiar material, supplies, and services; and ensure the interoperability of equipment and forces. These authorities are applicable only to "special operations-peculiar items." If SOCOM wants to acquire a weapon system that is not special operations specific, the acquisition must be executed through one of the military departments. The military services are responsible for funding certain types of SOCOM training, service-common equipment, and professional services. For example, the Air Force provides SOCOM with C-130s and the Army provides the ammunition for service-common weapons to include the M4. SOCOM, in turn, can modify these systems to special operations-specific requirements. Pursuant to statute (10 U.S.C. 167), SOCOM has an Acquisition Executive who has the authority to negotiate memoranda of agreement with the military departments to carry out the acquisition of equipment, material, and supplies; supervise the acquisition of equipment, material, supplies, and services; represent the command in discussions with the military departments regarding acquisition programs for which the command is a customer; and work with the military departments to ensure that the command is appropriately represented in any joint working group or integrated product team regarding acquisition programs for which the command is a customer. These statutory authorities enable SOCOM to manage and oversee its acquisition programs, to negotiate with the military departments for systems to be provided to SOCOM, and to have input into military department acquisitions when SOCOM will be one of the customers of the acquisition program. Special Operations Force Acquisition, Technology and Logistics (SOF AT&L) is the organization within SOCOM that leads internal major procurement efforts. The SOCOM Commander is directly responsible for all portions of the command and the Acquisition Executive (AE) reports directly to the Commander. Falling under the AE are the Program Executive Offices (PEOs) and Directorates. This direct chain of command allows for rapid communication on purpose, intent, and decisionmaking (see Figure 1 ). The structure's design is similar to that of the other services, which also follow a Secretary/Commander-AE-PEO-PM structure (see Appendix B ). One difference is that in the services, the Service Acquisition Executive reports to the Service Secretary, whereas in SOCOM the AE reports to the Commander. Internal to SOCOM, the Commander generally delegates acquisition decision authority to the Acquisition Executive. The Acquisition Executive in turn generally further delegates the majority of Milestone Decision Authority (MDA) to the PEOs. SOCOM officials have asserted that this delegation enables more rapid decisionmaking and accelerates the acquisition process. The method SOCOM uses for acquisitions is similar to the acquisition processes used by the military services: they share the same general statutory and regulatory framework; training and education opportunities (i.e., access to Defense Acquisition University and National Defense University); and DOD oversight regime. However, there are also significant differences, many of which relate to the size and scope of SOCOM and its authorities. Table 1 summarizes select similarities and differences. SOCOM's statutory acquisition authorities are more limited than those of the military departments. SOCOM acquisition authority is restricted to Special Operations-specific items, while the military services have the authority to acquire any necessary goods and services. When SOCOM does exercise its authority, it adheres to the same oversight and documentation requirements as the services. As James Smith, the current SOCOM Acquisition Executive, reportedly stated: We are absolutely subject to all of the same oversight and policy as the rest of DOD. Our workforce operates professionally within the same DOD 5000 directives, the same Federal Acquisition Regulation and the same Financial Management Regulation. I think it's important to understand that.... Give credit to our acquisition workforce for the results they achieve, and you might dismiss using USSOCOM as a benchmark for how to do acquisition under the assumption that we're somehow "different." In some instances, SOCOM may in fact have fewer acquisition authorities and flexibilities than the military departments, as in cases where statute specifically provides acquisition authorities to the military departments. For example, 10 U.S.C. 2216 established a Defense Modernization Account and granted authority for its use to the Secretary of Defense and the Secretaries of the military departments. Additionally, the FY2017 NDAA ( P.L. 114-328 , §2447d) granted a new reprogramming authority, referred to as a special transfer authority , to the Secretaries of the military departments in an effort to expedite the selection of prototype projects for production and rapid fielding. The FY2018 NDAA ( P.L. 115-91 , §809) required the Secretary of Defense to submit a report on the acquisition authorities available to the military departments that are not available to SOCOM, and to "determine the feasibility and advisability of providing such authorities to the Commander of the United States Special Operations Command." The regulations governing acquisition are found in the Federal Acquisition Regulation (FAR) and the Defense Acquisition Regulations Supplement (DFARS). The DFARS provides DOD-specific regulations that government acquisition officials—and those contractors doing business with DOD—must follow in the procurement process for goods and services. SOCOM is not referenced or discussed in the FAR; the DFARS includes a brief definitional reference to SOCOM, defining it as a defense agency for the purposes of the DFARS. Each military service and many DOD components also have their own acquisition regulatory supplement that provides unique acquisition guidance. For example, the Army maintains the Army Federal Acquisition Regulation Supplements (AFARS) and the Defense Logistics Agency (DLA) maintains the DLA Directive. SOCOM has its own supplement to the DFARS, known as the SOCOM Federal Acquisition Regulation Supplement (SOFARS). SOFARS Part 5601.101 defines the supplemental regulation's purpose as "provid[ing] the minimum essential implementation of the Federal Acquisition Regulation (FAR), and DOD FAR Supplement (DFARS)." SOCOM has also issued USSOCOM Directive 70-1, which seeks to set forth an overarching construct for acquisition, within the constraints of the FAR, DFAR, and SOFARS. There are no unique authorities granting SOCOM exemptions or waivers from acquisition requirements. The Office of the Secretary of Defense's issuances establishing policy, defining authorities, and assigning responsibility for acquisitions across all military services and defense agencies include The Defense Acquisition System (DOD Directive 5000.01), Operation of the Defense Acquisition System (DOD Instruction 5000.02), and Defense Acquisition of Services (DOD Instruction 5000.74). As such, SOCOM acquisition personnel are bound by and act with the same freedoms and restrictions as the military services and defense agencies. For example, all large DOD acquisition programs are given an Acquisition Category (ACAT) designation based on dollar figures and program scope. These designations determine the level of oversight required for the program. SOCOM and the military departments adhere to the same oversight standards and dollar threshold for categorizing programs. (For more information on program categories and dollar thresholds, see Table A-1 .) According to officials, SOCOM has a total of six programs that exceed the category II dollar thresholds. Currently, the Silent Knight Radar program, which is developing a SOF-common terrain following/terrain avoidance radar system for use in SOF fixed wing and rotary wing aircraft, is one of SOCOM's largest with a total estimated procurement cost through FY2023 of at $391.7 million. FY2017 actual procurement funding budget for the program was $34 million. In comparison, the military services have numerous major programs with significantly higher procurement appropriations. The Navy's 2017 appropriation for the Virginia Class submarine program ($5.39 billion) is 250% larger than SOCOM's entire FY2017 procurement appropriation ($2.08 billion). In FY2017, the SOCOM procurement appropriation was 1.5% of DOD's total procurement appropriation of $132.2 billion. See Table 2 for a comparison of the largest programs in the military services to that of SOCOM. The different size and scope of the acquisition efforts result in SOCOM having a substantially smaller acquisition workforce than the services. SOCOM's acquisition workforce consists of approximately 500 civilian and military personnel, less than 1% of the total DOD acquisition workforce of 156,000. A number of analysts and government officials have argued that SOCOM benefits from its size relative to the military services. The current SOCOM Acquisition Executive also reiterated this point when he reportedly stated that "[SOCOM's] ability to move relatively fast is a function of scale." When compared to the military services, SOCOM can be seen to operate like a small business. Many analysts argue that small businesses and organizations can be more nimble, more innovative, and more adaptable than large enterprises. As Sir Richard Branson, founder of the Virgin Group, reportedly stated, "Small businesses are nimble and bold and can often teach much larger companies a thing or two about innovations that can change entire industries." A number of analysts also argue that small organizations can be more effective in communication, innovation and redesign, customer service, and risk-taking; while others point out that small organizations can be more agile and less bureaucratic. A 2004 congressional report identified SOCOM's unique size, culture, and close proximity to the warfighter as factors that can contribute to more effective acquisitions. According to the congressional report: The successful use of the Special Operations Command acquisition authority below the acquisition category (ACAT) 1 level illustrates the transformation benefits of having a joint buyer, close to the user, maintain a streamlined acquisition process to deliver low dollar threshold systems rapidly to the warfighter. In discussing the SOCOM acquisition culture and the benefits of a flatter organization, a number of current and former SOCOM officials have stated that the lack of bureaucratic overhead allows the organization to identify emerging issues, modify programs that are underway, or, in certain cases, divest from programs more rapidly. This point has been highlighted by James "Hondo" Geurts, current Assistant Secretary of the Navy for Research, Development, and Acquisition (and former SOCOM Acquisition Executive). Another factor that potentially enables SOCOM's culture of innovation and risk-taking in its acquisition programs is its general ability to execute programs below statutory and regulatory dollar figures that require more rigorous oversight. Because SOCOM programs have lower dollar thresholds, its programs do not generally receive the same level of scrutiny brought to bear on the more expensive and higher-profile programs of the military services. For example, the Nunn-McCurdy Act (10 U.S.C. §2433) requires DOD to report to Congress when an MDAP experiences cost overruns of 15% or more. There are currently more than 150 MDAPs in DOD; many of these programs have a larger budget in a single year than SOCOM's entire procurement budget for FY2017. If SOCOM's current CAT II program (Silent Knight Radar) experienced 100% cost growth (from approximately $391 million to $782 million), it would still not require a Nunn-McCurdy notification to Congress. In comparison, the cost growth associated with the procurement of the CVN-78 Gerald R. Ford aircraft carrier ($1.4 billion) was approximately 70% of SOCOM's entire FY2017 procurement budget ($2.0 billion). Some analysts believe that these lower dollar thresholds allow SOCOM to operate below the radar, thus enabling a more nimble acquisition process and a culture that promotes "failing fast." Despite these perceived organizational advantages, SOCOM has experienced challenges in executing its acquisition programs. The Advanced SEAL Delivery System Program, intended to develop a covert submersible insertion vehicle, was documented by both the Government Accountability Office and RAND as experiencing considerable cost, schedule, and performance issues before finally being cancelled in 2009. This program illustrates observers' argument that it is not only the ability to succeed faster, but also to fail faster and adapt requirements or acquisition strategies faster, that gives SOCOM the ability to execute acquisitions more efficiently and effectively. Additionally, SOCOM's statutory restriction to procure strictly SOF-peculiar equipment, modifications, and services enables a more focused, operations-oriented acquisition culture. In a National Defense interview, James Smith reportedly stated the following: Our direct relationship to USSOCOM for the acquisition of only services and equipment that are unique to special operations gives us three primary advantages. First, USSOCOM is a combatant command with an extremely relevant ongoing mission. We're fully co-located and integrated with the staff here. We have a firsthand understanding of priorities and urgency that gives us a different appreciation for schedule emphasis. It's not a cliché to say that our operators will often accept the "80 percent" solution if we can get that solution into the fight sooner. The services, on the other hand, have a much broader acquisition mandate, including the acquisition of business systems, weapon procurement programs that must be integrated into joint operations, extensive logistic contracts, large- and small-scale platforms, and substantially more complex systems with multiple technologies and capabilities. This broader acquisition portfolio requires the services to manage acquisition programs across domains, using multiple acquisition processes, and to use different acquisition competencies. SOCOM benefits from being a smaller organization with a more focused mission set and limited scope of acquisition authorities. Other SOCOM attributes, such as delegating more decisionmaking to lower levels and promoting a more risk-taking culture, may be transferable to the services. A number of current senior acquisition officials in the military services recently served in SOCOM and appear to be promoting more delegation of authority and cultural risk-taking in the services, including General Paul Ostrowksi, formerly a SOCOM PEO and currently the Principal Military Deputy to the Assistant Secretary of the Army (Acquisition, Logistics and Technology), and James Guerts, formerly the SOCOM Acquisition Executive and currently the Assistant Secretary of the Navy (Research, Development and Acquisition). One potential issue for Congress may include the following: To what extent do current acquisition-related laws and regulations promote or inhibit a more efficient, less bureaucratic, and more balanced approach to risk in acquisitions? In some instances SOCOM has fewer acquisition authorities than the military departments. This occurs where legislation grants acquisition authorities or flexibilities to the military departments. The definition of military departments, codified in 50 U.S.C. 3004, does not include SOCOM. As a result, SOCOM may not receive new acquisition authorities provided by Congress and must work through the Secretary of Defense to obtain these authorities or seek a legislative change, potentially resulting in lost opportunities for SOCOM in its acquisition efforts. Potential associated issues for Congress may include the following: Based on the DOD report on acquisition authorities required in the 2018 NDAA, should additional acquisition authorities should be granted to SOCOM? Should the definition of military departments as they relate to acquisitions be modified to include SOCOM? Appendix A. Appendix B. Comparison of Chains of Command
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United States Special Operations Command (SOCOM) is the Unified Combatant Command responsible for training, doctrine, and equipping all special operations forces of the Army, Air Force, Marine Corps and Navy. SOCOM has been granted acquisition authority by Congress to procure special operations forces-peculiar equipment and services. There is a perception among some observers and officials that SOCOM possesses unique acquisition authorities that allow it to operate faster and more efficiently than the military departments. SOCOM possesses unique acquisition authorities when compared with other combatant commands. However, SOCOM is generally held to the same statutory and regulatory acquisition requirements as the military departments and, in some instances, has less acquisition authority. There are no unique authorities granting SOCOM exemptions or waivers from acquisition requirements. But when it comes to acquisition, SOCOM is different than the military services. SOCOM's acquisition performance is influenced by the size of the organization, focus of its acquisitions (which are limited to special operations-specific goods and services), and smaller size of its programs in terms of both scope of development and dollars. The current SOCOM Acquisition Executive reiterated these points when he reportedly stated that "[SOCOM's] ability to move relatively fast is a function of scale." These factors allow SOCOM to maintain the majority of its procurement programs at Category III levels, thereby reducing the oversight and bureaucratic burden, and allowing critical Milestone Decision Authority to remain at lower levels within the Command. As a result, some observers have argued that the SOCOM acquisition process is often capable of executing faster (and failing faster), maintaining closer communication between leadership and users, being more nimble, and fostering a culture willing to assume more risk.
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This report provides an overview of the major issues which have been raised recently in the Senate and in the press concerning the constitutionality of a Senate filibuster (i.e., extended debate) of a judicial nomination. The Senate cloture rule (Rule XXII, par. 2) requires a super-majority vote to terminate a filibuster. The Appointments Clause of the Constitution, which provides that the President is to "nominate, and by and with the Advice and Consent of the Senate, ... appoint" judges, does not impose a super-majority requirement for Senate confirmation. Since it has the effect of requiring a super-majority vote on a nomination, because it usually requires the votes of 60 Senators to end a filibuster, it has been argued that a filibuster of a judicial nomination is unconstitutional. In the absence of (1) any constitutional provision specifically governing Senate debate and (2) any judicial ruling directly on point, and given the division of scholarly opinion, this report will examine the issues but will not attempt a definitive resolution of them. The framers of the Constitution were committed to majority rule as a general principle. However, no provision of the Constitution expressly requires that the Senate and the House act by majority vote in enacting legislation or in exercising their other constitutional powers. There is a provision specifying that "a majority of each [House] shall constitute a quorum to do business." There are also a few provisions dictating that the Senate or House muster a two-thirds extraordinary majority to transact certain business of an exceptional nature. Although there is no constitutional provision requiring that the Senate act by majority vote in instances not governed by one of the provisions mandating an extraordinary majority, "the Senate operates under 'a majority rule' to transact business—a majority of the Senators voting, a quorum being present—with the exceptions set forth in the Constitution and the rules of the Senate." The Supreme Court has found that "the general rule of all parliamentary bodies is that, when a quorum is present, the act of a majority of the quorum is the act of the body," except when there is a specific constitutional limitation. However, the Court has also found that the Constitution, history, and judicial precedents do not require that a majority prevail on all issues. Does the commitment of the framers to majority rule as a general principle, the fact that the Senate usually operates pursuant to majority rule, and the enumeration in the Constitution of certain extraordinary majority voting requirements mean that any exception to majority rule other than the enumerated ones is unconstitutional? Is there any constitutional defense to be offered for a Senate filibuster? Article I, Section 5, clause 2, of the Constitution authorizes "each House [to] determine the rules of its proceedings.... " The rule-making power has been construed broadly by the courts. It has been argued that the rule-making power and historical practice are the foundation for the filibuster, and that Article I, Section 5, permits the Senate to adopt procedures unless they conflict with a constitutional prohibition. Supporters of the filibuster have contended that Senate rules are not in conflict with the Constitution because the rules require 60 votes to end debate on a nomination, not to confirm a nominee, and that therefore the Senate rules are not unconstitutional because they are not at odds with the few constitutional provisions in which the framers specified a particular type of majority. Opponents of the filibuster have claimed that Senate rules violate the constitutional principle of majority rule and in effect impose an extraordinary majority requirement for confirmation of nominees that is at odds with the Appointments Clause. Several factors have the effect of entrenching the filibuster. First, Senate Rule XXII, par. 2 (the cloture rule) applies, inter alia , to amendments to the Senate rules. (A vote of three fifths of the entire Senate is usually required to invoke cloture. A vote of two thirds of the Senators present and voting is required to invoke cloture on a measure or motion to amend the Senate rules.) Second, Senate Rule V, par. 2, provides that "the rules of the Senate shall continue from one Congress to the next Congress unless they are changed as provided in these rules." And third, because the Senate is a continuing body, its rules "are not newly adopted with each new session of Congress." Because the cloture rule may be applied to debate on a proposal to change the filibuster rule, it has been argued that the filibuster rule unconstitutionally interferes with the right of a majority to exercise the constitutional rulemaking authority by majority vote. However, supporters of the filibuster have contended that "there is no constitutional directive against entrenchment," and that the reference to "each House" in the rule-making clause (Article I, Section 5), authorizing each House to "determine the rules of its proceedings," means the House and Senate separately (not the Congress), and does not mean that one session of the Senate is barred from binding the next session. The entrenchment issue has given rise to a suggested scenario under which a simple majority might vote in favor of an amendment to the filibuster rule, a point of order might be raised asserting that a majority vote is sufficient to cut off debate on the amendment and to pass it (because the two-thirds requirement is unconstitutional), the matter would be referred by the Vice President to the Senate, and the point of order would be sustained by a simple majority of the Senate. A judicial appeal might ensue. Senators have considered changing Senate rules or practice by invoking the "constitutional" or "nuclear" option, terms that refer to various types of proceedings. This option was a focal point of a recent bipartisan agreement. The filibuster of a judicial nomination raises constitutional issues, particularly separation of powers ones, not posed by the filibuster of legislation. These issues should be considered in light of the pertinent language of the Constitution and the intent of the Framers. The Appointments Clause provides that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law.... " There are three stages in presidential appointments by the President with the advice and consent of the Senate. First, the President nominates the candidate. Second, the President and the Senate appoint the individual. And third, the President commissions the officer. It is noted that the Appointments Clause is in Article II of the Constitution, which sets forth the powers of the President. The power of appointment is one of the executive powers of government. "... [T]he power of appointment by the Executive is restricted in its exercise by the provision that the Senate, a part of the legislative branch of the Government, may check the action of the Executive by rejecting the officers he selects." The language of the Appointments Clause is ambiguous. It does not specify procedures or time limits applicable in confirmation proceedings, and it does not require that the Senate take a final vote on a nomination. "There is little evidence indicating the exact meaning of 'advice and consent' intended by the Framers.... Records of the constitutional debates reveal that the Framers, after lengthy discussions, settled on a judicial selection process that would involve both the Senate and the President. This important governmental function, like many others, was divided among coequal branches to protect against the concentration of power in one branch." The Senate's role of advice and consent was intended as a safeguard against executive abuses of the appointment power. Citing the language of the Appointments Clause and the intent of the Framers, supporters and critics of filibusters of judicial nominations disagree about the relative roles of the President and the Senate in regard to judicial appointments, about whether the Senate has a duty to dispose of the President's judicial nominations in a timely fashion, and about whether a majority of Senators has a constitutional right to vote on a nomination. If the Senate filibusters a judicial nomination, the President has "countervailing powers," including the ability to make a recess appointment, which does not require Senate confirmation but which is only temporary, expiring at the end of the next session of Congress. Because recess appointments deny the Senate the opportunity to consider the appointees, they raise separation of powers questions about the roles of the President and the Senate in the appointments process. Special issues are raised by recess appointments of Article III judges. The independence of such judges is generally guaranteed by their life tenure. However, "a recess appointee lacks life tenure.... As a result, such an appointee is in theory subject to greater political pressure than a judge whose nomination has been confirmed." The constitutionality of the filibuster has been challenged in court, and such litigation raises justiciability issues. In a number of cases, the courts have shown a reluctance to interpret the rules of either House or to review challenges to the application of such rules. However, the case law is not entirely consistent, and it has been suggested that a court will be more likely to reach the merits if a rule has an impact on parties outside the legislative sphere. Standing and the political question doctrine would be the primary justiciability issues raised by a court challenge to the filibuster rule. Standing is a threshold procedural question which turns not on the merits of the plaintiff's complaint but rather on whether he has a legal right to a judicial determination of the issues he raises. To satisfy constitutional standing requirements, "'[a] plaintiff must allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief.'" It has been suggested that those who might have standing to challenge the rule would include a judicial nominee not confirmed because of a filibuster; the President; and Senators who are part of a majority in favor of a nomination, but who cannot obtain the necessary votes to invoke cloture or to change the filibuster rule, who might allege a dilution of their voting strength. A nominee might have suffered a personal injury, caused by a filibuster, which might be remedied if the filibuster were declared unconstitutional. The standing of the President and of Senators raises more difficult questions than does the standing of a nominee. In Raines v. Byrd , the Court reviewed historical practice and concluded that constitutional disputes between the branches have generally not been resolved by the judiciary in cases brought by Members of Congress or presidents. Because the constitutionality of the filibuster is an issue in contention between the branches, the courts, applying Raines , might not accord standing to Senators or President Bush. Other issues, under Raines , arise in regard to the standing of Senators. Under Raines , to challenge executive branch action or the constitutionality of a public law, a Member must assert a personal injury or an institutional injury amounting to nullification of a particular vote. In regard to the filibuster dispute, it is questionable whether a Senator has suffered either a personal injury or an institutional one that has the effect of nullifying a particular vote. Under Raines , the availability of some means of legislative redress precludes a finding of nullification, and a court might find that the possibility of amending the filibuster rule is a means of legislative redress, even though a proposed amendment to the rule could itself be the subject of a filibuster. Judicial review is not available where the matter is considered to be a political question within the province of the executive or legislative branch. "Prominent on the surface of any case held to involve a political question is found a textually demonstrable constitutional commitment of the issue to a coordinate political department; ... or the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government.... " The rule-making clause (Article I, Section 5, clause 2) is a textual commitment of authority to each House to make and interpret its own rules of proceedings. Notwithstanding this textual commitment, the political question doctrine will not preclude judicial review where there is a constitutional limitation imposed on the exercise of the authority at issue by the political branch. It might be argued that the political question doctrine bars judicial review of the constitutionality of the filibuster rule because the rulemaking clause permits the Senate to make its own rules, and the Constitution does not expressly limit debate. On the other hand, it might be argued that the political question doctrine does not preclude judicial review because the exercise of the rulemaking power is restricted since the entrenchment of the filibuster may be at odds with "constitutional principles limiting the ability of one Congress to bind another." The question of the constitutionality of the Senate filibuster of a judicial nomination has divided scholars and has not been addressed directly in any court ruling. The constitutionality of the filibuster of a judicial nomination turns on an assessment of whether the Senate's power to make rules governing its own proceedings is broad enough to apply the filibuster rule to nominations. Supporters and critics of the filibuster of judicial nominations disagree about the relative roles of the President and the Senate in regard to judicial appointments, about whether the Senate has a duty to dispose of the President's judicial nominations in a timely fashion, and about whether a simple majority of Senators has a constitutional right to proceed to a vote on a nomination. The constitutionality of the filibuster might be challenged in court, but it is uncertain whether such an action would be justiciable.
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The Senate cloture rule requires a super-majority vote to terminate a filibuster (i.e., extended debate). The Appointments Clause of the Constitution, which provides that the President is to "nominate, and by and with the Advice and Consent of the Senate, ... appoint" judges, does not impose a super-majority requirement for Senate confirmation. Critics of the Senate filibuster argue that a filibuster of a judicial nomination is unconstitutional in that it effectively requires a super-majority vote for confirmation, although the Appointments Clause does not require such a super-majority vote. It has been argued that the Senate's constitutional power to determine the rules of its proceedings, as well as historical practice, provide the foundation for the filibuster. The question of the constitutionality of the filibuster of a judicial nomination turns on an assessment of whether the Senate's power to make rules governing its own proceedings is broad enough to apply the filibuster rule to nominations. Several factors have the effect of entrenching the filibuster (i.e., making it possible to filibuster a proposed amendment to the rules). Supporters and critics of the filibuster of judicial nominations disagree about the relative roles of the President and the Senate in regard to judicial appointments, about whether the Senate has a duty to dispose of the President's judicial nominations in a timely fashion, and about whether a simple majority of Senators has a constitutional right to proceed to a vote on a nomination. The constitutionality of the filibuster might be challenged in court, but it is uncertain whether such an action would be justiciable (i.e., appropriate for judicial resolution). Standing and the political question doctrine would be the primary justiciability issues raised by a court challenge to the filibuster rule. (Note: This report was originally written by [author name scrubbed], Legislative Attorney.)
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I n November 2011 the Environmental Protection Agency (EPA) proposed two Clean Water Act permits to regulate certain types of discharges from vessels into U.S. waters. The proposed permits would replace a single permit issued by EPA in 2008 that was due to expire in December 2013. As proposed, the two permits would apply to approximately 71,000 large domestic and foreign vessels and perhaps as many as 138,000 small vessels. This universe of regulated entities is diverse as well as large, consisting of tankers, freighters, barges, cruise ships and other passenger vessels, and commercial fishing vessels. Their regulated discharges are similarly diverse, including among other pollutants non-native aquatic nuisance species (ANS), nutrients, pathogens, oil and grease, metals, and toxic chemical compounds that can have a broad array of effects on aquatic species and human health, many of which can be harmful. Developing and administering a regulatory program covering sources so numerous and different from one another is more complicated than for other currently regulated sources. Because the sources themselves are mobile and move between jurisdictions, the traditional mechanism of regulating through state-issued permits is problematic. Many regulated vessels are small entities; thus, the economic impacts of regulatory requirements are an important consideration. Identifying technology-based treatment systems and management practices that can control vessel discharges effectively and economically presents many challenges. The two permits proposed by EPA in 2011 included one (draft VGP) for large vessels to replace the 2008 VGP, and one for smaller vessels covered by a congressionally enacted temporary moratorium (draft sVGP). On March 28, 2013, EPA issued a final version of the VGP for large vessels. It became effective on December 19, 2013. The permit for smaller vessels was issued on September 10, 2014; it was scheduled to become effective on December 19, 2014, but Congress passed a three-year extension as part of P.L. 113-281 . This report is an overview of the revised VGP for large vessels and two key issues: inclusion of numeric performance standards to limit ballast water discharges from vessels, and controversies about the role of states in regulating vessel discharges. It also reviews the final sVGP for small vessels and Congress's recent interest in these issues. The Clean Water Act (CWA) prohibits the discharge of pollutants from a point source into the navigable waters of the United States without a permit. Vessels are defined in the statute as point sources. In 1973, EPA promulgated a regulation that excluded discharges incidental to the normal operation of vessels (including ballast water, but not including vessel sewage discharges, which are regulated under CWA Section 312) from CWA permitting requirements. This long-standing regulation was challenged in federal district court by environmental advocacy groups who wanted EPA to address ballast water as a source of ANS in U.S. waters. In 2005 the court found that Congress had directly expressed its intention that discharges from vessels be regulated under the CWA, and that the 1973 regulation contradicted that intention. In September 2006 the court issued a final order vacating (revoking) the regulatory exclusion as of September 30, 2008, and remanding the ruling to EPA for further proceedings. The Ninth Circuit U.S. Court of Appeals upheld the district court's ruling on July 23, 2008. On June 17, 2008, EPA proposed two CWA general permits in response to the court's 2006 order, one applicable to commercial vessels and one applicable to small recreational vessels. CWA permits are either individual permits issued to specific facilities or general permits. Both types of permit are issued for a specific period of time (not to exceed five years), after which the permit must be renewed. A general permit covers multiple facilities within a specific category having common elements, such as similar types of operations that discharge the same types of wastes. Because of the large number of potential sources of vessels, EPA believed that it made administrative sense to use general permits, rather than individual permits. In August 2008, the federal district court agreed to EPA's request to delay vacating the regulatory exemption for three months, to ensure that permits could be issued before the exemption was eliminated. EPA finalized a Vessel General Permit for vessels subject to a permit requirement on December 18, 2008. The permit became effective on December 19, 2008. However, on the same day, the federal district court granted an EPA motion to delay vacating the existing regulatory exclusion until February 6, 2009. Thus, the effective date remained December 19, 2008, but regulated sources were not required to comply with terms of the permit until February 6, 2009. In July 2008, Congress enacted two bills to exempt discharges incidental to the normal operation of certain types of vessels from CWA permitting, thus restricting the population of vessels subject to EPA regulation. The first measure, P.L. 110-288 , the Clean Boating Act of 2008, exempted discharges incidental to the normal operation of recreational vessels of all sizes from CWA permitting requirements. The legislation directed EPA and the Coast Guard to create a regulatory regime under new CWA Section 312(o); EPA is currently developing regulations for recreational vessels, as required by the legislation. The second measure, P.L. 110-299 , provided a two-year moratorium on CWA permitting for certain discharges from commercial fishing vessels of all sizes and non-recreational vessels less than 79 feet in length. This moratorium has been extended three times. First, it was extended to December 18, 2013, by P.L. 111-215 . During the moratorium, EPA was directed to study the discharges from these vessels and submit a report to Congress. The 112 th Congress extended the permit moratorium for one more year, until December 18, 2014, in P.L. 112-213 . And in the 113 th Congress, legislation providing an additional three-year extension, until December 18, 2017, was enacted as part of a Coast Guard reauthorization bill ( S. 2444 / P.L. 113-281 ). Ballast water discharges from vessels less than 79 feet in length are not affected by the moratorium (although EPA believes that few of these smaller vessels use or discharge ballast water) and are required to be authorized by permits. (See " Small Vessel Permit Moratorium " for discussion of legislation.) However, P.L. 110-288 and P.L. 110-299 did not exempt or provide a permitting moratorium for all discharges from all types of vessels. Thus, the Vessel General Permit (VGP) finalized by EPA in December 2008 gave permit coverage to an estimated 72,000 vessels larger than 79 feet in length used in a transportation capacity that were not affected by the moratorium in P.L. 110-299 , including tankers, freighters, barges, and cruise ships, and it also applied to ballast water discharges from vessels covered by the moratorium. It applied to pollutant discharges, including ballast water, that are incidental to the normal operation from non-recreational vessels that are 79 feet or more in length, and to ballast water discharges from commercial vessels of less than 79 feet and commercial fishing vessels of any length. Geographically, it applied to discharges into waters of the United States in all states and territories, extending to 3 miles from the baseline (i.e., shoreline). In the 2008 permit, EPA identified 26 types of waste streams or discharge types from the normal operation of covered vessels (some are not applicable to all vessel types). The types of pollutant discharges subject to the permit included ANS (also known as invasive species), nutrients, pathogens, oil and grease, metals, and pollutants with toxic effects. The CWA requires that all point source discharges must meet effluent limitations representing applicable levels of technology-based control. Under the 2008 VGP, EPA concluded that, based on available information, it was not practicable to derive numeric effluent limits to achieve technology-based controls for many of the discharge types regulated under the permit. Thus, most discharges covered by the 2008 VGP were controlled by specific best management practices (BMPs), many of which were already in use. Some vessel categories, such as cruise ships, were subject to more detailed requirements for discharges such as graywater (water from showers, baths, sinks, and laundry facilities) and pool and spa water. Monitoring, recordkeeping, and reporting requirements applied, as well. Procedurally, vessels larger than 79 feet or more than 300 gross tons (an estimated 50,000 domestic and foreign vessels) were required to submit a Notice of Intent (NOI) to be covered by the permit. Smaller regulated vessels were automatically covered. There were no permit fees. Projected industry compliance costs (including paperwork requirements) ranged from a low of $8.9 million to $23.0 million annually; they varied based on assumptions of vessel populations affected and the number of instances in which incremental costs would be incurred. In anticipation of the expiration of the 2008 VGP on December 18, 2013, in November 2011, EPA proposed two Vessel General Permits, one for large vessels (draft VGP) to replace the 2008 VGP, and one for smaller vessels to authorize discharges from vessels covered by the congressionally enacted temporary moratorium (draft sVGP). Both draft permits proposed to regulate discharges from 26 types of waste streams (like the 2008 VGP), plus an additional waste stream category—fish hold effluent. Pollutants in these waste streams can include ANS, nutrients, pathogens, oil and grease, metals, and toxic chemical compounds. Both draft permits largely retained the 2008 permit's approach of relying on specific behaviors or BMP techniques to control most regulated discharges, as EPA again concluded that it is infeasible to develop numeric effluent limits for most controlled discharges covered by the permit. The draft VGP for larger vessels contained several changes that are discussed below—notably, including for the first time numeric ballast water discharge limits, more stringent effluent limits for oil-to-sea interfaces and exhaust gas scrubber washwater, as well as specifications to manage fish hold effluent. Both draft permits included streamlined recordkeeping and reporting requirements, modifying aspects of the 2008 VGP, such as allowing electronic recordkeeping and requiring an annual report in lieu of a one-time report and annual noncompliance report. On March 28, 2013, after reviewing over 5,500 public comments on the draft permit, EPA issued a final permit to replace the 2008 VGP. Requirements of the final permit are similar to the draft VGP. Smaller vessels continued to be covered by the congressional moratorium provided by P.L. 112-213 until December 18, 2014. If the moratorium had expired without further congressional action, smaller vessels would have been subject to the sVGP beginning on December 19. However, as described below, Congress enacted an extension of the moratorium until December 18, 2017. The following sections of this report provide an overview of EPA's revised VGP for large vessels and two issues of particular interest—requirements concerning ballast water management, and federal and state roles. It reviews recent congressional interest in these topics. Appendix A describes the sVGP for smaller vessels, now superseded by congressional action. The 2013 final VGP applies to seven categories of vessels operating in a capacity of transportation that have discharges incidental to their normal operations into waters subject to the permit: commercial fishing including fish processing, freight barge, freight ship, passenger vessel, tank barge, tank ship, and utility vessel. Freight barges (such as open and covered dry cargo barges, 68% of total), tank barges (e.g., liquid cargo barges, 12%), and utility vessels (such as research vessels and tug vessels, 11%) account for the majority of the 58,600 domestic vessels eligible for coverage under the VGP. Of the 12,430 foreign vessels eligible for coverage, freight ships (e.g., container ships) account for 66%, and tank ships (such as oil tankers) account for 28% of the total. Like the 2008 VGP, "waters subject to the permit" means "waters of the United States," including the territorial seas as defined in the CWA and extending to 3 miles from the baseline. EPA concluded that requiring all covered vessels to submit an NOI indicating coverage under the replacement VGP would be administratively impracticable, so the permit does not require operators of vessels smaller than 300 gross tons and with capacity to carry less than 8 cubic meters (2,113 gallons) of ballast water to submit NOIs. Consequently, more than 10,000 vessels would be automatically covered by the permit without submitting an NOI. This is essentially the same approach used in the 2008 VGP. However, all covered vessels are subject to the permit's requirements and must complete a Permit Authorization and Record of Inspection form and maintain that form on board at all times. The purpose of the form, according to EPA, is to confirm that vessels owners and operators have read the terms of the VGP and understand their obligation to comply. As noted above, CWA permits normally are issued for a specific period of time, not to exceed five years, with a provision for reapplying for further permit coverage prior to the expiration date. EPA had proposed a four-year permit term for the draft VGP, as a way to ensure that the permit keeps pace with developing technologies, especially for ballast water treatment, but the final permit provides a five-year term, consistent with most EPA-issued CWA permits. The 2013 permit's principal ballast water and non-ballast modifications of the 2008 VGP are discussed next, along with EPA's economic and benefits analysis. Ballast water discharge has been identified as a major pathway for the introduction of ANS. Ships use large amounts of ballast water for stability during transport. Ballast water is often taken on in the coastal waters in one region after ships discharge wastewater or unload cargo, and then discharged at the next port of call, wherever more cargo is loaded, which reduces the need for compensating ballast. Thus, the practice of taking on and discharging ballast water is essential to the proper functioning of ships, because the water that is taken in or discharged compensates for changes in the ship's weight as cargo is loaded or unloaded, and as fuel and supplies are consumed. However, ballast water discharge typically contains a variety of biological materials, including non-native ANS that can alter aquatic ecosystems. Concern about harmful impacts of ballast water discharge was the core of the legal challenge by environmental groups to EPA's 1973 regulations, which ultimately led to issuance of the 2008 VGP. The ballast water requirements of the 2008 VGP are minimal, largely requiring what current Coast Guard rules require—primarily use of ballast water exchange, or BWE. The 2008 permit mandates mid-ocean BWE for ships traveling outside the 200-nautical-mile exclusive economic zone (EEZ) of the United States. This requirement already applies under a 2004 Coast Guard rule (codified at 33 C.F.R. Part 151). EPA's VGP also requires BWE at least 50 nautical miles from shore for vessels engaged in Pacific nearshore voyages, which are not covered by the Coast Guard's mandatory exchange procedures. Further, the 2008 VGP requires vessels that declare they have "no ballast on board" either to seal the ballast tanks to prevent any discharge or to carry out saltwater flushing. The 2008 permit requires vessel operators to maintain a log book and records of ballast water management and submit reports of noncompliance to EPA annually. The 2008 VGP does not include numeric limits on living organisms or pathogenic discharges, which some environmental groups have advocated that EPA issue. EPA explained this position in a fact sheet accompanying the 2008 permit. EPA is not requiring any numeric treatment standards for the discharge of living organisms as part of this permit issuance and is instead requiring management practices (e.g. ballast water exchange) that decrease the risk of ANS introduction. EPA is proposing this approach because treatment technologies that effectively reduce viable living organisms in a manner that is safe, reliable, and demonstrated to work onboard vessels are not yet commercially available ... [R]equiring a numeric effluent limit for the discharge of living organisms is not practicable, achievable, or available at this time.... EPA will consider establishing treatment requirements in the next generation of permits that will provide for compliance with treatment standards that will be expressed as units of living or viable organisms per unit of volume in ballast water discharge. While the 2013 VGP contains a number of ballast water BMP and recordkeeping requirements similar to the 2008 permit, the 2013 permit departs from the 2008 permit by specifying ballast water numeric discharge limits. By replacing the non-numeric limitation for ballast water in the 2008 VGP with numeric limits, EPA expects that the changes will achieve significant reductions in the number of living organisms discharged via ballast water into waters subject to the permit. The VGP sets the numeric effluent limits for ballast water in terms of maximum acceptable concentration of living organisms per cubic meter discharged, as shown in the text box below. As discussed further below (see " Ballast Water Standards "), EPA now concludes that treatment technologies are available to meet limits in the VGP, and the requirements are economically practicable and economically achievable. The numeric limits in the VGP are identical to performance standards specified in the International Maritime Organization's (IMO's) 2004 International Convention for the Control and Management of Ships' Ballast Water and Sediment. They also are the same as standards finalized by the Coast Guard in 2012 under 33 C.F.R. Part 151 and 46 C.F.R. Part 162. Many ballast water treatment systems produce or use biocides as a disinfection agent to reduce living organisms present in the ballast water tank, but discharges of such substances may cause or contribute to violation of applicable water quality standards. Thus, the VGP also includes biocide effluent limitations to protect aquatic life. The permit sets limits of 200 micrograms per liter (µg/l) of chlorine dioxide, 500 µg/l of peracetic acid, 100 µg/l of ozone, and 1,000 µg/l of hydrogen peroxide. Vessels may comply with the concentration-based numeric treatment limits in one of four ways: (1) discharge treated ballast water meeting the applicable numeric limits (i.e., by using treatment technology); (2) transferring the ship's ballast water to a third party for on-shore treatment; (3) use treated municipal/potable water as ballast water; or (4) by not discharging ballast water. EPA estimates that approximately 2,880 domestic and 5,270 foreign vessels are potentially subject to the ballast water standards because they operate with on-board ballast water tanks, and the agency anticipates that about 40% of covered vessels will comply by installing a ballast water treatment system. EPA has concluded that several treatment technologies capable of meeting the permit's numeric limits are commercially and economically available now for shipboard installation. Under the VGP, new vessels constructed after December 1, 2013, must comply with the permit's numeric limits upon delivery. EPA determined that it would be infeasible to require all existing vessels to be fitted with ballast water treatment systems with a one-to-two year schedule. Thus, the permit requires existing vessels, constructed before December 1, 2013, to comply under a staggered schedule. Existing vessels with ballast water capacity of less than 1,500 cubic meters must comply by the time of their first scheduled drydocking after January 1, 2016. Existing vessels with ballast water capacity of more than 1,500 and less than 5,000 cubic meters must comply by the time of their first scheduled drydocking after January 1, 2014. Existing vessels with ballast water capacity greater than 5,000 cubic meters must comply by the time of their first scheduled drydocking after January 1, 2016. This time schedule is consistent with the timelines in the Coast Guard's March 2012 rules, described above. The IMO D-2 standard includes a phased schedule for similar ballast water capacity sizes of vessels, but with slightly different implementation dates. Certain vessel classes would not be subject to the ballast water numeric limits in the VGP. These include vessels engaged in short-distance voyages (e.g., they travel no more than 10 nautical miles), unmanned and unpowered barges, small inland and seagoing vessels (less than 3,000 gross tons), and existing bulk carrier vessels built before January 1, 2009, that operate solely within the Great Lakes (commonly known as Lakers). In general, according to EPA, these vessels face a number of challenges for managing ballast water, and in the case of existing Lakers there currently are no available treatment systems. Thus EPA has concluded that it is more appropriate to require these vessels to use BMPs such as avoiding discharge of ballast water in environmentally sensitive areas, but not require compliance with numeric limits. EPA will follow the state of technologies currently being tested for Lakers and will consider revising permit requirements during the term of the permit if technologies become available. The 2013 VGP contains several more stringent effluent limits/BMPs than in the 2008 VGP for certain vessel discharges. First, it requires all vessels to use "environmentally acceptable lubricants" on mechanical and other equipment that operate at the sea interface, such as wire rope or cables, unless technically infeasible. Vessel operators often use lubricants to maintain the functionality of such equipment, which can release quantities of oil or grease to water. The permit also requires maintenance BMPs to prevent leaks that could lead to oil discharges. Second, the permit prescribes BMPs to reduce discharges of fish hold effluent, which was not covered by the 2008 VGP. Commercial fishing vessels use various methods to store seafood after it is caught. Fish hold effluent is composed of seawater, melted ice, or ice slurry that is collected inside fish hold tanks. It contains pollutants such as biological wastes and nutrients which result from seafood catch. In addition, because holding tanks often are cleaned or disinfected between catches, the resulting effluent can contain organic material, oils, nutrients, and bacteria and viruses. BMPs specified in the permit are intended to minimize the discharge of fish hold water and ice while vessels are stationary at a pier. Third, the VGP includes numeric limits to control discharge to water of harmful exhaust emissions from engines that power ocean going vessels. The permit sets numeric limits and monitoring requirements for pH, turbidity, polycyclic aromatic hydrocarbons (PAHs), and nitrates plus nitrites. The limits are consistent with guidelines established by the IMO to implement engine and fuel standards in Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78). The permit also includes certain administrative modifications of the 2008 VGP, which requires owners/operators to self-inspect their vessels routinely as well as annually in more detail and keep written records. The 2008 permit allowed use of electronic recordkeeping systems, and the 2013 permit includes provisions clarifying how such systems are to be maintained in forms as readable and legally dependable as a paper equivalent. All vessels must report electronically, unless specifically exempted. The 2013 VGP modifies the earlier permit's reporting requirements by consolidating requirements for an annual noncompliance report as part of an annual report, instead of calling for separate reports. Under the 2008 VGP, cruise ships are subject to more detailed requirements for certain discharges, such as graywater and pool and spa water, and additional monitoring and reporting. These additional requirements recognize that cruise ships generate considerably more graywater discharges than a container or cargo ship, and onboard amenities such as photo developing and dry cleaning produce chemicals that are toxic to the aquatic environment and, thus, are not authorized by the permit. The 2008 VGP includes BMPs as well as numeric effluent limits for fecal coliform and residual chlorine in cruise ship discharges of graywater that are based on U.S. Coast Guard rules for discharge of treated sewage or graywater in Alaska. It also includes operational limits on cruise ship graywater discharges in nutrient-impaired waters, such as Chesapeake Bay or Puget Sound. The 2013 VGP retains the same numeric limits for graywater discharges, but tightens operational limits: cruise ships are prohibited from discharging graywater within 3 nautical miles of shore (rather than 1 nautical mile from shore under the 2008 VGP) unless it has been treated to the standards specified in the permit. In general, the 2013 permit includes the same requirements for large (more than 500 passengers) and medium cruise ships (carrying 100 to 499 passengers), but with some flexibility for the latter category because of differences in graywater holding capacity and operation. The 2013 VGP also includes additional requirements for large ferries (to minimize potential spills, drips, and leaks associated with carrying vehicles), barges (to prevent contamination of condensation with oily or toxic materials), oil and petroleum tankers (to protect against environmentally harmful discharges of oil during cargo loading and unloading), research vessels (to authorize only discharges for the purpose of conducting research on the aquatic environment or its natural resources), and emergency vessels (specifically to allow discharges incidental to the public safety responsibilities of firefighting and similar boats). EPA estimates that the total annual incremental costs of implementing the VGP will range from $7.2 million to $23.0 million (in 2010$) for domestic vessels. For vessels covered by this permit, these costs would be in addition to previous costs for complying with the 2008 VGP, described above. About 90% of the costs of the permit are associated with requirements mandating the use of environmentally acceptable lubricants, followed by those for ballast water. Further, EPA's estimates of compliance costs do not include the capital costs of installing, operating, and maintaining ballast water treatment systems, as these costs were previously estimated by the Coast Guard in its 2009 regulatory proposal to be approximately $168 million per year and thus represent baseline for estimating costs of the 2013 VGP. The average per vessel compliance costs of the 2013 permit range between $51 and $7,004, depending on the number of applicable discharge categories and existing baseline practices. Tank ships are expected to have the highest average compliance costs, due to potential incremental costs for oil tankers exclusively engaged in coastwise trade that may install onboard ballast water treatment systems to comply with the 2013 permit. Overall, EPA concludes that the estimated compliance costs generally represent a small share of per vessel operating revenue. Thus, meeting the 2013 VGP permit requirements is economically practicable and achievable for permittees. The principal benefits of the VGP will be reduced risk of ANS introduction and enhanced environmental quality from reduced pollutants, according to EPA. EPA concludes that the permit's ballast water management practices—including discharge standards, monitoring, and reporting—should reduce the number of ANS invasions, thus preventing significant future damages to fisheries, water-based recreation and tourism, biodiversity and ecosystems, threatened and endangered species, human health, and infrastructure. However, the agency cannot quantify these benefits. [T]he complexity of analyzing the probability of ANS introduction and spread, the wide range and varied nature of impacts ANS invasions can cause, and the great breadth of the scope of this Permit prohibit EPA from developing a quantified estimate of these benefits. Likewise, EPA concludes that the permit's controls on specific discharges, as well as its general housekeeping requirements, can be expected to generate both monetized benefits—such as preventing fishery closures and adverse human health impacts and increasing recreation opportunities—and nonmonetized benefits—such as preventing further stress on biodiversity and ecosystems. The magnitude of benefits is not calculable, according to EPA. EPA acknowledged significant uncertainty about several assumptions affecting estimated costs of the VGP, including uncertainty regarding discharge control practices currently implemented and the number of vessels expected to implement new practices. There also is uncertainty, EPA said, about costs of certain treatment systems, such as for bilge water, and practices such as use of environmentally acceptable lubricants, because of limited data and unknowns about applicability to different vessels. As a result, EPA concluded that its estimates should be interpreted as illustrative of a range of incremental costs, not as a precise account of costs that a vessel owner may incur for any specific vessel. Two prominent issues raised by the 2013 VGP are questions about inclusion of specific numeric ballast water discharge limits in the permit, and controversies about the role of states in regulating vessel discharges. Many observers expected EPA to propose numeric limits in the next iteration of the VGP after the 2008 permit, in view of the IMO and Coast Guard performance standards, which were promulgated in 2012. At issue had been whether EPA would propose more stringent numeric limits, as some environmental advocacy groups favor and a few states have already adopted. Anticipating expiration of the 2008 VGP, in 2010 EPA requested two reports to advise the agency on possible changes to the permit's ballast water management requirements. First, EPA and the Coast Guard jointly asked the National Research Council (NRC) of the National Academy of Sciences to evaluate the state of the science to support a quantitative approach to setting ballast water discharge standards, that is, specific numeric limits. The two agencies sought advice to better understand the relationship between concentrations of living organisms in ballast water discharges and the probability of ANS successfully establishing populations in U.S. waters, that is, whether setting maximum permissible limits on live organisms in ballast effluent can adequately protect against establishment of ANS in aquatic systems. The resulting NRC report concluded that the density of organisms released in a ballast discharge is "but one of scores of variables that can and do influence invasion outcome." The NRC concluded that, while a benchmark discharge standard that reduces the concentration of organisms below levels achieved by open-sea BWE is an important first step, additional research is needed in order to focus on the relationship between the quantity, quality, and frequency of release and the risk of successful invasion by ANS. Second, EPA asked its Science Advisory Board (SAB) to provide advice on technologies and systems to minimize the impacts of ANS in vessel ballast water discharge. EPA requested the SAB to assess whether existing shipboard treatment technologies can reach specified concentrations of organisms in vessel ballast water, how these technologies might be improved in the future, and how to overcome limitations in existing data. The SAB's overarching recommendation in its report is that, rather than relying solely on numeric standards, the agency should adopt a risk-based approach to minimize impacts of invasive species in vessel ballast water discharge, including methods to reduce invasion events, process and environmental monitoring, containment, and eradication. The SAB found that several existing technologies have been demonstrated that are capable of meeting the IMO D-2/Coast Guard and more stringent standards, but that technology is not available to reliably test for standards 100 or 1,000 times more stringent than the IMO standard, such as the Phase 2 standard included in the 2009 Coast Guard proposal or those adopted by California and New York. Reaching a more stringent standard would require new treatment systems that have not been tested in order to determine their practicality and cost, according to the SAB. These reports clearly influenced EPA's development of the 2011 draft VGP, which proposed to harmonize the permit's requirements for controlling ANS in ballast water discharge with the numeric limits in the IMO D-2 standards/Coast Guard rule, plus continued use of BMPs. EPA referenced both reports in explaining its conclusion that a more rapid implementation schedule than in the IMO D-2 standard is not economically achievable at this time, nor are more stringent numeric discharge limits practicable at this time. In particular, EPA concluded that data cited by the California State Lands Commission to justify that state's more stringent discharge limits "are not adequate to determine whether any of the treatment systems can meet a significantly more stringent limit than that proposed for this permit term." Nevertheless, EPA recognized that some commenters would urge the agency to require numeric limits more stringent than the IMO D-2/Coast Guard standards. Many environmental groups and some states have argued, for example, that setting a higher standard will better protect water quality from ANS invasion while also serving as incentive to industry to develop technology that meets the standard. Thus, EPA requested public comment on the appropriateness of the proposed ballast water controls in the draft VGP and whether to adopt alternative treatment limits (such as the California standards), as well as whether additional management measures discussed in the NRC or SAB reports (such as managing ballast uptake or reducing ballast water discharge volumes) should be incorporated in the permit. In the 2013 final VGP, EPA retained the position taken in the 2011 draft VGP that, based on current treatment and monitoring technologies, more stringent standards, such as California's, cannot be supported. EPA continues to agree with the NAS that establishing precise, quantifiable ballast water discharge standards more stringent than the IMO D-2/Coast Guard standards is not possible at this time. The final permit does not include additional management measures as a general requirement. However, the 2013 permit acknowledges unique vulnerabilities of the Great Lakes system to ANS invasion through ballast water discharges, and it includes additional protection for these waters. It requires all vessels that operate outside the EEZ and more than 200 nm from any shore to conduct saltwater flushing of ballast tanks before entering Great Lakes waters through the Saint Lawrence Seaway System. Also, all vessels that are equipped to carry ballast water and that enter the Great Lakes must conduct open ocean ballast water exchange. Preemption of state regulatory programs with a uniform national standard has been a key issue in dispute concerning efforts to regulate discharges from vessels, including ballast water discharges. The CWA permits EPA to authorize qualified states to administer the act's principal permitting program under Section 402, and EPA has done so for 46 states. Pursuant to CWA Section 402(c)(1), after such authorization, EPA suspends issuance of permits in lieu of the state. In other situations when EPA has issued a CWA general permit covering a similar category of dischargers, the EPA general permit only applies in non-authorized states where EPA retains permitting authority. In such cases, the EPA general permit typically is the model for a general permit issued directly by the authorized state; the state-issued permit must be at least as stringent as the EPA permit, but can be more stringent. Further, CWA Section 510 allows states to adopt standards, discharge limitations, or other requirements more stringent than federal rules, meaning that if a state were to assume the responsibility to issue vessel permits under the CWA, it could do so with alternative requirements no less stringent than the federal requirements. States often want the flexibility to require standards more stringent than federal, and this general authority in the statute gives states the ability to tailor and strengthen their implementation of federal water quality programs to address local conditions and circumstances. However, because vessels are mobile and frequently travel between jurisdictions, allowing individual states to issue CWA permits to vessels would be administratively more complex than issuing a permit to a factory or other stationary source. Thus, both the 2008 VGP and final 2013 VGP uniquely apply to vessel discharges into U.S. waters in all states and territories, regardless of whether a state is authorized to administer other aspects of CWA permitting. By preempting states from issuing CWA permits for discharges incidental to the normal operation of vessels, the possibility of vessels being subject to potentially conflicting conditions as they move between the waters of different states is theoretically precluded. However, even without issuing CWA permits, a number of states are effectively requiring vessels to meet their own discharge requirements beyond the VGP through a procedure called 401 certification. Under CWA Section 401, an applicant for a federal license or permit to conduct any activity that may result in a discharge to waters of the United States must provide the federal agency with a Section 401 certification. The certification, made by the state in which the discharge originates, declares that the discharge will comply with applicable provisions of the CWA, including state-established water quality standards. Section 401 provides states with two distinct powers: one, the power indirectly to deny federal permits or licenses by withholding certification; and two, the power to impose conditions upon federal permits by placing limitations on certification. Where states impose conditions on a federal permit—such as the VGP—the permittee must meet the additional state limitations as conditions of the federal permit. Prior to issuance of the 2013 VGP, 25 states certified the permit with additional permit conditions covering one or more of the 27 effluent streams. Of the 25 states, 14 certified the permit with conditions applicable to ballast water discharges, either with specific numeric discharge standards, or with more general language prohibiting nuisance conditions or other conditions in order to protect state waters. A group of commercial shipping operators challenged the state certifications under the 2008 federal permit, contending that the shipping industry is placed in the difficult regulatory position of being subject to a single federal permit with multiple state requirements. In federal court, the vessel operators argued that EPA should have provided notice and opportunity for comment before promulgating the final permit, which included the state certifications. They also argued that EPA erred by failing to consider possible effects and costs of compliance with state conditions. The court rejected the challenge, stating in its ruling that under the CWA, EPA does not have the power to amend or reject state certifications, which must be attached to the permit. The court wrote that petitioners do have recourse, including a challenge in state court to certification conditions imposed by a particular state, a challenge in federal or state court if they believe that a particular state's law imposes an unconstitutional burden on interstate commerce, or seeking modification of the CWA. States also have used their authority to issue state permits independent of the VGP. Both the commercial shipping industry and environmental groups have challenged these state actions, on differing grounds, but courts have generally upheld the permits. For example, a Minnesota appellate court upheld the state's permit despite challenges from an environmental group alleging that the state did not perform an adequate water quality impact review before issuing the permit and that the state failed to impose numeric limitations for ANS. Additionally, Michigan's permitting program and New York's 401 certification of the 2008 federal permit were upheld after challenges by shipping industry groups. The role of states in implementing the VGP is likely to remain an issue. EPA plans to provide a clearinghouse of information and other tools to track development of each state's 401 conditions. Some environmental advocacy groups criticized the 2013 final permit, asserting that it does not include adequate requirements to stop or reduce the spread of invasive species. Challenges to the final permit were filed by the Natural Resources Defense Council, Inc. and the Northwest Environmental Advocates, and the National Wildlife Federation, among others, in several federal appeals courts. All of the challenges were consolidated in the U.S. Court of Appeals for the Second Circuit in New York. Another party in the consolidated legal challenge to the 2013 permit is the Canadian Shipowners Association (CSA), which asked the court to review the VGP's January 1, 2014, deadline for implementing best available technology for ballast water management systems. At issue is the fact that the Coast Guard has been granting compliance extensions to its ballast water rules because of unavailability of certified technologies. The association argued that the deadline in the VGP, which does not provide for similar extensions, was not realistic—a point that EPA has conceded. EPA officials stated in congressional hearings that enforcement action against vessels that are unable to install Coast Guard-approved technology to meet the numerical limits in the 2013 VGP would have a low priority for the agency. In April 2014, the federal court granted CSA's request to stay the January 1, 2014, VGP deadline for vessels operated by CSA members, and subsequently the court agreed to a joint request by CSA and EPA to sever the shippers' petition for review from the environmental groups' challenge. In October 2015, the court ruled on the environmentalists' challenge and found that EPA acted arbitrarily and capriciously in issuing parts of the 2013 VGP. The court stated that, in choosing the IMO standard to control ballast water discharges, EPA did not adequately explain why standards higher/more stringent than the IMO standard should be used, given available technology. The court noted that the Science Advisory Board's 2011 report, discussed previously, identified a number of technologies, including onshore treatment, that can achieve standards higher than IMO for one or more organism sizes, which would require only "reasonable/feasible modifications." The court said that EPA should have adjusted its standard in light of available technologies discussed in the SAB report, or explained why it would not do so. The court also agreed with environmentalists that EPA's decision to exempt Lakers built before 2009 from numeric effluent limits of the VGP was arbitrary and capricious. The court said that EPA's belief that there is a lack of supply of updated shipboard systems for Lakers to meet numeric standards was not a legitimate reason to exempt pre-2009 Lakers from the 2013 VGP. The court remanded the permit to EPA for proceedings consistent with the opinion, but allowed the 2013 permit to remain in place until EPA issues a new VGP. The Canadian Shipowners Association's challenge to the 2013 VGP is in abeyance until EPA issues its response to the October 2015 remand order. Congressional interest in this topic has been evident for some time—as reflected in the bills enacted in 2008 and described previously to exempt certain vessels from a CWA permit requirement. As discussed above, a permit moratorium for small non-recreational vessels and commercial fishing vessels enacted in 2008 was temporary, but was extended twice by Congress until December 18, 2014. The sVGP was to apply to these vessels, if the moratorium had expired without congressional action. Several bills that included provisions to make that moratorium permanent were introduced in the 113 th Congress. These bills included H.R. 3464 , which the House passed in May 2014 as a provision of H.R. 4005 ; S. 2094 , approved by the Senate Commerce and Transportation Committee in July 2014; and S. 2963 , approved by the Senate Environment and Public Works Committee in December 2014. Supporters of proposals in these bills argued that small vessels covered by the current moratorium—commercial fishing vessels and other small non-recreational vessels—contribute little pollution and are not sources of invasive species, so a permanent permit exemption is appropriate. Others disagree with this view and argued that because of environmental concerns over vessel discharges, a permanent permit moratorium is inappropriate. Other legislation, to provide a one-year extension of the permit moratorium, also was introduced ( H.R. 5769 and S. 2943 ). The House passed H.R. 5769 on December 3, 2014. Some supporters of the approach in these bills said that a short-term extension would allow for comprehensive congressional attention to a number of vessel issues, including ballast water standards, in the 114 th Congress. As the date for the expiration of the moratorium approached, on December 10, 2014, the Senate and House passed legislation ( S. 2444 / P.L. 113-281 ) that includes a three-year extension of the small vessel moratorium, until December 18, 2017. (See Appendix A for details of the sVGP that would have become effective without this congressional action.) Ballast water discharges from vessels less than 79 feet in length are not affected by the moratorium and are required to be authorized by permits. According to EPA, owners and operators of small vessels that discharge ballast water can seek coverage either under the general permit for large vessels, requiring compliance with numeric standards (see " Ballast Water Requirements " above), or the general permit for small vessels, which took effect December 18, 2014. As described in Appendix A , the sVGP prescribes best management practices (BMPs) for ballast water discharges, not numeric standards. In the 114 th Congress, several bills that would make the existing temporary permit moratorium for small vessels permanent have been introduced. These bills are S. 371 , a bill that only addresses the permit moratorium, and S. 373 / H.R. 980 , bills that also address ballast water standards, as described next. The Senate Commerce, Science, and Transportation Committee approved S. 373 in February 2015, and it later included the text of the bill as titles of S. 2829 , the Maritime Administration Authorization and Enhancement Act for Fiscal Year 2017, which the Senate passed by voice vote on June 29, 2016, and S. 1611 , Coast Guard Authorization Act of 2015. Legislation addressing regulation and management of ballast water discharges that can contribute aquatic invasive species into U.S. waters has been introduced in Congress a number of times since 2000. In the 112 th Congress, two House Transportation and Infrastructure Committee subcommittees held a hearing that focused on how best to address invasive species problems. Since then, several legislative proposals have sought to harmonize ballast water management requirements in a single authority to be implemented by the Coast Guard, including provisions of H.R. 2838 , which the House passed in 2011.This legislation would establish a single federal ballast water management standard (i.e., the IMO D-2/Coast Guard numeric standard described previously). The legislation would supersede existing state standards or permits for any discharge incidental to the normal operation of a commercial vessel, although states could develop a ballast water inspection and enforcement program. It also would supersede EPA's ballast water management requirements under the CWA. Upon enactment of the legislation, state 401 certifications for ballast water discharge in the 2008 VGP would expire. The Coast Guard would have the primary role for enforcing the ballast water performance standard. In December 2012, Congress enacted H.R. 2838 with a number of modifications ( P.L. 112-213 ). First, as noted previously, it extended for one additional year the moratorium on CWA permit requirements for small vessels that was first enacted in P.L. 110-299 . Second, it deleted all of the comprehensive ballast water management requirements in the House-passed bill. In the 113 th Congress, similar legislation to establish nationally uniform ballast water discharge standards ( S. 2094 ) was approved by the Senate Commerce, Science, and Transportation Committee in July 2014, but no further action occurred. In the 114 th Congress, legislation addressing ballast water standards similar to S. 2094 has been introduced: S. 373 and H.R. 980 . As noted above, these bills also would make permanent the existing temporary permit moratorium for small non-recreational vessels and commercial fishing vessels. The Senate Commerce Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard held a hearing on issues concerning regulation and management of discharges incidental to the normal operation of vessels on February 4, 2015. Maritime industry witnesses discussed the overlapping Coast Guard and EPA regulatory requirements, and they also discussed concerns with additional state-imposed requirements. Two weeks later, the full committee approved S. 373 , the Vessel Incidental Discharge Act. As approved, the bill is similar to the legislation that the committee approved in the 113 th Congress, with some amendments. The amended bill would allow a state to adopt or enforce a more stringent ballast water performance standard if the Coast Guard determines that compliance with the state standard is achievable and is consistent with obligations under relevant international treaties or agreements. A second amendment would require vessels to conduct saltwater flushing of ballast water tanks prior to entering the Great Lakes (as they are required to do under the 2012 Coast Guard rule). As described above, the Commerce Committee subsequently included the text of S. 373 as titles of S. 2829 , the Maritime Administration Authorization and Enhancement Act for Fiscal Year 2017, which the Senate passed by voice vote on June 29, 2016, and S. 1611 , the Coast Guard Authorization Act of 2015. Further, on May 18, the House passed H.R. 4909 , the National Defense Authorization Act for FY2017. Title XXXVI of this bill, as passed, is identical to the text of H.R. 980 . In the Statement of Administration Policy on H.R. 4909 , the Administration indicated that it objects to this title of the bill. The Senate-passed companion bill to H.R. 4909 ( S. 2943 ) does not contain similar provisions. Appendix A. The sVGP On September 10, 2014, EPA issued notice of final permit issuance of the sVGP for small vessels. This general permit was scheduled to become effective on December 19, 2014, unless the existing temporary permit moratorium were extended by congressional action—as in S. 2444 , passed by Congress on December 10 (see " Small Vessel Permit Moratorium "). By announcing this final permit more than three months ahead of the effective date, EPA intended to give affected vessel owners and operators sufficient lead time to meet the permit's requirements. The 2014 sVGP was to apply to non-military, non-recreational vessels operating in a capacity of transportation that are less than 79 feet in length. EPA estimated that approximately 115,000 to 138,000 domestic and 156 foreign vessels were potentially subject to the sVGP. They include various types of commercial fishing vessels, tugs and towing vessels, water taxis and small ferries, tour boats, and various other types of vessels used for non-recreational purposes. Approximately 68,000 are commercial fishing vessels, comprising the largest category, which includes vessels involved in fish catching, fish processing, and charter fishing. The second-largest category is "unspecified" vessels (totaling 27,000), followed by passenger vessels (21,000), such as charter fishing vessels and harbor cruise vessels. These vessels were excluded from the 2008 VGP by the initial moratorium in P.L. 110-299 , which Congress subsequently extended—most recently to December 18, 2017, in S. 2444 . The sVGP would have regulated several categories of discharges, including fuel management, engine and oil control, solid and liquid waste management, vessel hull maintenance, graywater, fish hold effluent, and ballast water. It prescribed BMPs such as preventive maintenance of engines and fuel tanks to minimize the occurrence of leaks and spills that could release fuel or oil to receiving waters, and the minimization of graywater discharges that may contain soaps and detergents or nutrients into sensitive water bodies and confined waters. Most of the practices are already widely implemented by vessels subject to the draft sVGP, according to EPA. EPA concluded that few vessels covered by the sVGP are affected by ballast water management requirements, because vessels less than 100 feet long typically do not load and discharge ballast or rely on ballast for stability. However, for vessels less than 79 feet long that do use ballast as a stability enhancer, the sVGP prescribed BMPs, because in EPA's view, no existing treatment systems are believed to have been developed for vessels with these small amounts of ballast water. Appropriate ballast water management BMPs include avoiding or minimizing ballast water uptake in areas with a high potential to contain harmful organisms and only discharging the minimal amounts of ballast water necessary in U.S. coastal and inland waters. Because of the large universe of vessels covered by the sVGP, EPA determined that requiring all of these vessels to submit an NOI would be an extremely large administrative burden. Further, requiring an NOI for these vessels would be of little value, because of the limited range of discharge types and the reduced likelihood that they will introduce significant quantities of toxic and conventional pollutants to waterways. However, like the VGP, EPA would have required all vessel operators covered by the permit to comply with its requirements, including signing an sVGP Permit Authorization and Record of Inspection form and maintaining that form onboard at all times. The terms of the sVGP would expire five years after the permit's effective date. EPA made several changes in the 2014 sVGP, compared with the 2011 draft permit. For example, the final permit added a condition that accumulated bilgewater must be removed, to the extent practicable, prior to transporting a vessel from one waterbody to another over land. Overall, EPA estimated that the sVGP requirements could result in total annual costs for domestic vessels ranging between $7.1 million and $16.9 million (in 2010 dollars), in the aggregate. Approximately 35% of these costs were associated with vessel hull maintenance, 25% with recordkeeping and inspection, and 25% with engine and oil control BMPs. The average cost per vessel was estimated to range from $17 per year (for vessels that already implement control practices) to $133 per year. The estimated range depended on the number of applicable discharge categories and baseline practices. EPA lacks data to quantify the environmental benefits of the sVGP, but qualitatively, the agency expected that reducing discharges incidental to the operation of small non-recreational vessels would have two broad categories of benefits: enhanced environmental quality from reduced loads of pollutants, and reduced risk of introducing and spreading invasive species. As it did with the VGP, EPA acknowledged uncertainties about impacts of the sVGP, largely due to limitations of data regarding financial and operational characteristics of affected firms and compliance costs that firms may incur. Particularly for the smaller vessels covered by the sVGP, EPA said that uncertainty exists for the revenue data for firms and also on the number of firms that have vessels that could incur cost impacts. For example, EPA assumed the same range of cost per vessel for all industry sectors, based on the best and worst case scenarios, but the agency recognized that this simplifying assumption may be inaccurate, because some vessels may already be implementing discharge control practices and would therefore not incur additional costs. Despite uncertainties, EPA concluded that it is "unlikely that a significant number of firms in the commercial fishing industry incurring material economic impacts as a result of complying with the sVGP." The permit was expected to have some effect on small firms, because of the very large number of small operators, but "the exact impacts on the profitability of these small businesses are difficult to quantify ... due to limitations of the data." Appendix B. Discharges Incidental to the Normal Operation of Military Vessels As noted in the text of this report, discharges incidental to the normal operation of military vessels are not subject to EPA's VGP or the 2012 Coast Guard rule concerning ballast water discharges. Instead, such discharges are subject to separate regulatory requirements, pursuant to CWA Section 312(n), which Congress added to the act in 1996 (Section 325 of P.L. 104-106 ). Section 312(n) requires EPA and the Department of Defense (DOD) jointly to promulgate uniform national discharges standards (UNDS) for certain discharges incidental to the normal operation of a vessel of the Armed Forces, unless the Secretary of Defense finds that compliance with UNDS would not be in the national security interests of the United States. Once finalized, the standards will be applicable to discharges from U.S. Armed Forces vessels operating in the navigable waters of the United States, the territorial seas, and the contiguous zone. Since enactment of these provisions, EPA and DOD have been working through a multi-stage rulemaking process to develop the required standards. This process has already been underway for 20 years and is likely to extend for an unknown number of additional years. First, in Phase I, the agencies promulgated regulations in 1999 identifying 25 discharges for which it is "reasonable and practicable" to require a marine pollution control device (MPCD). Phase I also identified 14 discharges as not requiring control with a MPCD. These 1999 regulations are codified at 40 C.F.R. Part 1700. During Phase II, EPA and DOD are proposing discharge performance standards for the 25 categories of discharges identified in the 1999 rule. Phase II is occurring in three separate rulemakings. The first set of performance standards, which addressed 11 discharges, was published in 2014, and the second set of performance standards, addressing another 11 discharges, was published in October 2016. The third set of performance standards, which will address the final three discharges identified in the 1999 rule—all of which involve ballast discharges—will be published separately in a future rule. Phase III of the UNDS rulemaking will be a DOD-only rule. It will require DOD, in consultation with EPA and the Coast Guard, to promulgate regulations governing the design, construction, installation, and use of MPCDs necessary to meet the performance standards covered by Phase II. Similar to Phase II, Phase III will be promulgated in three batches. CWA Section 312(n) requires DOD to promulgate the Phase III standards within one year of finalization of the Phase II standards, and these regulations are to become effective upon promulgation, unless DOD specifies another effective date. EPA and DOD estimate that the universe of Armed Forces vessels affected by the UNDS rulemaking is about 6,230 ships of the U.S. Navy, Army, Marine Corps, Air Force, and Military Sealift Command. Approximately 18% of the total (1,090 vessels, including aircraft carriers, auxiliary ships, patrol ships, and submarines) are larger than 79 feet in length. The remaining 5,140 ships, including a variety of self-propelled boats, are less than 79 feet in length. According to EPA and DOD, in developing the Phase II discharge performance standards, the agencies are referencing the 2013 VGP and the 2014 sVGP as the baseline for each comparable discharge incidental to the normal operation of a vessel of the Armed Forces.
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In November 2011 the Environmental Protection Agency (EPA) proposed two Clean Water Act (CWA) permits to regulate certain types of vessel discharges into U.S. waters. The proposed permits would replace a single Vessel General Permit (VGP) issued in 2008 that was due to expire in December 2013. As proposed, the permits would apply to approximately 71,000 large domestic and foreign vessels and perhaps as many as 138,000 small vessels. This universe of regulated entities is diverse as well as large, consisting of tankers, freighters, barges, cruise ships and other passenger vessels, and commercial fishing vessels. Their discharges are similarly diverse, including among other pollutants aquatic nuisance species (ANS), nutrients, pathogens, oil and grease, metals, and toxic chemical compounds that can have a broad array of effects on aquatic species and human health, many of which can be harmful. EPA proposed two permits, one for large vessels to replace the 2008 VGP, and one for smaller vessels covered by a congressionally enacted temporary moratorium. Both were proposed well in advance of the VGP's expiration to provide ample time for the regulated community to prepare for new requirements. On March 28, 2013, EPA issued a final version of the VGP for large vessels. It took effect December 19, 2013. The permit for smaller vessels, the sVGP, was issued on September 10, 2014, and was scheduled to take effect on December 19, 2014. However, in December 2014, Congress passed legislation (S. 2444/P.L. 113-281) extending until December 18, 2017, the date when small vessels will need a CWA permit. The CWA requires that all regulated discharges must meet effluent limitations representing applicable levels of technology-based control. The 2013 VGP largely retains the current permit's approach of relying on best management practices to control most discharges, because EPA concluded that it is infeasible to develop numeric effluent limits for most controlled discharges. However, the new VGP includes for the first time numeric ballast water discharge limits, which are consistent with standards in a 2012 Coast Guard rule and an international convention. The 2013 VGP raises two key issues. One concerns inclusion of specific numeric ballast water discharge limits in the permit. At issue had been whether EPA would propose more stringent numeric limits, as some environmental groups have favored and a few states have already adopted. A second issue concerns the role of states in regulating vessel discharges. Environmental groups and Canadian shippers challenged the 2013 permit in federal court. In October 2015, the court supported the environmentalists' challenge, ruling that the permit violated the CWA because it did not require the use of best available technology to control discharges of invasive species from ships' ballast water. The court remanded the permit to EPA, but did not vacate it; the permit remains in effect until EPA issues a new permit. Congressional interest in this topic has been evident for some time. In 2008 Congress enacted two bills to exempt certain vessels from a CWA permit requirement, thus restricting the population of vessels subject to the VGP. One was a permanent permit moratorium for recreational vessels of all sizes. The other act was a temporary permit moratorium for small commercial vessels and commercial fishing vessels, which was extended twice by Congress and would have expired December 18, 2014, had Congress not enacted an additional three-year extension in P.L. 113-281. In the 114th Congress, bills addressing the temporary permit moratorium for small vessels and regulation of ballast water discharges have been introduced (S. 373/H.R. 980 and S. 371). The Senate Commerce Committee approved S. 373 in February 2015; the committee also included provisions of this bill in S. 2829, which the Senate passed in June 2016, and S. 1611. Further, the House has passed H.R. 4909, which includes the text of H.R. 980 as one title of that bill.
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Increasingly, the federal government uses technology to facilitate and support the federal procurement (or acquisition) process. Primary beneficiaries of this shift to online procurement systems (i.e., websites and databases) are the government's acquisition workforce and prospective and incumbent government contractors. Web-based procurement systems are essential for completing certain processes and fulfilling various requirements including, for example, publicizing contracting opportunities, helping to ensure that the government only does business with responsible contractors, capturing subcontracting information, and collecting and maintaining contract award data. Possible benefits conferred by the suite of acquisition systems include enhanced efficiency, improved access to information, mitigation of the administrative burden shared by federal employees and contractors, and the timely collection of accurate data. The government's reliance on web-based systems is not surprising for yet another reason: the magnitude of government procurement. Beginning with FY2008, the federal government has spent over $500 billion and conducted at least 5.7 million contract actions each fiscal year through FY2012. During the same time period, federal agencies dealt with at least 154,000 contractors each fiscal year. This figure does not include entities that competed for, but were not awarded, any government contract. Congressional interest in the executive branch's procurement systems (and, more broadly, government procurement) is fueled by a combination of its responsibilities. As the keeper of the federal purse and the body responsible for oversight of the executive branch, Congress takes a keen interest in how federal agencies spend the funds appropriated to them and, generally, how well the acquisition process works. While congressional oversight of government procurement includes overseeing web-based acquisition systems, these systems also serve as resources for congressional oversight efforts as well as legislative activities. Additionally, some online procurement systems may be useful when crafting responses to constituents who have commented on, or requested assistance related to, government procurement. Relatedly, Congress has demonstrated an ongoing interest in promoting the transparency of government spending data, including contract award information, for citizens and other interested parties. This report begins with an overview of major online procurement systems that support certain acquisition processes, or contain data about agencies' procurements. This section includes a table that provides basic information about each system and that may serve as a reference guide. The next section of the report then examines several issues and topics, including data quality, the System for Award Management (SAM), and the posting of contracts online. Major web-based, executive branch procurement systems are the focus of this report. This report does not include any agency-specific websites or databases. Additionally, it does not include all of the governmentwide online systems associated with government procurement, such as the Small Business Administration's Subcontracting Opportunities Directory and SUB-Net, or the RFP-EZ pilot program. Generally, only executive branch agencies are subject to the applicable statutes, regulations, policies, or guidelines that govern the use of the procurement systems covered in this report. Although individual legislative branch or judicial branch agencies might be permitted to use these systems, they are not necessarily required to do so. The past two decades have seen the federal government take "increasing advantage of technology to improve the efficiency and effectiveness of the acquisition lifecycle, from performing market research to recording contractor performance information." Initially, most online acquisition systems were established for the purpose of facilitating and improving the procurement process. Contracting officers, and other members of the government's acquisition workforce, post solicitations (and other documents, such as sources sought notices) on the Federal Business Opportunities (FedBizOpps) website. In turn, FedBizOpps is a resource for would-be government contractors seeking opportunities to sell their goods or services to the government. The System for Award Management streamlines the registration process for prospective and current contractors while providing a single repository of information for agency personnel to use, for example, to confirm business size, review contractors' certifications, and pay contractors. To aid in ensuring that the government does business only with responsible contractors, agency personnel also use SAM to determine whether a contractor is presently suspended or debarred, and query the Federal Awardee Performance Information and Integrity System (FAPIIS). Contracting officers submit performance information to the Past Performance Information Retrieval System (PPIRS) and, in turn, use information stored in the system when evaluating a contractor's past performance. Some web-based acquisition systems may primarily serve other purposes and other users. Congressional staff and agency personnel may find the contract award data available on the Federal Procurement Data System-Next Generation (FPDS-NG) website useful when developing, or implementing, policy. A push for transparency led to the passage of the Federal Funding Accountability and Transparency Act of 2006 (FFATA, P.L. 109-282 ). FFATA mandated the development of a user-friendly system comprising a variety of government spending data, including procurement data. Another effort aimed at enhancing transparency involves FAPIIS. Subsequent to the establishment of FAPIIS, legislation was enacted which made the contents of this system, except for past performance data, accessible to the public. Table 1 contains information regarding 11 web-based acquisition systems and a related Department of Labor system. The table reflects the current status of the General Services Administration's effort to consolidate eight procurement websites, plus the Catalog for Federal Domestic Assistance (CFDA), into one integrated system, SAM. Three websites—Central Contractor Registration (CCR, which includes Federal Agency Registration (FedReg)), Excluded Parties List System (EPLS), and Online Representations and Certifications Application (ORCA)—migrated to SAM in July 2012. None of the three is listed separately in Table 1 . Each of the five remaining procurement systems slated to migrate to SAM at later dates has its own entry in the table. These websites are the Electronic Subcontracting Reporting System (eSRS), FedBizOpps, FPDS-NG, PPIRS, and Wage Determinations Online (WDOL). Additional information about SAM is provided below. Over the years, questions have been raised regarding the accuracy, completeness, and timeliness of the contract award data available from FPDS and its successor, FPDS-NG. FPDS was established in February 1978, and by fall 1982 the Government Accountability Office (GAO) had published three reports that documented deficiencies in the completion and accuracy of data submitted by federal agencies. A decade later, during preparations for the transition from FPDS to FPDS-NG, GAO reported to the Director of OMB in late 2003 that FPDS data were "inaccurate and incomplete." During the transition, agencies were asked to "review their data and identify and correct any deficiencies" before they transferred the data to FPDS-NG and certify "the accuracy and completeness" of their FY2004 data. Yet, in 2005, GAO shared its concerns with the OMB Director regarding the "[t]imeliness and accuracy of data" and "[e]ase of use and access to data" in FPDS-NG. In its 2007 report, the Acquisition Advisory Panel (AAP) catalogued several problems with FPDS-NG, including inaccurate data, unclear instructions, the system's failure to capture certain data, and validation rules that did not function as intended. An April 2008 review of "complex service acquisitions" by GAO revealed that "the FPDS-NG field identifying major programs was typically blank." Other GAO studies revealed difficulties in identifying interagency contracts in FPDS-NG because of the way they were coded, and reported that "some contracts were incorrectly coded as T&M [time and material] contracts while others were incorrectly coded as having acquired commercial services." Reports of procurement data problems have been met by efforts to ensure the data are accurate and complete, and reported in a timely manner. Most recently, the Administrations of George W. Bush and Barack Obama have provided guidance to agencies regarding data submitted to FPDS-NG. The latest guidance, which was issued by the Office of Federal Procurement Policy (OFPP) in 2011, complements and expands upon FAR 4.604. Under FAR 4.604(a), an agency's senior procurement executive "is responsible for developing and monitoring a process to ensure timely and accurate reporting of contractual actions to FPDS [FPDS-NG]." Additionally, the chief acquisition officer of the agency "must submit to the General Services Administration (GSA), in accordance with FPDS [FPDS-NG] guidance, within 120 days after the end of each fiscal year, an annual certification of whether, and to what degree, agency CAR [contract action report] data for the preceding fiscal year is complete and accurate." OFPP's 2011 memorandum provides instructions, sampling methodologies, and templates for agencies to use in calculating and reporting the accuracy and completeness of data submitted to FPDS-NG. Agencies are required to compute the accuracy of 25 "key data elements," including date signed, extent competed, type of set aside, and place of manufacture. Governmentwide, the four-year average (FY2008-FY2011) for completeness was 98.3% and for sample accuracy 94.0%. Data were not provided for individual agencies, and these are the most recent data available. OFPP also stated in its memorandum that, in conjunction with GSA, it would carry out the following activities as part of its "sustained efforts to improve procurement data quality throughout the year": "continue the interagency working group on data quality, focusing on emerging issues, challenges, solutions, guidance, and process improvements;" "revitalize the [online] community of practice ... to collect tools and agency best practices for improving data quality and host focused discussions on key issues; and" "collaborate with the Federal Acquisition Institute and the Defense Acquisition University to review and improve related workforce training and development and to develop a better understanding of how procurement data are used throughout the acquisition process." Additionally, policies, system limitations, and regulations can be sources of seemingly inaccurate, or incomplete, data; lead to unusual, or anomalous, results; or hamper transparency. Examples include the following: FPDS-NG does not contain classified data, or information about purchases for "petroleum or petroleum products ordered against a Defense Logistics Agency Indefinite Delivery Contract." DOD's procurement data are not available immediately through FPDS-NG; the data are "subject to a 90-day delay." When registering in SAM, a business may choose to identify itself as, for example, a woman owned business or minority owned business. Independent verification of these designations is not required, which leaves open the question of the accuracy of this type of information. Data in FPDS-NG are identified, or organized, as data elements, and, over the years, data elements have been added, deleted, or revised. It is possible that the inclusion of a recently added data element, or one that is scheduled to be removed, in a user's search could affect the results. For example, conducting a search for FY2007 procurement data that includes a data element added to FPDS-NG in FY2010 might yield anomalous results. Regarding transparency, some might argue that it is hampered by regulations that permit the use of a generic Data Universal Numbering System (DUNS) number. Generally, an entity is required to have a unique DUNS when registering in SAM. Under certain circumstances, an entity may use an authorized generic DUNS number (e.g., 123456787, which is identified as "Miscellaneous Foreign Awardees"), which precludes identification of the contractor. As mentioned above, an initiative is underway to consolidate eight procurement websites, and the Catalog of Federal Domestic Assistance, into one system. The eight procurement websites are Central Contractor Registration, Electronic Subcontract Reporting System, Excluded Parties List System, Federal Business Opportunities, Federal Procurement Data System-Next Generation, Online Representations and Certifications Application, Past Performance Information Retrieval System, and Wage Determinations OnLine.gov. When discussing SAM, these websites are referred to as "legacy systems." The history of SAM begins with the Integrated Acquisition Environment (IAE). Established by OMB in 2001 and housed within GSA, IAE "was initiated to integrate, standardize, and streamline some of the many different acquisition data systems used throughout the government." The development and implementation of web-based acquisition systems occurred independently and, accordingly, without an overarching, comprehensive plan, as the federal government shifted from paper-based systems to web-based systems for its procurement processes. The mix of government procurement systems also included "unique data systems" that had been developed by some agencies for their own use. IAE's initial strategy was to "adopt, adapt, acquire," which involved adopting existing data systems that had been developed by federal agencies (e.g., DOD's CCR), adapting existing systems (e.g., transforming FPDS into FPDS-NG), and acquiring systems to fulfill unmet needs (e.g., ORCA). Although IAE improved the acquisition systems it inherited, questions remained regarding, among other things, the efficiency, responsiveness, and coherence of the existing systems. Testifying at a congressional hearing in fall 2009, the Federal Chief Information Officer (CIO) described the problems associated with the multiple procurement systems. Each of the eight IAE systems was originally developed independently, used different software, and operated on different hardware platforms run by different contractors. In this complex and stove-piped environment, it was difficult to respond to policy or technology changes in a timely manner. Specific issues, or problems, included separate logins, which are "inefficient and confusing"; overlapping data, which is "inefficient and creates opportunity for error"; no single or uniform level of service, which could subject users to varying levels of service; and multiple vendors hosting the systems, which is "more expensive than consolidated hosting." At the same hearing where he described the problems with the existing acquisition systems, the Federal CIO stated that consolidating the eight systems into "an integrated platform for procurement" would improve data quality, simplify access to procurement data, and improve the usability of the procurement systems. The effort to develop an integrated platform began in February 2010 when GSA awarded a contract to IBM US Federal to consolidate nine systems (eight procurement systems plus the CFDA) into SAM. Table 2 shows how SAM will be organized when completed. The first phase, launched in July 2012 after a two-month delay, saw the entity management functions—CCR (including Federal Agency Registration), EPLS, and ORCA—migrate to SAM. However, several news articles reported that problems with SAM prompted GSA to shut down the system for several days, until August 6, 2012. GSA also contacted the contractor responsible for SAM, summarizing, in a notice of concern, the problems encountered by users. The overall performance issues and functionality defects that materialized with the initial release of SAM Phase 1 on July 28, 2012, have prevented a majority of users from performing a variety of award management process with SAM Phase 1. The performance issues and defects continue to impact end to end award management processes within the system, forcing users to rely on emergency system workarounds. Concerns about the operability of SAM also prompted GSA to re-establish temporarily its Excluded Parties List System website in fall 2012. Contracting officers use EPLS to determine whether prospective contractors have been excluded from receiving government contracts. DOD responded to SAM performance issues by issuing a class deviation from registration requirements and annual representations and certifications requirements for contractors. The Defense Department's memorandum noted that "SAM has experienced performance issues that have affected the timely processing of awards," and added that GSA had been working aggressively to resolve the issues promptly. Reportedly, the Administrator of OFPP stated, in September 2012, that "'GSA has a lot of thinking to do before they implement future phases of SAM.... OFPP is working hand-in-hand with them and CIO [U.S. Chief Information Officer] Steve VanRoekel, and other users such as DOD, to make sure the system moves forward in the right direction.'" Several months after Phase 1 was implemented, GSA shifted management responsibility for SAM from its Office of Government-wide Policy to the agency's Federal Acquisition Service (FAS) and the Office of the Chief Information Officer. Specifically, the Acting FAS Commissioner and the Deputy CIO have taken over management of SAM. The same announcement noted that the Acting Administrator of General Services has "called for the development, reporting and monitoring of key metrics around the SAM implementation." While performance problems were not apparent publicly until implementation had begun, budget and schedule problems were identified earlier. In March 2012, GAO reported that the project has been plagued by cost increases, funding shortages, and schedule delays. Failure to "adequately execute the SAM hosting strategy as initially planned" and increased "demand for help desk services" contributed to higher development costs. GAO estimated that the cost of SAM-related contracts increased from $96.0 million (initial contract award amounts) to $181.1 million (GAO estimate). The increase in cost was due mostly to "higher than expected hosting costs." While costs have been increasing, "the program also did not receive funding increases it requested." GSA's response has been to modify and delay the schedule, and defer payments or revise contract requirements. GAO recommended that GSA "[r]eassess the SAM business case to compare the costs and benefits of various alternatives," and, if it makes sense to continue the project, then "reevaluate the hosting strategy" and "take steps to ensure that the SAM development contract payments are more closely aligned with the program schedule and delivery of capabilities." Public access to procurement information and data, which is often couched in terms of transparency, has grown over the years. Some procurement processes, such as the posting of solicitations, have moved online, and statutory requirements and policies have led to the creation of procurement data systems, such as USAspending.gov. Transparency can yield significant benefits, such as contributing to an informed citizenry, enhancing policy planning and decisionmaking, and fostering accountability. Access to online systems and procurement information and data, however, does not necessarily equate to comprehension. Without sufficient knowledge of government procurement and expertise in using the government's online acquisition systems, users may face challenges identifying which system(s) can be used meet their needs; understanding the capabilities and limitations of the different systems; determining how to access, or find, the data or information they seek; and understanding how to analyze and interpret the data or information they obtain. The following examples demonstrate situations users might encounter. The dollar amounts associated with some contract actions in FPDS-NG (and, relatedly, USAspending.gov) are either negative or zero. A negative dollar amount represents a deobligation and a dollar amount of zero represents an administrative action. The Federal Awardee Performance Information and Integrity System may contain information for a particular contractor that covers a five-year period. However, "some of that information may not be relevant to a determination of present responsibility" for the contractor, including "a prior administrative action such as debarment or suspension that has expired or otherwise been resolved." Moreover, a contractor's Certification Regarding Responsibility Matters only covers three years, not five years. For certain types of businesses, such as minority-owned and woman-owned, a business owner self-certifies that the business belongs in a particular group. A business owner's interpretation of a particular designation might differ from a user's interpretation. Thus, a user who is unaware self-certification is permitted for certain types of businesses might obtain incorrect data. FPDS-NG is a dynamic system in that data elements (e.g., type of contract, date signed, and vendor name) may be added, merged, or eliminated. For that reason, some searches could yield potentially inaccurate results. Presently, the federal government does not have a database of contracts awarded by federal agencies. (FPDS-NG includes discrete information, in data fields (data elements), about contract awards.) Since June 2003, at least two separate executive branch initiatives have explored the possibility of posting contracts online, and at least one bill, if enacted, would have led to posting contracts online. The General Services Administration led the initial executive branch effort, posting a notice in the Federal Register in 2003. The stated goal of the initiative was to increase transparency and "further the [Bush] Administration's global vision of a citizen-centric E-Government" while the notice sought comments that could aid in implementing a pilot. GSA noted that any proprietary information would be redacted from a contract before it would be posted. Whereas some respondents supported the proposal, suggesting that implementation would increase visibility of and transparency in federal procurement, others stated that existing information sources, policies, and regulations were sufficient. Working through its Integrated Acquisition Environment, GSA established a working group, which consisted of representatives from several federal agencies, to examine the feasibility, challenges, and anticipated benefits of posting federal contracts online. The project was named Contract Award Documents Online (CADO). The CADO working group considered how the Freedom of Information Act (FOIA) process might integrate with, or affect, making contracts publicly available as a matter of course, because agencies use the FOIA process when responding to most requests for copies of contracts. The CADO working group identified the following challenges: "CADO removes the FOIA staff from the process, exposing Agencies to legal challenges by minimizing active FOIA participation in the document release process." "Proactive posting to the public increases the potential for inadvertently releasing sensitive information." "Agency Staff limitations—CADO would require drastic increases in administrative and technical staff to maintain and operate proactive systems in both the vendor and government communities." "Lack of current federal regulation or policy guiding agencies and contractors in the procedures and processes of obtaining contract award documents outside of the current FOIA process." Anticipated benefits of making contracts publicly available include "[i]ncreased transparency of contract award documents … [p]otential reduction in the number of FOIA requests … [and] [r]educed cost of operations and maintenance of manual response systems in each agency." The CADO working group concluded, however, "that there is insufficient data supporting a Business Case to recommend the design, development and implementation of a centralized federal system to present contract award data online." More recently, DOD, GSA, and NASA issued an advance notice of proposed rulemaking regarding posting contracts online. Anticipating that, in the future, a requirement to post contracts, task orders, and delivery orders online might be established, in 2010 the Civilian Agency Acquisition Council (CAAC) and Defense Acquisition Regulations Council (DAR Council) solicited comments with the goal of learning how to post contracts "without compromising contractors' proprietary and confidential commercial or financial information." Additionally, the councils sought suggestions that would "facilitate uniform, consistent processing methods that are fair and equitable as well as cost effective and efficient, while at the same time simplifying access to acquisitions once posted." In responding to a particular set of comments elicited by the advance notice of proposed rulemaking, the CAAC and DAR Council identified several issues they believed warranted consideration prior to implementing a scheme for the posting of contracts online. Any contract-posting initiative must give consideration to the cost involved (in technology and software as well as the time of contractor and Government employees) and the risks associated with posting this information (e.g., lawsuits against the Government for inadvertently releasing information that could be damaging to national security and/or the competitive positions of companies doing business with the Government). DOD, GSA, and NASA advocate a judicious approach to establishing contract-posting requirements, one that will appropriately conserve resources and identify information that should be protected from general release to the public. Our assessment is that any contract posting requirement, at a minimum, should involve … a high dollar threshold [regarding the value of a contract], a requirement for only the successful offeror to redact the contract and/or proposal that will be posted, and an incentive for the successful offeror to do so. Necessary protections for information and personnel involve, at a minimum, a FOIA analysis, which is time consuming and requires senior analysts and attorneys. DOD, GSA, and NASA are concerned, too, that the on-going efforts to identify protections essential for safeguarding unclassified information are not yet sufficiently mature that such efforts can be bypassed to establish a contract-posting requirement prior to guidance on unclassified information. To avoid inadvertent disclosures, the Government would be required to review contractor-redacted documents before such items are posted to a public Web site. The contract or contractor's proposal may contain information that requires protection beyond trade secrets or proprietary information. Offering the following rationale, DOD, GSA, and NASA withdrew the advance notice of proposed rulemaking. [A]t this time … [we] do not plan to amend the FAR because some of the existing acquisition systems … provide certain information on Government contracts that is readily available to the public, and most of the content of a contract solicitation or contract action not already available on one of the [government] acquisition systems … is either standard FAR terms and conditions … agency specific terms and conditions … or sensitive information that may be releasable under FOIA. Congress also has shown interest in making procurement documents, including contracts, available to the public. If enacted, S. 3077 (110 th Congress) would have required that "the request for proposals, the announcement of the award, the contract, and the scope of work to be performed" for all "contracts, subcontracts, purchase orders, task orders, lease agreements and assignments, and delivery orders" be posted on the website required by the Federal Funding Accountability and Transparency Act (FFATA) of 2006. Neither this bill, nor its companion bill, H.R. 6411 , was enacted. During the 113 th Congress, a bill was introduced that, if enacted, would require executive branch agencies to make public records available on the Internet at no charge." Whether S. 549 would apply to government contracts probably would depend, at a minimum, on the interpretations of public record and record , and any regulations that would be promulgated to implement this bill. The term public record , as defined in S. 549 , "means any record, regardless of form or format, that an agency discloses, publishes, disseminates, or makes available to the public." The bill's definition of record "includes contracts entered into by persons working as agents of the Federal Government, including records in the possession of Government contractors." The DATA Act—which is the title of two similar bills, H.R. 2061 and S. 994 , that were introduced during the 113 th Congress—would amend the Federal Funding Accountability and Transparency Act (FFATA; P.L. 109-282 ; 31 U.S.C. §5101 note). If the DATA Act (i.e., either bill) is enacted, responsibility for the operation of the website established pursuant to FFATA, USAspending.gov, would shift from the Director of OMB to the Secretary of the Treasury. Generally, the DATA Act would require, among other things, the following: The Treasury Secretary, in consultation with the heads of OMB, GSA, and other federal agencies, to establish governmentwide "financial data standards for Federal funds"; The Director of OMB to lead an effort to consolidate financial reporting requirements for recipients of federal awards; and The Recovery Accountability and Transparency Board, in consultation with the Secretary of the Treasury and the head of OMB, to establish a pilot program for recipients of federal funds that meet certain conditions. The pilot program would involve reporting financial data related to receipt of federal funds. Neither bill would establish a procurement database. A key distinction between the thrust of the DATA Act and the purpose of most procurement databases is that the former focuses on spending data and using it as a tool to detect fraud, waste, or abuse while the latter facilitate the acquisition process. Possible implications for FPDS-NG involve the connection between it and USAspending.gov. FPDS-NG is the source of the prime contracting procurement data available through USAspending.gov. The implications of a requirement to develop and implement financial data standards for FPDS-NG. Web-based systems increasingly have become embedded in the federal government's acquisition process, providing the means for collecting, storing, searching, or disseminating a variety of data and other information to the acquisition workforce and other interested parties. Many of the systems were designed to facilitate the acquisition process; some of them also promote transparency. Recognizing the potential benefits of integrating certain online procurement systems (and the Catalog for Federal Domestic Assistance), GSA has undertaken an effort to consolidate nine systems into the System for Award Management. It remains to be seen whether efforts to disclose additional procurement information (such as posting contracts online), or to present procurement data in a new portal, or format (such as proposed in the DATA Act), come to fruition. No matter the source of information or data, though, some would argue that access does not necessarily confer comprehension, which may require some knowledge of government procurement.
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Increasingly, the federal government uses technology to facilitate and support the federal acquisition process. Primary beneficiaries of this shift to online systems (websites and databases) are the government's acquisition workforce and prospective and incumbent government contractors. The suite of web-based systems supports contracting officers' efforts to ensure the government contracts only with responsible parties, is essential to the dissemination of information regarding contracting opportunities, and facilitates interagency contracting. From the contractor perspective, the government's online systems streamline the processes involved in fulfilling various administrative requirements, provide access to possible contracting opportunities, and are potential resources for market research. Congressional interest in the government's online procurement systems, and, relatedly, the federal acquisition process, flows from the institution's responsibilities involving government spending and oversight of executive branch operations. Congress monitors how well the federal acquisition process works, which includes several web-based systems, and also uses data and information available from some of the systems as resources for its oversight activities. The federal government's major, governmentwide web-based acquisition systems include Acquisition Central, Electronic Subcontracting Reporting System (eSRS), Federal Business Opportunities (FedBizOpps), Federal Funding Accountability and Transparency Act (FFATA) Portal (this system is known as the "FFATA Portal"), Federal Procurement Data System-Next Generation (FPDS-NG), Federal Awardee Performance and Integrity Information System (FAPIIS), FFATA Sub-Award Reporting System (FSRS), Interagency Contract Directory (ICD), Past Performance Information Retrieval System (PPIRS), System for Award Management (SAM), USAspending.gov, and Wage Determinations On-line (WDOL). Interest in the federal government's online acquisition systems is reflected in a variety of issues and topics. Over the years, questions have been raised regarding the accuracy, completeness, and timeliness of the contract award data available from FPDS and its successor, FPDS-NG. Recent efforts to remedy these problems include guidance issued by the Office of Federal Procurement Policy (OFPP) in 2011, which provides instructions for calculating and reporting the accuracy and completeness of data submitted to FPDS-NG. The most recent information available regarding FPDS-NG data shows that, governmentwide, the four-year average (FY2008-FY2011) for completeness was 98.3% and for sample accuracy 94.0%. Another significant topic involving the government's web-based acquisition systems was the launch of the System for Award Management in 2012. The following three systems became part of SAM in July 2012: Central Contractor Registration (CCR, which includes Federal Agency Registration (FedReg)), Excluded Parties List System (EPLS), and Online Representations and Certifications Application (ORCA). When completed, SAM will also include five other online procurement systems, plus the Catalog of Federal Domestic Assistance (CFDA). A variety of issues and problems, including separate logins, overlapping data, the absence of a single, uniform level of service, and multiple vendors hosting the systems, prompted interest in developing an integrated system. Although this report does not focus on transparency, several issues discussed here are related to transparency. First, while the Federal Business Opportunities (FedBizOpps) website and FPDS-NG provide information about executive branch agencies' procurements, a database of federal agencies' contracts does not exist. In 2003, GSA established a working group to examine the feasibility, challenges, and anticipated benefits of posting federal contracts online. Ultimately, the working group concluded there were insufficient data to support recommending the establishment of a central system for posting contracts online. In 2010, the Department of Defense (DOD), GSA, and the National Aeronautics and Space Administration (NASA) issued an advance notice of proposed rulemaking (ANPR) regarding posting contracts online. Comments submitted in response to the notice identified several challenges, and the matter was concluded when the agencies withdrew the ANPR. Second, transparency does not necessarily equate to comprehension. Generally, variation exists among the users of government procurement systems regarding their knowledge of government procurement and procurement data. Third, during the 113th Congress, two similar bills (H.R. 2061 and S. 994) with the same name (Digital Accountability and Transparency Act, or DATA Act) were introduced, either of which would enhance transparency of spending data, including certain procurement data. If either bill is enacted, it might have implications for FPDS-NG.
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Following the terrorist attacks of 9/11, Congress passed the Authorization to Use Military Force (AUMF), which granted the President the authority "to use all necessary and appropriate force against those ... [who] planned, authorized, committed, or aided the terrorist attacks" against the United States. Soon thereafter, President Bush issued a military order formulating guidelines for the detention and treatment of foreign belligerents captured in the "war on terror" and establishing military commissions to try some detainees for violations of the law of war. Beginning in early 2002, the United States began transferring suspected foreign belligerents captured in the "war on terror" to the U.S. Naval Station in Guantanamo Bay, Cuba for preventive detention and potential prosecution for any war crimes they may have committed. In 2004, the Supreme Court issued two key rulings concerning the Executive's authority to detain persons in the "war on terror." In Hamdi v. Rumsfeld , a majority of the Court found that the 2001 AUMF permitted the preventive detention of enemy combatants captured during hostilities in Afghanistan, including those who were U.S. citizens. A divided Court found that persons deemed "enemy combatants" have the right to challenge their detention before a judge or other "neutral decision-maker." The Hamdi case concerned the rights of a U.S. citizen detained as an enemy combatant, and the Court did not decide the extent to which this right also applied to noncitizens held at Guantanamo and elsewhere. However, on the same day that Hamdi was decided, the Court issued an opinion in the case of Rasul v. Bush , holding that the federal habeas corpus statute, 28 U.S.C. § 2241, provided federal courts with jurisdiction to consider habeas corpus petitions by or on behalf of persons detained at Guantanamo. The Court's rulings in Hamdi and Rasul had two immediate consequences. First, the Department of Defense (DOD) established Combatant Status Review Tribunals (CSRTs), an administrative process to determine whether a detainee at Guantanamo was an "enemy combatant." Second, the U.S. District Court for the District of Columbia began to hear the dozens of habeas cases filed on behalf of the detainees, with different judges reaching conflicting conclusions as to whether the detainees had any enforceable rights available other than the bare right to petition for habeas . After the Supreme Court granted certiorari to hear a challenge by one of the detainees to his trial by military tribunal, Congress passed the Detainee Treatment Act of 2005 (DTA) . The DTA requires uniform standards for interrogation of persons in the custody of the DOD, and expressly bans cruel, inhuman, or degrading treatment of detainees in the custody of any U.S. agency. At the same time, however, it divested the courts of jurisdiction to hear challenges by those detained at Guantanamo Bay based on their treatment or living conditions. The DTA also eliminated the federal courts' statutory jurisdiction over habeas claims by aliens challenging their detention at Guantanamo Bay, but provided for limited appeals of status determinations made pursuant to the DOD procedures for CSRTs, along with final decisions by military commissions. However, in the 2006 case of Hamdan v. Rumsfeld , the Supreme Court interpreted the provision eliminating federal habeas jurisdiction as being inapplicable to cases that were pending at the time the DTA was enacted, permitting it to review the validity of military commissions established pursuant to President Bush's 2001 military order. The Court held that the military tribunals established by the President did not comply with the Uniform Code of Military Justice (UCMJ) or the law of war which the UCMJ incorporates, including the 1949 Geneva Conventions. In response to the Hamdan ruling, Congress enacted the Military Commissions Act of 2006 ("MCA" or "2006 MCA"). The act authorized the President to convene military commissions to try "unlawful alien combatants" for war crimes without complying with the parts of the UCMJ the earlier system was said to violate, and it also established procedural requirements for the commissions. Finally, the MCA expressly eliminated court jurisdiction over all pending and future causes of action by detainees, including habeas review, with the exception of the limited review process established under the DTA. The complete elimination of habeas corpus review by Congress compelled the courts to address directly an issue they had avoided reaching in earlier cases: Does the constitutional writ of habeas corpus extend to noncitizens held at Guantanamo? The Constitution's Suspension Clause prohibits the suspension of habeas corpus except when public safety requires it in the case of invasion or surrender. The MCA did not purport to be a suspension of habeas , and the government did not make such a claim to the courts. Instead, the government argued that noncitizens detained at Guantanamo are entitled to no constitutional protections, including the privilege of habeas corpus . Therefore, it was argued, denying these persons access to habeas review would not run afoul of the Suspension Clause. In the 2008 case Boumediene v. Bush , the Court rejected this argument in a 5-4 opinion, and ruled that the constitutional privilege of habeas extends to Guantanamo detainees and cannot be extinguished by statute unless an adequate substitute is provided. As a result of the Boumediene decision, detainees currently held at Guantanamo may petition for habeas review of their designation and detention as enemy combatants. The judicial process established by the DTA was effectively nullified by a D.C. Circuit's ruling in January 2009 interpreting the Boumediene decision, although Congress has not officially repealed it. Several legal issues remain unsettled, including the scope of habeas review available to detainees, the remedy available for those persons found to be unlawfully held by the United States, and the extent to which other constitutional provisions extend to noncitizens held at Guantanamo and elsewhere. Some of these issues were expected to be addressed by the Supreme Court this term in an appeal of a D.C. Circuit panel ruling in the case of Kiyemba v. Obama , in which the appellate court held that federal habeas courts lack the authority to order the release of Guantanamo detainees into the United States, even when those detainees are found to be unlawfully held and the government is unable to effectuate their release to a foreign country. After the Supreme Court granted certiorari to review the case, several countries agreed to resettle the Kiyemba petitioners. In March 2010, the Supreme Court vacated the appellate court's decision and remanded the case back to the circuit court for further consideration in light of these developments. On January 22, 2009, President Obama issued an Executive Order requiring that the Guantanamo detention facility be closed as soon as practicable, and no later than a year from the date of the Order. The Order further requires specified officials to review all Guantanamo detentions to assess whether the detainee should continue to be held by the United States, be transferred or released to a third country, or be prosecuted by the United States for criminal offenses. During the review process, the Secretary of Defense was required to take steps to ensure that all proceedings before military commissions and the United States Court of Military Commission Review were halted. Although the imposed deadline for closing the Guantanamo detention facility was not met, the Obama Administration maintains that it intends to close the facility as expeditiously as possible. The closure of the Guantanamo detention facility and its resulting effects could have implications for legal challenges raised by detainees , particularly if detainees are brought to the United States, where they would arguably have a more clearly defined entitlement to additional constitutional protections. In March 2009, the Obama Administration announced a new definitional standard for the government's authority to detain terrorist suspects, which no longer employs the phrase "enemy combatant" to refer to perso ns who may be properly detained, although the new standard is largely similar in scope to the "enemy combatant" standard used earlier. The Obama Administration standard would permit the detention of members of the Taliban, Al Qaeda, and associated forces, along with persons who provide "substantial support" (rather than merely "support") to such groups, regardless of whether these individuals were captured away from the battlefield in Afghanistan. The Obama Administration indicated that this definitional standard does "not rely on the President's authority as Commander-in-Chief independent of Congress's specific authorization." The scope of the Executive's detention authority has been subject to ongoing litigation and conflicting rulings. In January 2010, a D.C. Circuit panel held in the case of Al-Bihani v. Obama that support for or membership in an AUMF-targeted organization may be independently sufficient to justify military detention, without proof that the detainee committed any hostile act. In discussing the scope of the Executive's detention authority, the panel applied the standard that had been used by the Bush Administration rather than the slightly more limited standard applied by the Obama Administration, and disavowed the view that international law has relevance to the determination. The significance of this policy change and the circuit court's ruling remains to be seen. As of March 2010, reviewing courts have ruled that at least 11 detainees are lawfully held pursuant to the AUMF, while at least 33 have been held to be (or were conceded by the government to be) held without authorization. Also in January 2010, the Obama Administration reportedly completed its assessment of the nearly 200 detainees remaining at Guantanamo, determining that about 50 detainees will continue to be held without trial; that around 35 detainees will be prosecuted in military commission or federal court; and that suitable countries have been found to take the remaining detainees. However, the transfer of 30 detainees of Yemeni nationality back to Yemen was stymied because an Al Qaeda affiliate in Yemen is suspected to have been behind the Christmas 2009 bombing attempt. Additionally, Congress has balked at plans to bring detainees to the United States for continued, non-penal detention or for release. This report provides an overview of the early judicial developments and the establishment of CSRT procedures; summarizes selected court cases related to the detentions and the use of military commissions; and discusses the Detainee Treatment Act, as amended by the Military Commissions Act of 2006 and the Military Commissions Act of 2009, analyzing its effects on detainee-related litigation in federal court. The report summarizes the Supreme Court's decision in Boumediene invalidating Congress's efforts to revoke the courts' habeas jurisdiction, and discusses some remaining issues and subsequent developments. For discussion of legislation introduced in the 111 th Congress concerning detainees, see CRS Report R40754, Guantanamo Detention Center: Legislative Activity in the 111 th Congress , by [author name scrubbed]. For legislation related to habeas corpus rights of detainees, see CRS Report R41011, Habeas Corpus Legislation in the 111 th Congress , by [author name scrubbed]. The Bush Administration determined in February 2002 that Taliban detainees are covered under the Geneva Conventions, while Al Qaeda detainees are not, but that none of the detainees qualifies for the status of prisoner of war (POW). The Administration deemed all of them to be "unlawful enemy combatants," and claimed the right to detain them without trial or continue to hold them in preventive detention even if they are acquitted of criminal charges by a military tribunal. Fifteen of the detainees had been determined by the President to be subject to his military order ("MO") of November 13, 2001, making them eligible for trial by military commission for war crimes offenses. The Supreme Court, however, found that the procedural rules established by the Department of Defense to govern the military commissions were not established in accordance with the Uniform Code of Military Justice (UCMJ). The following sections trace the judicial developments with respect to the detention of alleged enemy combatants. Petitioners were two Australians and twelve Kuwaitis (a petition on behalf of two U.K. citizens was mooted by their release) who were captured during hostilities in Afghanistan and were being held in military custody at the Guantanamo Bay Naval Base, Cuba. The Bush Administration argued, and the court below had agreed, that under the 1950 Supreme Court case Johnson v. Eisentrager , "'the privilege of litigation' does not extend to aliens in military custody who have no presence in 'any territory over which the United States is sovereign.'" The Supreme Court distinguished Rasul by noting that Eisentrager concerned the constitutional right to habeas corpus rather than the right as implemented by statute. The Rasul Court did not reach the constitutional issue, but found authority for federal court jurisdiction in 28 U.S.C. § 2241, which grants courts the authority to hear applications for habeas corpus "within their respective jurisdictions," by any person who claims to be held "in custody in violation of the Constitution or laws or treaties of the United States." The Court also declined to read the statute to vary its geographical scope according to the citizenship of the detainee. Justice Kennedy, in a concurring opinion, would have found jurisdiction over the Guantanamo detainees based on the facts that Guantanamo is effectively a U.S. territory and is "far removed from any hostilities," and that the detainees are "being held indefinitely without the benefit of any legal proceeding to determine their status." Noting that the Writ of Habeas Corpus ("Writ") has evolved as the primary means to challenge executive detentions, especially those without trial, the Court held that jurisdiction over habeas petitions does not turn on sovereignty over the territory where detainees are held. Even if the habeas statute were presumed not to extend extraterritorially, as the government urged, the Court found that the "complete jurisdiction and control" the United States exercises under its lease with Cuba would suffice to bring the detainees within the territorial and historical scope of the Writ. Without expressly overruling Eisentrager , the Court distinguished the cases at issue to find Eisentrager inapplicable. Eisentrager listed six factors that precluded those petitioners from seeking habeas relief: each petitioner "(a) is an enemy alien; (b) has never been or resided in the United States; (c) was captured outside of our territory and there held in military custody as a prisoner of war; (d) was tried and convicted by a Military Commission sitting outside the United States; (e) for offenses against laws of war committed outside the United States; (f) and is at all times imprisoned outside the United States." The Rasul Court noted that the Guantanamo petitioners, in contrast, "are not nationals of countries at war with the United States, and they deny that they have engaged in or plotted acts of aggression against the United States; they have never been afforded access to any tribunal, much less charged with and convicted of wrongdoing; and for more than two years they have been imprisoned in territory over which the United States exercises exclusive jurisdiction and control." As to the petitioners' claims based on statutes other than the habeas statute, which included the federal question statute as well as the Alien Tort Statute, the Court applied the same reasoning to conclude that nothing precluded the detainees from bringing such claims before a federal court. The Court's opinion left many questions unanswered. It did not clarify which of the Eisentrager (or Rasul ) factors would control under a different set of facts. The opinion did not address whether persons detained by the U.S. military abroad in locations where the United States does not exercise full jurisdiction and control would have access to U.S. courts. The Hamdan opinion seems to indicate that a majority of the Court regarded Eisentrager as a ruling denying relief on the merits rather than a ruling precluding jurisdiction altogether. Under this view, it may be argued, there was no statutory bar precluding detainees in U.S. custody overseas from petitioning for habeas relief in U.S. courts, although it may be substantially more difficult for such prisoners to identify a statutory or constitutional infraction that would enable them to prevail on the merits. The Court did not decide the merits of the petitions, although in a footnote the majority opined that "Petitioners' allegations—that, although they have engaged neither in combat nor in acts of terrorism against the United States, they have been held in Executive detention for more than two years in territory subject to the long-term, exclusive jurisdiction and control of the United States, without access to counsel and without being charged with any wrongdoing—unquestionably describe 'custody in violation of the Constitution or laws or treaties of the United States.'" The opinion left to lower courts such issues as whether the detentions are authorized by Congress, who may be detained and what evidence might be adduced to determine whether a person is an enemy combatant, or whether the Geneva Conventions afford the detainees any protections. The Court did not address the extent to which Congress might alter federal court jurisdiction over detainees' habeas petitions, but Boumediene appears to foreclose the option of eliminating it completely, at least without an adequate substitute procedure. This issue is discussed more fully below. In response to Supreme Court decisions in 2004 related to "enemy combatants," the Pentagon established procedures for Combatant Status Review Tribunals (CSRTs), based on the procedures the Army uses to determine POW status during traditional wars. Detainees who are determined not to be enemy combatants are to be transferred to their country of citizenship or otherwise dealt with "consistent with domestic and international obligations and U.S. foreign policy." CSRTs confirmed the status of at least 520 enemy combatants. Any new detainees that might be transported to Guantanamo Bay would go before a CSRT. The CSRTs are not empowered to determine whether the enemy combatants are unlawful or lawful, which led two military commission judges to hold that CSRT determinations are inadequate to form the basis for the jurisdiction of military commissions. Military commissions must now determine whether a defendant is an unlawful enemy combatant in order to assume jurisdiction. CSRTs are administrative rather than adversarial, but each detainee has an opportunity to present "reasonably available" evidence and witnesses to a panel of three commissioned officers to try to demonstrate that the detainee does not meet the criteria to be designated as an "enemy combatant," defined as "an individual who was part of or supporting Taliban or al Qaida forces, or associated forces that are engaged in hostilities against the United States or its coalition partners[,] ... [including] any person who has committed a belligerent act or has directly supported hostilities in aid of enemy armed forces." Each detainee is represented by a military officer (not a member of the Judge Advocate General ("JAG") Corps) and may elect to participate in the hearing or remain silent. The government's evidence is presented by the recorder, who is a military officer, preferably a judge advocate. The CSRTs are not bound by the rules of evidence that would apply in court, and the government's evidence is presumed to be "genuine and accurate." The government is required to present all of its relevant evidence, including evidence that tends to negate the detainee's designation, to the tribunal. The CSRT is required to assess, "to the extent practicable, whether any statement derived from or relating to such detainee was obtained as a result of coercion and the probative value, if any, of any such statement." Unclassified summaries of relevant evidence may be provided to the detainee. The detainee's personal representative may view classified information and comment on it to the tribunal to aid in its determination but does not act as an advocate for the detainee. If the tribunal determines that the preponderance of the evidence is insufficient to support a continued designation as "enemy combatant" and its recommendation is approved through the chain of command, the detainee will be informed of that decision upon finalization of transportation arrangements (or earlier, if the task force commander deems it appropriate). In March 2002, the Pentagon announced plans to create a separate process for periodically reviewing the status of detainees. The process, similar to the CSRT process, affords persons detained at Guantanamo Bay the opportunity to present to a review board, on at least an annual basis while hostilities are ongoing, information to show that the detainee is no longer a threat or that it is in the interest of the United States and its allies to release the prisoner. If new information with a bearing on the detainee's classification as an "enemy combatant" comes to light, a new CSRT may be ordered using the same procedures as described above. The detainee's State of nationality may be allowed, national security concerns permitting, to submit information on behalf of its national. While the Supreme Court clarified in Rasul (and later Boumediene , discussed infra ) that detainees currently held at Guantanamo have recourse to federal courts to challenge their detention, the extent to which they may enforce any rights they may have under the Geneva Conventions and other law continues to remain unclear. Prior to the enactment of the DTA provisions eliminating habeas review, the Justice Department argued primarily that Rasul v. Bush merely decided the issue of jurisdiction, but that the 1950 Supreme Court decision in Johnson v. Eisentrager remained applicable to limit the relief to which the detainees may be entitled. While more than one district judge from the D.C. Circuit agreed, others did not, holding for example that detainees have the right to the assistance of an attorney. One judge found that a detainee has the right to be treated as a POW until a "competent tribunal" decides otherwise, but the appellate court reversed. The following sections summarize the three most important decisions prior to the enactment of the 2006 MCA, including the cases that eventually reached the Supreme Court as Boumediene v. Bush and Hamdan v. Rumsfeld . The Court of Appeals for the D.C. Circuit had ordered these cases dismissed for lack of jurisdiction on the basis of the MCA, but the Supreme Court reversed in both its Hamdan and Boumediene decisions, returning the cases to the district court for consideration on the merits. Also discussed is a Fourth Circuit case involving an alien, al-Marri, arrested in the United States and subsequently held in military custody as an enemy combatant. The Supreme Court initially granted certiorari to review the appellate court's decision. However, before the Court could consider the merits of the case, the government requested that the Court authorize al-Marri's release from military custody and transfer to civilian authorities to face criminal charges. The Court granted the government's request, vacated the appellate court's earlier judgment, and transferred the case back to the lower court with orders to dismiss it as moot. Seven detainees, all of whom had been captured outside of Afghanistan, sought relief from their detention at the Guantanamo Bay facility. U.S. District Judge Richard J. Leon agreed with the Bush Administration that Congress, pursuant to the 2001 AUMF, granted the President the authority to detain foreign enemy combatants outside the United States for the duration of the war against Al Qaeda and the Taliban, and that the courts have virtually no power to review the conditions under which such prisoners are held. Noting that the prisoners had been captured and detained pursuant to the President Bush's military order, Judge Leon agreed with the government that "(1) non-resident aliens detained under [such] circumstances have no rights under the Constitution; (2) no existing federal law renders their custody unlawful; (3) no legally binding treaty is applicable; and (4) international law is not binding under these circumstances." Judge Leon rejected the petitioners' contention that their arrest outside of Afghanistan and away from any active battlefield meant that they could not be "enemy combatants" within the meaning of the law of war, finding instead that the AUMF contains no geographical boundaries, and gives the President virtually unlimited authority to exercise his war power wherever enemy combatants are found. The circumstances behind the off-battlefield captures did, however, apparently preclude the petitioners from claiming their detentions violate the Geneva Conventions. Other treaties put forth by the petitioners were found to be unavailing because of their non-self-executing nature. The court declined to evaluate whether the conditions of detention were unlawful. Judge Leon concluded that "[w]hile a state of war does not give the President a 'blank check,' and the courts must have some role when individual liberty is at stake, any role must be limited when, as here, there is an ongoing armed conflict and the individuals challenging their detention are non-resident aliens." He dismissed all seven petitions, ruling that "until Congress and the President act further, there is ... no viable legal theory under international law by which a federal court could issue a writ." On appeal, the Khalid case was consolidated with In re Guantanamo Detainee Cases as Boumediene v. Bush . U.S. District Judge Joyce Hens Green interpreted Rasul more broadly, finding that the detainees do have rights under the U.S. Constitution and international treaties, and thus denied the government's motion to dismiss the 11 challenges before the court. Specifically, Judge Green held that the detainees are entitled to due process of law under the Fifth Amendment, and that the CSRT procedures do not meet that standard. Interpreting the history of Supreme Court rulings on the availability of constitutional rights in territories under the control of the American government (though not part of its sovereign territory), Judge Green concluded that the inquiry turns on the fundamental nature of the constitutional rights being asserted rather than the citizenship of the person asserting them. Accepting that the right not to be deprived of liberty without due process of law is a fundamental constitutional right, the judge applied a balancing test to determine what process is due in light of the government's significant interest in safeguarding national security. Judge Green rejected the government's stance that the CSRTs provided more than sufficient due process for the detainees. Instead, she identified two categories of defects. She objected to the CSRTs' failure to provide the detainees with access to material evidence upon which the tribunal affirmed their "enemy combatant" status and the failure to permit the assistance of counsel to compensate for the lack of access. These circumstances, she said, deprived detainees of a meaningful opportunity to challenge the evidence against them. Second, in particular cases, the judge found that the CSRTs' handling of accusations of torture and the vague and potentially overbroad definition of "enemy combatant" could violate the due process rights of detainees. Citing detainees' statements and news reports of abuse, Judge Green noted that the possibility that evidence was obtained involuntarily from the accused or from other witnesses, whether by interrogators at Guantanamo or by foreign intelligence officials elsewhere, could make such evidence unreliable and thus constitutionally inadmissible as a basis on which to determine whether a detainee is an enemy combatant. Judge Green objected to the definition of "enemy combatant" because it appears to cover "individuals who never committed a belligerent act or who never directly supported hostilities against the U.S. or its allies." She noted that government counsel had, in response to a set of hypothetical questions, stated that the following could be treated as enemy combatants under the AUMF: "[a] little old lady in Switzerland who writes checks to what she thinks is a charity that helps orphans in Afghanistan but [what] really is a front to finance al-Qaeda activities, a person who teaches English to the son of an al Qaeda member, and a journalist who knows the location of Osama Bin Laden but refuses to disclose it to protect her source." Judge Green stated that the indefinite detention of a person solely because of his contacts with individuals or organizations tied to terrorism, and not due to any direct involvement in terrorist activities, would violate due process even if such detention were found to be authorized by the AUMF. This case was consolidated with the Khalid decision and heard as Boumediene v. Bush by the D.C. Circuit Court of Appeals, and on appeal, the Supreme Court. Salim Ahmed Hamdan, who was captured in Afghanistan and is alleged to have worked for Osama Bin Laden as a bodyguard and driver, brought this challenge to the lawfulness of the Secretary of Defense's plan to try him for alleged war crimes before a military commission, arguing that the military commission rules and procedures were inconsistent with the UCMJ and that he had the right to be treated as a prisoner of war under the Geneva Conventions. U.S. District Judge Robertson agreed, finding no inherent authority in the President as Commander-in-Chief of the Armed Forces to create such tribunals outside of the existing statutory authority, with which the military commission rules did not comply. He also concluded that the Geneva Conventions apply to the whole of the conflict in Afghanistan, including under their protections all persons detained in connection with the hostilities there, and that Hamdan was thus entitled to be treated as a prisoner of war until his status was determined to be otherwise by a competent tribunal, in accordance with article 5 of the Third Geneva Convention (prisoners of war). The D.C. Circuit Court of Appeals reversed, ruling that the Geneva Conventions are not judicially enforceable. Judge Williams wrote a concurring opinion, construing Common Article 3 to apply to any conflict with a non-state actor, without regard to the geographical confinement of such a conflict within the borders of a signatory state. The Circuit Court interpreted the UCMJ language to mean that military commission rules have only to be consistent with those articles of the UCMJ that refer specifically to military commissions, and therefore need not be uniform with the rules that apply to courts-martial. After the appellate court decision was handed down, Congress passed the DTA, which revoked federal court jurisdiction to hear habeas corpus petitions and other causes of action brought by Guantanamo detainees. (The provisions of the DTA are discussed in greater detail infra .) The Supreme Court nevertheless granted review and reversed. Before reaching the merits of the case, the Supreme Court declined to accept the government's argument that Congress, by passing the DTA, had stripped the Court of its jurisdiction to review habeas corpus challenges by or on behalf of Guantanamo detainees whose petitions had already been filed. The Court also declined to dismiss the appeal as urged by the government on the basis that federal courts should abstain from intervening in cases before military tribunals that have not been finally decided, noting the dissimilarities between military commission trials and ordinary courts-martial of service members pursuant to procedures established by Congress. The government's argument that the petitioner had no rights conferred by the Geneva Conventions that could be adjudicated in federal court likewise did not persuade the Court to dismiss the case. Regardless of whether the Geneva Conventions provide rights enforceable in Article III courts, the Court found that Congress, by incorporating the "law of war" into UCMJ article 21, brought the Geneva Conventions within the scope of law to be applied by courts. Justice Scalia, joined by Justices Thomas and Alito, dissented, arguing that the DTA should be interpreted to preclude the Court's review. With respect to the authority to create the military commissions, the Court held that any power to create them must flow from the Constitution and must be among those "powers granted jointly to the President and Congress in time of war." It disagreed with the government's position that Congress had authorized the commissions either when it passed the AUMF or the DTA. Although the Court assumed that the AUMF activated the President's war powers, it did not view the AUMF as expanding the President's powers beyond the authorization set forth in the UCMJ. The Court also noted that the DTA, while recognizing the existence of military commissions, does not specifically authorize them. At most, these statutes "acknowledge a general Presidential authority to convene military commissions in circumstances where justified under the 'Constitution and laws,' including the law of war." The habeas corpus statute permits those detained under U.S. authority to challenge their detention on the basis that it violates any statute, the Constitution, or a treaty. The D.C. Circuit nevertheless held that the Geneva Conventions are never enforceable in federal courts. The Supreme Court disagreed, finding the Conventions were applicable as incorporated by UCMJ Article 21, because "compliance with the law of war is the condition upon which the authority set forth in Article 21 is granted." In response to the alternative holding by the court below that Hamdan, as a putative member of Al Qaeda, was not entitled to any of the protections accorded by the Geneva Conventions, the Court concluded that Common Article 3 of the Geneva Conventions applies even to members of Al Qaeda, according to them a minimum baseline of protections, including protection from the "passing of sentences and the carrying out of executions without previous judgment pronounced by a regularly constituted court, affording all the judicial guarantees which are recognized as indispensable by civilized peoples." While recognizing that Common Article 3 "obviously tolerates a great degree of flexibility in trying individuals captured during armed conflict," and that "its requirements are general ones, crafted to accommodate a wide variety of legal systems," the Court found that the military commissions under M.C.O. No. 1 did not meet these criteria. In particular, the military commissions did not qualify as "regularly constituted" because they deviated too far, in the Court's view, from the rules that apply to courts-martial, without a satisfactory explanation of the need for such deviation. Justice Alito, joined by Justices Scalia and Thomas, dissented, arguing that the Court is bound to defer to the President's plausible interpretation of the treaty language. While the Hamdan Court declared the military commissions as constituted under the President Bush's Military Order to be "illegal," it left open the possibility that changes to the military commission rules could cure any defects by bringing them within the law of war and conformity with the UCMJ, or by asking Congress to authorize or craft rules tailored to the armed conflict it authorized against those responsible for the 9/11 terrorist attacks. The Court did not resolve the extent to which the detainees, as aliens held outside of U.S. territory, have constitutional rights enforceable in federal court. The decision may affect the treatment of detainees outside of their criminal trials; for example, in interrogations for intelligence purposes. Common Article 3 of the Geneva Conventions mandates that all persons taking no active part in hostilities, including those who have laid down their arms or been incapacitated by capture or injury, are to be treated humanely and protected from "violence to life and person," torture, and "outrages upon personal dignity, in particular, humiliating and degrading treatment." Insofar as these protections are incorporated in the UCMJ and other laws, it would seem the Court is ready to interpret and adjudicate them, to the extent it retains jurisdiction to do so. It is not clear how the Court views the scope of the relevant armed conflict, however, because its decisions on the merits have been limited to cases arising out of hostilities in Afghanistan. The opinion reaffirms the holding in Rasul v. Bush that the AUMF does not provide the President a "blank check," and, by finding in favor of a noncitizen held overseas, seems to have extended to non-citizens the Hamdi comment that [w]hatever power the United States Constitution envisions for the Executive in its exchanges with other nations or with enemy organizations in times of conflict, it most assuredly envisions a role for all three branches when individual liberties are at stake. The dissenting views also relied in good measure on actions taken by Congress, seemingly repudiating the view expressed earlier by the Executive that any efforts by Congress to legislate with respect to persons captured, detained, and possibly tried in connection with the armed conflict would be an unconstitutional intrusion into powers held exclusively by the President. Expressly or implicitly, all eight participating Justices applied the framework set forth by Justice Jackson in his famous concurrence in the Steel Seizures case, which accords greater deference to the President in cases involving national security where he acts with express congressional authority than when he acts alone. The differing views among the Justices seem to have been a function of their interpretation of the AUMF and other acts of Congress as condoning or limiting executive actions. The Military Commissions Act likely resolves many issues regarding the scope of the President's authority to try detainees by military commission; however, the constitutionality of the various measures remains to be resolved. The case of Ali Saleh Kahlah al-Marri differs significantly from cases discussed above in that the petitioner, a lawful alien resident, was arrested and imprisoned within the United States. Whether a person in his position may lawfully be detained pursuant to the AUMF has not been fully resolved. The issue divided the Fourth Circuit, which initially found in favor in the petitioner but then reversed en banc , only to have the Supreme Court vacate the en banc opinion after the government charged the petitioner with a federal crime and moved him into the ordinary criminal justice system. The following section describes the facts of the case and the issues that divided the courts, which may return to relevance, especially if congressional efforts are successful in making military commissions the sole forum for trying persons who meet the definition of persons triable under the Military Commissions Act, as amended. Al-Marri, a Qatari student, was arrested in December 2001 in Peoria, IL, and transported to New York City, where he was held as a material witness for the grand jury investigating the 9/11 attacks. He was later charged with financial fraud and making false statements and transferred back to Peoria. Before his case went to trial, however, he was declared an "enemy combatant" and transferred to military custody in South Carolina. Al-Marri's counsel filed a petition for habeas corpus challenging al-Marri's designation and detention as an "enemy combatant." The petition was eventually dismissed for lack of jurisdiction by the U.S. Court of Appeals for the Seventh Circuit, and a new petition was filed in the Fourth Circuit. In March 2005, Judge Floyd agreed with the government that the detention was authorized by the AUMF and transferred the case to a federal magistrate to examine the factual allegations supporting the government's detention of the petitioner as an enemy combatant. The government provided a declaration asserting that al-Marri is closely associated with Al Qaeda and had been sent to the United States prior to September 11, 2001, to serve as a "sleeper agent" for Al Qaeda in order to "facilitate terrorist activities and explore disrupting this country's financial system through computer hacking." The magistrate judge recommended the dismissal of the petition on the basis of information the government provided, which al-Marri did not attempt to rebut and which the magistrate judge concluded was sufficient for due process purposes in line with the Hamdi decision. The district judge adopted the magistrate judge's report and recommendations in full, rejecting the petitioner's argument that his capture away from a foreign battlefield precluded his designation as an "enemy combatant." Al-Marri appealed, and the government moved to dismiss on the basis that section 7 of the 2006 MCA stripped the court of jurisdiction. The petitioner asserted that Congress did not intend to deprive him of his right to habeas or that, alternatively, the MCA is unconstitutional. The majority of the appellate panel avoided the constitutional question by finding that al-Marri does not meet the statutory definition as an alien who "has been determined by the United States to have been properly detained as an enemy combatant or is awaiting such determination." Turning to the merits, the majority found that al-Marri does not fall within the legal category of "enemy combatant" within the meaning of Hamdi , and that the government could continue to hold him only if it charges him with a crime, commences deportation proceedings, obtains a material witness warrant in connection with grand jury proceedings, or detains him for a limited time pursuant to the USA PATRIOT Act. In so holding, the majority rejected the government's contention that the AUMF authorizes the President to order the military to seize and detain persons within the United States under the facts asserted by the government, or that, alternatively, the President has inherent constitutional authority to order the detention. The government cited the Hamdi decision and the Fourth Circuit's decision in Padilla v. Hanft to support its contention that al-Marri is an enemy combatant within the meaning of the AUMF and the law of war. The court, however, interpreted Hamdi as confirming only that "the AUMF is explicit congressional authorization for the detention of individuals in the narrow category ... [of] individuals who were 'part of or supporting forces hostile to the United States or coalition partners in Afghanistan and who engaged in an armed conflict against the United States there.'" Likewise, Padilla, although captured in the United States, could be detained pursuant to the AUMF only because he had been, prior to returning to the United States, "'armed and present in a combat zone' in Afghanistan as part of Taliban forces during the conflict there with the United States." The court explained that the two cases cited by the government, Hamdi and Padilla , involved situations similar to the World War II case Ex parte Quirin , in which the Supreme Court agreed that eight German saboteurs could be tried by military commission because they were enemy belligerents within the meaning of the law of war. In contrast, al-Marri's situation was to be likened to Ex parte Milligan , the Civil War case in which the Supreme Court held that a citizen of Indiana accused of conspiring to commit hostile acts against the Union was nevertheless a civilian who was not amenable to military jurisdiction. The court concluded that enemy combatant status rests, in accordance with the law of war, on affiliation with the military arm of an enemy government in an international armed conflict. Judge Hudson dissented, arguing that the broad language of the AUMF, which authorized the President "to use all necessary and appropriate force against those nations, organizations, or persons he determines" were involved in the terrorist attacks of September 11, 2001, "would certainly seem to embrace surreptitious al Qaeda agents operating within the continental United States." He would have found no meaningful distinction between the present case and Padilla . The government petitioned for and was granted a rehearing en banc . On rehearing, the narrowly divided Fourth Circuit full bench rejected the earlier panel's decision in favor of the government's position that al-Marri fit the legal definition of "enemy combatant," but also reversed the district court's decision that al-Marri was not entitled to present any more evidence to refute the government's case against him. Four of the judges on the panel would have retained the earlier decision, arguing that it was not within the court's power to expand the definition of "enemy combatant" beyond the law-of-war principles at the heart of the Supreme Court's Hamdi decision. However, these four judges joined in Judge Traxler's opinion to remand for evidentiary proceedings in order "at least [to] place the burden on the Government to make an initial showing that normal due process protections are unduly burdensome and that the Rapp declaration is 'the most reliable available evidence,' supporting the Government's allegations before it may order al-Marri's military detention." Judge Traxler, whose opinion is controlling for the case although not joined in full by any other panel member, agreed with the four dissenting judges that the AUMF "grants the President the power to detain enemy combatants in the war against al Qaeda, including belligerents who enter our country for the purpose of committing hostile and war-like acts such as those carried out by the al Qaeda operatives on 9/11." Accordingly, he would define "enemy combatant" in the present terrorism-related hostilities to include persons who "associate themselves with al Qaeda" and travel to the United States "for the avowed purpose of further prosecuting that war on American soil, ... even though the government cannot establish that the combatant also 'took up arms on behalf of that enemy and against our country in a foreign combat zone of that war.'" Under this definition, American citizens arrested in the United States could also be treated as enemy combatants under similar allegations, at least if they had traveled abroad and returned for the purpose of engaging in activity related to terrorism on behalf of Al Qaeda. However, Judge Traxler did not agree that al-Marri had been afforded due process by the district court to challenge the factual basis for his designation as an enemy combatant. While recognizing that the Hamdi plurality had suggested that hearsay evidence might be adequate to satisfy due process requirements for proving enemy combatant status, Judge Traxler did not agree that such relaxed evidentiary standards are necessarily appropriate when dealing with a person arrested in the United States: Because al-Marri was seized and detained in this country,... he is entitled to habeas review by a civilian judicial court and to the due process protections granted by our Constitution, interpreted and applied in the context of the facts, interests, and burdens at hand. To determine what constitutional process al-Marri is due, the court must weigh the competing interests, and the burden-shifting scheme and relaxed evidentiary standards discussed in Hamdi serve as important guides in this endeavor. Hamdi does not, however, provide a cookie-cutter procedure appropriate for every alleged enemy-combatant, regardless of the circumstances of the alleged combatant's seizure or the actual burdens the government might face in defending the habeas petition in the normal way. In December 2008, the Supreme Court agreed to hear an appeal of the Al-Marri ruling, potentially setting the stage for the Court to make a definitive pronouncement regarding the President's authority to militarily detain terrorist suspects apprehended away from the Afghan battlefield. However, on January 22, 2009, President Obama instructed the Attorney General, Secretary of Defense, and other designated officials to review the factual and legal basis for al-Marri's continued detention as an enemy combatant, and "identify and thoroughly evaluate alternative dispositions." This review culminated in criminal charges being brought against al-Marri in the U.S. District Court for the Central District of Illinois, alleging that al-Marri provided material support to Al Qaeda and had conspired with others to provide material support to Al Qaeda. The United States thereafter moved for the Supreme Court to dismiss al-Marri's appeal as moot and authorize his transfer from military to civilian custody pending his criminal trial. On March 6, 2009, the Court granted the government's application concerning the transfer of al-Marri to civilian custody. It vacated the Fourth Circuit's judgment and remanded the case back to the appellate court with instructions to dismiss the case as moot. Accordingly, the appellate court's earlier decision regarding the President's authority to detain terrorist suspects captured within the United States is no longer binding precedent in the Fourth Circuit. Al-Marri thereafter pled guilty in federal court to one count of conspiracy to provide material support to Al Qaeda, and was sentenced to eight and a half years in prison. The dismissal of al-Marri's case means that the President's legal authority to militarily detain terrorist suspects apprehended in the United States has not been definitively settled. Indeed, the transfer of al-Marri to civilian custody to face trial in federal court means that the United States no longer holds any terrorist suspect in military detention who was apprehended in the United States. Whether circumstances will arise either in the conflict with Al Qaeda or some other military conflict that will compel the Supreme Court to more definitively address the President's military detention authority remains to be seen. The DTA, passed after the Court's 2004 decision in Rasul, requires uniform standards for interrogation of persons in the custody of the Department of Defense, and expressly bans cruel, inhuman, or degrading treatment of detainees in the custody of any U.S. agency. The prohibited treatment is defined as that which would violate the Fifth, Eighth, and Fourteenth Amendments to the U.S. Constitution, as the Senate has interpreted "cruel, inhuman, or degrading" treatment banned by the U.N. Convention Against Torture. The provision does not create a cause of action for detainees to ask a court for relief based on inconsistent treatment, and it divests the courts of jurisdiction to hear challenges by those detained at Guantanamo Bay based on their treatment or living conditions. It also provides a legal defense to U.S. officers and agents who may be sued or prosecuted based on their treatment or interrogation of detainees. This language appears to have been added as a compromise because the Bush Administration reportedly sought to have the Central Intelligence Agency excepted from the prohibition on cruel, inhuman and degrading treatment on the grounds that the President needs "maximum flexibility in dealing with the global war on terrorism." The DTA also includes a modified version of the "Graham-Levin Amendment," which requires the Defense Department to submit to the Armed Services and Judiciary Committees the procedural rules for determining detainees' status. The amendment neither authorizes nor requires a formal status determination, but it does require that certain congressional committees be notified 30 days prior to the implementation of any changes to the rules. As initially adopted by the Senate, the amendment would have required these procedural rules to preclude evidence determined by the board or tribunal to have been obtained by undue coercion, however, the conferees modified the language so that the tribunal or board must assess, "to the extent practicable ... whether any statement derived from or relating to such detainee was obtained as a result of coercion" and "the probative value, if any, of any such statement." The Graham-Levin Amendment also eliminated the federal courts' statutory jurisdiction over habeas claims by aliens detained at Guantanamo Bay, but provided for limited appeals of status determinations made pursuant to the DOD procedures for Combatant Status Review Tribunals (CSRTs). In June 2008, the Supreme Court invalidated the provision that eliminated habeas corpus jurisdiction, but stated that the DTA appellate process "remains intact," although it appears that the process is not an adequate substitute for habeas review. . However, the D.C. Circuit held that the DTA appellate procedure is no longer good law, leaving habeas petitions as the only means of seeking review of detention. The DTA also provided for an appeal to the Court of Appeals for the District of Columbia Circuit of final sentences rendered by a military commission. As initially enacted, the DTA required the court to review capital cases or cases in which the alien was sentenced to death or to a term of imprisonment for 10 years or more, and made review over convictions with lesser penalties discretionary. The scope of review was limited to considering whether the decision applied the correct standards consistent with Military Commission Order No. 1 (implementing President Bush's Military Order) and whether those standards were consistent with the Constitution and laws of the United States, to the extent applicable. After the Court's decision in Hamdan , the Bush Administration proposed legislation to Congress, a version of which was enacted on October 17, 2006. The Military Commissions Act of 2006 (MCA or 2006 MCA) authorized the trial of certain detainees by military commission and prescribed detailed rules to govern their procedures. The 2006 MCA also amended the DTA provisions regarding appellate review and habeas corpus jurisdiction. In 2009, Congress enacted the Military Commissions Act of 2009 (2009 MCA) as part of the National Defense Authorization Act for FY2010 ( P.L. 111-84 ). The 2009 MCA modified many of the rules for military commissions to make them more closely resemble those used in courts-martial proceedings, but made only minor modifications to existing laws concerning court jurisdiction to adjudicate claims raised by detainees. The 2006 MCA expanded the DTA to make its review provisions the exclusive remedy for all aliens detained as enemy combatants anywhere in the world, rather than only those housed at Guantanamo Bay, Cuba. It does not, however, require that all detainees undergo a CSRT or a military tribunal in order to continue to be confined. However, inasmuch as the U.S. Court of Appeals for the District of Columbia Circuit declared the DTA appellate procedures to be defunct in light of the Supreme Court's Boumediene decision, it appears that all challenges must now be brought by means of habeas review rather than under the DTA. The records of CSRT proceedings will likely be relevant to habeas determinations. Appeals from the final decisions of military commissions continue to go to the United States Court of Appeals for the District of Columbia Circuit as they did under the DTA, but are routed through an appellate body, the Court of Military Commission Review (CMCR). Review of decisions of a military commission may only concern matters of law, not fact. Under the 2006 MCA, appeals could be based on inconsistencies with the procedures set forth by the act, or, to the extent applicable, the Constitution or laws of the United States. The 2009 MCA specifies that the circuit court may consider and take action regarding the sufficiency of the evidence used to support the commission's verdict. Section 7 of the 2006 MCA revoked U.S. courts' jurisdiction to hear habeas corpus petitions by all aliens in U.S. custody as enemy combatants, including lawful enemy combatants, regardless of the place of custody. It replaced 28 U.S.C. § 2241(e), the habeas provision added by the DTA, with language providing that (1) No court, justice, or judge shall have jurisdiction to hear or consider an application for a writ of habeas corpus filed by or on behalf of an alien detained by the United States who has been determined by the United States to have been properly detained as an enemy combatant or is awaiting such determination. (2) Except as provided in paragraphs (2) [review of CSRT determinations] and (3) [review of final decisions of military commissions] of section 1005(e) of the Detainee Treatment Act of 2005 (10 U.S.C. 801 note), no court, justice, or judge shall have jurisdiction to hear or consider any other action against the United States or its agents relating to any aspect of the detention, transfer, treatment, trial, or conditions of confinement of an alien who is or was detained by the United States and has been determined by the United States to have been properly detained as an enemy combatant or is awaiting such determination. This amendment took effect on the date of its enactment, and applied to "all cases, without exception, pending on or after the date of [enactment] which relate to any aspect of the detention, transfer, treatment, trial, or conditions of detention of an alien detained by the United States since September 11, 2001." In Boumediene v. Bush , discussed infra , the Supreme Court held that MCA § 7 acted as an unconstitutional suspension of the writ of habeas corpus, and authorized Guantanamo detainees to petition federal district courts for habeas review of CSRT determinations of their enemy combatant status. Under the DTA appeals provision, there was no apparent limit to the amount of time a detainee could spend awaiting a determination as to combatant status. Aliens who continue to be detained despite having been determined not to be enemy combatants were not permitted to challenge their continued detention or their treatment, nor were they able to protest their transfer to another country, for example, on the basis that they fear torture or persecution. However, these matters may be raised in habeas petition. The extent of relief the courts may be able to grant under habeas review is currently being litigated. A continuing source of dispute in the detention and treatment of detainees is the application of the Geneva Convention. As noted previously, the habeas corpus statute has traditionally provided for, among other things, challenges to allegedly unlawful detentions based on rights found in treaties. Thus, for instance, Common Article 3 of the 1949 Geneva Conventions, which prohibits the "passing of sentences and the carrying out of executions without previous judgment pronounced by a regularly constituted court, affording all the judicial guarantees which are recognized as indispensable by civilized peoples," has been used as a basis for challenging the confinement of detainees. Section 5 of the 2006 MCA (28 U.S.C. § 2241 note), however, specifically precludes the application of the Geneva Conventions to habeas or other civil proceedings. Further, the MCA, as amended, provides that the Geneva Conventions may not be claimed as a basis for a private right of action by an alien who is subject to military commission proceedings. However, Congress in the 2009 MCA removed language deeming that the military commission structure established by the act complies with the requirement under Common Article 3 of the Geneva Convention that trials be by a regularly constituted court. In addition, the act provides that the President shall have the authority to interpret the meaning of the Geneva Conventions. The intended effect of this provision is unclear. While the President generally has a role in the negotiation, implementation, and domestic enforcement of treaty obligations, this power does not generally extend to "interpreting" treaty obligations, a role more traditionally associated with courts. In general, Congress is prohibited from exercising powers allocated to another branch of government. In United States v. Klein , the Supreme Court invalidated a law passed by Congress that was designed to frustrate an earlier finding of the Supreme Court as to the effect of a presidential pardon. Similarly, a law that was specifically intended to grant the authority of the President to adjudicate or remedy treaty violations could violate the doctrine of separation of powers, as providing relief from acts in violation of treaties is a judicial branch function. Instead, what appears to be the main thrust of this language is to establish the authority of the President within the Executive Branch to issue interpretative regulations by Executive Order. However, the context in which this additional authority would be needed is unclear. One possible intent of this provision is that the President is being given the authority to "interpret" the Geneva Convention for diplomatic purposes (e.g., to define treaty obligations and encourage other countries to conform to such definitions). This interpretation seems unlikely, as the President's power in this regard is already firmly established. Another possible meaning is that the President is being given the authority to apply the Geneva Conventions to particular fact situations, such as specifying what type of interrogation techniques may be lawfully applied to a particular individual suspected of being an enemy combatant. This interpretation is possible, but it is not clear how the power to "interpret" would be significant in that situation, as the 2006 MCA precludes application of the Geneva Convention in those contexts in which such interrogations would be challenged—military commissions, habeas corpus , or any other civil proceeding. The more likely intent of this language would be to give the President the authority to promulgate regulations prescribing standards of behavior of employees and agents of federal agencies. For instance, this language might be seen as authorizing the President to issue regulations to implement how agency personnel should comply with the Geneva Conventions, policies which might otherwise be addressed at the agency level. Thus, for instance, if the CIA had established internal procedures regarding how to perform interrogation consistent with the Geneva Convention, then this language would explicitly authorize the President to amend such procedures by Executive Order. Whether the President already had such power absent this language is beyond the scope of this report. Shortly after the enactment of the 2006 MCA, the government filed motions to dismiss all of the habeas petitions in the D.C. Circuit involving detainees at Guantanamo Bay and the petition of an alien then detained as an enemy combatant in a naval brig in South Carolina. As originally enacted, the 2006 MCA provided that military commissions could exercise personal jurisdiction over alien "unlawful enemy combatants." Pursuant to modifications made by the 2009 MCA, military commissions may now exercise jurisdiction over alien "unprivileged enemy belligerents." Despite the difference in nomenclature, the two terms are used to refer to similar categories of persons. Some observers raised concern that the 2006 MCA permits the President to detain American citizens as enemy belligerents without trial. The prohibition in the 2006 MCA with respect to habeas corpus petitions applied only to those filed by or on behalf of aliens detained by the United States as enemy combatants. However, both MCAs can be read by implication to permit the detention of U.S. citizens as enemy belligerents, although it does not permit their trial by military commission, which could affect their entitlement to relief using habeas corpus procedures. A plurality of the Supreme Court held in 2004 in Hamdi v. Rumsfeld , that the President has the authority to detain U.S. citizens as enemy combatants pursuant to the AUMF, but that the determination of combatant status is subject to constitutional due process considerations. The Hamdi plurality was limited to an understanding that the phrase "enemy combatant" means an "individual who ... was 'part of or supporting forces hostile to the United States or coalition partners' in Afghanistan and who 'engaged in an armed conflict against the United States' there," but left it to lower courts to flesh out a more precise definition. The U.S. Court of Appeals for the Fourth Circuit found that the definition continued to apply to a U.S. citizen who returned to the United States from Afghanistan and was arrested at the airport. More recently, the Fourth Circuit appeared to have expanded the definition of "enemy combatant" to individuals arrested in the United States on suspicion of planning to participate in terrorist acts without necessarily having engaged in hostilities in Afghanistan, but this ruling was part of a judgment that was thereafter vacated by the Supreme Court. (See discussion of Al-Marri , supra .) In theory, the executive branch could detain a citizen as an enemy belligerent and argue that the definition of "unprivileged enemy belligerent" provided in the 2009 MCA, which does not explicitly limit its definitional scope to aliens, bolsters the detention authority already possessed by virtue of the AUMF. Constitutional due process would apply, and the citizen could petition for habeas corpus to challenge his detention. However, under the 2006 MCA the citizen-combatant would not be able to assert rights based on the Geneva Convention in support of his contention that he is not an enemy belligerent. In that sense, U.S. citizens could be affected by the 2006 and 2009 MCAs even though they do not directly apply to U.S. citizens. On the other hand, since the 2009 MCA's definition for unprivileged enemy belligerent applies on its face only for the purposes of chapter 47a of Title 10, U.S. Code (providing for the trial by military commission of alien unprivileged enemy belligerents), it may be argued that outside of that context, the terms "enemy belligerent" and "enemy combatant" should be understood in the ordinary sense, that is, to include only persons who participate directly in hostilities against the United States. This interpretation seems unlikely, given that it would also mean that this narrower definition of "enemy belligerent" was also meant to apply in the context of the 2006 MCA's habeas corpus provisions, such that some aliens who fall under the jurisdiction of a military commission under the 2006 MCA would nevertheless have been able to argue that their right to petition for habeas corpus or pursue any other cause of action in U.S. court is unaffected, a reading that does not seem consistent with Congress's probable intent. Further, it does not appear that Congress meant to apply a different definition of "enemy belligerent" to persons depending on their citizenship. Congress could specify that U.S. citizens captured in the context of the armed conflict against terrorist organizations be subject to trial in U.S. court for treason or a violation of any other statute, or prescribe procedures for determining whether U.S. citizens are subject to detention as enemy belligerents, if constitutional, but it has not done so. At the same time as it was considering the Boumediene case, the D.C. Circuit was reviewing several challenges brought pursuant to the DTA in which detainees contested CSRT determinations that they are properly detained as "enemy combatants." The first of these cases to advance involved Haji Bismullah, who was captured in Afghanistan in 2003, and Husaifa Parhat and six other detainees, all ethnic Chinese Uighers captured in Pakistan in December 2001. In January 2009, the D.C. Circuit ruled that the judicial review system established under by the DTA had been effectively nullified by the Supreme Court's ruling in Boumediene , meaning that detainees could only challenge the legality of their confinement via habeas corpus review. At issue was a series of motions filed by both parties seeking to establish procedures governing access to classified information, attorneys' access to clients, and other matters. The petitioners sought to have the court adopt rules similar to what the district court had ordered when the cases were before it on petitions of habeas corpus . The government sought to establish rules restricting scope of discovery and attorney-client communication to what it viewed as the proper scope of the court's review, that is, the CSRT proceedings. The D.C. Circuit in July 2007 issued an order rejecting the government's motion to limit the scope of the court's review to the official record of the CSRT hearings ( Bismullah I ). Rather, the court decided, in order to determine whether a preponderance of evidence supported the CSRT determinations, it must have access to all the information a CSRT "is authorized to obtain and consider, pursuant to the procedures specified by the Secretary of Defense." The court denied the petitioners' motion for discovery, at least for the time being, stating there was no need for additional evidence to challenge a CSRT's ruling that specific evidence or a witness was not reasonably available. And, because the DTA does not authorize the court to hold a status determination invalid as "arbitrary and capricious," there was no need for it to evaluate the conduct of other detainees' CSRTs. The court also denied as unnecessary the petitioners' motion to appoint a special master. The court also promised to enter a protective order to implement guidelines for handling classified and sensitive information and for government monitoring of attorney client written communications ("legal mail"). Again stressing its mandate under the DTA to determine whether a preponderance of the evidence supports a CSRT's status determination, the court found that counsel for the detainees, to aid in their capacity to assist the court, should be presumed to have a "need to know" all government information concerning their clients except for highly sensitive information, in which case the government could present the evidence to the court ex parte . The court rejected the government's proposal that would have allowed the government, rather than the court, to determine what unclassified information would be required to be kept under seal. With respect to legal mail, the court agreed to the government's proposal to have mail from attorneys to detainees reviewed by a "privilege team," composed of Department of Defense personnel not involved in the litigation, to redact information not pertinent to matters within the court's limited scope of review. The government asked the panel to reconsider the ruling based on its belief that the order would require the government to undertake an overly burdensome search of all relevant federal agencies in order to create a new record for each detainee that would be entirely different from the record reviewed by the CSRT for that case. The court denied the request for rehearing, explaining its view that its previous order would not require a search for information that is not "reasonably available" ( Bismullah II ). The court also suggested that the government might instead convene new CSRTs to reconfirm the detainees' status, this time ensuring that the relevant documents are retained for the purpose of review under the DTA. The government also objected to the requirement that it turn over classified information to the petitioners' counsel on the basis of the risk to intelligence sources and methods as well as the burden of conducting the necessary reviews to determine which information must be turned over. The court rejected the argument, pointing out that DOD regulations declare classified information to be not reasonably available where the originating agency declines to authorize its use in the CSRT process. In light of this fact, the court suggested, the burden of reviewing the information should not be as great as the government had argued. The government then asked for an en banc hearing, but the D.C. Circuit, evenly divided , declined. The government then sought expedited review at the Supreme Court, urging the Court to decide the cases concurrently with the Boumediene case, but the Court took no action on the request. Instead, it granted certiorari and vacated the decision, remanding for reconsideration in light of its decision in Boumediene . On August 22, 2008, the D.C. Circuit reinstated without explanation its decisions in Bismullah I and Bismullah II , presumably because it did not find the Boumediene ruling to conflict with its decisions in these cases. The government subsequently petitioned for a rehearing of the case, arguing that the Supreme Court's ruling in Boumediene effectively nullified the system of circuit court review established by the DTA, as Congress had not intended for detainees to have two judicial forums in which to challenge their detention. The D.C. Circuit granted the government's motion for rehearing, and on January 9, 2009, a three-judge panel held that, in light of the Supreme Court's ruling in Boumediene restoring detainees' ability to seek habeas review of the legality of their detention, the appellate court no longer had jurisdiction over petitions for review filed pursuant to the DTA. Writing for the panel, Judge Douglas H. Ginsburg described both the text of the DTA and the subsequent jurisdiction-stripping measures of the 2006 MCA, stating they left no doubt that Congress understood review under DTA to be a substitute for and not a supplement to habeas corpus and hence the exclusive means by which a detainee could contest the legality of his detention in a court." In the aftermath of Boumediene , Judge Ginsburg wrote, the DTA "can no longer function in a manner consistent with the intent of Congress." Accordingly, the court held that the DTA may no longer serve as an avenue of judicial review of detainees' claims, as Congress had intended this review process to be available to detainees only in the absence of the availability of habeas review. In January 2009, a review panel considering new information determined that Bismullah was not an enemy combatant, and he was repatriated to Afghanistan. In October 2007, while the government's petition to the Supreme Court for certiorari in the Bismullah case was pending, the government produced to the counsel of Husaifa Parhat, one of the parties to the Bismullah case, a record (including both classified and unclassified material) of what was actually presented to Parhat's CSRT. Parhat subsequently filed a separate motion to the D.C. Circuit requesting review of the CSRT's determination that he was an enemy combatant. In June 2008, a three-judge panel for the D.C. Circuit ruled in the case of Parhat v. Gates that petitioner had been improperly deemed an "enemy combatant" by a CSRT, the first ruling of its kind by a federal court. Because the court's opinion contained classified information, only a redacted version has been released. Parhat, an ethnic Chinese Uighur captured in Pakistan in December 2001, was found to be an "enemy combatant" by the CSRT on account of his affiliation with a Uighur independence group known as the East Turkistan Islamic Movement (ETIM), which was purportedly "associated" with Al Qaeda and the Taliban and engaged in hostilities against the United States and its coalition partners. The basis for Parhat's alleged "affiliation" with the ETIM was that an ETIM leader ran a camp in Afghanistan where Parhat had lived and received military training. For his part, Parhat denied membership in the ETIM or engagement in hostilities against the United States, and claimed he traveled to Afghanistan solely to join the resistance against China, which was not alleged to have been a coalition partner of the United States. The Circuit Court agreed with Parhat that the record before the CSRT did not support the finding that he was an "enemy combatant," as that term had been defined by the DOD, and accordingly the CSRT's determination was not supported by a "preponderance of the evidence" and "consistent with the standards and procedures specified by the Secretary of Defense for Combatant Status Review Tribunals," as required by the DTA. The DOD defined an "enemy combatant" as an individual who was part of or supporting Taliban or al Qaida forces, or associated forces that are engaged in hostilities against the United States or its coalition partners. This includes any person who has committed a belligerent act or has directly supported hostilities in aid of enemy armed forces. Both parties agreed that for a detainee who is not a member of the Taliban or Al Qaeda to be deemed an enemy combatant under this definition, the government must demonstrate by a preponderance of the evidence that (1) the detainee was part of or supporting "forces"; (2) those forces are associated with Al Qaeda or the Taliban; and (3) the forces are engaged in hostilities against the United States or its coalition partners. The circuit court found that the evidence presented by the government to support the second and third elements was insufficient to support the CSRT's determination that Parhat was an enemy combatant. Most significantly, the court found that the principal evidence presented by the government regarding these elements—four government intelligence documents describing ETIM activities and the group's relationship with Al Qaeda and the Taliban—did not "provide any of the underlying reporting upon which the documents' bottom-line assertions are founded, nor any assessment of the reliability of that reporting." As a result, the circuit court found that neither the CSRT nor the reviewing court itself were capable of assessing the reliability of the assertions made by the documents. Accordingly "those bare assertions cannot sustain the determination that Parhat is an enemy combatant," and the CSRT's designation was therefore improper. The circuit court stressed that it was not suggesting that hearsay evidence could never reliably be used to determine whether a person was an enemy combatant, or that the government must always submit the basis for its factual assertions to enable an assessment of its claims. However, evidence "must be presented in a form, or with sufficient additional information, that permits the [CSRT] and court to assess its reliability." Having found that the evidence considered by the CSRT was insufficient to support the designation of Parhat as an enemy combatant, the circuit court next turned to the question of remedy. Although Parhat urged the court to order his release or transfer to a country other than China, the court declined to grant such relief, postulating that the government might wish to hold another CSRT in which it could present additional evidence to support Parhat's designation as an enemy combatant. While acknowledging that the DTA did not expressly grant the court release authority over detainees, the court stated that there was nonetheless "a strong argument ... [that release authority] is implicit in our authority to determine whether the government has sustained its burden of proving that a detainee is an enemy combatant," and indicated that it would not "countenance 'endless do-overs'" in the CSRT process. The circuit court also noted that following the Supreme Court's ruling in Boumediene, Parhat could pursue immediate habeas relief in federal district court, where he would "be able to make use of the determinations we have made today regarding the decision of his CSRT, and ... raise issues that we did not reach" before a court which unquestionably would have the power to order his release. The continuing viability of the circuit court's ruling in Parhat is unclear given the Court's subsequent ruling in Bismullah that the DTA review process has been nullified. However, the circuit court panel in Bismullah implied that, despite its determination that the DTA review process was no longer available to detainees, its ruling in Parhat remains in force. The government declined to reconvene CSRTs for Parhat and 16 other Uighurs detained at Guantanamo, and no longer considers them enemy combatants. However, the DOD continues to maintain custody over them pending their transfer to a third country. The government was initially unable to effectuate their transfer to a country where they would not face a substantial risk of torture or persecution. Although some of the Uighurs have successfully been transferred to other countries, several remain at Guantanamo. The Uighurs filed habeas petitions with the U.S. District Court for D.C., and requested that they be released into the United States pending the court's final judgment on their habeas petitions. In October 2008, District Court Judge Ricardo M. Urbina found that the government had no authority to detain the petitioners and ordered their release into the United States, at least until they may be transferred to a third country. The government quickly filed an emergency motion with the D.C. Circuit to temporarily stay Judge Urbina's ruling pending the circuit court's disposition of a government motion for a stay pending appeal. The emergency motion was granted by a three-judge panel of the circuit court. Later, the panel granted the government's motion for expedited review of the district court's order and, in a 2-1 decision, a stay of the Uighurs' transfer pending review of the district court's ruling. In February 2009, the circuit panel reversed the district court, finding that the constitutional writ of habeas did not entitle petitioners to the "extraordinary remedy" of being released into the United States in light of long-standing jurisprudence recognizing the "exclusive power of the political branches to decide which aliens may, and which aliens may not, enter the United States." The Supreme Court subsequently agreed to hear an appeal of the circuit court's ruling. However, the United States was thereafter able to find countries willing to resettle the Kiyemba petitioners, and several have in fact been transferred. Five of the Kiymemba petitioners remain detained at Guantanamo, apparently having rejected current offers for resettlement. Because the Supreme Court had granted certiorari on the understanding that no remedy was available for the petitioners other than release into the United States, it vacated the appellate court's ruling and remanded the case to circuit court to consider the ramifications of the new circumstances surrounding the petitioners' detention. It remains to be seen whether the appellate court will reaffirm its previous ruling regarding the federal habeas courts' authority to release detainees into the United States. The petitioners in Boumediene were aliens detained at Guantanamo who sought habeas review of their continued detention. Rather than pursuing an appeal of their designation as enemy combatants by CSRTs using the DTA appeals process, the petitioners sought to have the district court decisions denying habeas review reversed on the basis that the 2006 MCA's "court-stripping" provision was unconstitutional. On appeal, the D.C. Circuit affirmed, holding that the 2006 MCA stripped it and all other federal courts of jurisdiction to consider petitioners' habeas applications. Relying upon its earlier opinion in Al Odah v. United States and the 1950 Supreme Court case Johnson v. Eisentrager , in which the Supreme Court found that the constitutional writ of habeas was not available to enemy aliens imprisoned for war crimes in post-WWII Germany, the D.C. Circuit held that the 2006 MCA's elimination of habeas jurisdiction did not operate as an unconstitutional suspension of the writ , because aliens held by the United States in foreign territory do not have a constitutional right to habeas . Consequently, the court did not examine whether the DTA provides an adequate substitution for habeas review. The Supreme Court initially denied the petitioners' request for review, with three Justices dissenting to the denial and two Justices explaining the basis for their support. In June 2007, however, the Court reversed its denial and granted certiorari to consider the consolidated cases of Boumediene and Al Odah . In a 5-4 opinion authored by Justice Kennedy, the Court reversed the D.C. Circuit and held that petitioners had a constitutional right to habeas that was withdrawn by the 2006 MCA in violation of the Constitution's Suspension Clause. The petitioners in Boumediene argued that they possess a constitutional right to habeas , and that the 2006 MCA deprived them of this right in contravention of the Suspension Clause, which prohibits the suspension of the writ of habeas except "when in Cases of Rebellion or Invasion the public Safety may require it." The 2006 MCA did not expressly purport to be a formal suspension of the writ of habeas , and the government did not make such a claim to the Court. Instead, the government argued that aliens designated as enemy combatants and detained outside the de jure territory of the United States have no constitutional rights, including the constitutional privilege to habeas , and that therefore stripping the courts of jurisdiction to hear petitioners' habeas claims did not violate the Suspension Clause. The Court began its analysis by surveying the history and origins of the writ of habeas corpus , emphasizing the importance placed on the writ for the Framers, while also characterizing its prior jurisprudence as having been "careful not to foreclose the possibility that the protections of the Suspension Clause have expanded along with post-1789 developments that define the present scope of the writ." The Court characterized the Suspension Clause as not only a "vital instrument" for protecting individual liberty, but also a means to ensure that the judiciary branch would have, except in cases of formal suspension, "a time-tested device, the writ, to maintain the delicate balance of governance" between the branches and prevent "cyclical abuses" of the writ by the executive and legislative branches. The Court stated that the separation-of-powers doctrine and the history shaping the design of the Suspension Clause informed its interpretation of the reach and purpose of the Clause and the constitutional writ of habeas . The Court found the historical record to be inconclusive for resolving whether the Framers would have understood the constitutional writ of habeas as extending to suspected enemy aliens held in foreign territory over which the United States exercised plenary, but not de jure control. Nonetheless, the Court interpreted the Suspension Clause as having full effect at Guantanamo. While the Court did not question the government's position that Cuba maintains legal sovereignty over Guantanamo under the terms of the 1903 lease giving the U.S. plenary control over the territory, it disagreed with the government's position that "at least when applied to non-citizens, the Constitution necessarily stops where de jure sovereignty ends." Instead, the Court characterized its prior jurisprudence as recognizing that the Constitution's extraterritorial application turns on "objective factors and practical concerns." Here, the Court emphasized the functional approach taken in the Insular Cases , where it had assessed the availability of constitutional rights in incorporated and unincorporated territories under the control of United States. Although the government argued that the Court's subsequent decision in Eisentrager stood for the proposition that the constitutional writ of habeas does not extend to enemy aliens captured and detained abroad, the Court found this reading to be overly constrained. According to the Court, interpreting the Eisentrager ruling in this formalistic manner would be inconsistent with the functional approach taken by the Court in other cases concerning the Constitution's extraterritorial application, and would disregard the practical considerations that informed the Eisentrager Court's decision that the petitioners were precluded from seeking habeas . Based on the language found in the Eisentrager decision and other cases concerning the extraterritorial application of the Constitution, the Court deemed at least three factors to be relevant in assessing the extraterritorial scope of the Suspension Clause: (1) the citizenship and status of the detainee and the adequacy of the status determination process; (2) the nature of the site where the person is seized and detained; and (3) practical obstacles inherent in resolving the prisoner's entitlement to the writ. Applying this framework, the Court characterized petitioners' circumstances in the instant case as being significantly different from those of the detainees at issue in Eisentrager . Among other things, the Court noted that unlike the detainees in Eisentrager , the petitioners denied that they were enemy combatants, and the government's control of the post-WWII, occupied German territory in which the Eisentrager detainees were held was not nearly as significant nor secure as its control over the territory where the petitioners are located. The Court also found that the procedural protections afforded to Guantanamo detainees in CSRT hearings are "far more limited [than those afforded to the Eisentrager detainees tried by military commission], and, we conclude, fall well short of the procedures and adversarial mechanisms that would eliminate the need for habeas corpus review." While acknowledging that it had never before held that noncitizens detained in another country's territory have any rights under the U.S. Constitution, the Court concluded that the case before it "lack[ed] any precise historical parallel." In particular, the Court noted that the Guantanamo detainees have been held for the duration of a conflict that is already one of the longest in U.S. history, in territory that, while not technically part of the United States, is subject to complete U.S. control. Based on these factors, the Court concluded that the Suspension Clause has full effect at Guantanamo. Having decided that petitioners possessed a constitutional privilege to habeas corpus , the Court next assessed whether the court-stripping measure of MCA § 7 was impermissible under the Suspension Clause. Because the MCA did not purport to be a formal suspension of the writ, the question before the Court was whether Congress had provided an adequate substitute for habeas corpus . The government argued that the 2006 MCA complied with the Suspension Clause because it applied the DTA's review process to petitioners, which the government claimed was a constitutionally adequate habeas substitute. Though the Court declined to "offer a comprehensive summary of the requisites for an adequate substitute for habeas corpus ," it nonetheless deemed the habeas privilege, at minimum, as entitling a prisoner "to a meaningful opportunity to demonstrate that he is being held pursuant to 'the erroneous application or interpretation' of relevant law," and empowering a court "to order the conditional release of an individual unlawfully detained," though release need not be the exclusive remedy or appropriate in every instance where the writ is granted. Additionally, the necessary scope of habeas review may be broader, depending upon "the rigor of any earlier proceedings." The Court noted that petitioners identified a myriad of alleged deficiencies in the CSRT process which limited a detainee's ability to present evidence rebutting the government's claim that he is an enemy combatant. Among other things, cited deficiencies include constraints upon the detainee's ability to find and present evidence at the CSRT stage to challenge the government's case; the failure to provide a detainee with assistance of counsel; limiting the detainee's access to government records other than those that are unclassified, potentially resulting in a detainee being unaware of critical allegations relied upon by the government to order his detention; and the fact that the detainee's ability to confront witnesses may be "more theoretical than real," given the minimal limitations placed upon the admission of hearsay evidence. While the Court did not determine whether the CSRTs, as presently constituted, satisfy due process standards, it agreed with petitioners that there was "considerable risk of error in the tribunal's findings of fact." "[G]iven that the consequence of error may be detention for the duration of hostilities that may last a generation or more, this is a risk too serious to ignore." The Court held that for either the writ of habeas or an adequate substitute to function as an effective remedy for petitioners, a court conducting a collateral proceeding must have the ability to (1) correct errors in the CSRT process; (2) assess the sufficiency of the evidence against the detainee; and (3) admit and consider relevant exculpatory evidence that was not introduced in the prior proceeding. The Court held that the DTA review process is a facially inadequate substitute for habeas review. It listed a number of potential constitutional infirmities in the review process, including the absence of provisions (1) empowering the D.C. Circuit to order release from detention; (2) permitting petitioners to challenge the President's authority to detain them indefinitely; (3) enabling the appellate court to review or correct the CSRT's findings of fact; and (4) permitting the detainee to present exculpatory evidence discovered after the conclusion of CSRT proceedings. As a result, the Court deemed 2006 MCA § 7's application of the DTA review process to petitioners as failing to provide an adequate substitute for habeas , therefore effecting an unconstitutional suspension of the writ . In light of this conclusion, the Court held that petitioners could immediately pursue habeas review in federal district court, without first obtaining review of their CSRT designations from the D.C. Circuit as would otherwise be required under the DTA review process. While prior jurisprudence recognized that prisoners are generally required to exhaust alternative remedies before seeking federal habeas relief, the Court found that petitioners in the instant case were entitled to a prompt habeas hearing, given the length of their detention. The Court stressed, however, that except in cases of undue delay, federal courts should generally refrain from considering habeas petitions of detainees being held as enemy combatants until after the CSRT had an opportunity to review their status. Acknowledging that the government possesses a "legitimate interest in protecting sources and methods of intelligence gathering," the Court announced that it expected courts reviewing Guantanamo detainees habeas claims to use "discretion to accommodate this interest to the greatest extent possible," so as to avoid "widespread dissemination of classified information." As a result of the Boumediene decision, detainees currently held at Guantanamo may petition a federal district court for habeas review of status determinations made by a CSRT. However, the full consequences of the Boumediene decision are likely to be significantly broader. While the petitioners in Boumediene sought habeas review of their designation as enemy combatants, the Court's ruling that the constitutional writ of habeas extends to Guantanamo suggests that detainees may also seek judicial review of claims concerning unlawful conditions of treatment or confinement or to protest a planned transfer to the custody of another country. The conduct of trials before military commissions at Guantanamo may also be affected by Boumediene , as enemy combatants may now potentially raise constitutional arguments against their trial and conviction. Aliens convicted of war crimes before military commissions may also potentially seek habeas review of their designation as an enemy combatant by the CSRT, a designation that served as a legal requisite for their subsequent prosecution before a military commission. Although the Boumediene Court held that DTA review procedures were an inadequate substitute for habeas , it made "no judgment as to whether the CSRTs, as currently constituted, satisfy due process standards," and emphasized that "both the DTA and the CSRT process remain intact." Whether these procedures violate due process standards, facially or as applied in a given case, and whether a particular detainee is being unlawfully held, are issues that will be addressed by the District Court when reviewing the habeas claims of Guantanamo detainees. Over 200 habeas petitions have been filed on behalf of Guantanamo detainees in the U.S. District Court for the District of Columbia. In the aftermath of the Boumediene ruling, the District Court adopted a resolution for the coordination and management of Guantanamo cases. The resolution calls for all current and future Guantanamo cases to be transferred by the judge to whom they have been assigned to Senior Judge Thomas F. Hogan, who has been designated to coordinate and manage all Guantanamo cases so that they may be "addressed as expeditiously as possible as required by the Supreme Court in Boumediene v. Bush .... " Judge Hogan is responsible for identifying and ruling on procedural issues common to the cases. The transferring judge will retain the case for all other purposes, though Judge Hogan is to confer with those judges whose cases raise common substantive issues, and he may address those issues with the consent of the transferring judge. District Court Judges Richard J. Leon and Emmet G. Sullivan have declined to transfer their cases for coordination, and it is possible that the three judges may reach differing opinions regarding issues common to their respective cases. Litigation concerning detainees' habeas claims remains ongoing. Final rulings have been reached in several cases. In some instances, detainees have been ordered released (including Lakhdar Boumediene), while in others, detention has been deemed lawful. On January 22, 2009, President Barack Obama issued Executive Order 13492, requiring that the Guantanamo detention facility be closed as soon as practicable, and no later than a year from the date of the Order. Any persons who continue to be held at Guantanamo at the time of closure are to be either transferred to a third country for continued detention or release, or transferred to another U.S. detention facility. The Order further requires specified officials to review all Guantanamo detentions to assess whether the detainee should continue to be held by the United States, transferred or released to a third country, or be prosecuted by the United States for criminal offenses. Reviewing authorities are required to identify and consider the legal, logistical, and security issues that would arise in the event that some detainees are transferred to the United States. The Order also requires reviewing authorities to assess the feasibility of prosecuting detainees in an Article III court. During the review period, the Secretary of Defense was required to take steps to ensure that all proceedings before military commissions and the United States Court of Military Commission Review were halted. Although the deadline for the closure of the Guantanamo detention facility has not been met, the Administration has stated that it remains committed to closing the facility as expeditiously as possible. The Administration's efforts to close the detention facility have been limited, in part, by congressional measures limiting the transfer of detainees into the United States. In the first session of the 111 th Congress, several appropriations and authorizations measures were enacted which effectively barred funds from being used to transfer any detainee into the United States for release or purposes other than prosecution, and restrict funds from being used to transfer detainees into the country to face prosecution prior to the submission of certain reports to Congress. The full implications of these actions upon ongoing litigation involving persons currently detained at Guantanamo remain to be seen. However, the closure of the Guantanamo detention facility would raise a number of legal issues with respect to the individuals presently interned there, particularly if those detainees are transferred to the United States. The nature and scope of constitutional protections owed to detainees within the United States may be different than those available to persons held at Guantanamo or elsewhere. This may have implications for the continued detention or prosecution of persons transferred to the United States. Although the scope of constitutional protections owed to Guantanamo detainees remains a matter of legal dispute, it is clear that the procedural and substantive due process protections of the Constitution apply to all persons within the United States, regardless of their citizenship. Accordingly, detainees transferred to the United States might be able to more successfully pursue legal challenges against aspects of their detention that allegedly infringe upon constitutional protections owed to them. In March 2009, the Obama Administration announced a new definitional standard for the government's authority to detain terrorist suspects, which does not use the phrase "enemy combatant" to refer to persons who may be properly detained. Under this new definition, the Administration claims that: The President has the authority to detain persons that the President determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, and persons who harbored those responsible for those attacks. The President also has the authority to detain persons who were part of, or substantially supported, Taliban or al-Qaida forces or associated forces that are engaged in hostilities against the United States or its coalition partners, including any person who has committed a belligerent act, or has directly supported hostilities, in aid of such enemy armed forces. This definitional standard is largely similar to that used by the Bush Administration to detain terrorist suspects as "enemy combatants." Like the previous administration, the Obama Administration claims the power to militarily detain members of the Taliban or Al Qaeda, regardless of whether such persons were captured away from the battlefield in Afghanistan. However, there are a few differences in the standard used by the Bush and Obama Administrations. Most notably, whereas the Bush Administration claimed the authority to detain persons who supported Al Qaeda, the Taliban, or associated forces, the standard announced by the Obama Administration expressly requires such support to be "substantial." While the Obama Administration claims that activities constituting "substantial support" will be developed in application to individual cases, it has stated that it would not cover "unwitting or insignificant" support. The Obama Administration has stated that this definitional standard is based upon the authority provided by the AUMF, as informed by the laws of war. The Administration has also claimed that this standard does "not rely on the President's authority as Commander-in-Chief independent of Congress's specific authorization." The Bush Administration had previously argued that, separate from the authority provided by the AUMF, the President has the independent authority as Commander-in-Chief to order the detention of terrorist suspects. While the Obama Administration has not expressly rejected this claim, it appears that the Administration will not rely upon the notion of inherent constitutional authority to serve as a legal basis for the detention of terrorist suspects. The full implications of this change in language and intent remain to be seen. One issue that is subject to debate is the Executive's authority under the AUMF and traditional law-of-war principles to detain members of Al Qaeda or the Taliban who did not directly participate in battlefield hostilities. The nature of activities constituting "substantial support" for the groups may also merit significant judicial attention. The scope of the Executive's detention authority under the AUMF and the law of war has been subject to conflicting rulings in the D.C. Circuit. In 2009, several habeas courts reached different conclusions regarding the scope of the President's military detention authority. A few district court judges held that the Executive has authority to detain persons who were "part of" or "substantially supported" Al Qaeda, the Taliban, or associated forces, so long as those terms are understood to include only those persons who were members of the enemy organizations' armed forces at the time of capture. Other district court judges held that that the Executive has authority under the AUMF and the law of war to detain persons who were "part of" the Taliban, Al Qaeda, or associated forces, but lacks authority to detain non-members who provide "support" to such organizations (though such support may be considered when determining whether a detainee was "part of" one of these groups). In January 2010, a three-judge panel of the D.C. Circuit Court of Appeals considered the scope of Executive's detention authority in the case of Al-Bihani v. Obama . In an opinion supported in full by two members of the panel, the appellate court endorsed the definitional standard for the Executive's detention authority that had initially been asserted by the Bush Administration (a standard which was later somewhat circumscribed by the Obama Administration ); namely, that the President may detain those persons who were "part of or supporting Taliban or al Qaeda forces, or associated forces that are engaged in hostilities against the United States or its coalition partners." While the panel concluded that either support for or membership in an AUMF-targeted organization may be independently sufficient to justify detention, it declined "to explore the outer bounds of what constitutes sufficient support or indicia of membership to meet the detention standard." It did, however, note that this standard would, for example, permit the detention of a "civilian contractor" who "purposefully and materially supported" an AUMF-targeted organization through "traditional food operations essential to a fighting force and the carrying of arms." Notwithstanding the government's reliance on the law of war to interpret the scope of the AUMF and seemingly in conflict with Supreme Court discussion of the issue, the panel rejected the idea that the international law of war has any relevance to the courts' interpretation of the scope of the detention power conferred by the AUMF. The standard endorsed by the panel will be controlling for the D.C. Circuit unless the decision is overturned either by the Circuit Court of Appeals sitting en banc or the Supreme Court, or unless Congress takes up Judge Brown's separate invitation to craft appropriate habeas standards for detainee cases. The Supreme Court decision in Boumediene holding that the DTA violates the Constitution's Suspension Clause (article I, § 9, cl. 2) leaves open a number of constitutional questions regarding the scope of the Writ of Habeas Corpus and options open to Congress to make rules for the detention of suspected terrorists. The following sections provide a brief background of habeas corpus in the United States, outline some proposals for responding to the Boumediene holding, and discuss relevant constitutional considerations. The Writ of Habeas Corpus ( ad subjiciendum ), also known as the Great Writ, has its origin in Fourteenth Century England. It provides the means for those detained by the government to ask a court to order their warden to explain the legal authority for their detention. In the early days of the Republic, its primary use was to challenge executive detention without trial or bail, or pursuant to a ruling by a court without jurisdiction, but the writ has expanded over the years to include a variety of collateral challenges to convictions or sentences based on alleged violations of fundamental constitutional rights. The habeas statute provides jurisdiction to hear petitions by persons claiming that they are held "in custody in violation of the Constitution or laws or treaties of the United States." A court reviewing a petition for habeas corpus does not determine the guilt or innocence of the petitioner; rather, it tests the legality of the detention and the custodian's authority to detain. If the detention is not supported by law, the detainee is to be released. Minor irregularities in trial procedures that do not amount to violations of fundamental constitutional rights are generally to be addressed on direct appeal. Article I, § 9, cl. 2, of the Constitution provides: "The Privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it." Given the emphasis the Rasul Court had placed on the distinction between the statutory and constitutional entitlement to habeas corpus , it might have seemed reasonable to suppose that Congress retained the power to revoke by statute what it had earlier granted without offending either the Court or the Constitution, without regard to establishing a public safety justification. However, as the Boumediene case demonstrates, the special status accorded the Writ by the Suspension Clause complicates matters. The relevance of the distinction between a "statutory" and a "constitutional" privilege of habeas corpus is not entirely clear. The federal courts' power to review petitions under habeas corpus has historically relied on statute, but it has been explained that the Constitution obligates Congress to provide "efficient means by which [the Writ] should receive life and activity." While the Court has stated that "at the absolute minimum, the Suspension Clause protects the writ 'as it existed in 1789,'" it has also presumed that "the Suspension Clause of the Constitution refers to the writ as it exists today, rather than as it existed in 1789." The Boumediene Court declined to adopt a date of reference by which the constitutional scope of the writ is to be judged. Accordingly, it remains unclear whether statutory enhancements of habeas review can ever be rolled back without implicating the Suspension Clause. The constitutionally mandated scope of the writ may turn on the same kinds of "objective factors and practical considerations" that the Court stated would determine the territorial scope of the writ. Under Boumediene , it appears that Congress's ability to revoke altogether the courts' jurisdiction over habeas petitions for certain classes of persons is constrained by the Constitution, but Congress has the power to impose some procedural regulations that may limit how courts consider such cases. Congress retains the option of withdrawing habeas jurisdiction if it provides an effective and adequate alternative means of pursuing relief. The Court's opinion in Boumediene did not fully delineate the lower bounds of what the Court might consider as necessary either to preserve the constitutional scope of the writ or to provide an adequate substitute, but indicated that the prisoners are entitled to "a meaningful opportunity to demonstrate that [they are] being held pursuant to the erroneous application or interpretation of relevant law." A more direct option to affect the outcome of habeas cases brought by detainees may involve enacting a clear statutory definition of who may be detained and the purpose of the detention, along with an appropriate procedure designed to distinguish those who meet the definition from those who do not. Such an approach could potentially increase certainty with respect to courts' decisions regarding whether the detention of particular alleged enemy combatants comports with statutes and treaties, although constitutionally based claims may remain less predictable. Congress could formally suspend the writ with respect to the detainees, although it is unclear whether Congress's views regarding the requirements of public safety are justiciable. If they are, then a reviewing court's assessment of the constitutionality of habeas -suspending legislation would likely turn on whether Al Qaeda's terrorist attacks upon the United States qualify as a "rebellion or invasion," and whether the court finds that "the public safety" requires the suspension of the writ. Congress might be able to impose some limitations upon judicial review of CSRT determinations if it strengthened the procedural protections afforded to detainees in CSRT status hearings. Legislation addressing some or all of the potential procedural inadequacies in the CSRT process identified in Boumediene might permit judicial review of CSRT determinations to be further streamlined. In 2008, Attorney General Michael Mukasey recommended that Congress enact new legislation to eliminate the DTA appeals process and make habeas corpus the sole avenue for detainees to challenge their detention in civilian court, and also to eliminate challenges to conditions of confinement or transfers out of U.S. custody. In a speech before the American Enterprise Institute on July 21, 2008, Attorney General Mukasey discussed this suggestion along with five other points he felt Congress should address: Courts should be prohibited from ordering that an alien captured and detained abroad be brought to the United States for court proceedings, or be admitted and released into the United States. Procedures should be put in place to ensure that intelligence information, including sources and methods, are protected from disclosure to terrorist suspects. Detainees awaiting trial by military commission should be prevented from bringing habeas petitions until the completion of their trials. Congress should reaffirm the authority to detain as enemy combatants persons who have "engaged in hostilities or purposefully supported al Qaeda, the Taliban, and associated organizations." Congress should establish sensible procedures for habeas challenges by assigning one district court exclusive jurisdiction over the cases, with one judge deciding common legal issues; by adopting "rules that strike a reasonable balance between the detainees' rights to a fair hearing ... and our national security needs ..." that would "not provide greater protection than we would provide to American citizens held as enemy combatants in this conflict"; and ensuring that court proceedings "are not permitted to interfere with the mission of our armed forces." Other proposals that have been floated include the creation of a new national security court to authorize preventive detention of terror suspects or the use of civilian or military courts to prosecute all detainees who cannot be released to their home country or another country willing to take them. Among the issues associated with prosecuting all of the detainees in civilian court is that the detainees may not have committed any crimes cognizable in federal court. Persons accused of engaging in terrorist acts (including attempts, conspiracies and the like) against the United States could likely be prosecuted, but jurisdiction over offenses involving the provision of material support to a terrorist organization abroad is somewhat more limited, and for acts occurring prior to 2004, included only persons subject to the jurisdiction of the United States. Congress could also take no action and allow the courts to address the issues in the course of deciding the habeas petitions already docketed. Whether Congress enacts legislation to guide the courts or permits courts to resolve the habeas cases as they now stand, courts will be faced with determining the scope of the writ as it applies to detainees in Guantanamo and perhaps elsewhere outside the United States. Although the Boumediene Court held that DTA review procedures were an inadequate substitute for habeas , it expressly declined to assess "the content of the law that governs" the detention of aliens at Guantanamo. Nonetheless, the Supreme Court identified a number of potential deficiencies in the status review process that necessitated habeas review of CSRT determinations, including the detainee's lack of counsel during the hearings; the presumption of validity accorded to the government's evidence; procedural and practical limitations upon the detainee's ability to present evidence rebutting the government's charges against him and to confront witnesses; potential limitations on the detainee's ability to introduce exculpatory evidence; and limitations on the detainee's ability to learn about the nature of the government's case against him to the extent that it is based upon classified evidence. Whether these procedures violate due process standards, facially or as applied in a given case, and whether a particular detainee is being unlawfully held, are issues that will be addressed by the district court when reviewing the habeas claims of Guantanamo detainees. Boumediene considered challenges to the legality of detention, the issue at the heart of most of the habeas challenges brought by Guantanamo detainees to date. However, there are also some cases challenging the conditions under which a detainee is being held. These two categories of challenges may involve different procedural routes and the application of different constitutional rights. The extent to which Congress may limit the scope of challenges Guantanamo detainees may bring may turn on the unresolved question of which constitutional rights apply to aliens detained in territory abroad. If detainees are transferred into the United States, the degree to which Congress may limit their access to the courts may be subject to further constitutional constraints. The Supreme Court has not directly addressed whether there must exist a judicial forum to vindicate all constitutional rights. Justice Scalia has pointed out that there are particular cases, such as political questions cases, where all constitutional review is in effect precluded. Other commentators point to sovereign immunity and the ability of the government to limit the remedies available to plaintiffs. However, the Court has, in cases involving particular rights, generally found a requirement that effective judicial remedies must be available. Although the extent of constitutional rights enjoyed by aliens outside the territory of the United States is subject to continuing debate, the right to liberty enjoyed by aliens within the United States, except when deprived of it in accordance with due process of law, seems well established. Unlike the appeals process under the DTA, which is no longer available to detainees as a result of the D.C. Circuit's decision in Bismullah , habeas challenges may also permit challenges to detention not based solely on the adequacy of CSRT procedures. It is unclear how much of a role CSRT proceedings will play in habeas cases or whether courts will abstain from hearing cases that have not yet received a CSRT ruling (should such a case occur). There is no statutory requirement that all detainees receive a CSRT determination in order to be detained, nor that detainees receive any kind of a hearing within any certain period of time after their capture. This might have left some detainees without effective means to pursue a DTA challenge. Moreover, it appears that some detainees who were determined by CSRTs to be properly classified as enemy combatants have been released from Guantanamo without a new determination, which may call into question the importance of the CSRT procedure as the primary means for obtaining release and therefore, the sole focus of a collateral challenge. Detainees may also be transferred or released based on the results of periodic reviews conducted by Administrative Review Boards (ARBs) to determine whether the detainee is no longer a threat or that it is in the interest of the United States and its allies to release the prisoner. The DTA provided no opportunity to appeal the result of an ARB finding and no means of challenging a decision not to convene a new CSRT to consider new evidence. The scope and standard for habeas review involving detainees has been the subject of several orders by judges for the U.S. District Court for the District of Columbia. In such proceedings, the government has the burden of demonstrating, by a preponderance of the evidence, the lawfulnes s of the petitioner's detention. The government is also required to explain its legal justification for detaining the petitioner, including, where appropriate, the standard it uses to define the scope of its detention authority. The government is also required to provide the petitioner with all reasonably available exculpatory evidence. In December 2008, Senior Judge Thomas F. Hogan, who is coordinating and managing most Guantanamo cases for the D.C. District Court, issued a case management order that, among other things, requires the government to disclose any evidence it has relied upon to justify the petitioner's detention. With respect to classified information, Judge Hogan's order requires the government, unless granted an exception by the district court judge considering the case's merits, to "provide the petitioner's counsel with the classified information, provided the petitioner's counsel is cleared to access such information. If the government objects to providing the petitioner's counsel with the classified information, the government shall move for an exception to disclosure." There is no requirement that classified information be provided to a petitioner himself. Moreover, the order rescinds the requirement of an earlier case management order that petitioners receive an "adequate substitute" for any classified information disclosed to the court or petitioners' counsel. In January 2010, a D.C. Circuit panel held in the case of Al-Bihani v. Obama that the procedural protections afforded in habeas cases involving wartime detainees do not need to mirror those provided to persons in the traditional criminal law context. Judge Janice Rogers Brown, writing for herself and another member of the panel, argued that a lower procedural standard may exist in habeas cases involving challenges to wartime detention, as "national security interests are at their zenith and the rights of the alien petitioner [are] at their nadir." The government needs only to support its detention using a "preponderance of evidence" standard. The panel also held that habeas courts assessing the validity of a petitioner's detention could properly consider hearsay evidence proffered by the government in support of his detention. According to the majority opinion, "the question a habeas court must ask when presented with hearsay is not whether it is admissible—it is always admissible—but what probative weight to ascribe to whatever indicia of reliability it exhibits." Although it appears less common for challenges to prison conditions to be entertained under habeas review, such cases have been heard by federal courts on habeas petitions. Persons incarcerated in federal prisons may also ask a district court to address such complaints using their general jurisdiction to consider claims that arise under the Constitution, by means of a writ of mandamus. These writs, which are directed against government officials, have been used to require those officials to act in compliance with constitutional requirements. Although these challenges are often denied on the merits or on procedural grounds, cases have been brought based on the First Amendment, Sixth Amendment, Eighth Amendment and various other grounds. The Boumediene Court declined to discuss whether challenges to conditions of detention are within the constitutional scope of the writ as it applies to Guantanamo detainees. A variety of challenges has been raised by detainees in Guantanamo regarding conditions of their detention, including such issues as whether prisoners can be held in solitary confinement, when they can be transferred, or whether they can have contact with relatives. Although some of these were brought as habeas corpus cases, Guantanamo detainees have also sought relief from the courts using the All Writs Act, principally to prevent their transfer to other countries without notice, but for other reasons too. Use of the All Writs Act by a court is an extraordinary remedy, generally not invoked if there is an alternative remedy available. In April 2009, a D.C. Circuit panel interpreted Boumediene as invalidating the MCA's court-stripping provisions with respect "to all habeas claims brought by Guantanamo detainees, not simply with respect to so-called 'core' habeas claims." In that case, the panel found that habeas courts could consider not only Guantanamo detainees challenges to the legality of their detention, but also their proposed transfer to another country (though habeas review of such transfers may be quite limited). Accordingly, whether Guantanamo detainees may challenge their conditions of confinement may depend on whether a reviewing court considers these conditions to be "a proper subject of … habeas relief." Habeas courts have thus far rejected challenges by Guantanamo detainees relating to their conditions of detention. The rejection of challenges to conditions of confinement may be based, at least in part, upon the opinion that any such claim by Guantanamo detainees does not derive from a constitutional protection to which they are entitled. In February 2009, a D.C. Circuit panel held in the case of Kiyemba v. Obama that the Constitution's due process protections did not extend to non-citizen detainees held at Guantanamo. In October 2009, the Supreme Court granted certiorari to review the Kiyemba ruling. On March 1, 2010, the Supreme Court vacated the appellate court's opinion and remanded the case back to the appellate court for further consideration in light of new developments surrounding the Kiyemba petitioners' detention. It remains to be seen whether the appellate court will reaffirm its earlier ruling regarding the Constitution's application to detainees held at Guantanamo, or whether the issue will even be reached by the court. Presuming that the circuit court's earlier constitutional analysis is reaffirmed, the ability of non-citizen detainees held outside the United States to challenge the conditions of their detention may be quite limited. If detainees currently held at Guantanamo are transferred into the United States, however, they might be able to more successfully pursue legal challenges against aspects of their detention that allegedly infringe upon constitutional protections owed to them. Under Title 28, U.S. Code, a court conducting habeas review must "award the writ or issue an order directing the respondent to show cause why the writ should not be granted, unless it appears from the application that the detainee is not entitled to it." The court can order either party to expand the record by submitting additional information bearing on the petition. The court may order hearings to assist it in determining the facts, and is authorized to "dispose of the matter as law and justice require," or in criminal cases, to vacate a sentence, grant a new trial, or order that a prisoner be released. By contrast, the DTA review procedures did not address the remedies available to detainees who prevail in a challenge. Detainees who succeed in persuading a CSRT that they are not enemy combatants do not have an express right to release or even a right initially to be informed of the CSRT's decision. If the CSRT Director approves a finding that a detainee is no longer an enemy combatant, the detainee may be held for as long as it takes the government to arrange for his transfer to his home country or another country willing to provide asylum, during which time he need not be told of the CSRT's conclusion. According to one report of unclassified CSRT records, in the event the CSRT Director disapproves of the finding, new CSRTs may be convened, apparently without notifying or permitting the participation of the detainee, although the government might present new evidence to the new panel. The Supreme Court viewed the lack of an express power permitting the courts to order the release of a detainee as a factor relevant to the DTA's inadequacy as a substitute proceeding. In the context of CSRT determinations, the government suggested to the Court that remand for new CSRT proceedings would be the appropriate remedy for a determination that an error of law was made or that new evidence must be considered. Whether such a remedy would be acceptable probably depends on whether measures are taken to decrease the risk of error under the CSRT procedures. The available remedy for Guantanamo detainees found to be unlawfully held by the United States is an issue of ongoing litigation. The typical remedy for habeas claims is the release of the individual being unlawfully detained. But given that detainees are being held in a military facility in Cuba, it is unclear whether the order of their release is a practical remedy, particularly in cases where the government is unable to effectuate a detainee's transfer to a third country. Whether or not a court would have the power to craft a habeas remedy for Guantanamo detainees that permits their entry into the United States remains unresolved. The Supreme Court has recognized that habeas relief "is at its core, an equitable remedy," and judges have broad discretion to fashion an appropriate remedy for a particular case. On the other hand, in the immigration context, courts have long recognized that the political branches have plenary authority over whether arriving aliens may enter the United States. As previously discussed, in October 2008, a federal district court ordered the release into the United States of 17 Guantanamo detainees who were no longer considered enemy combatants, finding that the political branches' plenary authority in the immigration context did not contravene the petitioners' entitlement to an effective remedy to their unauthorized detention. However, the D.C. Circuit panel stayed the district court's order pending appellate review, and subsequently reversed the district court's decision in the case of Kiyemba v. Obama , decided in February 2009. Writing for the majority of the panel, Judge Randolph stated that federal courts lacked the authority to order a non-citizen detainee's entry and release into the United States. In reaching this conclusion, the majority opinion cited long-standing Supreme Court jurisprudence in the immigration context which recognized and sustained, "without exception ... the exclusive power of the political branches to decide which aliens may, and which aliens may not, enter the United States, and on what terms." According to the majority, this jurisprudence made clear that it was "not within the province of any court, unless expressly authorized by law, to review the determination of the political branch of the Government to exclude a given alien." The Kiyemba majority held that the district court lacked the legal authority to override the Executive's determination not to admit the petitioners into the United States. The majority held that the district court's order was not supported by federal statute or treaty. The majority also found that aliens held at Guantanamo were not protected by the Due Process Clause of the Constitution, and the district court's order therefore could not be based upon a liberty interest owed to the petitioners under the Constitution. The Kiyemba majority also found that the district court's order was improper to the extent that it was based on the notion that where there is a legal right, there must also be a remedy. The majority stated that it did "not believe the maxim reflects federal statutory or constitutional law." While acknowledging that the Supreme Court's decision in Boumediene made clear that the constitutional writ of habeas extended to Guantanamo detainees, the Kiyemba majority held that the constitutional writ of habeas did not entitle petitioners to the "extraordinary remedy" of being ordered transferred and released into the United States. Writing separately from the Kiyemba majority, Judge Rogers argued that the majority's opinion was "not faithful to Boumediene and would compromise both the Great Writ as a check on arbitrary detention and the balance of powers over exclusion and admission and release of aliens into the United States." She would have found that the Executive has no independent authority to detain aliens to prevent their entry into the United States, and would have held that a habeas court has the power to order the conditional release of a Guantanamo detainee into the United States when the Executive lacks authority to detain him. Nonetheless, she concurred with the majority's judgment that the district court's order was improper, because the lower court had not considered whether the Executive was authorized to detain the petitioners pursuant to U.S. immigration laws even after it had determined that they were not "enemy combatants." In October 2009, the Supreme Court agreed to review the appellate court's ruling. Following the Supreme Court's grant of certiorari, however, several Kiyemba petitioners were resettled in foreign countries, and the United States was able to find countries willing to settle the remaining petitioners (although five petitioners have rejected these countries' offers for resettlement). On March 1, 2010, the Supreme Court vacated the appellate court's opinion and remanded the case in light of these developments. Because the Supreme Court had granted certiorari on the understanding that no remedy was available for the petitioners other than release into the United States, it returned the case to the D.C. Circuit to review the ramifications of the new circumstances. Litigation in Kiyemba remains ongoing. In Boumediene , the Supreme Court held that the constitutional writ of habeas extended to persons detained at Guantanamo, even though they are held outside the de jure sovereign territory of the United States. Left unresolved in the Court's discussion of the extraterritorial application of the Constitution is the degree to which the writ of habeas and other constitutional protections applies to aliens detained in foreign locations other than Guantanamo (e.g., at military facilities in Afghanistan and elsewhere, or at any undisclosed U.S. detention sites overseas). In April 2009, a federal district court held that the constitutional writ of habeas extended to at least some detainees held by the United States at the Bagram Theater Internment Facility in Afghanistan. The Boumediene Court indicated that it would take a functional approach in resolving such issues, taking into account "objective factors and practical concerns" in deciding whether the writ extended to aliens detained outside U.S. territory. Practical concerns mentioned in the majority's opinion as relevant to an assessment of the writ's extraterritorial application include the degree and likely duration of U.S. control over the location where the alien is held; the costs of holding the Suspension Clause applicable in a given situation, including the expenditure of funds to permit habeas proceedings and the likelihood that the proceedings would compromise or divert attention from a military mission; and the possibility that adjudicating a habeas petition would cause friction with the host government. The Boumediene Court declined to overrule the Court's prior decision in Eisentrager , in which it found that convicted enemy aliens held in post-WWII Germany were precluded from seeking habeas relief. Whether enemy aliens are held in a territory that more closely resembles post-WWII Germany than present-day Guantanamo may influence a reviewing court's assessment of whether the writ of habeas reaches them, as well as its assessment of the merits of the underlying claims. In April 2009, District Court Judge John D. Bates found in the case of Al Maqaleh v. Gates that the constitutional writ of habeas may extend to non-Afghan detainees currently held by the United States at the Bagram Theater Internment Facility in Afghanistan, when those detainees had been captured outside of Afghanistan but were transferred to Bagram for long-term detention as enemy combatants. Judge Bates held that the circumstances surrounding the detention of the petitioners in Al Maqaleh were "virtually identical to the detainees in Boumediene – they are [non-U.S.] citizens who were ... apprehended in foreign lands far from the United States and brought to yet another country for detention" Applying the factors discussed in Boumediene as being relevant to a determination of the extraterritorial scope of the writ of habeas corpus , Judge Bates concluded that the writ extended to three of the four petitioners at issue in Al Maqaleh , who were not Afghan citizens. The constitutional writ was not found to extend to a fourth petitioner who was an Afghan citizen, however, because review of his habeas petition could potentially cause friction with the Afghan government. This ruling has been appealed. Presuming that the ruling is upheld, it could have significant ramifications for U.S. detention policy, as at least some foreign detainees held outside the United States or Guantanamo could seek review of their detention by a U.S. court. On September 14, 2009, the DOD announced modifications to the administrative process used to review the status of aliens held at Bagram, which would afford detainees greater procedural rights. The modified process does not contemplate judicial review of administrative determinations regarding the detention of persons at Bagram. Whether detainees who are facing prosecution by a military commission may challenge the jurisdiction of such tribunals prior to the completion of their trial remains unsettled, although the district court has so far declined to enjoin military commissions. Supreme Court precedent suggests that habeas corpus proceedings may be invoked to challenge the jurisdiction of a military court even where habeas corpus has been suspended. Habeas may remain available to defendants who can make a colorable claim not to be enemy belligerents within the meaning of the MCA, and therefore to have the right not to be subject to military trial at all, perhaps without necessarily having to await a verdict or exhaust the appeals process. Interlocutory challenges contesting whether the charges make out a valid violation of the law of war, for example, seem less likely to be entertained on a habeas petition. The Executive's policy of detaining wartime captives and suspected terrorists at the Guantanamo Bay Naval Station has raised a host of novel legal questions regarding, among other matters, the relative powers of the President and Congress to fight terrorism, as well as the power of the courts to review the actions of the political branches. The DTA was Congress's first effort to impose limits on the President's conduct of what the Bush Administration termed the "Global War on Terror" and to prescribe a limited role for the courts. The Supreme Court's decision striking the DTA provision that attempted to eliminate the courts' habeas jurisdiction may be seen as an indication that the Court will continue to play a role in determining the ultimate fate of the detainees at Guantanamo. However, the Court did not foreclose all options available to Congress to streamline habeas proceedings involving detainees at Guantanamo or elsewhere in connection with terrorism. Instead, it indicated that the permissibility of such measures will be weighed in the context of relevant circumstances and exigencies. As a general matter, the courts did not accept the Bush Administration's view that the President has inherent constitutional authority to detain those he suspects may be involved in international terrorism. Rather, the courts have looked to the language of the AUMF and other legislation to determine the contours of presidential power. The Supreme Court has interpreted the AUMF with the assumption that Congress intended for the President to pursue the conflict in accordance with traditional law-of-war principles, and has upheld the detention of a "narrow category" of persons who fit the traditional definition of "enemy belligerent" under the law of war. Other courts have been willing to accept a broader definition of enemy belligerency to permit the detention of individuals who were not captured in circumstances suggesting their direct participation in hostilities against the United States, but a plurality of the Supreme Court warned that a novel interpretation of the scope of the law of war might cause their understanding of permissible executive action to unravel. Consequently, Congress may be called upon to consider legislation to support the full range of authority asserted by the executive branch in connection with the "war on terror." In the event the Court finds that the detentions in question are fully supported by statutory authorization, whether on the basis of existing law or new enactments, the key issue is likely to be whether the detentions comport with due process of law under the Constitution. In the event that detainees currently held at Guantanamo are transferred into the United States, such persons may receive more significant constitutional protections. These protections may inform executive policy, legislative proposals, and judicial rulings concerning matters relating to detainees' treatment, continued detention, and access to federal courts.
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After the Supreme Court held that federal courts have jurisdiction under the federal habeas corpus statute to hear legal challenges on behalf of persons detained at the U.S. Naval Station in Guantanamo Bay, Cuba, in connection with the conflict against Al Qaeda and associated groups (Rasul v. Bush), the Pentagon established administrative hearings, called "Combatant Status Review Tribunals" (CSRTs), to allow the detainees to contest their status as enemy combatants, and informed them of their right to pursue habeas relief in federal court. Lawyers subsequently filed dozens of petitions on behalf of the detainees in the District Court for the District of Columbia, where district court judges reached inconsistent conclusions as to whether the detainees have any enforceable rights to challenge their treatment and detention. Congress subsequently passed the Detainee Treatment Act of 2005 (DTA) to divest the courts of jurisdiction to hear some detainees' challenges by eliminating the federal courts' statutory jurisdiction over habeas claims (as well as other causes of action) by aliens detained at Guantanamo. The DTA provided for limited appeals of CSRT determinations or final decisions of military commissions. After the Supreme Court rejected the view that the DTA left it without jurisdiction to review a habeas challenge to the validity of military commissions in the case of Hamdan v. Rumsfeld, Congress enacted the Military Commissions Act of 2006 (MCA) (P.L. 109-366) to authorize the President to convene military commissions and to amend the DTA to further reduce detainees' access to federal courts, including in cases already pending. In 2008, the Supreme Court ruled in Boumediene v. Bush that aliens detained at Guantanamo have the constitutional privilege of habeas corpus, and the judicial review mechanism provided by the MCA and DTA by which detainees could challenge the legality of their detention did not provide a constitutionally adequate habeas substitute. The immediate impact of the Boumediene decision is that detainees at Guantanamo may petition a federal district court for habeas review of the legality and possibly the circumstances of their detention, perhaps including challenges to the jurisdiction of military commissions. Several issues remain unresolved and are the subject of ongoing litigation, including the constitutional protections owed to detainees held at Guantanamo and other locations outside the United States; the substantive scope of military detention authority; the procedural standards used to assess the adequacy of evidence supporting a detainee's designation as an enemy belligerent; and the authority of federal habeas courts to compel the release of detainees determined to be unlawfully held into the United States if the Executive cannot effectuate their release to another country. The Supreme Court was expected to consider some of these issues in the case of Kiyemba v. Obama, but changed circumstances surrounding some of the petitioners resulted in the Court remanding the case back to the D.C. Circuit for further consideration. In March 2009, the Obama Administration announced a new definitional standard for the government's authority to detain terrorist suspects, which is largely similar in scope to the "enemy combatant" standard used by the Bush Administration to detain terrorist suspects. The standard would permit the detention of members of the Taliban, Al Qaeda, and associated forces, along with persons who provide "substantial support" to such groups, regardless of whether such persons were captured away from the battlefield in Afghanistan. Courts that have considered the Executive's authority to detain under the AUMF and law of war have reached differing conclusions as to the scope of this detention authority. In January 2010, a D.C. Circuit panel held that support for or membership in an AUMF-targeted organization may constitute a sufficient ground to justify military detention.
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The Administration's 2010 and 2011 budget outlines contain a proposal to cap the value of itemized deductions at 28%, for high-income taxpayers. In the 2010 plan, the expected revenue was dedicated to addressing health care issues. Other revenue sources have been proposed for this purpose and the current proposal is part of the Administrations tax provisions for upper income taxpayers. The itemized deduction cap has generated considerable concern about its potential negative effect on charitable contributions, especially in light of the difficulties charities are having during current economic conditions. The proposed tax change, however, would not go into effect until 2011 and could actually increase current contributions in the short term. Thus, it is the longer-term, or permanent, effect on giving that is considered in this analysis. The analysis also considers the effects of other income tax changes and of the estate tax. Deductions normally save taxes at the marginal tax rate. If a taxpayer's top bracket is 35%, a dollar of deduction would lower taxes by 35 cents. The proposal would limit the reduction to 28 cents. Taxpayers claim deductions for charitable gifts when they itemize. Most taxpayers (70%) do not deduct their contributions because they take the standard deduction or in some cases do not file tax returns. In addition, the provision would affect only the top two marginal tax rates, which affect only about 1.4% of returns. Limiting the value of itemized deductions or converting deductions into credits is not a radical idea. The Congressional Budget Office, for example, discussed converting deductions into a credit in its 2009 Budget Options study. President Bush's Advisory Panel proposed to apply a credit to mortgage interest deductions and eliminate tax deductions although it would have retained and extended the charitable deduction. The reason for proposed credits and caps on itemized deductions is that itemized deductions create subsidies that differ across income classes. For the 70% of households that do not file returns or file returns but do not itemize, there is no subsidy. For returns that do, the subsidy rates vary; the lowest income taxpayers receive a subsidy of 10% to 15%, while the highest income taxpayers have a subsidy rate of 35%. In evaluating the proposed contribution deduction and its implications for charitable giving, this report first compares the magnitude of the proposal with past tax changes. The lack of any clear indication in historical experience of powerful effects of tax changes suggests a small response. The following section provides calculations of the consequences for charitable giving, which are estimated based on the share of giving that is affected by the cap, the magnitude of the price change, and the elasticity (behavioral response to tax changes). It also considers the effects of other income tax provisions in the budget and the effects on different types of charitable organizations. The study also discusses the role of the estate tax. It concludes with discussions of policy trade-offs and alternative policy options. Some insight into the expected impact of the deduction cap might be found by comparing tax changes to past tax revisions. The price of charitable contributions for itemizers is (1-t), where t is the tax rate at which contributions are deducted. For example, if the individual is in a 25% tax bracket, the tax price is 0.75, indicating that a taxpayer has to give up 75 cents for each dollar of contributions. That is, if the taxpayer in that bracket contributes a dollar, he or she saves 25 cents and only loses 75 cents that could have been used for other purposes. The tax price of giving is affected by a cap on the rate at which deductions occur but is also affected by the marginal statutory rate. Consider the top tax rate. It has fluctuated substantially since the income tax was introduced in 1913, beginning at rates as low as 7% and rising as high as 92%. Starting in the mid-sixties, the top rate was 70% for many years (although it rose slightly with the Vietnam War surcharge). Beginning with legislation in 1981, the top tax rate has been reduced substantially. Effective in 1982, it was reduced from 70% to 50%. In 1986, it was further reduced to 28%. Rate increases occurred in 1990 and 1991, and decreases in 2001. Table 1 compares the magnitude of those past changes in tax price to the effects of the proposed itemized deduction cap. Two effects are considered for the cap: the effect of imposing a cap on the current (2009) top tax rate of 35% and the effect of imposing a cap on the top rate of 39.6% which is scheduled for 2011. The percentage changes in tax price in the 1981 and the 1986 legislation were very large compared with the current proposal. If their effects are compared with the proposal's effect with current tax rates, the 1981 legislation is over six times as large and the 1986 change is over four times as large. The combined changes are 12 times the size of the proposed tax increase at the top rate (where the main effects of the proposal will be directed). Tax rate changes differ from caps on deductions because they also have an offsetting income effect. This effect tends to be smaller than the price change, however, because of graduated rates, and in some cases were offset by other provisions. For example, the Tax Policy Center reports that allowing the individual rates to rise to their planned 2012 levels in the top 1% would result in an 11.6% reduction in tax price but only a 4.4% reduction in income. The 1986 Tax Reform Act, with one of the deepest tax cuts in the top rates, maintained the pre-existing revenue yield and distribution across income classes. Thus, it contained no income effects. Table 1 addresses rate changes that affected the top rate, but the 1981 and the 1986 tax changes also reduced marginal tax rates across a broad range of taxpayers. In addition, non-itemizers were allowed an itemized deduction in 1985 and 1986. Figure 1 shows the pattern of giving as a percentage of GDP over this period. There is no indication in this pattern of significant shifts due to tax rate changes. Contributions after 1981, despite tax price increases, remained relatively stable as a percentage of price. The small peak around 1986 is generally attributed by most researchers to a temporary rise in deductions reflecting a timing shift as tax cuts for 1987 and 1988 were pre-announced in the 1986 tax cut, but by 1989 contributions had returned to their previous levels. Contributions following the 1993 tax increase fell rather than increased. A more detailed discussion of the potential effects is presented in the next section, but this historical comparison suggests it is unlikely that a significant effect on charitable giving will occur. To estimate the effect on charitable giving arising from the itemized deduction cap, three elements are required: the share of donations affected, the percentage change in price for those donations, and the permanent price elasticity. As shown in Figure 2 , a relatively small share, 15.9% of all charitable contributions, would be affected by the itemized deduction cap (which affects 1.4% of taxpayers). According to the Tax Policy Center, the share of individual contributions that are subject to the two highest tax brackets are 4.7% for the current 33% bracket (36% in 2011 absent tax law changes) and 23.2% in the 35% bracket (39.6% in 2011 absent tax law changes). Thus a total of 27.9% of individual charitable contributions on itemized returns falls within these marginal rates. Some higher-income individuals will not be affected by this cap because they are subject to the alternative minimum tax, with a maximum rate already at 28%. There is already a limit on charitable contributions, which is often exceeded by high-income donors, and for some donors, contributions are not affected by changes in the tax rate for itemized deductions because they already contribute in excess of the maximum. Charitable contribution deductions cannot exceed a certain percentage of income (50% for ordinary contributions, less for gifts of appreciated property and gifts to foundations). The excess contributions are carried over to future years to be deducted, but for very large donations or for contributors who have large donations year after year, these deductions may never be taken. If they are, their value declines because of the time value of money. This effect is potentially quite significant among wealthy donors. One study of contributions from income and estate data found that the wealthy who appeared in the estate tax data contributed over a long period of time about twice the amount of their deductions claimed. The average adjusted gross income in this panel (covering 1987 to 1996) was $1.8 million. The relationship between contributions and deductions was highly variable from year to year, likely reflecting the importance of large one-time gifts. Another study reported the percentage of giving over the limits for a single year (1995) and for a panel covering 1991-1995. For the adjusted gross income class of $2.5 million or over, the percentage of giving over the limit was 27.6% in 1995, whereas for the panel, the percentage of giving over the limit was 34%. Adjustments for the fraction of contributions in the top two brackets not affected by the tax change are based on this data, using the 1991-1995 panel. The overall excess of contributions over deductions in this data, covering income classes of $200,000 and over, weighted by giving, is 18.7%. Based on the estate tax study, that the highest income class, which accounts for about half the excess, is assumed to never deduct the excess, while the remaining income classes deduct it the following year, which at a discount rate of 5% would cause a loss of 5% of the value. This is equivalent to assuming that about half the excess contribution's deduction value is lost This adjustment reduces the share of deductions affected in the lower income bracket from 4.7% to 4.5% and the share in the higher income bracket from 23.2% to 20.8%. Overall the share falls from 27.9% to 25.3%. Finally, the estimate is adjusted for the share contributed by individuals who itemize, estimated at 63.2% for the latest year available. Although individual inter-vivos contributions are the bulk of the source of charitable contributions, about a quarter of contributions are made by corporations, estates, and foundations. Contributions are also made by individual non-itemizers. Thus the 25.3% of individual contributions affected by the rate change represent 15.9% of total contributions. The price of charitable contributions for itemizers is (1-t), where t is the tax rate at which contributions are deducted. For example, if the individual is in a 25% tax bracket, the tax price is 0.75, indicating that a taxpayer has to give up 75 cents for each dollar of contributions because the contribution reduces taxes by 25 cents. Tax prices can also be affected by matching-donation programs; for example, an offer to match each dollar of contribution with an additional dollar from a matching-program sponsor would lead, even for a non-itemizer, to a tax price of 0.5 (i.e., it costs only 50 cents of income to achieve a dollar in contributions). Effects are calculated compared to two baselines: current tax rules with tax rates of 33% and 35% and tax rules in 2011 with rates of 36% and 39.6%. In addition to the basic price effects, price effects are also estimated incorporating the proposed increase in the tax rate on capital gains from 15% to 20%, which affects gifts of appreciated property. This effect is only related to a comparison of current tax rules. A significant portion of high-income individuals' contributions are in the form of appreciated property. The value of donating property differs from the value of cash donations. Currently, taxpayers are allowed to deduct the entire cost of appreciated property, without paying the capital gains tax. Since the cost of a dollar of consumption from sale of an appreciated asset is 1/(1-at g ) where t g is the capital gains tax rate and a is the share of value that would be taxed as a gain, the price of charitable giving is (1-t)(1-at g ). In Table 2 , the base case represents the case with no appreciation. Two cases with appreciation of 50% of the value and 100% of the value are included. The third element needed to estimate the effect on aggregate contributions of changes in the proposed policy is a measure of the responsiveness of contributions to prices. The estimate is based on the elasticity. Elasticities can be either price elasticities or income elasticities. A price elasticity is the percentage change in giving divided by the percentage change in price (with price equal to (1-t)). This relationship is negative, and an elasticity greater than one in absolute value is generally referred to as relatively elastic, while an elasticity less than one in absolute value is relatively inelastic. An income elasticity is the percentage change in giving divided by the percentage change in income and is positive. The remainder of this subsection discusses price elasticities. Price elasticities greater than one indicate that a price subsidy induces more giving than the revenue loss; if price elasticities are less than one, more charitable spending could be achieved by other means, such as direct grants. The evidence on these elasticities is generally drawn from tax data because variation in the price of giving generally occurs through the tax system. Most earlier studies of responses were based on comparing individuals who face different tax rates because they have different incomes; more recently researchers have used panel studies that allow for variation over time, while still focusing on the individual. However, aggregate changes over time also provide some insight into effects. As noted above in the historical comparison, the aggregate data on giving are not suggestive of a significant response to tax rate changes whether general (as in 1981 and 1986) or directed at higher-income individuals (as in 1990, 1993, and 2001). The share of giving did not change between 1980 and 1983. Similarly, with the 1986 change individual giving as a share of output was 1.47% in 1983 and 1.45% in 1989. While such basic comparisons do not control for many potentially important factors, the lack of evidence of large effects suggests that responses to tax changes cannot be very large. Another way in which the price of giving changes is through matching grants. A small literature has developed which examines the response to matching grants through laboratory field experiments where solicitations vary randomly over individuals as to the existence and size of a matching grant. These studies have generally found modest effects of matching grants. In one study, the announcement of matching grants led to increases in donations but the magnitude of the match did not matter; the estimated overall price elasticity was low, at 0.3. Another study found that the matching grant (up to a given amount) actually produced a smaller response than apprising prospective donors of a lead contribution that had already been made. In a study that surveyed philanthropy and high-net-worth households, one question asked was whether tax payers would reduce their charitable giving if there were no tax deductions for donations. Fifty-two percent of respondents said they would not reduce their donations at all, 37% said they would somewhat decrease donations, and only 10% would dramatically decrease donations. Since, at a 35% rate the tax price would increase by about 50%, this response suggests relative inelasticity. Note, however, that data on what individuals say they would do are not generally considered as reliable as evidence about what they actually do. All of these types of findings suggest an inelastic response in charitable giving relative to price changes. For many years, however, tax economists estimating the response of taxpayers to changes in the tax price of charitable giving estimated a relatively elastic response of over one. In a study published in 1991, an estimate of typical values was set at a price elasticity of -1.27 and a typical income elasticity as 0.78. These studies generally used cross sections of individuals with different tax rates. Researchers confronted many issues in estimating these relationships. One was separating income from price effects when the two moved together. Another (which had already become important in the discussion of capital gains realizations) was the possibility of timing of responses. For individuals with fluctuating incomes, there is an incentive to make charitable deductions in years with high tax rates; indeed, compared to permanent responses, this type of shifting over time is relatively costless. One could have no permanent effects on giving with a permanent change in taxes, but observe effects across individuals because of transitory effects. The tax legislation of the 1980s provided a dramatic set of tax cuts and in 1992, researchers at the Treasury Department presented a paper to the National Tax Association which highlighted the shortcomings of research and its ability to predict behavior. This paper used panels that traced the same taxpayers to highlight two important points. When the same data were used to estimate responses in the traditional cross section approach (yielding a price elasticity of -1.1 and an income elasticity of 0.67, typical of values in the literature) and these data were then used to predict charitable giving during the 1980s, the results were significantly in error. For example, in the $1,000,000 and over income class giving in 1982 fell (after establishing a baseline using the income elasticity), due to price effects, by a third of the predicted amounts (12.6% rather than 36.8%). For the $200,000 to $1,000,000 class, the model predicted a fall of 21% in 1982 but contributions rose by 33.2%. In general, this pattern overall suggests elasticities that are too high. Moreover, all of the high-income groups had a rise in giving in 1986 suggesting an important timing effect. There was more-mixed evidence of a timing effect for 1981. The 1981 tax cut was not announced as far in advance as the 1986 tax cut. As a result of these concerns, research turned to panel studies which could attempt to account for transitory price effects, which would be expected, at least among sophisticated high-income individuals, to be quite significant. At the same time, a temporary rise or fall in income should have a relatively small effect (consistent with the permanent income hypothesis). Thus, transitory price elasticities would be expected to be high, probably higher than permanent price elasticities, while temporary income elasticities would be small. For lower-income and less sophisticated taxpayers these results would not necessarily be expected. There is no consensus from the panel studies and unfortunately, estimates of responsiveness show significant variation depending on time period, data set and methodology, suggesting that flaws remain. Table 3 shows the results of applying a low, a high, and more central range of price elasticities from the studies (which are discussed in greater detail in Appendix A ). Compared with current tax rates, the central estimate suggests a reduction of somewhat more than one-half of 1% in charitable giving in response to the proposed change. One issue of concern raised in response to the Obama proposal is the effect on charities during the current economic downturn. The proposal is not scheduled to take place until 2011, and thus the price effects for the deduction cap (as shown in Table 3 ) would not apply until that time. Moreover, there should be an increase in current giving, as taxpayers shift their donations to the present in anticipation of higher costs in the future. Normally transitory price elasticities would likely be higher than permanent ones although the evidence presented in Appendix A is mixed. But even at the elasticity of 0.5, the reductions in Table 1 should be turned into increases if taxpayers make donations now (i.e., a 0.8% increase in giving). Transitory price effects would also occur if the increase in top tax rates in 2011 were to be confirmed by legislation making all but those tax cuts permanent, without enacting the itemized deduction cap. Because taxpayers would be certain that rates would be higher in 2011, and thus the tax price lower, they would defer current giving. The magnitude of this effect would depend on the extent that taxpayers did not already expect those tax increases. Thus, from the perspective of a price effect, the price today for the top rate taxpayer is1.06 ((1-.35)/(1-.396)) as compared to the future or 6% higher; for the second-highest bracket the price would be 4.7%. At a maximum, at an elasticity of 0.5 contributions would fall by about 0.4%. The results in Table 3 reflect only the changes in relative price, but there are other effects as well. There are income effects associated with the charitable giving deduction cap itself, which are small since on average charitable contributions are a small part of a taxpayer's budget, typically less than 3%. If the entire budget outline were considered, the income effects could be significant. Income elasticities, as noted above, are the percentage change in giving divided by the percentage change in income; they tend to be lower than one for necessities and higher than one for luxuries. In calculating income effects, note that there is also uncertainty regarding the elasticity with respect to permanent income, and a range of estimates have been found. As with price elasticities, there are other kinds of evidence, and this evidence tends to suggest elasticities that are higher than the price elasticities used above. The line graph in Figure 1 indicates that over a very long period aggregate individual contributions were about the same relative to output, about 1.5%. Were the income elasticity less than one, a general downward trend would be expected, whereas with an elasticity greater than one an upward trend would be expected. For example, if income grew at 3% per year and the income elasticity was 0.5, the share of contributions should have fallen 1.61% in 1967 to 1.05% in 2007, whereas with a unitary elasticity it would have been the same; the actual ratio was approximately the same, 1.66%. If the only influence on charitable giving were income and price, this graph would be suggestive of a very low price elasticity and a unitary income elasticity. Giving across individuals also appears to be relatively constant. Data presented for 1992 that included estimates for non-itemizers indicated that contributions were 4.4% for the lowest income class ($5,000 to $10,000), fell to 3.4% in the $10,000 to $15,000 class, and fell slowly ranging between 2.4% and 2.6% for all the classes between $30,000 and $1 million. Giving did rise at the very top income class as a percentage of income, to 3.1% from 2.6%. These data also tend to suggest a unitary elasticity of income; however, income may be correlated with other social factors that mean changes in income due to a tax cut could not be inferred from these data. (As an example, high-income individuals give a relatively small share of their income to religious organizations, while lower and moderate income individuals give more.) Statistical studies are performed to control for other influences and for individual fixed effects (such as religiosity), but the income elasticities, (as can be seen in the Appendix A ) vary considerably. They tend on average to be above the price elasticities. Estimates in this report use an elasticity of one. For high-income individuals, these income effects are expected to be negligible compared with current law (where taxpayers could lose from the itemized deduction cap, but gain from the lower inframarginal tax rates, that is, tax rate on the first increments of income, and lower taxes on dividends). The Tax Policy Center estimates a 0.3% gain in income of the top percentile, which includes the estate tax. However, there are income gains for the entire population that average overall 3.5%; subtracting out a 0.2% overall gain from estate taxes, there is a gain due to all income taxes of 3.3%. This overall income effect would apply to all individuals, who constitute 74.8% of contributions. At a 1.0 elasticity, this would result in a 2.46% increase in giving. For the comparison to current law, a 5.3% decline in income of the top 1% is projected because the lower marginal tax rates will not be extended, the cap on itemized deductions is imposed and the capital gains and dividends tax rates are raised. However, other tax cuts in the administration's package would lead to an overall effect of zero, and there should be overall no income effects. The overall effects are reported in Table 4 . Including all income tax effects, and taking into account gifts of appreciated assets, the effect on charitable giving compared with current tax rates would be a reduction of less than 1%. Compared with 2011 law, charitable giving should rise by about a 1% due to the proposals. Table 4 does not report sensitivity analysis, although the only differential effect from Table 3 is for the comparison with 2011. Income elasticities reported in Appendix A , outside of those that were not statistically significant, range from 0.4 to 1.3, resulting in income effects of 1% and 3.2% and a net, using a 0.5 price elasticity of a decline of 0.44% or an increase of 1.76%. Different types of charities may be affected differently by the change because the negative effects are more concentrated on higher-income donors. Higher-income donors contribute larger shares of their donations to contribute to health, education, art, environmental, and similar organizations, and less to religious organizations, those meeting basic needs, and combined purpose organizations. The different types of recipients for all contributions are shown in Figure 3 . If higher-income individuals contributed the same shares as overall contributions, the estimated effects in Table 4 would apply to all charities. However, evidence indicates that patterns for giving for high-income individuals differ from those of overall giving. Table 5 uses data in a study on high-net-worth philanthropy to estimate the differential effects across different types of organizations, combining both price and income effects (as shown in Table 4 ). (See Appendix B for the methodology used.) The study also estimated the shares of each type of charity that were directed to the needs of the poor; in general, higher-income donors give a small share of their donations to charities that benefit the poor. As the table indicates, charities that are not relatively favored by high-income donors will have very small reductions or gains, depending on the comparison made. These include religious organizations, combined purpose charities and charities designed to meet basic needs. Organizations that are more likely to be recipients of donations from high-income individuals will be more likely to have reductions in gifts and those reductions will be larger. Health will experience the greatest declines, followed by arts, other, and education. The modern U.S. estate tax was enacted as part of the Revenue Act of 1916 and almost from its onset a deduction for charitable bequests was allowed. As noted above, charitable bequests make up approximately 8% of all charitable giving. As with the more familiar income tax deduction, the estate tax deduction for charitable bequests reduces estate tax liability by the dollar value of the charitable bequest times the estate tax rate. Since 1916, the top marginal estate tax rate trended upward (increasing the value of the deduction) for roughly 65 years, before reversing course and trending downward (reducing the value of the deduction) over the past 25 years. Under current law, the estate tax has been repealed in 2010, before reappearing at its 2001 level the following year, although there are legislative proposals to revise that. These fluctuations in estate taxation could have important implications for the level of charitable bequests in the coming years. In contrast, the President's FY2010 and FY2011 Budget Outlines maintain the estate tax in its 2009 form and the Senate Budget Resolution for FY2010 reduces the top marginal tax rate by 10 percentage points. Unlike the personal income tax, the deduction for charitable bequests is not subject to a cap. That is not to say that similar distributional issues are not present. In fact, the benefit of the deduction for charitable bequests against the taxable estate is more heavily skewed towards higher wealth estates than under the income tax. This follows from the structure of the estate tax which has historically had a high exemption, resulting in a narrow base of roughly 2% of adult deaths each year since 1916. For this narrow base, however, the tax (subsidy) rate has been historically quite high, though trending downward from 70% to 45% over the part quarter century. As in the case of the income tax discussion, this section examines historical changes in the estate tax, the estimated effect of different regimes on charitable giving through bequests, the effects of temporary changes, and the effects of the estate tax on gifts during the lifetime. It also discusses what types of charities might be most affected. Some insight into the expected impact of a change in the estate tax might be found by comparing tax changes to past tax revisions. The price of charitable bequests for estates subject to the estate tax is (1-t), where t is the tax rate at which contributions are deducted. For example, for an estate in the 45% tax bracket, the tax price is 0.55, indicating that the estate tax reduces bequeathable wealth by 55 cents for each dollar of charitable bequest. As shown in Figure 4 , the top marginal estate tax rate has fluctuated considerably since 1916, ranging from rates as low as 10% to rates as high as 77%. The estate tax's origin as a revenue source in times of crisis can be observed in its early years by spikes in the top rates which correspond, roughly, to World War I and World War II. The gradual shift away from this original purpose may be observed by the persistence of the World War II rate increase lasting through 1976. Beginning with the Tax Reform Act of 1976 (TRA76), the top rate has been consistently reduced. Table 6 examines how these reductions in the top marginal estate tax rate have affected the tax price of charitable bequests. Taken together, the tax price of charitable bequests has risen 139% since the enactment of TRA76. The result is that individuals engaged in estate planning face a much reduced incentive for charitable bequests than 40 years ago. Figure 5 shows the pattern of charitable bequests as a percentage of GDP over the 1967-2007 time period. The pattern of bequests shows some evidence of shifting in response to tax changes. While little can be said concerning the 1976 tax change, it appears that estates may have increased charitable bequests prior to the tax price increases brought about by the 1981 and 2001 reductions in the top marginal estate tax rate. This evidence is harder to pin to the tax changes, compared to changes in the personal income tax rate, as the timing of bequests is tied to the timing of death, which is not generally thought to be strongly correlated with taxes. It is also worth noting that relative to GDP, bequests have generally stayed within a narrow range over this time period. For example, both the 1969 and 2000 levels of bequests were 0.2% of GDP. Given the inability to smooth charitable bequests over time and narrow affected populations year-to-year variation in bequests as a percentage of GDP is not unexpected. To estimate the effect on charitable giving of changes in the estate tax, four elements are required: the share of bequests affected, the percentage change in price for those bequests, the price elasticity and the wealth elasticity. Although changes in either the estate tax rate or the estate tax exemption are expected to elicit behavioral responses, estimates in this study are confined to the effect of changes in the estate tax rate in this study. As shown in Figure 6 , a relatively small share (4% to 6.4%) of total charitable contributions would be affected by the repeal and reinstatement of the estate tax (which affects approximately 2% of decedents). Using Giving USA 2008 and SOI data, approximately 53% of all charitable bequests in 2007 were made by estates subject to the estate tax. In addition, another 32% of all charitable bequests were made by estates that filed estate tax returns, but were not liable for the estate tax. Taken together, between 53% and 85% of all charitable bequests may be influenced by the estate tax. Thus between 4% and 6.4% of all charitable contributions may be affected by estate tax rate changes. The price of charitable bequests for estates subject to the estate tax is (1-t), where t is the tax rate at which charitable bequests are deducted from the gross estate. For example, for an estate in the 45% tax bracket, the tax price is 0.55, indicating that the estate tax reduces bequeathable wealth by 55 cents for each dollar of charitable bequest. Table 7 illustrates how the tax price of charitable bequests under current law compares with those under the President's Budget Outline. Effects and the FY2010 Senate Budget Resolution are calculated compared to the President's Budget Outline or, equivalently, 2009 law. The third element needed to estimate the effect on aggregate charitable contributions due to changes in the price of charitable bequests is a measure of the responsiveness of bequests to changes in the estate tax rate. As mentioned above, these measures are generally reported as elasticities: the percentage change in charitable bequests divided by the percentage change in price (with price equal to (1-t)). Most evidence on these elasticities comes from analysis of tax or probate records. Unlike studies of the personal income tax, all of these studies are essentially cross-sectional, since death is a one-time occurrence. In addition, these studies focus on the charitable bequests of the second-to-die spouse, since the incentives are difficult to specify for a first-to-die spouse given the existence of the marital deduction. As noted above, a visual examination of historical charitable bequests and the top marginal estate tax rate provides qualified evidence of the impact of estate taxes on charitable bequests. This suggests that the behavioral response to a change in the estate tax is relatively elastic. Another source of information on the responsiveness of bequests to changes in the estate tax rate is the expectations of high net worth households. In a recent study that surveyed high net worth households' philanthropy, one question asked was whether tax payers would reduce their charitable giving if the estate tax were repealed. Fifty-three percent of respondents said they would not reduce their donations at all, 7.8% said they would somewhat decrease donations and only 2.1% would dramatically decrease donations. Given that a repeal of the estate tax would result in an 82% increase in the tax price of charitable bequests, this suggests that the behavioral response to a change in the estate tax is relatively inelastic, according to survey respondents. Given the mixed message of these types of evidence, more sophisticated empirical evidence is considered. In this area, economists have generally found large behavioral responses to changes in the tax price of charitable bequests. These studies use either probate records or estate tax returns to look at how individuals respond to estate taxes when planning their estates and the studies identify the tax price by way of either the rate schedule within a year or changes in the rate schedule over time. Note that unlike the studies of individual behavior, estate behavior cannot be examined by following an estate over time. Table 8 shows the results of applying a range of price elasticities, representing the high, low and central estimates from the studies. Compared to the President's Budget Outline, the central estimate suggests a reduction of over 7.2% in total charitable contributions from a repeal of the estate tax, an increase of nearly 1.6% from reverting to 2001 estate tax law and a decrease of nearly 1.6% from adopting the Senate Budget Resolution. The low elasticity estimates, however, better fit the observed historical trend in Figure 5 . Compared to the President's Budget Outline, the low elasticity estimate suggests a reduction of nearly 4% in total charitable contributions from a repeal of the estate tax, an increase of almost 1% from reverting to 2001 estate tax law and a decrease of nearly 1% from adopting the provision in the Senate Budget Resolution. A note of caution is required to interpret the estimates presented above. Uncertainty surrounding the timing of death combined with the temporary nature of the estate repeal, under current law, could lead to decreased tax planning and subsequently changes in charitable bequests. Taken together with the President's outline to maintain the 2009 form of the estate tax the estimates are likely greater, in absolute value, than what expected results if current law were followed. Changes in the estate tax impact charitable giving through an effect on lifetime giving. A small literature has developed around this question and has generally found that lifetime giving to charities responds in a relatively inelastic manner to changes in the tax price of bequests. In particular, a permanent repeal of the estate tax could reduce lifetime charitable giving by roughly 5.7%. That is, repealing the estate tax would raise the cost of making lifetime charitable contributions while alive, relative to the cost of giving gifts to heirs at death. In contrast, reverting to the 2001 estate tax law would increase lifetime charitable contributions by nearly 1.3% and following the Senate Budget Resolution would decrease lifetime charitable contributions by nearly 1.3%. The results presented in Table 8 , above, only reflect the change in relative price brought about by a change in the estate tax rate. A change in the estate tax will, however, also change after-tax bequeathable wealth. While some uncertainty surrounds estimates of the elasticity of charitable bequests with respect to wealth, the use of multiple information types allows a consensus to emerge. One source of information is the examination of the level of charitable bequests over an extended time period. As observed in Figure 5 , charitable bequests as a percentage of GDP tracked within a narrow range suggesting a wealth elasticity of near unity. By way of comparison, an upward/downward sloping line would have been indicative of a wealth elasticity greater/less than unity. If the only influence on charitable bequests were wealth and price, this figure would suggest a unitary wealth elasticity and price elasticity greater than unity. This observed wealth elasticity, however, may be influenced by other social factors. Statistical studies which estimate the wealth elasticity, and attempt to control for other influences for charitable bequest, vary widely. Overall, the studies find wealth elasticities that are below, in absolute value, the price elasticities. Given that the estimates straddle unity, it is used in the calculations. Some economists argue that the graduated rate structure of the estate tax virtually ensures that the price effect will dominate the wealth effect and that if the estate tax were assessed at a flat rate the wealth effect would dominate. This assertion fits with the elasticities found in the economics literature and, thus, it is not surprising to find this same pattern in the overall effect reported in Table 9 . Specifically, compared with the President's baseline repealing the estate tax would reduce total charitable contributions by nearly 4%, or a 50% reduction in charitable bequests. As way of comparison reverting to 2001 law would increase total charitable giving by close to 1%, while adopting the provision in the Senate Budget Resolution would decrease charitable giving by nearly 1%. Evaluating these alternatives at our lower price elasticity, the resulting total effects are significantly closer to 0, or -0.66%, 0.15% and -0.15% of total charitable contributions, respectively. In addition to the overall effect, categories of charities are likely to be affected differentially. As mentioned above, higher-income donors contribute larger shares of their donations to health, education, art, environmental, and similar organizations, and less to religious organizations, those meeting basic needs, and combined purpose organizations during their lifetimes. Figure 7 breaks out charitable bequests by type of charity. Compared to lifetime giving, foundations receive a much greater share of charitable bequests. Of the remaining charities, only education also rises, in percentage terms relative to lifetime giving, whereas the arts and health organizations hold up better than religion or human services organizations. Because of the large share of bequests that involve foundations, the effects on actual charitable spending changes are likely to be delayed as foundations tend to retain assets and spend in the future. (These effects can also occur with inter-vivos giving where gifts can be made to foundations, to endowments and supporting organizations, and through donor advised funds, all of which delay the spending of charitable funds; the importance of this effect is likely to be more limited, however, because of the smaller share of foundation giving in lifetime contributions.) The ultimate timing and distribution of contributions to foundations is difficult to determine, although they may likely be devoted to the same ultimate purposes as are generally favored by high-income individuals' lifetime giving. Of course, when evaluating the effect of policy changes on different types of charities the initial share of bequests is only one determinant of the effect, with the relative elasticities for each charity being a second factor. According to one study, bequests to the arts and social welfare organizations are relatively unresponsive to changes in the tax price, while bequests to education and medical organizations, along with religious organizations, are relatively responsive. Although these results generally conform to observed bequest patterns, the tax price effect on education appears to be an anomaly, likely due to aggregation bias. Charitable contributions have a public goods aspect, which means they are undersupplied in a market economy, providing a justification for government subsidies to private contributions, provision of grants, or direct provision of goods (such as assistance for the poor, health research and care, education, and other goods). The argument typically made for limiting itemized deductions, such as those for charitable giving, points to the differential subsidies for some individuals as compared to others due to the difference in marginal tax rates. In addition, if the price elasticity is less than one, the government loses more in revenue than the charity gains in donations, an attribute that is referred to as inefficiency. Alternative policy options might be to find a different source of revenue. The type of revenue source could reflect efficiency goals (which might include limits on itemized deductions) or distributional objectives (such as raising revenue from higher-income taxpayers). One approach if the concern about the itemized deduction cap is primarily directed at charitable contributions is to exclude charitable deductions from the cap. According to Internal Revenue Service Statistics of Income for 2006, charitable contributions accounted for 23% of itemized deductions for the $500,000-and-over adjusted gross income class, representative of the group of taxpayers affected by the itemized deduction cap. Thus about a quarter of revenue projected from the itemized deduction cap would be sacrificed by excluding charitable contributions. A revenue-raising alternative to the cap on itemized deductions is to impose a floor or ceiling, allowing deductions only in excess of a percentage of income or directly limiting the amount of deductions that can be taken. (There is a ceiling of 50% of adjusted gross income for charitable gifts, and smaller ceilings for other types of gifts, such as gifts of appreciated property. Ceilings already exist for mortgage interest deductions based on the amount of the mortgage, and percentage of income floors exist for medical expenses, casualty losses, and miscellaneous deductions.) A floor would likely preserve the incentive effects at the margin of charitable contributions. According to the 2004 Statistics of Income Public Use File, 96% of contributions are made by taxpayers who contribute at least 1% of income and 88% are made by those who contribute at least 2% of income. The overall cap on itemized deductions is projected to raise about $31 billion when fully effective in FY2012; thus the annual cost of excluding the charitable deductions would be about $7 billion. CBO estimated that a 2% floor on charitable deductions would raise about $25 billion. Thus, the revenue could be made up with a lower floor. A more limited option would be to impose a floor under the higher tax rates for charitable contributions. That is, the general cap could be imposed, but itemized deductions in excess of some percentage of income would be excluded. If the main objective is to raise revenue from higher-income taxpayers, an alternative is to increase the top rates or add a surcharge, a proposal that was made by then-Chairman Rangel in his 2007 tax reform proposal. Raising top income rates further would increase the subsidy to charitable giving, although a surcharge based on adjusted gross income (i.e., pre-deduction income) would not. Other provisions to raise revenue that affect high-income individuals would be to increase the tax rate further on dividends (which prior to 2003 were taxed at ordinary rates) and capital gains (taxed at various rates in the past). Another provision that would affect higher-income individuals and encourage charitable giving would be to return to the pre-2001 treatment under the estate tax. Concerns about dire consequences for charitable giving in the wake of a proposed cap on the rate at which itemized deductions are valued appear to be overstated. Depending on which set of tax rates are used as the baseline, charitable deductions would decrease by less than 1% or less than 2%, and if income effects are incorporated, the budget outline taken as a whole would increase charitable giving. Moreover, since the change is not scheduled to take place until 2011 it would not reduce current giving and, indeed, could increase it. The provisions on the estate tax also have consequences for charitable giving that could be more important per dollar of revenue. The retention of the current estate tax rates compared with the elimination of the tax now scheduled for 2010 would increase charitable giving, but would lower it compared with the pre-2001 rates scheduled to be in effect if the Bush tax cuts expired. The effects of the cap on itemized deductions and any changes in bequests that might arise differentially affect certain types of charities. Appendix A. Evidence on Elasticities for Inter-Vivos Giving Table A -1 reports the results of six different studies (with a number of specifications which attempt to measure both permanent and transitory effects of changes in price and income on charitable giving. Two of these studies (Bakija, and Bakija and McClelland) also provided some critiques of other studies and some sensitivity analysis that is useful in understanding the studies and their strengths and weaknesses. Results that are not statistically significant have an asterisk. Lack of statistical significance means that, although a relationship that most closely fits the data is estimated, there is such deviation from that relationship in the observations that there is not a clear causal effect. They are usually, although not always, associated with very small values that are close to zero. While the studies differ in methodology, as discussed below, one difference is the type of data used. Tax return data are available for general use only to researchers in the Treasury Department and the Joint Committee on Taxation. (The Congressional Budget Office, CBO, has access to taxpayer data but must have uses approved by the Joint Committee on Taxation.) The data on giving and tax rates are probably superior in these studies and contain a larger sample of high-income taxpayers; however, such research cannot be replicated or subjected to any sensitivity analysis by others. Other researchers have to use public use data constructed from other sources. Of the six studies in Table 3 , three (Randolph, Auten et al., and Bakija and Heim) used taxpayer data and all had as authors or coauthors a Treasury employee. The Bakija and McClelland study, with a CBO coauthor, included a sensitivity analysis for the Auten et al. study, but used a public use file, not the tax data. The other two studies also used a public use file. Many of the studies listed below report multiple results using different specifications and, in general, an attempt is made to report the results that appear to be preferred by the author(s). For comparison with this table and to illustrate the importance of dealing with transitory effects, Bakija and McClelland, who presented a range of strategies, also estimated a standard pooled cross section estimate, the type that had been done prior to the evidence shown by the 1980s tax cuts that did not deal with transitory effects. That estimate showed results that are typical of past cross section studies, a price elasticity of -1.22 and an income elasticity of 0.84. In general, the theoretical expectation is that transitory price effects are large and transitory income effects are small (due to the permanent income hypothesis or consumption smoothing). Price elasticities and income elasticities in cross section studies are a combination of permanent and transitory effects. Thus, a lower permanent price elasticity and a higher permanent income elasticity would be expected than those observed in cross section studies. Only two studies, Randolph (1995)and Bakija and Heim (2008) find these results, and the Bakija and Heim income elasticity is only marginally higher. Randolph (1995) was the first study to focus on the problem of transitory effects, and the technique used a 10-year panel that treated deviations from average income (and the resultant deviations from tax rates) as transitory. Permanent tax rates varied through changes in the tax law (and years around the 1981 and 1986 changes were excluded). This study allowed a long period of time to be transitory; therefore, it is possible that some of the permanent price and income effects are reflected in the transitory estimates, as the author acknowledges. Other studies tend to allow much shorter-term transitory effects, which might go too far in the other direction. Randolph's model allowed the price elasticity to vary by the share of giving, and he reports two measures: one unweighted with a price elasticity of-0.08 which is not statistically significant and one weighted more heavily toward large contributors, which Randolph appears to prefer. The results in the Randolph study are consistent in general magnitude with the expectations based on the aggregate data discussed in the text: a small permanent price elasticity, a large transitory price elasticity, an income elasticity of around one and a smaller transitory income elasticity. Bakija (2000), who among other things, replicates the Randolph results with public use data, argues that the second weight, which yields an insignificant price elasticity, is more appropriate (although he criticizes other aspects of the model). In his own replications with public use files he finds effects similar to Randolph's unweighted results but suggests the appropriate measure of the aggregate elasticity evaluated over the full sample. These results are similar to Randolph's unweighted results: he also finds similar results for the elasticity when confined to incomes over $100,000. Based on the specification he prefers and his replication, this approach basically finds no evidence of a permanent price response. The Randolph study differs from the other studies in some important ways. By using average income over the panel as permanent income and estimating transitory effects based on deviations, he allows a broad scope for shifting over time, whereas other studies use shorter periods. This choice may be influenced by experience with capital gains realizations studies where using short periods to control for transitory effects were not successful in producing results that were reasonable. Barrett et al. allow limited intertemporal shifting variation and also a lagged value of giving to deal with adjustment. They focus particularly on how quickly adjustment takes place, which they find to be very rapid. Their panel also does not include tax rate changes after 1986 which are an important exogenous source of variation. They find a lower price elasticity than a standard cross section, but also a small income elasticity. Like the other studies, this study includes individual fixed effects which are designed to control for heterogeneity among taxpayers (e.g. a taste for philanthropy, religiosity, etc). (Randolph could not employ individual fixed effects because he used an average over the entire panel for permanent income which was then indistinguishable from a fixed effect.) One drawback, however, of fixed effects, as Barrett et al. acknowledge, is that the fixed effect could also be picking up permanent income effects, and so suppressing the value of that elasticity. The Barrett et al. study also allowed a more limited scope for intertemporal substitution. Auten et al. also use fixed effects and more limited intertemporal substitutions. As pointed out by Bakija and McClelland, they also had a problem in that they did not deal with known changes in the tax law (that is, 1986 was a higher-tax year than 1987 even though the high realizations in 1989 were associated with a pre-announced drop in tax rates) which would tend to bias their price elasticities up. This was a particular problem for panels that included 1986, and Bakija and McClelland reestimated their model using a public data file and found a much lower elasticity. Bakija (2000) mainly contrasted his model with Randolph's by using legislated transitory changes in tax rates as the way to determine the transitory component of taxes. Bakija and McClelland base their analysis off Auten et al. and while they introduce a number of innovations, their main changes are to model expected tax changes and introduce adjustment lags. Bakija and Heim use a panel approach with tax data, with fixed effects, with more limited substitution frameworks than Randolph, and with attention to expectations of tax changes. They characterize intertemporal substitution mainly through those pre-announced tax changes and allow shorter substitution periods. The main source of determining the price elasticity is the difference in response across taxpayers who had different changes in their tax rates. They also examine separate estimates for higher-income individuals. They obtain very different estimates depending on how they deal with fixed time effects (variables meant to control for changes that affect all observations in a given year), which cannot be introduced into the higher-income levels because they are so closely correlated across the sample with legislated changes in tax rates. The first one they reported, which did not use fixed time effects but incorporated a time trend, is included in the assessment. Ultimately no study is perfect, and thus it is difficult to choose a central elasticity from among these. Excluding the high elasticities in Auten et al. for the panel that covers 1986 and that are likely overstated the elasticities range from essentially zero to 0.8. It seems likely that the unweighted Randolph estimate may be biased downwards, but some others may be biased upwards because of fixed effects or short periods for intertemporal substitution. Ultimately a center elasticity of 0.5 is used. Income elasticities may be biased in the other direction but should be above the cross section results for that era and typical of the past (0.84) so, for that reason, and for reasons stated in the body of the paper, a unitary elasticity is used. Appendix B. Methodology for Estimating Effects by Type of Charity and Charitable Purpose The first step in the estimation is to measure the ratio of the charitable giving share for each type of charity to the total share. For example, if affected donors give half a share to a given charity as their share overall, the price effects of the cap will have half the effect of the total. These shares were taken from Table 10 of the Center of Philanthropy's study of patterns of household giving. Affected taxpayers fell into two categories in this study, $1 million or more and $200,000 to $1,000,0000. Shares were weighted based on the share of total giving in each tax-rate class, adjusted for limits on giving; the result was that 89% of the allocation was based on taxpayers with $1 million and over. Note that this methodology assumes that price elasticities are the same for different types of giving. Once these ratios were obtained, they were multiplied by the overall price effects to obtain the reductions in demand due to price effects. To incorporate the income effects, data on the top 1% and the overall income effects, along with the share of income allocated to the top 1%, subtracting out the effects of the estate tax, were used. This income effect was used for their share of the contributions of each type, with the remaining 99% income effect used for the remaining contributions. For the comparison with current tax rules, income of the top 1% fell by 5.3% and income of the remaining 99% increased by 1.1%. For the comparison with law in 2011, there was a 0.1% increase in income in the top 1% and a 4.4% increase in income in the remaining 99%. Denoting "a" as the ratio of the share by high-income taxpayers of each category divided by the share of all contributions by these taxpayers. The weighted income effect was a times 0.1747 times the income effect of the top 1% + (0.75-a times 0.1747). The share of income in the high-income category is 17.47% and 75% of contributions are from individuals. Appendix C. Evidence on Elasticities for Charitable Bequests Table C -1 reports the results of seven different studies that attempt to estimate both the price and wealth elasticities of charitable bequests. Although these studies find a diverse set of estimated elasticities, they reach two common general conclusions: the price elasticity dominates the wealth elasticity and charitable bequests, generally, respond elastically to changes in the tax price of bequests. The exception to this second conclusion is provided by Greene and McClelland (2001) and is likely explained by their focus on the portion of the tax price related to the exemption level.
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The Administration's 2010 and 2011 budget outlines contain a proposal to cap the value of itemized deductions at 28%, for high-income taxpayers. In the 2010 proposal, the expected revenue was dedicated to addressing health care issues; as other sources are expected to finance health care, the proposal is now part of the increased taxes on upper income taxpayers. This proposal has generated considerable concern about its potential negative effect on charitable contributions. This concern has been heightened because charities are having difficulties in the current economic climate. The proposed tax change, however, would not go into effect until 2011 and thus the change could actually increase near-term contributions. Thus, it is the longer-term, or permanent, effect on giving that is the effect considered in this analysis. The analysis also considers the effects of other income tax changes and of the estate tax. The estimated effects of the cap and other elements of the budget package depend on whether the proposals are compared with the current tax rates of 33% and 35% or the rates scheduled for 2011, 36% and 39.6%. Compared with current rules, estimated effects are between one-half a percent and 1% decline in charitable giving, depending on whether the effects of capital gains tax rates on gifts of appreciated property are included. When compared with tax rate provisions in 2011, charitable deductions are estimated to fall by about 1.5% if only the cap is considered, but if income effects from the entire budget package are included contributions actually rise 2.5%. The relatively modest effects of the proposal arise because (1) the effect of caps on the subsidy value is limited, (2) only a fraction (about 16%) of charitable giving is affected, and (3) because evidence suggests that behavioral responses to changes in subsidies are relatively small. Different charities will be affected differently because the giving patterns of higher-income individuals differ from the average. Estimates show smaller reductions or larger increases for religious or combined charities, or charities directed at meeting basic needs, whereas the proposal is more likely to have negative effects for charities serving the health sector, and to a lesser extent art and education charities. Overall, contributions that benefit the poor will be less likely to fall or more likely to rise than the average contribution because the charitable purposes more favored by higher-income contributors are less likely to direct benefits to low-income recipients. Estate tax changes would also affect charitable giving. The budget outlines hold the current 2009 estate tax rules constant. Allowing the estate tax to lapse in 2010, as would the current rules, could lead to reductions in charitable giving of around 4%. Returning to the higher estate tax rates currently scheduled for 2011 could increase charitable giving, by about 1%, while adopting the FY2010 Senate Budget Resolution provision could reduce charitable contributions by about 1%. Although a smaller share of charitable contributions are affected by the estate tax, the changes in subsidy value are much larger if the estate tax is repealed, and the estimated behavioral response is greater. The immediate effects on contributions and the distributional effects of changes are, however, uncertain. Over half of bequests involve gifts to foundations, which finance a variety of charitable objectives and provide benefits with a considerable delay. Revenue from the cap on itemized deductions is currently directed at increasing revenues to finance other programs. If the cap is rejected either overall, or for charitable contributions, other revenue sources found, or the debt increased. Alternative revenue options include, among others, implementing a floor under charitable deductions and increases in tax rates on high-income taxpayers.
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The spread of housing into forests and other wildlands, combined with various ecosystem health problems, has substantially increased the risks to life and property from wildfire. Wildfires seem more common than in the 1960s and 1970s, with 2005, 2006, 2007, 2011, and 2012 being the most severe fire seasons since 1960. National attention was focused on the problem by a fire that burned 239 houses in Los Alamos, NM, in May 2000. Issues for Congress include oversight of the agencies' fire management activities and other wildland management practices that have altered fuel loads over time; consideration of programs and processes for reducing fuel loads; and federal roles and responsibilities for wildfire protection and damages. Funding for wildfire protection programs is also a significant congressional issue, but is covered separately in CRS Report R43077, Wildfire Management: Federal Funding and Related Statistics and CRS Report RL33990, Federal Funding for Wildfire Control and Management . Many discussions of wildfire protection focus on the federal agencies that manage lands and receive funds to prepare for and control wildfires. The Forest Service (FS), in the Department of Agriculture, is the "big brother" among federal wildfire-fighting agencies. The FS is the oldest federal land management agency, created in 1905, with fire control as a principal purpose. The FS administers more land in the 48 coterminous states than any other federal agency, receives about two-thirds of federal fire funding, and created the symbol of fire prevention, Smokey Bear. The Department of the Interior (DOI) contains several land-managing agencies, including the Bureau of Land Management (BLM), National Park Service, Fish and Wildlife Service (FWS), and Bureau of Indian Affairs (BIA); DOI fire protection programs have been coordinated and funded through the BLM. Despite the substantial attention given to the FS and DOI agencies, the majority of wildlands are privately owned, and states are responsible for fire protection for these lands, as well as for their own lands. This report provides historical background on wildfires, and describes concerns about the wildland-urban interface and about forest and rangeland health. The report discusses fuel management, fire control, and fire effects. The report then examines federal, state, and landowner roles and responsibilities in protecting lands and resources from wildfires, and concludes by discussing current issues for federal wildfire management. Wildfire has existed in North America for millennia. Many fires were started by lightning, although Native Americans also used fire for various purposes. Wildfires were a problem for early settlers. Major forest fires occurred in New England and the Lake States in the late 1800s, largely fueled by the tree tops and limbs (slash) left after extensive logging. One particularly devastating fire, the Peshtigo, is commonly cited as the worst wildfire in American history; it burned nearly 4 million acres, obliterated a town, and killed 1,500 people in Wisconsin in 1871. Large fires in cut-over areas and the subsequent downstream flooding were principal reasons for Congress authorizing the President in 1891 to establish forest reserves (now national forests). The nascent FS focused strongly on halting wildfires in the national forests following several large fires that burned nearly 5 million acres in Montana and Idaho in 1910. The desire to control wildfires was founded on a belief that fast, aggressive control efforts were efficient, because fires that were stopped while small would not become the large, destructive conflagrations that are so expensive to control. In 1926, the agency developed its 10-acre policy —that all wildfires should be controlled before they reached 10 acres in size—clearly aimed at keeping wildfires small. Then in 1935, the FS added its 10:00 a.m. policy —that, for fires exceeding 10 acres, efforts should focus on control before the next burning period began (at 10:00 a.m.). These policies were seen as the most efficient and effective way to control large wildfires. In the 1970s, these aggressive FS fire control policies began to be questioned. Research had documented that, in some situations, wildfires brought ecological benefits to the burned areas—aiding regeneration of native flora, improving the habitat of native fauna, and reducing infestations of pests and of exotic and invasive species. In recognition of these benefits, the FS and the National Park Service initiated policies titled "prescribed natural fire," colloquially known as "let-burn" policies. Under these policies, fires burning within prescribed areas (such as in wilderness areas) would be monitored, rather than actively suppressed; if weather or other conditions changed or the wildfire threatened to escape the specified area, it would then be suppressed. These policies remained in effect until the 1988 wildfires in the area around Yellowstone National Park. Because at least one of the major fires in Yellowstone began as a prescribed natural fire, the agencies temporarily ended the use of the policy. Today, unplanned fire ignitions (by lightning or humans) that occur within site and weather conditions identified in fire management plans are called wildland fires for resource benefit, and are part of the agencies' fire use programs. Aggressive fire control policies were abandoned for federal wildfire planning in the late 1970s. The Office of Management and Budget challenged excessive proposed budget increases based on the above-mentioned policies and a subsequent study suggested that the fire control policies would increase expenditures beyond efficient levels. Concerns about unnatural fuel loads were raised in the 1990s. Following the 1988 fires in Yellowstone, Congress established the National Commission on Wildfire Disasters, whose 1994 report described a situation of dangerously high fuel accumulations. This report was issued shortly after a major conference examining the health of forest ecosystems in the intermountain West. The summer of 1994 was another severe fire season, leading to more calls for action to prevent future severe fire seasons. The Clinton Administration developed a Western Forest Health Initiative, and organized a review of federal fire policy, because of concerns that federal firefighting resources had been diverted to protecting nearby private residences and communities at a cost to federal lands and resources. In December 1995, the agencies released the new Federal Wildland Fire Management Policy & Program Review: Final Report , which altered federal fire policy from priority for private property to equal priority for private property and federal resources, based on values at risk. (Protecting human life remains the first priority in firefighting.) Concerns about historically unnatural fuel loads and their threat to communities persist. In 1999, the General Accounting Office (GAO; now the Government Accountability Office) issued two reports recommending a cohesive wildfire protection strategy for the FS and a combined strategy for the FS and BLM to address certain firefighting weaknesses. The Clinton Administration developed a program, called the National Fire Plan, and supplemental budget request to respond to the severe 2000 fire season. In the FY2001 Interior appropriations act ( P.L. 106-291 ), Congress enacted the additional funding, and other requirements for the agencies. During the severe 2002 fire season, the Bush Administration developed a proposal, called the Healthy Forests Initiative, to expedite fuel reduction projects in priority areas. The various elements of the proposal were debated, but none were enacted during the 107 th Congress. Some elements have been addressed through regulatory changes, while others were addressed in legislation in the 108 th Congress, especially the Healthy Forests Restoration Act of 2003 ( P.L. 108-148 ). FS fire control programs appeared to be quite successful until the 1980s. For example, fewer than 600,000 acres of FS protected land burned each year from 1935 through 1986, after averaging 1.2 million acres burned annually during the 1910s. As shown in Table 1 , the average annual acreage of FS protected land burned declined nearly every decade until the 1970s, but rose substantially in the 1980s and 1990s, concurrent with the shift from fire control to fire management. Furthermore, the acreage of FS protected land burned did not exceed 1 million acres annually between 1920 and 1986; since then, more than 1 million acres of FS protected land have burned in each of at least 12 years—1987, 1988, 1994, 1996, 2000, 2002, 2003, 2006, 2007, 2008, 2011, and 2012. In contrast, the acreage burned of wildlands protected by state or other federal agencies has declined substantially since the 1930s, but has started to increase at a relatively modest pace beginning in the 1990s, as shown in Table 1 . There are still occasional severe fire seasons, with more than 6 million acres burned 11 times since 1960 and 6 of those in the past decade—1963, 1969, 1996, 2000, 2002, 2004, 2005, 2006, 2007, 2011, and 2012. Nonetheless, even the worst of these fire seasons (2006) saw only slightly more acres burned than the annual average in the 1950s. It should also be recognized that only a small fraction of wildfires become catastrophic. In one case study, for 1986-1995 in Colorado, less than 1% of all wildfire ignitions grew to more than 1,000 acres, but these larger fires accounted for nearly 79% of the acreage burned. More than 95% of the fires were less than 50 acres, and these 12,608 fires accounted for only 3% of acreage burned. Thus, a small percentage of the fires account for the vast majority of the acres burned, and probably an even larger share of the damages and control costs, since the large fires (conflagrations) burn more intensely than smaller fires and suppression costs (per acre) are higher for conflagrations because of overhead management costs and the substantial cost of aircraft used in fighting conflagrations. Wildfires stir a primeval fear and fascination in most of us. Many have long been concerned about the loss of valuable timber to fire and about the effects of fire on soils, watersheds, water quality, and wildlife. In addition, the loss of houses and other structures adds to wildfire damages. Historically, wildfires were considered a major threat to people and houses primarily in the brushy hillsides of southern California. However, people have increasingly been building their houses and subdivisions in forests and other wildlands, and this expanding wildland-urban interface has increased the wildfire threat to people and houses throughout the West and in the South. Also, a century of using wildlands and suppressing wildfires has apparently significantly increased fuel loads, at least in some ecosystems, and led to historically unnatural combinations of vegetation and structures, exacerbating wildfire threats. The wildland-urban interface has been defined as the area "where combustible homes meet combustible vegetation." This interface includes a wide variety of situations, ranging from individual houses and isolated structures to subdivisions and rural communities surrounded by wildlands. While this situation has always existed to some extent, subdivisions in wildland settings appear to have grown significantly over the past two decades. Standard definitions of the interface have been developed by the federal agencies, but have not been used to assess the changing situation. Most observers agree that protecting homes and other structures in the interface is an appropriate goal for safeguarding the highest values at risk from wildfire. However, there are differences of opinion about how to best protect the WUI. FS research has indicated that the characteristics of the structures and their immediate surroundings are the primary determinants of whether a structure burns. In particular, non-flammable roofs and cleared vegetation for at least 10 meters (33 feet) and up to 40 meters (130 feet) around the structure is highly likely to protect the structure from wildfire, even when neighboring structures burn. Others propose reducing fuels in a band surrounding communities in the WUI; many proposals for fuel reduction suggest treatments within a half-mile (sometimes a quarter-mile) of WUI communities. Still others suggest that reducing fuels on wildlands removed from the WUI can nonetheless protect communities by reducing the danger of uncontrollable conflagrations. These differences lead to discussions about the proper federal role in protecting homes in the interface (see below). The increasing extent of wildfires in the national forests in the past two decades has been widely attributed to deteriorating forest and rangeland health, resulting at least in some cases directly from federal forest and rangeland management practices. Ecological conditions in many areas, particularly in the intermountain West (the Rocky Mountains through the Cascades and Sierra Nevadas), have been altered by various activities. Beginning more than a century ago, livestock grazing affected ecosystems by reducing the amount of grass and changing the plant species mix in forests and on rangelands. This reduced the fine fuels that carried surface fires (allowed them to spread), encouraged trees to invade traditionally open grasslands and meadows, and allowed non-native species to become established, all of which, experts believe, induce less frequent but more intense wildfires. In addition, first to support mining and railroad development and later to support the wood products industry, logging of the large pines that characterized many areas has led to regeneration of smaller, less fire-resistant trees in some areas. Roads that provide access for logging, grazing, and recreation have also been implicated in spreading non-native species. The nature, extent, and severity of these forest and rangeland health problems vary widely, depending on the ecosystem and the history of the site. In rangelands, the problem is likely to be invasion by non-native species (e.g., cheatgrass or spotted knapweed) or by shrubs and small trees (e.g., salt cedar or juniper). In some areas (e.g., western hemlock or inland Douglas-fir stands), the problem may be widespread dead trees due to drought or insect or disease infestations. In others (e.g., southern pines and western mixed conifers), the problem may be dense undergrowth of different plant species (e.g., palmetto in the South and firs in the West). In still others (e.g., ponderosa pine stands) the problem is more likely to be stand stagnation (e.g., too many little green trees, because intra-species competition rarely kills ponderosa pines). One FS research report has categorized these health problems, for wildfire protection, by classifying ecosystems according to their historical fire regime. The report describes five historical fire regimes: I. ecosystems with low-severity, surface fires at least every 35 years (often called frequent surface- fire ecosystems); II. ecosystems with stand replacement fires (killing much of the standing vegetation) at least every 35 years; III. ecosystems with mixed severity fires (both surface and stand replacement fires) at 35-100+ year intervals; IV. ecosystems with stand replacement fires at 35-100+ year intervals; and V. ecosystems with stand replacement fires at 200+ year intervals. It is widely recognized that fire suppression has greatly exacerbated these ecological problems, at least in frequent surface-fire ecosystems (fire regime I)—forest ecosystems that evolved with frequent surface fires that burned grasses, needles, and other small fuels at least every 35 years, depending on the site and plant species (e.g., southern yellow pines and ponderosa pine). Surface fires reduce fuel loads by mineralizing biomass that may take decades to rot, and thus provide a flush of nutrients to stimulate new plant growth. Historically, many surface fires were started by lightning, although Native Americans used fires to clear grasslands of encroaching trees, stimulate seed production, and reduce undergrowth and small trees that provide habitat for undesirable insects (e.g., ticks and chiggers) and inhibit mobility and visibility when hunting. Eliminating frequent surface fires through fire suppression plus other activities has led to unnaturally high fuel loads, by historic standards, in frequent surface-fire ecosystems. These historically unnatural fuel loads can lead to stand replacement fires in ecosystems adapted to frequent surface fires. In particular, small trees and dense undergrowth can create fuel ladders that sometimes cause surface fires to spread upward into the forest canopy. In these ecosystems, the frequent surface fires had historically eliminated much of the understory before it got large enough to create fuel ladders. Stand replacement fires in frequent surface-fire ecosystems might regenerate new versions of the original surface-fire adapted ecosystems, but some observers are concerned that these ecosystems might be replaced with a different forest that doesn't contain the big old ponderosa pines and other traditional species of these areas. Stand replacement fires are not, however, an ecological catastrophe in all ecosystems. Perennial grasses and some tree and brush species have evolved to regenerate following intense fires that kill much of the surface vegetation (fire regimes II, IV, and V). Aspen and some other hardwood tree and brush species, as well as most grasses, regrow from rootstocks that can survive intense wildfires. Some trees, such as jack pine in the Lake States and Canada and lodgepole pine in much of the West, have developed serotinous cones, that open and disperse seeds only after exposure to intense heat. In such ecosystems, stand replacement fires are normal and natural, although avoiding the incineration of structures located in those ecosystems is obviously desirable. Some uncertainty exists over the extent of forest and rangeland health problems and how various management practices can exacerbate or alleviate the problems. In 1995, the FS estimated that 39 million acres in the National Forest System (NFS) were at high risk of catastrophic wildfire, and needed some form of fuel treatment. More recently, the Coarse-Scale Assessment reported that 51 million NFS acres were at high risk of significant ecological damage from wildfire, and another 80 million acres were at moderate risk. (See Table 2 .) The Coarse-Scale Assessment also reported 23 million acres of Department of the Interior lands at high risk and 76 million acres at moderate risk. All other lands (calculated as the total shown in the Coarse-Scale Assessment less the NFS and DOI lands) included 107 million acres at high risk and 314 million acres at moderate risk of ecological damage. Fuel management is a collection of activities intended to reduce the threat of significant damages by wildfires. The FS began its fuel management program in the 1960s. By the late 1970s, earlier agency policies of aggressive suppression of all wildfires had been modified, in recognition of the enormous cost of organizing to achieve this goal and of the ecological benefits that can result from some fires. These understandings have in particular led to an expanded prescribed burning program. The relatively recent recognition of historically unnatural fuel loads from dead trees, dense understories of trees and other vegetation, and non-native species has spurred additional interest in fuel management activities. The presumption is that lower fuel loads and a lack of fuel ladders will reduce the extent of wildfires, the damages they cause, and the cost of controlling them. Numerous on-the-ground examples support this belief. However, little empirical research has documented this presumption. As noted in one research study, "scant information exists on fuel treatment efficacy for reducing wildfire severity." This study also found that "fuel treatments moderate extreme fire behavior within treated areas, at least in" frequent surface-fire ecosystems. Others have found different results elsewhere; one study reported "no evidence that prescribed burning in these [southern California] brushlands provides any resource benefit ... in this crown-fire ecosystem." A recent summary of wildfire research reported that prescribed burning generally reduced fire severity, that mechanical fuel reduction did not consistently reduce fire severity, and that little research has examined the potential impacts of mechanical fuel reduction with prescribed burning or of commercial logging. Before examining fuel management tools, a brief description of fuels may be helpful. Wildfires are typically spread by fine fuels —needles, leaves, grass, etc.—both on the surface and in the tree crowns (in a stand-replacement crown fire); these are known as 1-hour time lag fuels, because they dry out (lose two-thirds of their moisture content) in about an hour. Small fuels, known as 10-hour time lag fuels, are woody twigs and branches, up to a quarter-inch in diameter; these fuels also help spread wildfires because they ignite and burn quickly. Larger fuels—particularly the 1,000-hour time lag fuels (more than 3 inches in diameter)—may contribute to the intensity and thus to the damage fires cause, but contribute little to the rate of spread, because they are slow to ignite. One researcher noted that only 5% of large tree stems and 10% of tree branches were consumed in high intensity fires, while 100% of the foliage and 75% of the understory vegetation were consumed. Finally, ladders of fine and small fuels between the surface and the tree crowns can spread surface fires into the canopy, thus turning a surface fire into a stand-replacement fire. Fire has been used as a tool for a long time. Native Americans lit fires for various purposes, such as to reduce brush and stimulate grass growth. Settlers used fires to clear woody debris in creating agricultural fields. In forestry, fire has been used to eliminate logging debris, by burning brush piles and by prescribed burning harvested sites to prepare them for reforestation. Prescribed burning has been used increasingly over the past 40 years to reduce fuel loads on federal lands. FS prescribed burning has averaged 1.2 million acres annually over the past 10 years. BLM prescribed burning has averaged nearly 126,000 acres over the past 10 years. These burning programs are a significant increase from historic levels; as recently as FY1995, the acreage in prescribed burns was 541,300 FS acres and 57,000 BLM acres. However, much of the prescribed burning is in the Southern Region; prescribed burning in the intermountain West is still at relatively modest levels. Typically, areas to be burned are identified in agency plans, and fire lines (essentially dirt paths) are created around the perimeter. The fires are lit when the weather conditions permit (i.e., when the burning prescription is fulfilled)—when the humidity is low enough to get the fuels to burn, but not when the humidity is so low or wind speed so high that the burning cannot be contained. (This, of course, presumes accurate knowledge of existing and expected weather and wind conditions, as well as sufficient fire control crews with adequate training on the site.) When the fire reaches the perimeter limits, the crews "mop up" the burn area to assure that no hot embers remain to start a wildfire after everyone is gone. Prescribed burning is widely used for fuel management because it reduces biomass (the fuels) to ashes (minerals). It is particularly effective at reducing the smaller fuels, especially in the arid West where deterioration by decomposers (insects, fungi, etc.) is often very slow. In fact, it is the only human treatment that directly reduces the fine and small fuels that are important in spreading wildfires. However, prescribed fires are not particularly effective at reducing larger-diameter fuels or thinning stands to desired densities and diameters. There are several limitations in using prescribed fire. The most obvious is that prescribed fires can be risky—fire is not a controlled tool; rather, it is a self-sustaining chemical reaction that, once ignited, continues until the fuel supply is exhausted. Fire control (for both wildfires and prescribed fires) thus focuses on removing the continuous fuel supply by creating a fire line dug down to mineral soil. The line must be wide enough to prevent the spread of fire by radiation (i.e., the heat from the flames must decline sufficiently across the space that the biomass outside the fire line does not reach combustion temperature, about 550 o F). Minor variations in wind and in fuel loads adjacent to the fire line can lead to fires jumping the fire line, causing the fire to escape from control. Winds can also lift burning embers across fire lines, causing spot fires outside the fire line which can grow into major wildfires under certain conditions (such as occurred near Los Alamos, NM, in May 2000). Even when general weather conditions—temperature, humidity, and especially winds—are within the limits identified for prescribed fires, localized variations in the site (e.g., slope, aspect, and fuel load) and in weather (e.g., humidity and wind) can be problematic. Thus, prescribed fires inherently carry some degree of risk, especially in ecosystems adapted to stand-replacement fires and in areas where the understory and undergrowth have created fuel ladders. Another concern is that prescribed fires generate substantial quantities of smoke—air pollution with high concentrations of carbon monoxide, hydrocarbons, and especially particulates that degrade visibility. Some assert that prescribed fires merely shift the timing of air pollution from wildfires. Others note that smoke from pre-industrial wildland fires was at least three times more than from current levels from prescribed burning and wildfire. Others have observed that fire prescriptions are typically cooler and more humid than wildfire burning conditions, and thus prescribed fires may produce more pollution (because of less efficient burning) than wildfires burning the same area. The Clean Air Act requires regulations to preserve air quality, and regulations governing particulate emissions and regional haze have been of concern to land managers who want to expand prescribed burning programs. Previous proposed legislation (e.g., H.R. 236 , 106 th Congress) would have exempted FS prescribed burning from air quality regulations for 10 years, to demonstrate that an aggressive prescribed burning program will reduce total particulate emissions from prescribed burning and wildfires. However, owners and operators of other particulate emitters (e.g., diesel vehicles and fossil fuel power plants) generally object to such exemptions, arguing that their emissions would likely be regulated more stringently, even though wildland fires are one of the largest sources of particulates. Another tool commonly proposed for fuel treatment is traditional timber harvesting, including salvaging dead and dying trees before they rot or succumb to disease and commercially thinning dense stands. In areas where the forest health problems include large numbers of dead and dying trees, a shift toward an inappropriate or undesirable tree species mix, or a dense understory of commercially usable trees, timber harvesting can be used to improve forest health and remove woody biomass from the forest. Nonetheless, some interest groups object to using salvage and other timber harvests to improve forest health. Timber generally may only be removed from federal forests under timber sale contracts. Stewardship contracts allow timber sales and forest management services, such as fuel reduction, to be combined in one contract, essentially as a trade of goods (timber) for services (fuel reduction); this form of contracting is discussed below, under " Other Fuel Management Tools ." Because timber sale contracts have to be bought and goods-for-services contracts must generate value to provide services, the contracts generally include the removal of large, merchantable trees. Critics argue that the need for merchantable products compromises reducing fuel loads and achieving desired forest conditions. Timber harvests remove heavy fuels that contribute to fire intensity, and can break fuel ladders, but the remaining limbs and tree tops ("slash") substantially increase fuel loads on the ground and get in the way of controlling future fires, at least in the short term, until the slash is removed or disposed of through burning. "Slash is a fire hazard mainly because it represents an unusually large volume of fuel distributed in such a way that it is a dangerous impediment in the construction of fire lines" (i.e., in suppressing fires). If logging slash is treated, as has long been a standard practice following timber harvesting, the increased fire danger from higher fuel loads that follow timber harvesting can be ameliorated. Various slash treatments are used to reduce the fire hazard, including lop-and-scatter, pile-and-burn, and chipping. Lop-and-scatter consists of cutting the tops and limbs so that they lie close to the ground, thereby hastening decomposition and possibly preparing the material for broadcast burning (essentially, prescribed burning of the timber harvest site). Pile-and-burn is exactly that, piling the slash (by hand or more typically by bulldozer) and burning the piles when conditions are appropriate (dry enough, but not too dry, and with little or no wind). Chipping is feeding the slash through a chipper, a machine that reduces the slash to particles about the size of a silver dollar, and scattering the chips to allow them to decompose. Thorough slash disposal can significantly reduce fuel loads, particularly on sites with large amounts of noncommercial biomass (e.g., undergrowth and unusable tree species) and if combined with some type of prescribed burning. However, data on the actual extent of various slash disposal methods and on needed slash disposal appear to be available only for a few areas. The other principal tool for fuel management is mechanical treatment of the fuels. One common method is precommercial thinning—cutting down many of the small (less than 4½-inch diameter) trees that have little or no current market value. Other treatments include pruning and mechanical release of seedlings (principally by cutting down or mowing competing vegetation). Mechanical treatments are often effective at eliminating fuel ladders, but as with timber cutting, do not reduce the fine fuels on the sites without additional treatment (e.g., without prescribed burning). Mechanical fuel treatments alone tend to increase fine fuels and sometimes larger fuels on the ground in the short term, until the slash has been treated. Some critics have suggested using traditionally unused biomass, such as slash and thinning debris, in new industrial ways, such as using the wood for paper or particleboard or burning the biomass to generate electricity. Research has indicated that harvesting small diameter timber may be economically feasible, and one study reported net revenues of $624 per acre for comprehensive fuel reduction treatments in Montana that included removal and sale of merchantable wood. However, thus far, collecting and hauling chipped slash and other biomass for products or energy have apparently not been seen as economically viable by potential timber purchasers, given that such woody materials are currently left on the harvest sites. The market for biomass could change if a clean energy standard (CES) is implemented or if technological advances are made in cellulosic biofuels for the Renewable Fuel Standard (RFS), as this could lead to more presure on the use of biomass for energy purposes. Another possibility is to significantly change the traditional approach to timber sales. Stewardship contracting, in various forms, has been tested in various national forests. Sometimes, the stewardship contract (payment and performance) is based on the condition of the stand after the treatment, rather than on the volume harvested; this is also known as end-results contracting. A variation on this theme, which has been discussed sporadically for more than 30 years, is to separate the forest treatment from the sale of the wood. The most common form is essentially to use commercial timber to pay for other treatments; that is, the contractor removes the specified commercial timber and is required to perform other activities, such as precommercial thinning of a specified area. Because of the implicit trade of timber for other activities, this is often called goods-for-services stewardship contracting. FS and BLM goods-for-services stewardship contracting was authorized through FY2013 in the FY2003 Continuing Appropriations Resolution ( P.L. 108-7 ). Some observers believe that such alternative approaches could lead to development of an industry based on small diameter wood, and thus significantly reduce the cost of fuel management. Others fear that this could create an industry that cannot be sustained after the current excess biomass has been removed or that would need continuing subsidies. Direct federal funding for prescribed burning and other fuel treatments (typically called hazardous fuels or fuel management ) is part of FS and BLM appropriations for Wildfire Management. Appropriations for fuel reduction have risen from less than $100 million in FY1999 to more than $400 million annually since FY2003, and to $462.4 million in FY2013, with emergency supplemental funding. Funds appropriated for other purposes can also provide fuel treatment benefits. As noted above, salvage and other commercial timber sales can be used to reduce fuels in some circumstances. Various accounts, both annual appropriations and mandatory spending, provide funding for reforestation, timber stand improvement, and other activities. Reforestation actually increases fuels, but timber stand improvement includes precommercial thinning, pruning, and other mechanical vegetative treatments included in " Other Fuel Management Tools " (see above), as well as herbicide use and other treatments that do not reduce fuels. The cost of federal fire management is high and has risen significantly from historic levels. Wildfire appropriations for the FS and DOI totaled less than $1 billion annually prior to FY1997. For FY2003-FY2008, funding averaged more than $3 billion annually. One critic has observed that emergency supplemental appropriations, to replenish funds borrowed from other accounts to pay for firefighting, are viewed by agency employees as "free money" and has suggested that this has led to wasting federal firefighting funds, which he calls "fire boondoggles." Another critic asserts that poorly designed incentives are the principal cause of the current problems and that the current fire management funding system will not resolve those problems. For FY2013, the FS received approximately 76% of the funds appropriated by Congress for wildfire management (including emergency supplemental funds). The other roughly 24% goes to DOI. Four managing agencies at DOI receive wildfire management funding: the BLM, the National Park Service, the U.S. Fish and Wildlife Service, and the Bureau of Indian Affairs. The BLM retained about 52% of DOI funding for non-suppression wildfire activities in FY2012. Federal fire management policy was revised in 1995, after severe fires in 1994 and the deaths of several firefighters. Current federal wildfire policy is to protect human life first, and then to protect property and natural resources from wildfires. This policy includes viewing fire as a natural process in ecosystems where and when fires can be allowed to burn with reasonable safety. But when wildfires threaten life, property, and resources, the agencies act to suppress those fires. Despite control efforts, some wildfires clearly become the kind of conflagration (stand replacement fire or crown fire) that gets media attention. As noted above, relatively few wildfires become conflagrations; it is unknown how many wildfires might become conflagrations in the absence of fire suppression efforts. A wide array of factors determine whether a wildfire will blow up into a conflagration. Some factors are inherent in the site: slope (fires burn faster up steep slopes); aspect (south-facing slopes are warmer and drier than north-facing slopes); and ecology (some plant species are adapted to periodic stand replacement fires). Other factors are transient, changing over time (from hours to years): moisture levels (current and recent humidity; long-term drought); wind (ranging from gentle breezes to gale force winds in some thunderstorms); and fuel load and spatial distribution (more biomass and fuel ladders make conflagrations more likely). Whether a wildfire becomes a conflagration can also be influenced by land management practices and policies. Historic grazing and logging practices (by encouraging growth of many small trees), and especially fire suppression over the past century, appear to have contributed to unprecedented fuel loads in some ecosystems. Fuel treatments can reduce fuel loads, and thus probably reduce the likelihood and severity of catastrophic wildfires, at least in some ecosystems; however, some policies and decisions may restrict fuel treatment—for example, air quality protection that limits prescribed burning or wilderness designation that prevents fuel reduction with motorized or mechanical equipment. Other practices and policies are more problematic. For example, timber harvesting can reduce fuel loads, if accompanied by effective slash disposal, but data on the need for and on the extent and efficacy of slash disposal are not available. Similarly, road construction into previously unroaded areas can increase access, and thus facilitate fuel treatment and fire suppression; conversely, roadless area protection and even road obliteration can impede fuel treatment, but may reduce the likelihood of a wildfire ignition, because human-caused wildfires are more common along roads. Once a wildfire becomes a conflagration, halting its spread is exceedingly difficult, if not impossible. Dropping water or fire retardant ("slurry") from helicopters or airplanes ("slurry bombers") can occasionally return a crown fire to the surface, where firefighters can control it, and can be used to protect individually valuable sites (e.g., structures). However, this strategy is not particularly useful in large, extended fires. Setting backfires—lighting fires from a fire line to burn toward the conflagration—can eliminate the fuel ahead of the conflagration, thus halting its spread, but can be dangerous, because the backfire sometimes becomes part of the conflagration. Most firefighters recognize the futility of some firefighting efforts, acknowledging that some conflagrations will burn until they run out of fuel (move into an ecosystem or an area where the fuel is insufficient to support the conflagration) or the weather changes (the wind dies or precipitation begins, or both). Wildfires cause damages, killing some plants and occasionally animals. Firefighters have been injured and killed, and structures can be damaged or destroyed. The loss of plants can heighten the risk of significant erosion and landslides. Some observers have reported "soil glassification," where the silica in the soils has been melted and fused, forming an impermeable layer in the soil; however, research has yet to document the extent, frequency, and duration of this condition, and the soils and burning conditions under which it occurs. Others have noted that "even the most intense forest fire will rarely have a direct heating effect on the soil at depths below 7 to 10 cm" (centimeters), about 3 to 4 inches. Damages are almost certainly greater from stand replacement fires than from surface fires. Stand replacement fires burn more fuel, and thus burn hotter (more intensely) than surface fires. Stand replacement fires kill many plants in the burned area, making natural recovery slower and increasing the potential for erosion and landslides. Also, because they burn hotter, stand replacement fires generally are more difficult to suppress, raising risks to firefighters and to structures. Finally, stand replacement fires generate substantial quantities of smoke, which can directly affect people's health and well-being. Wildfires, especially conflagrations, can also have significant local economic effects, both short-term and long-term, with larger fires generally having greater and longer-term impacts. Wildfires, and even extreme fire danger, may directly curtail recreation and tourism in and near the fires. If an area's aesthetics are impaired, local property values can decline. Extensive fire damage to trees can significantly alter the timber supply, both through a short-term glut from timber salvage and a longer-term decline while the trees regrow. Water supplies can be degraded by post-fire erosion and stream sedimentation, but the volume flowing from the burned area may increase. However, federal wildfire management includes substantial expenditures, and fire-fighting jobs are considered financially desirable in many areas. Ecological damages from fires are more difficult to determine, and may well be overstated, for two reasons. First, burned areas look devastated immediately following the fire, even when recovery is likely; for example, conifers with as much as 60% of the crown scorched are likely to survive. Second, even the most intense stand replacement fires do not burn 100% of the biomass within the burn's perimeter—fires are patchy. For example, in the 1988 fires in Yellowstone, nearly 30% of the area within the fire perimeters was unburned, and another 15%-20% burned lightly (a surface fire); 50%-55% of the area burned as a stand replacement fire. Emergency rehabilitation is common following large fires. This is typically justified by the need for controlling erosion and preventing landslides, and may be particularly important for fire lines (dug to mineral soil) that go up steep slopes and could become gullies or ravines without treatment. Sometimes, the rehabilitation includes salvaging dead and damaged trees, because the wood's quality and value deteriorate following the fire. Emergency rehabilitation often involves seeding the sites with fast-growing grasses. While helpful for erosion control, such efforts might inhibit natural restoration if the grasses are not native species or if they inhibit tree seed germination or seedling survival. Finally, as mentioned above, wildfires can also generate ecological benefits. Many plants regrow quickly following wildfires, because fire converts organic matter to available mineral nutrients. Some plant species, such as aspen and especially many native perennial grasses, also regrow from root systems that are rarely damaged by wildfire. Other plant species, such as lodgepole pine and jack pine, have evolved to depend on stand replacement fires for their regeneration; fire is necessary to open their cones and spread their seeds. One author identified research reporting various significant ecosystems threatened by fire exclusion —including aspen, whitebark pine, and ponderosa pine (western montane ecosystems), longleaf pine, pitch pine, and oak savannah (southern and eastern ecosystems), and the tallgrass prairie. Other researchers found that, of the 146 rare, threatened, or endangered plants in the coterminous 48 states for which there is conclusive information on fire effects, 135 species (92%) benefit from fire or are found in fire-adapted ecosystems. Animals, as well as plants, can benefit from fire. Some individual animals may be killed, especially by catastrophic fires, but populations and communities are rarely threatened. Many species are attracted to burned areas following fires—some even during or immediately after the fire. Species can be attracted by the newly available minerals or the reduced vegetation allowing them to see and catch prey. Others are attracted in the weeks to months (even years) following, to the new plant growth (including fresh and available seeds and berries), for insects and other prey, or for habitat (e.g., snags for woodpeckers and other cavity nesters). A few may be highly dependent on fire; the endangered Kirtland's warbler, for example, only nests under young jack pine that was regenerated by fire, because only fire-regenerated jack pine stands are dense enough to protect the nestlings from predators. In summary, many of the ecological benefits of wildfire that have become more widely recognized over the past 30 years are generally associated with light surface fires in frequent-fire ecosystems. This is clearly one of the justifications given for fuel treatments. Damage is likely to be greater from stand replacement fires, especially in frequent-fire ecosystems, but even crown fires produce benefits in some situations (e.g., for the jack pine regeneration needed for successful Kirtland's warbler nesting). Individuals who choose to build or live in homes and other structures in the wildland-urban interface face some risk of loss from wildfires. As noted above, catastrophic fires occur, despite people's best efforts, and can threaten houses and other buildings. To date, insurance companies (and state insurance regulators) have done relatively little to ameliorate these risks, in part because of federal disaster assistance paid whenever numerous homes are burned (such as in Los Alamos in May 2000). However, landowners can take steps, individually and collectively, to reduce the threat to their structures. Research has documented that home ignitability —the likelihood of a house catching fire and burning down—depends substantially on the characteristics of the structure and its immediate surroundings. Flammable exteriors—wood siding and especially flammable roofs—increase the chances that a structure will ignite by radiation (heat from the surrounding burning forest) or from firebrands (burning materials carried aloft by wind or convection and falling ahead of the fire). Alternate materials (e.g., brick or aluminum siding and slate or copper roofing) and protective treatments can reduce the risk. In addition, the probability of a home igniting by radiation depends on its distance from the flames. Researchers found that 85%-95% of structures with nonflammable roofs survived two major California fires (in 1961 and 1990) when there were clearances of 10 meters (33 feet) or more between the homes and surrounding vegetation. Thus, building with fire resistant materials and clearing flammable materials—including vegetation, firewood piles, and untreated wood decks—from around structures reduces their chances of burning. In addition, landowners can cooperate in protecting their homes in the wildland-urban interface. Fuel reduction within and around such subdivisions can reduce the risk, and economies of scale suggest that treatment costs for a subdivision might be lower than for an individual (especially if volunteer labor is contributed). In addition, as noted above, narrow and unmarked roads can hinder fire crews from reaching wildfires. Assuring adequate roads that are clearly marked and mapped can help firefighters to protect subdivisions. Finally, communal water sources, such as ponds and cisterns, may improve the protection of structures and subdivisions. In general, the states are responsible for fire protection on non-federal lands, although cooperative agreements with the federal agencies may shift those responsibilities. Typically, local governments are responsible for putting out structure fires. Maintaining some separation between suppressing structural fires and wildfires may be appropriate, because the suppression techniques and firefighter hazards and training differ substantially. Nonetheless, cooperation and some overlapping responsibilities are also warranted, simply because of the locations of federal, state, and local firefighting forces. In addition, state and local governments have other responsibilities that affect wildfire threats to homes. For example, zoning codes—what can be built where—and building codes—permissible construction standards and materials—are typically regulated locally. These codes could (and some undoubtedly do) include restrictions, standards, or guidelines for improving fire protection in the wildland-urban interface. The insurance industry, and home fire insurance requirements, are generally regulated by states. State regulators could work with the industry to increase the consideration of wildfire protection and home defensibility in homeowners' insurance. Road construction and road maintenance are often both state and local responsibilities, depending on the road; these roads are usually designed and identified in ways that are useful for fire suppression crews. State and local governments could further assist home protection from wildfires by supporting programs to inform residents, especially those in the urban-wildland interface, of ways that they can protect their homes. The federal government has several roles in protecting lands and resources from wildfire, including protecting federal lands, assisting protection by states and local governments, and assisting public and private landowners in the aftermath of a disaster. These programs and their funding levels are described in CRS Report R43077, Wildfire Management: Federal Funding and Related Statistics , CRS Report RL33990, Federal Funding for Wildfire Control and Management , and CRS Report RL31065, Forestry Assistance Programs . The federal government clearly is responsible for fire protection on federal lands. Federal responsibility to protect neighboring non-federal lands, resources, and structures, however, is less clear. This issue was raised following several 1994 fires, where the federal officials observed that firefighting resources were diverted to protecting nearby private residences and communities at a cost to federal lands and resources. In December 1995, the agencies released the new Federal Wildland Fire Management Policy & Program Review: Final Report , which altered federal fire policy from priority for private property to equal priority for private property and federal resources, based on values at risk. (Protecting human life is the first priority in firefighting.) Funding for fire protection of federal lands accounts for about 95% of all federal wildfire management appropriations. As noted above, fire appropriations have risen dramatically over the past decade. The federal government also provides assistance for fire protection. Most federal wildfire protection assistance has been through the FS, but the Federal Emergency Management Agency (FEMA) in the Department of Homeland Security also has a program to assist in protecting communities from disasters (including wildfire). FS efforts are operated through a cooperative fire protection program within the State and Private Forestry (S&PF) branch. This fire program includes financial and technical assistance to states and to volunteer fire departments. The funding provides a nationwide fire prevention program and equipment acquisition and transfer (the Federal Excess Personal Property program) as well as training and other help for state and local fire organizations. The 2002 Farm Bill ( P.L. 107-171 ) created a new community fire protection program under which the FS can assist communities in fuel reduction and other activities on private lands in the wildland-urban interface. One particular program, FIREWISE, is supported through an agreement with and grant to the National Fire Protection Association, in conjunction with the National Association of State Foresters, to help private landowners learn how to protect their property from catastrophic wildfire. Funding for cooperative fire assistance rose substantially in FY2001, from less than $30 million to nearly $150 million. Funding has declined since, but remains substantially higher than the $15 million-$20 million annually in the 1990s. FEMA has programs to assist fire protection efforts. One FEMA program is fire suppression grants under the Stafford Act (the Disaster Relief and Emergency Assistance Act, 42 U.S.C. §5187). These are grants to states to assist in suppressing wildfires that threaten to become major disasters. Also, the U.S. Fire Administration is a FEMA entity charged with reducing deaths, injuries, and property losses from fires; agency programs include data collection, public education, training, and technology development. The federal government has one other program that supports federal and state wildfire protection efforts—the National Interagency Fire Center (NIFC). The center was established by the BLM and the FS in Boise, ID, in 1965 to coordinate fire protection efforts (especially aviation support) in the intermountain West. The early successes led to the inclusion of the National Weather Service (in the National Oceanic and Atmospheric Administration of the U.S. Department of Commerce) and of the other DOI agencies with fire suppression responsibilities (the National Park Service, Fish and Wildlife Service, Bureau of Indian Affairs, and Office of Aircraft Services). (FEMA is not included in the NIFC.) NIFC also coordinates with the National Association of State Foresters to assist in the efficient use of federal, state, and local firefighting resources in areas where wildfires are burning. The federal government also provides relief following many disasters, to assist recovery by state and local governments and especially the private sector (including the insurance industry). The federal land management agencies generally do not provide disaster relief, although there has been some economic assistance for communities affected by wildfires upon occasion, as described above. Wildfire operations funding includes money for emergency rehabilitation, to reduce the possibility of significant erosion, stream sedimentation, and mass soil movement (landslides) from burned areas of federal lands. While not direct relief for affected communities, such efforts may prevent flooding and debris flows that can exacerbate local economic and social problems caused by catastrophic fires. Two authorized programs, FS Emergency Reforestation Assistance and USDA Emergency Forest Restoration, can aid private landowners whose lands were damaged by wildfire, but the programs have not been funded in recent years. FEMA is the principal federal agency that provides relief following declared disasters, although local, state, and other federal agencies (e.g., the Farm Service Agency and the Small Business Administration) also have emergency assistance programs. The Stafford Act established a process for governors to request the President to declare a disaster, and public and individual assistance programs for disaster victims. If the risk of catastrophic fires destroying homes and communities continues to escalate, as some have suggested, requests for wildfire disaster relief would also likely rise. This might lead some to argue that a federal insurance mechanism might be a more efficient and equitable system for sharing the risk. Federal crop insurance and national flood insurance have existed for many years, while federal insurance for other catastrophic risks (e.g., hurricanes, tornados, earthquakes, volcanoes) has also been debated. An analysis of these alternative systems is beyond the scope of this report, but these might provide alternative approaches that could be adapted for federal wildfire insurance, if such insurance were seen as appropriate. Some observers, however, object to compensating landowners for building in what critics identify as unsafe areas. The severe fire seasons in recent years have raised many wildfire issues for Congress and the public. There have been spirited discussions about the effects of land management practices, especially timber sales, on fuel loads. A broad range of opinion exists on this issue, but most observers generally accept that current fuel loads reflect the aggressive fire suppression of the past century as well as historic logging and grazing practices. Some argue that catastrophic wildfires are nature's way of rejuvenating forests that have been mismanaged in extracting timber, and that the fires should be allowed to burn to restore the natural conditions. Others argue that the catastrophic fires are due to increased fuel loads that have resulted from reduced logging in the national forests over the past decade, and that more logging could contribute significantly to reducing fuel loads and thus to protecting homes and communities. However, the extent to which timber harvests affect the extent and severity of current and future wildfires cannot be determined from available data. Some critics suggest that historic mismanagement—excessive fire suppression and past logging and grazing practices—by the FS warrants wholesale decentralization or revision of the management authority governing the National Forest System. Research information on causative factors and on the complex circumstances surrounding wildfire is limited. The value of wildfires as case studies for building predictive models is constrained, because the a priori situation (e.g., fuel loads and distribution) and burning conditions (e.g., wind and moisture levels, patterns, and variations) are often unknown. Experimental fires in the wild would be more useful, but are dangerous and generally unacceptable to the public. Prescribed fires could be used for research, but the burning conditions are necessarily restricted. Fires in the laboratory are feasible, but often cannot duplicate the complexity and variability of field conditions. Thus, research on fire protection and control is challenging, and predictive tools for fire protection and control are often based substantially on expert opinion and anecdotes, rather than on documented research evidence. Concerns over forest and rangeland health, particularly related to fuel loads, have been discussed for nearly two decades; a major conference on forest ecosystem health was held in Idaho in 1993. Significant funding to address these concerns, however, was not proposed until September 2000. While higher funding for wildfire protection, including fuel reduction, has persisted, some question whether this additional funding is sufficient to adequately reduce fuel loads. In 1999, GAO estimated that it would cost $725 million annually —nearly $12 billion through 2015—to reduce fuels using traditional treatment methods on the 39 million FS acres that were estimated to be at high risk of catastrophic wildfire. This is nearly double the significantly increased appropriations for FS fuel reduction since FY2001. The cost of a comprehensive fuel reduction program, as many advocate, would likely exceed the GAO estimate of $12 billion, because the scope of potential costs and proposed programs has increased. The FS estimate of FS acres at high risk of ecological loss due to catastrophic fire increased from 39 million acres in 1999 to 51 million acres in 2003. In addition, the GAO cost figure (received from the FS) of $300 per acre on average for fuel reduction might be low. One might anticipate more careful federal prescribed burning after the May 2000 escaped prescribed fire burned 239 homes in Los Alamos, NM; more cautious prescribed burning is likely to have higher unit costs than the GAO figure. Also, many advocate emphasizing fuel reduction in the wildland-urban interface, and treatment costs in the interface are higher, because of risks to homes and other structures from prescribed burning and because of possible damage to aesthetics from mechanical treatments. GAO also addressed a subset of the widely advocated comprehensive fuel reduction program, by estimating the cost for the initial treatment of FS high-risk acres. The FS has estimated that there are 23 million high-risk acres of DOI land and 107 million high-risk acres of other land. In addition, many advocate reducing fuels on lands at moderate risk—80 million FS acres, 76 million DOI acres, and 313 million other acres. Finally, in frequent-fire ecosystems, retreatment would be needed on the 5-35 year fire cycle (depending on the ecosystem), suggesting that fuel management costs would need to be continued beyond the 16-year program examined by GAO. If a comprehensive program were undertaken to reduce fuels on all high-risk and moderate-risk federal lands, using GAO's treatment cost rate of $300 per acre, the total cost would come to $69 billion —$39 billion for FS lands and $30 billion for DOI lands—for initial treatment. This would come to $4.3 billion annually over 16 years, whereas the Administration's requested budget for fuel treatment in FY2008 was $499.8 million ($297.0 million for the FS and $202.8 million for the BLM), a little more than 10% of what some implicitly propose. This raises questions about whether a comprehensive fuel reduction program is feasible and how to prioritize treatment efforts. There is a final significant question: would it work? The answer depends, in part, on how one defines successful fire protection. Fuel reduction might help restore "more natural" conditions to forests and rangelands, as many advocate, and would likely yield some social benefits (e.g., improved water quality, more habitat for fire-dependent animal species). Others, however, advocate fuel reduction to allow greater use of forests and rangelands, for timber production, recreation, water yield, etc. Fuel reduction will certainly not reduce the conflict over the goals and purposes of having and managing federal lands. Reducing fuel loads might reduce acreage burned and the severity and damages of the wildfires that occur. Research is needed in various ecosystems to document and quantify the relationships among fuel loads and damages and the probability of catastrophic wildfires, to examine whether the cost of fuel reduction is justified by the lower fire risk and damage. However, it should also be recognized that, regardless of the extent of fuel reduction and other fire protection efforts, as long as there is biomass for burning, especially under severe weather conditions (drought and high wind), catastrophic wildfires will occasionally occur, with the attendant damages to resources, destruction of nearby homes, other economic and social impacts, and potential loss of life. Agee, James K. Fire Ecology of Pacific Northwest Forests . Washington, DC: Island Press, 1993. 493 p. Brown, Arthur A. and Kenneth P. Davis. Forest Fire Control and Use . 2 nd ed. New York, NY: McGraw-Hill Book company, 1973. 686 p. Carle, David. Burning Questions: America 's Fight With Nature's Fire . Westport, CT: Praeger Publishers, 2002. 298 p. Chandler, Craig, Phillip Cheney, Philip Thomas, Louis Trabaud, and Dave Williams. Fire In Forestry. Volume I: Forest Fire Behavior and Effects . New York, NY: John Wiley & Sons, 1983. 450 p. Chandler, Craig, Phillip Cheney, Philip Thomas, Louis Trabaud, and Dave Williams. Fire In Forestry. Volume II: Forest Fire Management and Organization . New York, NY: John Wiley & Sons, 1983. 298 p. Gonzalez-Caban, Armando and Philip N. Omi, technical coordinators. Proceedings of the Symposium on Fire Economics, Planning, and Policy: Bottom Lines . General Technical Report PSW-GTR-173. Berkeley, CA: USDA Forest Service, Pacific Southwest Research Station, Dec. 1999. 332 p. Kozlowski, T.T. and C.E. Ahlgren, eds. Fire and Ecosystems . New York, NY: Academic Press, 1974. 542 p. National Academy of Public Administration. Wildfire Suppression: Strategies for Containing Costs . Washington, DC: Sept. 2002. 2 volumes. Nelson, Robert H. A Burning Issue: A Case for Abolishing the U.S. Forest Service . Lanham, MD: Rowman & Littlefield Publishers, Inc., 2000. 191 p. O'Toole, Randal. Reforming the Fire Service: An Analysis of Federal Fire Budgets and Incentives . Bandon, OR: Thoreau Institute, July 2002. 53 p. Pyne, Stephen J. Fire in America : A Cultural History of Wildland and Rural Fire . Princeton, NJ: Princeton University Press, 1982. 654 p. Pyne, Stephen J., Patricia L. Andrews, and Richard D. Laven. Introduction to Wildland Fire , 2 nd ed. New York, NY: John Wiley & Sons, Inc., 1996. 769 p. Sampson, R. Neil and David L. Adams, eds. Assessing Forest Ecosystem Health in the Inland West: Papers from the American Forests Workshop, November 14 th -20 th , 1993, Sun Valley , Idaho . New York, NY: Food Products Press, 1994. 461 p. Sampson, R. Neil, R. Dwight Atkinson, and Joe Lewis, eds. Mapping Wildfire Hazards and Risks . New York, NY: Food Products Press, 2000. 343 p. Wright, Henry A. and Arthur W. Bailey. Fire Ecology: United States and Southern Canada . New York, NY: John Wiley & Sons, 1982. 501 p.
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Congress continues to face questions about forestry practices, funding levels, and the federal role in wildfire protection. Recent fire seasons have been, by most standards, among the worst in the past half century. National attention began to focus on wildfires when a prescribed burn in May 2000 escaped control and burned 239 homes in Los Alamos, NM. President Clinton responded by requesting a doubling of wildfire management funds, and Congress enacted much of this proposal in the FY2001 Interior appropriations act (P.L. 106-291). President Bush responded to the severe 2002 fires by proposing a Healthy Forests Initiative to reduce fuel loads by expediting review processes. Many factors contribute to the threat of wildfire damages. Two major factors are the decline in forest and rangeland health and the expansion of residential areas into wildlands—the wildland-urban interface. Over the past century, aggressive wildfire suppression, as well as past grazing and logging practices, have altered many ecosystems, especially those where light, surface fires were frequent. Many areas now have unnaturally high fuel loads (e.g., dead trees and dense thickets) and an historically unnatural mix of plant species (e.g., exotic invaders). Fuel treatments have been proposed to reduce the wildfire threats. Prescribed burning—setting fires under specified conditions—can reduce the fine fuels that spread wildfires, but can escape and become catastrophic wildfires, especially if fuel ladders (small trees and dense undergrowth) and wind spread the fire into the forest canopy. Commercial timber harvesting is often proposed, and can reduce heavy fuels and fuel ladders, but exacerbates the threat unless and until the slash (tree tops and limbs) is properly disposed of. Other mechanical treatments (e.g., precommercial thinning, pruning) can reduce fuel ladders, but also temporarily increase fuels on the ground. Treatments can often be more effective if combined (e.g., prescribed burning after thinning). However, some fuel treatments are very expensive, and the benefit of treatments for reducing wildfire threats depends on many factors. It should also be recognized that, as long as biomass, drought, lightning, and high winds exist, catastrophic wildfires will occur. Only about 1% of wildfires become conflagrations (raging, destructive fires), but which fires will "blow up" into crown wildfires is unpredictable. It seems likely that management practices and policies, including fuel treatments, affect the probability of such events. However, past experiences with wildfires are of limited value for building predictive models, and research on fire behavior under various circumstances is difficult, at best. Thus, predictive tools for fire protection and control are often based on expert opinion and anecdotes, rather than on research evidence. Individuals who choose to build homes in the urban-wildland interface face some risk of loss from wildfires, but can take steps to protect their homes. Federal, state, and local governments can and do assist by protecting their own lands, by providing financial and technical assistance, and by providing relief after the fire.
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Efforts to set standards for child labor in America largely began late in the 19 th century, mostly at the state level. During the first decade of the 20 th century, child labor became a federal concern. Congressional hearings were followed by extensive study of the issue—and by several unsuccessful efforts to deal with child labor through law. Finally, with the adoption of the Fair Labor Standards Act (FLSA) of 1938, the modern federal role in child labor regulation took shape. The history of child labor in the American workplace can be divided, roughly, into four periods. First, from the late 19 th century to 1941, reformers sought to remove children from the workplace (whether factory, field, or tenement house) and to encourage more extended school attendance. Second, with World War II, the focus shifted to alleged labor shortages for war production. Some urged modification of work restrictions for older children: too young for the draft but old enough to be useful employees. Third, by the late 1940s, another shift took place. Too many older youths were believed to be out of school, out of work, and unable to find employment for which, it was argued, they were often unprepared both in terms of training and discipline. Thus, various "school-to-work" transition programs were developed together with "incentives" for employers to hire youth workers. Fourth, since roughly the late 1980s, child labor in its various aspects has largely disappeared from the policy scene; the issue is often viewed as a remnant of an earlier period in American history. Debate over the regulation of child labor is often contentious, sparking sharp differences of opinion. Some have urged modification of existing federal child labor law to afford greater opportunities for young persons to learn the value of work or to gain entry into a skilled occupation. Others have questioned whether minors should be employed at all, especially while attending school. Child labor can also provide an occasion for youth to be exploited and, possibly, endangered. This report briefly describes the early history of child labor regulation, reviews recent federal initiatives in that area, and summarizes legislation from the 108 th Congress through the 113 th Congress. Prior to the 20 th century, employment of children largely reflected socioeconomic class stratification. Where children were of working-class families, it was largely assumed that they would work—even when they were very young. Some were employed in the street trades, delivering newspapers and telegrams, shining boots and shoes, running errands, and at whatever hours the duties demanded. Others were engaged in industrial homework, in tasks often reserved for the very young who could work, usually alongside a parent or another adult, in a tenement flat in segments of garment production or in other types of work that could be performed, sometimes on a piece rate basis, in one's place of residence. Still others worked in mines or factories, most notoriously, perhaps, the "breaker boys" (who separated coal from slate and rock) in the coal mines, the child workers in the textile mills, and the helpers in the glass factories. Agricultural labor by children seems always to have been in a category by itself. Usually, until the early 20 th century, such work seems to have been on the family farm (whatever its size) or in an agricultural operation in the general vicinity of a youth's place of residence, though he (or she) might reside and work beyond the view and reach of a parent. Regulation of child labor has been motivated by diverse concerns: economic, humane, and more broadly social. In the 19 th and early 20 th centuries, child workers were often viewed as an alternative source of low-wage labor who vied with their parents and other adults for employment—even at the cost of their own health and education. Products of child labor competed with goods produced by adults, exerting a downward pressure on wages and living standards. Aside from health and safety hazards, inadequate rest, it was argued, left children ill-suited for educational activities and, in turn, as adults, ill-prepared for employment or for the support of their own children, thus extending the cycle of poverty and adding to social-welfare costs. Early on, the trade union movement voiced strong opposition to child labor. New York labor activist Samuel Gompers championed child labor reform during the late 19 th century and later, as president of the American Federation of Labor (AFL), used his influence to improve the lot of working children. Workers advocate "Mother" (Mary Harris) Jones brought added visibility to the plight of child workers and to that of their parents as well. After its organization in 1899, the National Consumers League (NCL), under the leadership of Florence Kelley, took up the campaign against child labor, as did a significant body of social workers, clergy, and concerned individuals. In 1904, these forces were drawn together with the establishment of the National Child Labor Committee (NCLC) which, thereafter, would remain a central force in the movement to end the exploitation of children in the workplace. The regulation of child labor generally began at the state level. Initial laws were often loosely drawn and, where they exerted a restraining influence, subject to court challenge. Each type of work by children—for example, in the mines, factories, fields, or street trades—presented its own special challenges for reformers. Industrial homework by children was especially difficult to restrain. Although often not formally employed, children worked in tenement sweatshops making clothing, processing food, and engaging in whatever other work might profitably be conducted at home. Any tenement might become a little factory where conditions were often adverse and hours of work were unrestrained. Thus, child labor and industrial homework, from a regulatory/reform perspective, became intermeshed. Reformers tended to agree that child labor could not be controlled while industrial homework continued. Reformers, however, did not always agree on timing or overall strategy. Most seem to have concurred that, ultimately, reform would need to be federal. Faced with state regulation of child labor or industrial homework, employers could simply move to another state. Further, those who utilized child labor could play one jurisdiction against another. At the same time, the strength of reform organization varied from one state to another. Some believed that state action was more nearly feasible than securing broader national change, at least at that time. In 1906, Senator Albert Beveridge (R-IN) and Representative Herbert Parsons (R-NY) introduced legislation to prevent the employment of children in factories and mines. Debate on this first federal initiative continued for several years but it did not become law. However, with the work of the various reform groups, the proposal raised the visibility of child labor as a public policy issue. In 1907, legislation was approved (P.L. 59-41) that authorized the Secretary of Commerce and Labor (then, a single department) "to investigate and report upon the industrial, social, moral, education[al], and physical condition of woman and child workers in the United States." The result was a detailed survey which appeared in 19 volumes between 1910 and 1913. Building from that evidentiary record, Congress turned again to the legislative process to deal with child labor and related problems. Although Congress and the advocates of reform sought to limit oppressive child labor, the best approach was not immediately clear. Thus, sequentially, Congress moved in three directions—each uniformly unsuccessful. In 1916, a decade after the Beveridge proposal, new federal child labor legislation was introduced by Senator Robert Owen (D-OK) and by Representative Edward Keating (D-CO) with support from the reform community. A regional struggle then in progress pitted one state against another in a contest for economic growth with low-wage nonunion labor a bargaining chip. Southern manufacturers viewed child labor restrictions as an "effort of northern agitators to kill the infant industries of the south." The Owen-Keating Act (1916), based on the commerce clause of the U.S. Constitution, sought to ban the movement in interstate commerce of certain products of child labor. In June 1918, however, the U.S. Supreme Court declared the act unconstitutional ( Hammer v. Dagenhart , 247 U.S. 251), and reformers searched for a new approach. Congress next turned to its taxing power as an indirect method for controlling child labor. Senator Atlee Pomerene (D-OH) proposed to levy a 10% tax "on the annual net profits of industries" that employed children in violation of certain age and hours standards. The tax penalty would offset any competitive advantage that child labor might otherwise provide. Although the measure was in reality child labor legislation, it was hoped that it might secure Court approval. However, the Supreme Court declared the Pomerene Act (child labor tax) of 1919 unconstitutional in May 1922 ( Bailey v. Drexel Furniture Company , 259 U.S. 20). In the wake of the Drexel case, Samuel Gompers met at AFL headquarters with Florence Kelley of the National Consumers League, representatives of the NCLC, and others. After extended discussion and a weighing of options, the group developed a proposal for a constitutional amendment to grant Congress the right "to limit, regulate, and prohibit the labor of persons under 18 years of age." The child labor amendment (1924) involved far more than the mere passing of legislation since the case for approval had to be made to each state legislature. While the proponents of child labor reform began optimistically, support began to erode on a number of fronts for reasons not necessarily associated with child labor per se. The proposed amendment remained unratified in 1937 when Congress turned back to direct legislation with consideration of the Fair Labor Standards Act. From the period of the Beveridge bill (1906) to the New Deal era, children's advocates remained divided over the means for ending oppressive child labor. The reform community initially split with respect to federal action. Then, it had largely coalesced behind the Owen-Keating (1916) and Pomerene (1918) bills, debating long and hard over the wisdom of a constitutional amendment (1924). By late 1932, leaders of the Children's Bureau in the Department of Labor (DOL) and the NCLC, with others, decided to shift their focus away from ratification of the constitutional amendment (which was then perceived to be in doubt) and back toward action by individual states. In retrospect, this shift of emphasis may have been a misreading of the times. "By 1933," notes Walter Trattner in his reform-oriented study, Crusade for the Children , "the spreading contagion of child labor had found every weakness and loophole in state labor legislation." He observes: "Sweatshops and fly-by-night plants were exploiting children for little or no pay, moving at will across state lines to take advantage of laws of nearby states. The individual states were unable to halt these abuses which had far-reaching effects, including the complete breakdown of wage scales." Thus, in competitive terms, some argued, it was not feasible for individual states to lead in labor-related reform, even were they predisposed to do so. Trattner concludes: "Everywhere people were looking to Washington for help and direction." Soon after the inauguration of President Franklin D. Roosevelt in 1933, Congress passed the National Industrial Recovery Act (NIRA, 1933). Under the National Recovery Administration (NRA), industries were encouraged to develop codes of fair competition, which in many instances came to include minimum wage and overtime pay standards, a ban on industrial homework, and the restriction or elimination of child labor. Elimination of child labor under the Cotton Textile Code seemed, momentarily, a major breakthrough. However, in May 1935, the Supreme Court declared that the NIRA was unconstitutional ( Schechter Poultry Corp. et al. v. United States , 295 U.S. 495). The Agricultural Adjustment Act (AAA) of May 1933 and the Jones-Costigan Sugar Stabilization Act (1934) were roughly companion measures to the NIRA. In exchange for certain price supports, the government required grower/producer adherence to certain labor and marketing standards. In 1937, the AAA was similarly declared unconstitutional. In an effort to salvage NIRA and AAA labor standards, less comprehensive measures followed. First, Labor Secretary Frances Perkins, long a child labor reformer, urged that government, as a consumer (a more likely constitutional strategy), refuse to purchase items produced by child labor or under unsafe and unclean conditions in tenements (industrial homework). These restrictions were made part of the Public Contracts Act (1936), co-sponsored by Senator David Walsh (D-MA) and Representative Arthur Healey (D-MA), also called the Walsh-Healey Act. Second, agricultural labor standards, though limited, reemerged in the Beet Sugar Act (1937), again linked to a federal support system. Following the adoption of the Walsh-Healey Act, Secretary Perkins urged passage of general federal minimum wage and overtime pay legislation. Trattner notes that Roosevelt, possibly believing that the wage and hour measure could more easily be enacted "if it were made more attractive by integrating it with child labor," combined the several provisions. Perkins recalls that child labor provisions were added late in the process at the urging of Grace Abbott, who was then head of the Children's Bureau at DOL. "The President readily agreed and was delighted that we might make this bill cover child labor as well as low wages and long hours." After exhaustive debate, the Fair Labor Standards Act (FLSA), with its child labor provisions, became federal law during the summer of 1938. The FLSA was not a complete victory for advocates of child labor regulation. Historian Jeremy Felt argues that the act may have served "as a deterrent and as an educational force" but added that "in those areas where children are useful they continue to be employed." Further, the act did not address the competition from goods produced abroad by child workers under conditions the FLSA proscribed in America. During the early 1940s, as enforcement of the FLSA commenced, DOL found (like reformers early in the century) that illegal exploitation of children as laborers was extremely difficult to eradicate where industrial homework persisted. Attempts to regulate the latter were largely unproductive. By the mid-1940s, DOL had imposed an outright ban on industrial homework in certain garment-related fields. Thereafter, abusive child labor seems to have faded as a public policy issue, gradually being replaced by concern with youth unemployment, training, and "school-to-work" transition. The FLSA, as amended, protects children by setting conditions under which they may be employed and, in certain types of work, prohibiting their employment altogether. Although the basic structure of the act has changed little since 1938, Congress has altered specific provisions of the statute and DOL has variously refined its administration through the rulemaking process. Under the FLSA, employers may not use "oppressive child labor in commerce or in the production of goods for commerce." "Oppressive" is defined in the act and left to the Secretary of Labor to administer. Persons under 18 years of age may not be employed in mining or manufacturing or "in any occupation which the Secretary of Labor shall ... declare to be particularly hazardous for the employment of children ... or detrimental to their health or well-being." Otherwise, 16 years of age is the usual minimum age for employment. The Secretary may permit the employment of persons 14 to 16 years of age in work not deemed "oppressive," that does not interfere with schooling, and that is not detrimental to "health and well-being." The Secretary has established hours during which children of various ages may work. The Fair Labor Standards Act sets forth general policies and, at the same time, may specify in precise detail, either in the statute or through implementing regulations, how coverage is to be applied: namely, who is covered and who is exempt. The FLSA, rooted in the commerce clause of the Constitution, excludes from coverage children who are not involved in activities affecting interstate commerce—though such persons may be protected by state statutes. Also excluded are children employed by "a parent or a person standing in place of a parent employing his own child or a child in his custody." A child, for instance, assisting a parent (helping around a "mom-and-pop" corner grocery or doing chores around the home) would not be covered under federal child labor law. Nor do the child labor provisions of the act apply to children employed as actors or in related activities. Traditionally, the "street trades" (such as newspaper delivery) have been regarded as appropriate for children and, thus, are not restrained by FLSA child labor provisions. During the mid-1990s, departmental regulations were altered, administratively, to allow youths of 14 and 15 years of age to work in certain "sports-attending services at professional sporting events." Youth and child employment in agriculture is treated somewhat differently from nonagricultural employment. For example, a child working for a parent on a family farm is not covered under the FLSA. The law and regulations include differences with respect to age and the types of work that children and teenagers may perform. Table 1 provides a general summary of these requirements. Under the FLSA, manufacturing and mining work is deemed too hazardous for persons under 18 years of age. However, the Secretary may, at his or her discretion, designate other types of work as similarly too hazardous for persons under 18. In such cases, the Secretary will issue "hazardous occupations orders" or HOs which are incorporated in the Code of Federal Regulations (see Table 2 ). Often, an exception will be made (and written into the HO) with respect to apprentices and student-learners. The regulations make clear that, where there is a conflict between the HOs and any other provision of law, the higher standard prevails. Each HO is precise, frequently responding to problems that have arisen in the workplace. Currently, there are 17 HOs in place with respect to nonagricultural employment and include occupations such as work involving "manufacturing or storing explosives," "operation of power-driven meat-processing machines," "forest fire fighting," and "logging occupations and occupations in the operation of any sawmill." Eleven HOs have been published with respect to agricultural employment (see Table 3 ). On September 2, 2011, DOL issued a proposed rule to change the regulations that implement the child labor provisions in agriculture. The proposed rule would have modified and expanded the number of hazardous occupations in agriculture. In response to concerns about the potential effects of the proposed rule on the parental exemption, DOL announced, on February 1, 2012, that it was going to reconsider the part of the rule dealing with the interpretation of the parental exemption. On April 26, 2012, DOL announced that it was withdrawing the proposed rule. Child labor law is enforced by the Wage and Hour Division (WHD) of the U.S. Department of Labor. Much enforcement is complaint driven. Child advocates argue that child workers may not be likely to complain. If children are employed illegally with parental knowledge or consent, complaints may be infrequent. Enforcement may be complicated in the case of migrant farmworkers. In addition to WHD enforcement, some have urged other forms of nonparental oversight of child labor. Academic problems or frequent truancy could indicate oppressive child labor. Physicians may detect health problems that could be work-related. Efforts in these directions, early in the century, were often unsuccessful but systems of work permits—sometimes linking school attendance and performance to employment—continue to be urged, together with work injury reporting. Employers who illegally employ child workers are subject to both criminal and civil penalties. An employer who willfully violates child labor law is subject to a criminal fine of up to $10,000. For a second conviction of a willful violation, an employer is subject to a fine of up to $10,000, a sentence of up to six months in prison, or both. Effective June 1, 2010, DOL increased the minimum fines that can be imposed against employers who illegally employ children under the age of 14. For employers who illegally employ a worker under the age of 12, the minimum penalty for violating child labor law was raised to $8,000 per minor (from $850 for nonagricultural employers and $1,150 for agricultural employers). The penalty for illegally employing persons ages 12 or 13 was raised to a minimum of $6,000 per employee (from $850 for nonagricultural employers and $1,025 for agricultural employers). The maximum penalty for illegally employing children under the age of 14 is $11,000 per minor. A civil penalty of up to $50,000 may be assessed for each child labor violation that causes the serious injury or death of a minor. This penalty may be doubled, up to $100,000, if the violations are determined to be willful or repeated. By the late 1940s, exploitation and endangerment of young children in the world-of-work was popularly believed to have been resolved through legislation (the FLSA) and through the administrative discretion of the Secretary of Labor in implementing the FLSA. But, occasionally someone would recall that very young children still toiled in field harvest work, or an especially egregious accident would bring the more general issue back to the front page. At the same time, there had begun a gradual shift of focus to a new issue—inadequate opportunities for youth employment—and the related question of delinquency. In May 1961, for example, some 500 men and women met in Washington, DC, "to discuss [this] ... serious but little known national problem." The summary report of the conference observed that Again and again in the past decade, juvenile delinquency and the outbreaks of youthful street gangs have made headlines. The fact that large numbers of our youth, 16 to 21 years of age, are out of school and unemployed, significant as it may be in terms of delinquency, has far greater significance in terms of what changes are taking place in our society.... The summary report pointed to an unemployment rate of 17.1% for this age group—with a somewhat higher rate for minority youth. "There have always been young people who dropped out before finishing high school or grade school.... But until recently, except during the depression, there were ample unskilled jobs for workers of limited education." That, the report stated, was no longer true. "When no work is to be had at home, the small-town boys and the farm boys go off to the cities where, ill-prepared for urban jobs, they swell the ranks of the young unemployed." And that, argued Harvard's James B. Conant, "is social dynamite " (emphasis in the original). Through the next two decades, the literature on youth employment (youth joblessness) grew rapidly with numerous panaceas for the problem being advanced. In retrospect, there seems to have been little agreement among policy analysts—except that the problem was serious. However, youth unemployment (or joblessness) notwithstanding, large numbers of youths have continued to seek and to find work. Although many young persons under the age of 15 are employed, there are more data on the employment status of older youth. Looking at the labor force participation of 15- to 17-year-old-youth through the period 1996-1998, on average, "about a fourth of both male and female youths were employed during average school months. During the summer, about one-third of both male and female youths worked," the Department of Labor reported. But DOL also reported significant variations in employment status when considered in terms of race and ethnicity. About 28% of white youths were employed during school months; about 38% during the summer. For blacks, the comparable figures were 13% (school months) and 20% (summer); for youth of Hispanic origin, 15% (school months) and 20% (summer). In July 1982, Labor Secretary Raymond Donovan (for the Reagan Administration) proposed that existing child labor policy be updated. The Administration's plan would have (1) opened more opportunities for employment for children 14 and 15 years of age; (2) extended the number of hours per day and per week that children might be employed; (3) revised standards for the employment of child workers in jobs once considered too hazardous; and (4) simplified and broadened the manner in which employers could become certified by DOL to employ full-time students at less than the standard minimum wage. The Donovan proposal sparked an immediate reaction. When opening hearings before the House Labor Standards Subcommittee of which he was chair, Representative George Miller (D-CA) sharply criticized the Administration's proposals. In turn, Wage/Hour Administrator William Otter defended them as sound and reasonable public policy. He read from letters from young persons, parents, and potential employers urging flexibility in child labor regulation so that 14- and 15-year-olds could be more easily employed. Although acknowledging a high unemployment rate among 16- to 19-year-olds, Otter affirmed his concern "about the unemployment levels of all age groups" and stated the view that "[u]nreasonable and artificial impediments to the employment of all age groups should be eliminated." Proponents and critics seemed to agree that the Reagan Administration "had walked into a minefield" where the child labor issue was concerned. In February 1983, Nation's Restaurant News reported that "Federal wage and hour regulators are sifting through a blizzard of letters from restaurant operators across the nation supporting the Reagan Administration's plan to relax child labor restrictions on the employment of young teenagers in food-service outlets." But, the News also reported that the proposal had "generated a storm of protest from educational groups, labor unions, and Congressmen who expressed outrage over what some described as a scheme to enable restauranteurs to exploit school age workers." For a time, the regulations remained under review with periodic speculation that their release was imminent. In the spring of 1984, the Nation's Restaurant News speculated that they would likely appear "by the end of the year." Later, it was reported that the proposal was "likely to resurface" in the near future. But, after a year, it was noted that DOL was again delaying "action on a regulation governing the employment of minors between the ages of 14 and 16." Some suggested "a politically inspired delay" in release of a final rule. Whatever the cause, a final revision never appeared. As the Reagan Administration proposals receded ever further into the background, several committees of Congress conducted hearings on aspects of child labor—a process that would continue, intermittently, through the 1980s and 1990s. But, although they established an evidentiary record, no general legislation restructuring child labor law was approved. In 1987, Labor Secretary William Brock announced the formation of a Child Labor Advisory Committee to assist him with interpretation of child labor issues. The committee was chaired by Linda Golodner, who was also executive director of the National Consumers' League. The advisory body quickly concluded that child labor was "often on the low end of the priority list" at DOL and that it took "very, very long for [its] ... recommendations to get through the bureaucracy." In the spring of 1989, the department explained that the suggestions of the committee had, gradually, moved through four lower levels of review and that, by mid-May, they had reached the desk of the Administrator of the Wage and Hour Division. Administrative changes in the wake of the 1988 election may have caused further delay in moving forward with child labor issues. With the appointment of Elizabeth Dole as Secretary of Labor (January 1989), the department appeared to have adopted a more active interest in the child labor issue. In mid-1989, Secretary Dole announced the appointment of William Brooks of General Motors to serve as Assistant Secretary for Employment Standards and charged him, inter alia, with child labor issues. Almost at once, the new assistant secretary was confronted with a GAO report affirming that child labor violations had increased dramatically during recent years. But GAO also suggested that data concerning work (and injuries) involving young persons were not entirely satisfactory. A more nearly adequate database was needed. Departmental initiatives, with investigations by GAO and the Consumers' League, combined with existing congressional concern to give the issue of child labor enhanced visibility. In early 1990, Brooks informed the Advisory Committee that a special task force on child labor would be formed within DOL and would look into such issues as possible revision of the hazardous work orders and the penalty structure for child labor violations. Brooks promised, the Daily Labor Report reported, "that in the next six months, rigorous enforcement of child labor law will be the watchword of the agency." Hearings followed, along with new legislative proposals. And, DOL launched Operation Child Watch, the first in a series of "sweeps" or general inspections aimed at compliance. Changes were made in the penalty structure and, presumably, in DOL's enforcement policy. Some viewed DOL's initiatives as a "commendable start"—but there were also misgivings. Representative Don Pease (D-OH), one of the more outspoken advocates of child labor reform, argued that something more was needed than "occasional public relations events" and intermittent crack-downs on violators. Although Pease seems to have favored legislative reform, the Bush Administration apparently did not. In June 1990, Brooks assured the National Grocers Association that no new legislation was necessary: that any needed changes "can be made administratively." The status of the Advisory Committee was unclear. Golodner reported in November of 1990 that no meeting of the committee had been held since early in the year, that the terms of current members had expired in March, and that no new members had been named by DOL. In late 1990, Secretary Dole indicated her intent to retire. Brooks resigned to return to General Motors. In 1994, the Clinton Administration proposed a general review of child labor regulation, similar in scope to that proposed by Secretary Donovan, though of a different thrust. Comprehensive oversight and administrative reform continued to be discussed but, essentially, both Congress and DOL proceeded on an ad hoc basis. In April 1986, Senator Dan Quayle (R-IN) proposed that child labor law be relaxed to permit 14- and 15-year-olds to work as bat boys or bat girls for professional baseball teams, even when games might run until late at night. The Senator stated that baseball "is the All-American sport" and indicated that youngsters should not be forced to wait until they were 16 years of age "to associate with the players of their home town teams." Congress mandated a study of the question, and the issue was allowed to die. In the spring of 1993, the matter was raised again when it prevented a 14-year-old youngster from Georgia from serving as a bat boy for the Savannah Cardinals. Labor Secretary Robert Reich, faced with the difficulty of explaining the logic of the work hours requirement, suspended its enforcement and proposed to allow children of 14 and 15 years of age to work as late as circumstances might dictate—"before, during, and after a sporting event," around the playing field, "club house or locker room"—to provide "sports-attending services at professional sporting events." Certain conditions were specified, intended to protect children from hazardous activity. And thus, by the spring of 1995, the regulation had been changed. But questions remained. For example, if it were inappropriate, per se, for young persons (14 and 15 years of age) to work late hours on a school night, did it really matter what sort of work they were doing? How did "sports-attending services" differ, in that context, from work in the food services industry or in a real estate or law office entering data into a computer? Might a more routine business environment be preferable to that of professional sports for the education and welfare of 14- and 15-year-olds? Some in the restaurant industry argued that "it was unfair to exempt the sports industry from the hours and time restrictions while leaving the restrictions in place for all other employment." Under Hazardous Occupations Order No. 12, persons under 18 were not allowed to load waste paper and boxes into commercial (industrial) paper balers and compactors. Operation of such equipment, DOL had determined, was especially hazardous for younger workers. Even loading them was viewed by the department as a serious risk. Karen Keesling, Acting Administrator of DOL's Wage and Hour Division, explained that it was not just the loading but that individuals involved in that process would likely reach into a baler or compactor to keep the materials from falling out or to clear jammed materials—and "that is extremely hazardous." Conversely, the National Grocers Association termed HO 12 "a prime example of regulatory excess." In March 1995, Representative Thomas Ewing (R-IL) introduced H.R. 1114 , legislation that would have permitted operation of the baling/compacting machinery by "minors under 18 years of age"—so long as the equipment met safety standards established by the private sector American National Standards Institute (ANSI). A similar proposal was introduced by Senator Larry Craig (R-ID). The legislation was supported by the National Grocers Association and opposed by the Child Labor Coalition (a youth advocacy group) and by people in the trade union movement. As signed into law ( P.L. 104-174 ) on August 6, 1996, the legislation had been redrawn to permit workers "who are 16 and 17 years of age ... to load materials into, but not operate or unload materials from, scrap paper balers and paper box compactors" that meet ANSI safety standards and where certain other requirements have been met. Whether the qualifying language was adequate to protect the youthful workers, however, remained in dispute. Hazardous Occupations Order No. 2, as developed at the discretion of the Secretary of Labor, restricted the work-related operation of certain motor vehicles by persons under the age of 18 as "particularly hazardous" for younger workers. While not absolutely precluded, strict guidelines and limitations had to be complied with. Conformity with specified safety standards and operation only during daylight hours was required. Employment-related driving could only be "occasional and incidental" though there might be some doubt about the definition of such terms. In April 1994, Representative Mike Kreidler (D-WA) introduced legislation directing the Secretary to modify HO 2 to permit a wider opportunity for young persons to drive in conjunction with their regular work. No action was taken on the Kreidler bill and in July 1995, new legislation was introduced by Representative Randy Tate (R-WA) and Senator Slade Gorton (R-WA). Hearings followed but the legislation died at the close of the 104 th Congress. In July 1997, Representative Larry Combest (R-TX) reintroduced the issue as H.R. 2327 (the Drive for Teen Employment Act). Though modification of HO 2 had been endorsed by automobile dealers, it had been opposed by the Department of Labor and by groups associated with children's advocacy such as the Child Labor Coalition and the National Consumers League. Persons 16 and 17 years of age, normally, are beginning drivers who will have only recently qualified for a driver's license. Although some youngsters may be fine drivers, it was argued that their lack of experience created a significant risk, both to the young persons themselves and to the public. In its final form, the legislation proposed to allow persons 17 years of age to engage in limited professional driving, under specified safety conditions and with certain limitations, but would still prohibit such activity by persons under 17. The Combest bill, as amended, was signed by President Clinton on October 31, 1998 ( P.L. 105-334 ). The remainder of this report summarizes child labor legislation in recent Congresses, beginning with the most recent Congress and ending with the 108 th Congress. On June 12, 2013, Representative Lucille Roybal-Allard (D-CA) introduced H.R. 2342 , the Children's Act for Responsible Employment of 2013, or CARE Act of 2013. Among other things, H.R. 2342 would raise from 14 to 16 the minimum age at which youth may be employed in agriculture. The act would raise from 16 to 18 the minimum age at which youth employed in agriculture can work in occupations declared hazardous by the Secretary of Labor. Under current law, the minimum age at which youth can be employed in nonagricultural occupations is 16. The minimum age to be employed in agricultural occupations is 14. H.R. 2342 would raise the minimum age to be employed in agricultural occupations to 16, the same as in nonagricultural occupations. Under current law, youth under the age of 18 cannot be employed in nonagricultural occupations found by the Secretary of Labor to be particularly hazardous for the employment of youth. In agriculture, the minimum age to be employed in hazardous occupations is 16. H.R. 2342 would raise the minimum age to work in hazardous occupations in agriculture to 18, the same as in nonagricultural occupations. H.R. 2342 would not allow the employment of youth in hazardous occupations on a farm owned by a parent. Under current law, the restrictions on the employment of youth in hazardous occupations in agriculture do not apply to a farm owned or operated by a parent. Outside of agriculture, the restrictions on the employment of youth in hazardous occupations apply to all businesses, whether or not owned by a parent. Under current law, in nonagricultural occupations, except in mining, manufacturing, and hazardous occupations, youth under the age of 16 may work in a business owned by a parent. In agriculture, youth of any age may work on a farm owned or operated by a parent. H.R. 2342 would change the parental exemption in agriculture to a farm owned by a parent, instead of a farm owned or operated by a parent. Under current law, youth ages 12 or 13 can be employed on a farm with the consent of the parent or if the parent is employed on the same farm. Also, with the consent of the parent youth under 12 can be employed on a farm that is exempt from the minimum wage standards of the FLSA (i.e., on small farms). H.R. 2342 would remove these exemptions. H.R. 2342 would direct the Secretary of Labor to revise federal child labor regulations to prohibit the employment of children under the age of 18 in occupations that involve the handling of pesticides. H.R. 2342 would establish minimum civil penalties and raise the maximum civil penalty for each employee subject to a violation of child labor law. The legislation would establish criminal penalties for repeated or willful violations of child labor law that result in the death or serious injury or illness of an employee under the age of 18. H.R. 2342 was referred to the Subcommittee on Workforce Protections of the House Education and the Workforce Committee. In the 112 th Congress, Representative Lucille Roybal-Allard (D-CA) introduced H.R. 2234 , the Children's Act for Responsible Employment of 2011, or CARE Act of 2011. The text of H.R. 2234 is the same as H.R. 2342 , which was introduced in the 113 th Congress and described above. H.R. 2234 was introduced on June 16, 2011, and was referred to the Subcommittee on Workforce Protections of the House Education and the Workforce Committee. On September 15, 2009, Representative Lucille Roybal-Allard (D-CA) introduced H.R. 3564 , the Children's Act for Responsible Employment of 2009, or CARE Act. The legislation would prohibit the employment of persons under 18 in agriculture, unless they are employed by a parent (or someone standing in the place of a parent) on a farm owned and operated by the parent. The legislation would also repeal Section 213(c)(4) of the FLSA, which allows the Secretary of Labor to grant requests for waivers from employers to allow them to hire persons ages 10 and 11 to work outside of school hours in the hand harvesting of crops. The bill would increase civil penalties and establish criminal penalties for violations of child labor law. The legislation would direct the Secretary of Labor to analyze data and report annually to Congress on each work-related injury, illness, or death of persons under the age of 18 employed in agriculture. Employers would be required to report to the Secretary of Labor any work-related death or any serious injury or illness of agricultural employees under the age of 18. The bill would require the Secretary of Labor to issue rules to prohibit the employment of persons under the age of 18 in occupations where workers are protected from exposure to pesticides. H.R. 3564 was referred to the Subcommittee on Workforce Protections of the House Committee on Education and Labor. Several child labor bills were introduced in the 110 th Congress. ( Table 4 , below, provides a summary of this legislation.) Different bills with same title—the Child Labor Protection Act of 2007—were introduced in the 110 th Congress. In the House, on June 8, 2007, Representative Lynn Woolsey (D-CA) introduced H.R. 2637 , the Child Labor Protection Act of 2007. The legislation was referred to the Committee on Education and Labor. The House approved the bill by voice vote on June 12, 2007. H.R. 2637 would increase from $10,000 to $11,000 the maximum employer penalty for each employee who is subject to a violation of the child labor provisions of the FLSA. The measure would also establish a maximum civil penalty of $50,000 for each violation that causes the death or serious injury of any employee under the age of 18. The $50,000 penalty may be doubled for repeated or willful violations of child labor law. The bill would also increase from $1,000 to $1,100 the maximum penalty for violating the minimum wage or overtime provisions of the FLSA. In the Senate, Senator Norm Coleman (R-MN), on June 12, 2007, introduced S. 1598 , which was also called the Child Labor Protection Act of 2007. The measure was referred to the Committee on Health, Education, Labor, and Pensions (HELP). S. 1598 includes the identical changes in civil penalties as contained in H.R. 2637 . On April 23, 2008, Senator Olympia Snowe (R-ME) introduced an amendment ( S.Amdt. 4573 ) in the nature of a substitute to H.R. 493 , the Genetic Information Nondiscrimination Act of 2008. H.R. 493 was approved by the House on April 25, 2007. Senator Snowe's amendment included the provisions of H.R. 2637 / S. 1598 . The Senate approved the amendment by a vote of 95 in favor and none opposed. The measure was signed into law by President George W. Bush on May 21, 2008, and became P.L. 110-233 . On June 13, 2007, Senator Tom Harkin (D-IA) introduced S. 1614 , another bill that was called the Child Labor Protection Act of 2007. S. 1614 would amend the FLSA to establish a minimum civil penalty of $500 and a maximum penalty of $15,000 for each employee who is subject to a child labor violation. The bill would also create a minimum penalty of $15,000 and a maximum penalty of $50,000 for each violation of child labor law that causes the death or serious injury of an employee under the age of 18. The latter penalty could be doubled to a maximum of $100,000. The bill would also increase from $1,000 to $1,100 the maximum penalty for violating the minimum wage or overtime provisions of the FLSA. Finally, the measure would establish criminal penalties (fines, imprisonment, or both) for violations of the child labor provisions of the FLSA. The bill was referred to the Senate HELP Committee. On June 12, 2007, Representative Lucille Roybal-Allard (D-CA) introduced H.R. 2674 , the Children's Act for Responsible Employment of 2007, or CARE Act of 2007. Except for two provisions, the measure is the same as the CARE Act of 2005 ( H.R. 3482 ), which was introduced in the 109 th Congress. Unlike H.R. 3482 , the CARE Act of 2007 does not direct the Secretary of Labor to employ additional inspectors to enforce child labor law. Also, the CARE Act of 2007 would not amend the WIA law with respect to youth activities under the Migrant and Seasonal Farmworker Programs. H.R. 2674 was referred to the Subcommittee on Workforce Protections of the Education and Labor Committee. Representative Bruce Braley (D-IA) introduced the Child Labor Safety Act. The act would increase from $11,000 to $50,000 the maximum civil penalty for each employee who is subject to a violation of the child labor provisions of the FLSA. The bill would also raise from $50,000 to $100,000 the maximum penalty for each violation that causes the death or serious injury of any employee under the age of 18. The measure would impose criminal penalties (a maximum fine of $50,000 or imprisonment for up to six months) for violations of child labor law. The bill was introduced on September 10, 2008, and was referred to the Committee on Education and Labor. As with previous years, child labor remained a subject of interest among some Members of the 109 th Congress. Several bills from prior Congresses were re-introduced. Several new bills were added. (See Table 5 , below.) On March 8, 2005, the Child Modeling Exploitation Prevention Act ( H.R. 1142 ) was introduced in the House by Representative Mark Foley (R-FL), with others. The bill was referred to the Subcommittee on Workforce Protections of the House Committee on Education and the Workforce and to the Subcommittee on Crime, Terrorism, and Homeland Security of the House Committee on the Judiciary. No further action was taken on the measure. For a number of years, Representative Foley had raised the issue of children engaged in modeling on Internet sites. "What occurs," he explained in a floor statement, "... is that young girls, 10, 12, 13 years old, are encouraged by their parents and aided and abetted by individuals to display themselves on the Internet for viewer ship, if you will, [by] people who pay a fee, a monthly fee in order to view the site." Although some parents, he suggested, are deceived into thinking that such activity is legitimate modeling, Mr. Foley disagreed. He stated that he was "not suggesting that there is not an appropriate place in commerce for young people to display their talents" but, rather, that he had in mind a particular type of website that encourages "inappropriate" types of modeling by children. In the 109 th Congress, Representative Foley introduced H.R. 1142 , which was similar to legislation introduced in the previous Congress (by Representative Foley in the House and Senator Jim Bunning in the Senate). The proposal amended Section 12 of the FLSA to provide that "no employer may employ a child model in exploitive child modeling." It went on to explain: (A) In this subsection, the term 'exploitive child modeling' means modeling involving the use of a child under 17 years old for financial gain without the purpose of marketing a product or service other than the image of the child. (B) Such term applies to any such use, regardless of whether the employment relationship of the child is direct or indirect, or contractual or noncontractual, or is termed that of an independent contractor. The measure distinguished between an image that is exploitive and one that, "taken as a whole, has serious literary, artistic, political, or scientific value." The legislation proposed both fines and imprisonment (of not more than 10 years) for violators. General restructuring of the child labor components of the FLSA has long been sought, though from somewhat different perspectives, by industry and by labor. In 1990 (the 101 st Congress), Representatives Don Pease (D-OH), Charles Schumer (D-NY) and Tom Lantos (D-CA ) introduced legislation titled the "Young American Workers' Bill of Rights." With various changes (but with a continuity of thrust), the legislation would be reintroduced in each Congress thereafter. In the 109 th Congress, the initiatives were set forth in H.R. 2870 (Lantos), the Youth Worker Protection Act. The Lantos bill was comprehensive, providing for a wide variety of changes in current law and practice. (a) The bill begins by defining a "minor." He or she must be "is at least 14 years old or, if younger than 14 years old, is otherwise permitted to work under this Act." "In the case of a minor who is between the ages of 16 and 18 years, the employment is not in an occupation that is particularly hazardous for the employment of children between those ages or detrimental to their health or well-being.... " "The minor is employed in accordance with this Act and in accordance with any other Federal, State, or local law that provides greater protection to minors." (b) The minor has a work permit that includes the specified provisions under this Act. —The work permit shall include name, date of birth, gender, racial or ethnic background, and contact information for the minor; name, contact information, and consent of a parent of the minor; a certification (if appropriate) by a school official showing attendance requirements; e.g., name, contact information, and type of business of the employer; and type of work. —The Secretary of Labor will prescribe a unified model for such work permits that will contain information concerning the identity of the child worker and his/her parent (or a similar person where appropriate), contact information and parental consent for the child to work, school status, identification of employer, type of work to be engaged in, name and contact information of the designated state agency, summary of age limitations and other legal requirements for employment of minors, among other information. A system of expiration dates for individual work permits is specified. —The designated state agency may revoke a work permit if the agency finds either of the following: (1) the minor "is not in compliance with school attendance requirements," or (2) the minor is adversely affected by the employment involved. The minor or the parent of the minor would have had an option for appeal of the revocation. (c) Hours that are allowable for work by minors were specified in H.R. 2870 , together with the number of hours per day and week that can be worked. (d) If the minor sustains a serious work-related injury, the designated state agency must be notified by each of the following: the employer, the appropriate medical professional, the appropriate law enforcement officer (where applicable), and an employee of the school attended by the minor where an absence of more than three days is involved. (e) The bill provided that the designated state agency must collect and retain (for seven years) statistical data concerning the work permit system and any work-related injury information. (f) The designated state agency must report annually to the Secretary of Labor. The report shall include assorted statistical data (see item "e" above) and information concerning "the activities and number of work-hours devoted by State and local government employees (including contractors) to the administration and enforcement of child labor laws in the State." (g) The bill would have provided that "[no employer may employ a minor in youth peddling" and defines what is included in the concept of youth "peddling." (See discussion of the "peddling" issue, above.) (h) It set forth extensive requirements for enforcement and penalties. (i) The bill amended Section 13(c) of the FLSA to raise the age for employment in agriculture outside of school hours from "twelve years of age" to "fourteen years of age." (j) It makes uniform the standard for employment in hazardous agricultural work. (k) The bill would repeal the provision of current law permitting, at the discretion of the Secretary (with certain specific criteria), children as young as 10 years of age to work in hand harvest agricultural work. (l) It would eliminate the employment of children under 18 years of age in connection with commercial paper balers and compactors. (See discussion above.) (m) "Not later than 24 months after the date of the enactment of this section," the Secretary of Labor is directed to promulgate a rule revising the Hazardous Occupations restraints in certain specified industries. The Secretary was also directed at "appropriate intervals, but in no case less than once during each five-year period," to conduct "a comprehensive review" of the Hazardous Occupations Orders to assure that they are current. (n) Within 24 months of enactment of this section, the Secretary is directed to promulgate a rule to prohibit employment of minors in (1) seafood processing and (2) employment "requiring a minor to handle or dispose of oil or other liquids from fryers." (o) Within 36 months, the Secretary was directed to review the employment of minors in work involving: (1) "[r]epetitive bending, stooping, twisting, or squatting," (2) "[l]ifting of heavy and/or unwieldy objects," (3) "[w]orking alone or late at night in retail establishments where there is direct contact with the public and cash is handled," and (4) "[w]ork in the entertainment industry that is detrimental to the health, safety, education or well-being of minors." The Secretary shall submit to Congress a report of the review, together with proposed regulations governing such work. On July 25, 2005, H.R. 2870 was referred to the House Subcommittee on Workforce Protections of the House Committee on Education and the Workforce. The subcommittee took no action on the bill. For several years, Representative Lucille Roybal-Allard (D-CA) presented legislation that dealt primarily, though not exclusively, with child labor in agriculture. On July 27, 2005, Representative Roybal-Allard introduced H.R. 3482 , the Children's Act for Responsible Employment of 2005, or the CARE Act of 2005. The Roybal-Allard bill began with a revision of Section 13(c), eliminating the option of having young persons under 16 years of age employed in agriculture "including in an agricultural occupation that the Secretary of Labor finds and declares to be particularly hazardous." The bill offered two exceptions: where the employee "is employed by a parent of the employee or by a person standing in the place of the parent," or "on a farm owned or operated by the parent or person" standing in the place of a parent. Further, the bill repealed Section 213(c)(4), which allows the Secretary of Labor to grant requests for waivers from employers to allow them to hire minors ages 10 and 11 to work outside of school hours in the hand harvesting of crops. The bill expanded the penalties, both civil and criminal, for persons found to be in violation of the act. Also, the Secretary of Labor, with respect to persons under 18 years of age employed in agriculture, was to gather data with respect to "each serious lost-time work-related injury, serious lost-time worker-related illness," or work-related death. An employer was expected to submit a report to the Secretary. Failure to file a report was subject to a civil penalty of up to $7,000 per violation. The Secretary could employ at least 100 additional inspectors, whose principal purpose would be to enforce compliance with child labor laws. The bill provided that the Secretary, not later than 180 days after the date of enactment, would issue rules relating to the exposure of child workers to certain pesticides and related chemicals. It allowed for some measure of accommodation between the Secretary of Labor and the Administrator of the Environmental Protection Agency with respect to pesticide-related fines. Finally, H.R. 3482 amended the Workforce Investment Act (WIA) of 1998 to provide the greater of $10 million or 4% of the amount appropriated for WIA youth activities for youth activities under the Migrant and Seasonal Farmworker Programs. The Roybal-Allard bill was referred to the House Committee on Education and the Workforce. On October 12, 2005, it was referred to the Subcommittee on Workforce Protections and to the Subcommittee on 21 st Century Competitiveness. The subcommittee took no action on the bill. On November 1, 2005, Representative Rosa DeLauro (D-CN) introduced the Safe at Work Act ( H.R. 4190 ). The bill was referred to the House Committee on Education and the Workforce and, on March 24, 2006, to the Subcommittee on Workforce Protections. No action was taken on the proposal. The DeLauro bill was divided into two parts: First, the bill required that the Secretary of Labor "not enter into any agreement to provide any person with notice prior to commencing an investigation or inspection." Second, it required the Comptroller General to conduct a study of violations of child labor laws "including the number and type of allegations of child labor violations, when and whether inspections or investigations commenced for each such allegation, what enforcement action or other outcome resulted from such inspections or investigations, and a comparison of the extent to which such violations occurred in both large and small businesses.... " The time period for the Comptroller General's study was five years prior to the date of enactment. On September 23, 2003, Representative Tom Lantos (D-CA) introduced H.R. 3139 , the Youth Worker Protection Act, one component of which was the provision that "No employer may employ a minor [a person under 18 years of age] in youth peddling." The bill, which went on to define what is included within the concept of "peddling," was referred to the Committee on Education and the Workforce and, in mid-October 2003, to the Subcommittee on Workforce Protections. Periodically through recent years, concerns have been raised about the welfare of young persons (the age varies) who are engaged in certain types of outside sales work. On occasion, the focus has been upon the "street trades": selling newspapers, candy, or other items at subway stops or, locally, from door-to-door. In such cases, a manager or supervisor may recruit young persons, move them to various local sites and, at day's end, collect them and bring them back to their homes. But, there is also another arrangement: the "traveling sales crews" in which a sales team goes on the road and remains away from its home base, possibly for extended periods. Some argue that each of these types of sales ("peddling") can encompass risks, especially for young persons. Such sales work by young persons suggests numerous questions of public policy. For example, how young is too young for children to be engaged in street sales, potentially in rough neighborhoods with which they may not be familiar? And, if they do engage in such work, through what hours should they be employed: how early in the morning and how late at night? The situation becomes more complicated when groups of recruits are transported from their homes to a distant city to engage in sales work. Are the vehicles in which they are transported safe and insured? How and where are these workers housed? Does the manager or supervisor have authority and responsibility with respect to the off-hours behavior of these young workers? What happens if one of these young persons becomes ill and needs medical attention? Beyond the personal, there are strictly workplace questions. What is the employment relationship between these workers and the manager or supervisor? Are the youth workers employees, independent contractors, or something else entirely? To the extent that they are employees, by whom are they employed? The manager or supervisor may also be an employee of some more distant entity. Where does responsibility ultimately reside? How are wages and benefits handled? What employment records are maintained—and by whom? From a policy perspective, some may ask: Should young persons be excluded, by law, from working in street or door-to-door sales or in related support services other than actual selling? Were otherwise applicable hours restrictions to be observed, would such work be acceptable? Would a blanket prohibition on outside sales work by persons under 18 years of age unduly restrict their capacity to earn? Is there something inherently inappropriate about street sales or door-to-door sales? Is such work wrong when 16- and 17-year-olds are involved, but a legitimate entrepreneurial activity if all of the sales staff (and, perhaps, support staff) are 18 and over? Is such work acceptable when confined to a certain radius from the permanent residence of the sales staff? And, how expansive should that radius be? In May 1985 (the 99 th Congress), then-Representative Ron Wyden (D-OR), stating that "unscrupulous door-to-door selling groups" were exploiting young persons (some of them, children; others, young adults), introduced legislation to establish a National Clearinghouse on Fraudulent Youth Employment Practices. While Wyden conceded that "the vast majority of door-to-door sellers are wholly honorable and reputable," others, he suggested, were not. These companies "can be peddling anything from magazine subscriptions to chemical cleaners." He outlined a host of alleged violations of law and fraudulent sales practices engaged in by such firms and urged his colleagues to help "put these dangerous and unscrupulous operators out of business. And ... take a step toward protecting our youth from dangerous employment practices." Hearings were conducted (November 1985) by the House Subcommittee on Civil and Constitutional Rights. Susan Meisinger, speaking for the Reagan Labor Department, testified that there was indeed a problem. "Unlawful practices reported by the States include violations of their child labor laws, violations of minimum wage laws, employer failure to pay taxes and unemployment insurance, and abuse of child workers," Meisinger noted, "including forcing them to pay kickbacks, child molesting, and placing them in high risk, late night employment environments." But the Reagan Administration was divided on the issue. Victoria Toensing, representing the Department of Justice, agreed that "problems relating to the recruitment and use of salespersons do exist" but she suggested that any legislative action would be premature. "The extent of these problems has not yet been established," Toensing stated, and, in any case, state and local authorities "may be as effective, if not more so, than the federal government in preventing such abuses." Further, she suggested, not all of the alleged worker/victims were minors. After reviewing a series of federal statutes that might apply if there actually were a problem, Toensing noted that the Department of Justice "... considers present statutory provisions adequate." The Wyden bill ( H.R. 2544 ) died at the close of the 99 th Congress. Hearings on the general issue were subsequently conducted by the Senate Permanent Subcommittee on Investigations (1987) and by the House Committee on Government Operations' Subcommittee on Employment and Housing (1990). In each case, the matter was restricted to general oversight. Further legislation was not then proposed. In November 1999 (the 106 th Congress), Senator Kohl introduced S. 1989 , the Traveling Sales Crew Protection Act—his interest sparked by an auto accident in Wisconsin in which seven young people were killed and others injured. The Senator explained: "The driver [in the Wisconsin case] had a suspended license and a series of violations." These firms, he stated, "employ crews who travel from city to city selling products door to door. Often times," he asserted, "... [they] mistreat their workers and violate local, state, and federal labor law. Because they rapidly move from state to state, enforcement efforts are difficult if not impossible for local authorities." Senator Kohl recalled that it had been 12 years since the hearing by the Permanent Subcommittee on Investigations (noted above) and affirmed: "... nothing has changed. These abuses continue, and Congress should act." But, no action was taken: the bill died at the close of the 106 th Congress. Early in the 107 th Congress, Senator Kohl introduced new traveling sales crew/peddling legislation ( S. 96 ). The Kohl bill would have amended the FLSA to provide that "No individual under 18 years of age may be employed in a position requiring the individual to engage in door to door sales or in related support work in a manner that requires the individual to remain away from his or her permanent residence for more than 24 hours." After defining the operative language, the bill set forth a registration requirement for employers and supervisors of traveling sales crew workers. Then, assuming that such practices were to be allowed, it outlined the obligations of the parties—dealing with such issues as housing, transportation, wages (and deductions therefrom), insurance, and related matters. It then proposed a system for enforcement. A comprehensive and detailed proposal, S. 96 was referred to the Committee on Health, Education, Labor and Pensions (HELP) where no action was taken. Then, on May 22, 2002, Senator Kohl introduced S. 2549 , an abbreviated version of the traveling sales crew/peddling legislation. An amendment to Section 12 of the FLSA, S. 2549 read, in pertinent part: No individual under 18 years of age may be employed in a position requiring the individual to engage in door to door sales or in related support work in a manner that requires the individual to remain away from his or her permanent residence for more than 24 hours. It further authorized the Secretary of Labor to "issue such rules and regulations as are necessary to carry out" the proposed amendment. On August 1, 2002, the HELP Committee, to which the bill had been referred, was discharged from further consideration and the bill, under unanimous consent, was agreed to by the Senate. It was referred to the House Committee on Education and the Workforce, Subcommittee on Workforce Protections, where it died at the close of the 107 th Congress. The issue was raised in the 108 th Congress, again in an abbreviated form, with introduction of H.R. 3139 by Representative Lantos: an umbrella child labor reform proposal, discussed below. No action, however, was taken on the Lantos bill. In the 109 th Congress, Lantos again introduced the issue as part of H.R. 2870 , a general bill dealing with child labor. But once more, the bill was directed to the Subcommittee on Workforce Protections, where it remained. On May 1, 2003, legislation to permit employment of young persons (of at least 14 years of age) in sawmilling and woodworking facilities was introduced by Representative Joseph Pitts (R-PA) and Senator Arlen Specter (R-PA)—respectively H.R. 1943 and S. 974 . On October 8, 2003, a hearing on the Pitts bill was conducted by the House Subcommittee on Workforce Protections. Work in or around sawmills and wood-working machinery has been deemed by DOL as especially hazardous for persons under 18 years of age. The practice violates at least two Departmental Hazardous Occupations (HO) Orders: HO 4, covering sawmills, and HO 5, dealing with power-driven woodworking machines. Speaking generally, the Amish resist requirements of law that would alter their traditional way of life and have rejected compulsory school attendance beyond the 8 th grade. The Daily Labor Report explains: "After completing their formal classroom training [elementary school] at age 14 or 15, Amish boys typically receive training in farming or carpentry from their fathers." In recent years, the opportunity for the Amish to farm has diminished—in part, because of increased land values and property taxes. Therefore, the Amish have sought other activities for their children. "What are we supposed to do with them if they don't work here," lamented one member of the Amish community, "have them stay on the street all day?" The Amish have sought to have their sons work in sawmills and woodworking plants where there is Amish supervision (or where they are supervised by an adult relative). The Department of Labor has held that permitting children to work in such plants would be a violation of federal child labor law: HO 4 and HO 5. The result has been a clash between the Amish and DOL. The Amish have pressed for an amendment to the child labor provisions of the FLSA in order to accommodate their practices. At least since the 105 th Congress, legislation to amend federal child labor law on behalf of the Amish has been repeatedly introduced, both in the House and in the Senate. The bills, generally, would widen the opportunity for youth ages 14 to 18 "to be employed inside or outside places of business where machinery is used to process wood products." In order to qualify for such employment, a youth would have to be "a member of a religious sect or division thereof whose established teachings do not permit formal education beyond the eighth grade." In the 105 th and 106 th Congresses, the Amish legislation was passed by the House under suspension but the Senate did not act. Had the legislation been adopted, Amish children, having left school after the 8 th grade, could have been employed in work otherwise regarded as too hazardous for persons under 18 years of age. Some have suggested that constitutional issues may be involved in affording special treatment to the Amish that is not afforded to other religious groups. Setting aside issues of legality, other questions could be raised, given that Amish children are permitted to leave school after the 8 th grade. First, would elimination of federal restrictions upon child labor—to the extent proposed in the legislation—provide an opportunity (and, perhaps, an incentive) for Amish children to leave school and to enter the world-of-work? Or, would it merely recognize that Amish children are already out of school and, thus, permit them to be productively occupied? Second, assuming that these children do leave school to work, are sawmills and wood processing establishments appropriate places of employment for any youngsters under the age of 18? Might other areas of skills training be more suitable for children than mill work with its attendant hazards? What types of work are suitable for 14-year-old Amish children and who should decide? In order to strengthen the ties of Amish children to the Amish community, youngsters are systematically separated from the non-Amish world. The work experience of Amish children with the skills they acquire on the family farm may not be readily transferable to the non-Amish marketplace. Thus, with only an 8 th -grade education and lacking experience in the non-Amish world, their subsequent choices may be, accordingly, restricted, rendering their out-migration from the community within which they were raised extremely difficult. Some may applaud this result; others may question the appropriateness of a federal role in its facilitation. On May 3, 2001, the Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education, conducted an oversight hearing on the employment needs of Amish youth. Representative Mark Souder (R-IN) spoke in support of exemption. Mr. Souder, representing a partly Amish constituency, explained that the Amish had not been able to persuade DOL to acquiesce in industrial employment for Amish children at age 14. Urging amendment of the FLSA to permit such employment, he argued that the Amish children would be "supervised by adults who know and care about them" and that the proposed amendment "would protect a truly endangered religion and culture." Thomas M. Markey of DOL testified in opposition, arguing: "Sawmills are dangerous places to work, even for adults." Pointing to a high accident and fatality rate for the industry nationwide, he stated that such work is "even more dangerous for children." On June 13, 2001, during consideration of S. 1 (reauthorization of the Elementary and Secondary Education Act), Senator Specter proposed S.Amdt. 420 . It would have amended the FLSA to permit Amish youngsters, 14 years of age and older, to work, under specified conditions, in mills and woodworking plants. Senator Edward M. Kennedy (D-MA), chairman of the Committee on Health, Education, Labor, and Pensions (HELP), and Senator Specter engaged in a brief debate. Senator Kennedy affirmed that it "would be valuable to have ... an open hearing" on the issue—particularly with respect to the safety of prospective workers—and agreed that his committee would conduct such a hearing. With that understanding, Senator Specter then withdrew his proposed amendment. On July 25, 2001, legislation to permit Amish youth to work at age 14 in wood processing plants was introduced both in the House and in the Senate: H.R. 2639 (Pitts) and S. 1241 (Specter). No action was taken on these proposals. The Pitts ( H.R. 1943 ) and Specter ( S. 974 ) bills of the 108 th Congress largely follow the pattern of recent years. To be exempt from the restraints of federal child labor law, several standards would be imposed. The targeted youth must be "at least 14" years of age. Further, the child: (a) Must be "by statute or judicial order ... exempt from compulsory school attendance beyond the eighth grade." (b) Must be "supervised by an adult relative" or "by an adult member of the same religious sect or division as the individual." (c) May not "operate or assist in the operation of power-driven woodworking machines." (d) Must be "protected from wood particles or other flying debris within the workplace by a barrier appropriate to the potential hazard of such wood particles or flying debris or by maintaining a sufficient distance from machinery in operation ... " (e) "[I]is required to use personal protective equipment to prevent exposure to excessive levels of noise and saw dust." Other concerns aside, some may ask: Would the safeguards be adequate? In the absence of frequent DOL inspections, would the precautions be observed? Does the fact that a supervisor would be of "the same religious sect" as the child worker render the work any less hazardous—or the supervisor any more diligent in monitoring the youth's work? On October 8, 2003, the Subcommittee on Workforce Protections conducted a hearing on H.R. 1943 . In an opening statement, Chairman Charlie Norwood (R-GA) observed that the bill provides: that certain youth whose religious faith and beliefs dictate that they "learn by doing" are afforded an opportunity to do so, and that the federal government—however well-meaning—does not endanger the belief and culture of these young people and their families. As the lead witness (DOL was not represented at the hearing), Representative Pitts stated that actions of the department had "severely threatened the lifestyle and religion of this respected and humble community" and averred that the "government should not interfere" with Amish practices lest "their strong heritage ... be undermined." Representative Mark Souder (R-IN), while reviewing the proposed safeguards embodied in the amendment, also framed the issue in religious terms. Government bureaucracy, he stated, "... is threatening the Amish people's very way of life. It is interfering with their religious freedom." Christ K. Blank, speaking for the Old Order Amish, concurred, declaring "the ages 14 through 17 to be a very tender receptive age" and a period during which "to instill ... Amish values and work ethics in our children." But, not all were in complete agreement. Nicholas Clark of the United Food and Commercial Workers, AFL-CIO, recognized the religious desires of the Amish community. He pointed out, however, that federal government studies had found that working conditions in "sawmilling and woodworking are among the most hazardous occupations for adults, with a death rate that is five times the national average for all industries," and that such work is "especially inappropriate for young workers" (emphasis in the original). Clark expressed concern about constitutional issues and raised, as well, the issue of equity. The proposed amendment "... would grant Amish-owned sawmills and woodworking firms an exception from child labor laws that are [sic] denied firms owned by persons of non-Amish faiths." Further, he argued, it would deny "Amish children the very real benefits of governmental health and safety protections that are afforded Catholic, Baptist, Jewish or any other" non-Amish children. While sawmills and woodworking plants "provide much needed employment for Amish adults," he concluded, "they cannot safely or constitutionally serve that purpose for Amish children." As the first session of the 108 th Congress moved to a close, several appropriations bills (among them, the measure providing funding for the Department of Labor) remained to be passed. Ultimately, the several appropriations bills were combined in H.R. 2673 , the FY2004 Consolidated Appropriations bill. A conference report on H.R. 2673 ( H.Rept. 108-401 ) was filed on November 25, 2003. Included in the conference report (Senator Specter had served as a Senate conferee) was language roughly paralleling that of H.R. 1943 , the Amish child labor bill. In an explanation of the measure, the conference report stated: The conference agreement includes a provision to permit youth, ages 14 through 17, who by statute or judicial order are exempt from compulsory school attendance beyond the eighth grade, to work inside or outside places of business where machinery is used to process wood products. The youth would be permitted to perform activities such as sweeping, stacking wood, and writing orders. Safety provisions include prohibiting the youth from operating machinery, and requiring the use of eye and body protections. On December 8, 2003, the House voted to approve the conference report (with the Amish child labor provision included). The vote was 242 yeas to 176 nays. Senate consideration of the measure was deferred until the second session of the 108 th Congress. On January 20 and 22, the Senate considered the conference report, though attention appears to have focused on overtime pay regulations and subjects other than the Amish child labor provision. On January 22, the Senate approved the conference report by a vote of 65 yeas to 28 nays. The measure was signed by the President on January 23, 2004 ( P.L. 108-199 ). In a statement to the press, Senator Specter noted that he had "toured an Amish sawmill in Lancaster County, PA," had met with some members of the Amish people, and had come to "know of the importance of this legislation to their community and culture. This is an issue of freedom of religion," he affirmed, "where the Amish prefer to educate their children aside from the public schools and part of that educational process is for teenagers to work in the lumber mills."
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The history of child labor in America is long and, in some cases, unsavory. It dates back to the founding of the United States. Historically, except for the privileged few, most children worked—either for their parents or for an outside employer. Through the years, however, child labor practices have changed. So have the benefits and risks associated with employment of children. In some respects, altered workplace technology has served to make work easier and less hazardous. At the same time, some processes and equipment have rendered the workplace more advanced and dangerous, especially for children and youth. Child labor first became a federal legislative issue at least as far back as 1906 with the introduction of the Beveridge proposal for regulation of the types of work in which children might be engaged. Although the 1906 legislation was not adopted, it led to extended study of the conditions under which children were employed or allowed to work and to a series of legislative proposals—some approved, others defeated or overturned by the courts—culminating in the Fair Labor Standards Act (FLSA) of 1938. The latter statute, amended periodically, remains the primary federal law dealing with the employment of children. Generally speaking, work by young persons (under 18 years of age) in mines and factories is not allowed. The types of nonfarm work that may be suitable (or especially hazardous) for persons under 18 years of age has been left mainly to the discretion of the Secretary of Labor. Some types of work—for example, some newspaper sales and delivery, theatrical (and related) employment—are exempt from the FLSA child labor requirements. Finally, a distinction has been made between employment in nonagricultural occupations and in agricultural occupations and, in the latter case, between work for a parent and commercial employment. This report examines the historical issue of child labor in America and summarizes legislation that has been introduced from the 108th Congress to the 113th Congress.
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On February 6, 2007, President George W. Bush formally announced the creation of a new Unified Combatant Command for the African continent, reflecting Africa's increasing strategic importance to the United States. The Department of Defense (DOD) organizes its command structure by dividing its activities among joint military commands based either on a geographic or functional area of responsibility (AOR). With the creation of the new command, DOD now has six geographic commands and four functional commands. Previously, U.S. military involvement in Africa was divided among three geographic commands: European Command (EUCOM), Central Command (CENTCOM), and Pacific Command (PACOM). The command's area of responsibility (AOR) includes all African countries except Egypt, which remains in the AOR of CENTCOM. Africa Command (AFRICOM) was launched with initial operating capability (IOC) as a sub-unified command under EUCOM on October 1, 2007, and reached full operating capability (FOC) as a stand-alone unified command on October 1, 2008. AFRICOM's first commander, Army General William E. "Kip" Ward, former Deputy Commander of EUCOM, retired in 2011, transferring command authority to General Carter F. Ham, formerly Commanding General of U.S. Army Europe, on March 9. Although the precise wording of AFRICOM's mission statement has evolved since the command was first announced, DOD officials have broadly suggested that the command's mission is to promote U.S. strategic objectives and protect U.S. interests in the region by working with African partners to strengthen their defense capabilities so that they are better able to contribute to regional stability and security. A key aspect of this mission is its supporting role to other agencies' and departments' efforts on the continent. But like other combatant commands, AFRICOM is expected to oversee military operations, when directed, to deter aggression and respond to crises. AFRICOM's first major military operation was Operation Odyssey Dawn, the U.S. contribution to a multilateral military effort to enforce a no-fly zone and protect civilians in Libya, in support of U.N. Security Council Resolution 1973. Initial U.S. military operations, launched on March 19, 2011, included Tomahawk cruise missile attacks targeting Libyan command and control and air defense facilities. General Ham served as theater commander for the operation, with tactical operations coordinated by a Joint Task Force under Admiral Sam Locklear. Locklear serves jointly as Commander of U.S. Naval Forces Europe and Africa, and as Commander of Allied Joint Force Command, Naples, which has operational responsibility for NATO missions in the Mediterranean. The Commander of U.S. Air Forces Africa served as Joint Force Air Component Commander for Operation Odyssey Dawn. AFRICOM also supported the U.S. humanitarian response that commenced on March 4, through the delivery of relief supplies and the evacuation of foreign nationals fleeing the violence. NATO assumed the lead for military operations in Libya on April 1 under Operation Unified Protector. Congress continues to closely monitor developments related to the ongoing conflict in Libya. The Bush Administration's motivation for the creation of a new unified command for Africa evolved in part out of concerns about DOD's division of responsibility for Africa among three geographic commands, which reportedly posed coordination challenges. Although some military officials had advocated the creation of an Africa Command for over a decade, more recent crises highlighted the challenges created by "seams" between the commands' boundaries. One such seam was located between Sudan (then within CENTCOM's AOR), Chad and the Central African Republic (then within EUCOM's AOR), an area of periodic instability. The United States, acting both alone and a member of the North Atlantic Treaty Organization (NATO), has provided airlift and training for African peacekeeping troops in the Darfur region of Sudan, and although CENTCOM had responsibility for Sudan, much of the airlift and training was done by EUCOM. Additionally, close observers say that EUCOM and CENTCOM had become overstretched by the mid 2000s, particularly given the wars in Iraq and Afghanistan. The Commander of EUCOM, whose AOR included 92 countries prior to AFRICOM's creation, testified before Congress that the increasing strategic significance of Africa will continue to pose the greatest security stability challenge in the EUCOM AOR. The large ungoverned area in Africa, HIV/AIDS epidemic, corruption, weak governance, and poverty that exist throughout the continent are challenges that are key factors in the security stability issues that affect every country in Africa. His predecessor, General James L. Jones, who later served as President Barack Obama's National Security Advisor, pointed out in 2006 that EUCOM's staff were spending more than half their time on Africa issues, up from almost none three years prior. AFRICOM has faced myriad challenges in its establishment, and outstanding issues remain as the command moves forward. Some of these issues have been or may be addressed by Congress. Key oversight questions relating to the command may include the following: What are the United States' strategic interests in Africa? How are U.S. strategic interests influencing the size and scope of the U.S. military footprint on the continent, and what effect might AFRICOM's creation have on future U.S. military operations in Africa? Is AFRICOM's mission well defined? The 2010 Quadrennial Defense Review (QDR) addresses steps the U.S. military will take in order to improve potential "contingency response." How has AFRICOM prepared to meet potential contingencies on the continent? How are AFRICOM and U.S. military efforts in Africa perceived by Africans and by other foreign countries, including China? Have those perceptions evolved since the command was first announced? What are the costs associated with AFRICOM? How are these costs affected by AFRICOM's chosen headquarters location? How closely do the State Department and DOD coordinate on plans for the command and on U.S. military efforts in Africa in general? What are the Obama Administration's views on the development of AFRICOM's interagency process? Has AFRICOM's enhanced integration of non-DOD USG agency personnel proven effective in supporting the command's mission? How is AFRICOM addressing the intelligence community's need to realign its resources directed toward the continent? What are AFRICOM's current intelligence, surveillance, and reconnaissance (ISR) needs? How is the Obama Administration ensuring that U.S. military efforts in Africa do not overshadow or contradict U.S. diplomatic and development objectives? Should conflict prevention activities be an essential part of DOD's mandate, and are they sustainable? What are the authorities granted to U.S. Chiefs of Mission regarding combatant command activities in the countries to which they are posted, and are these authorities sufficient? How prominent are counterterrorism operations and programs, particularly relative to the peacekeeping training and support components, in AFRICOM's mandate? Would some DOD-implemented counterterrorism programs be more appropriately implemented by other U.S. agencies? How do AFRICOM's civil affairs teams contribute to the command's mission? Are the legal authorities guiding DOD's implementation of security cooperation programs sufficient for AFRICOM to fulfill its mandate? Do any of these authorities hinder the U.S. military's ability to conduct these programs? Are there procedural challenges that hinder AFRICOM's ability to conduct its capacity building mandate in a timely manner? Does the lack of assigned forces affect AFRICOM's ability to implement its mandate? How can AFRICOM ensure that improvements in partner capacity are sustained? How does DOD ensure that the training and equipment provided to African forces are not used to suppress internal dissent or threaten other nations? This report provides information on AFRICOM's mission, structure, interagency coordination, and its basing and manpower requirements. It also gives a broad overview of U.S. strategic interests in Africa and the role of U.S. military efforts on the continent. The mission of geographic commands is defined by a general geographic area of responsibility (AOR), while the mission of functional commands is the worldwide performance of trans-regional responsibilities. There are currently six geographic combatant commands: Africa (AFRICOM), European (EUCOM), Pacific (PACOM), North (NORTHCOM), Southern (SOUTHCOM), and Central (CENTCOM) Commands. There are four functional commands, including Transportation (TRANSCOM), Special Operations (SOCOM), Joint Forces (JFCOM) and Strategic (STRATCOM) Commands. As mentioned above, DOD responsibilities for Africa were divided among three geographic commands prior to October 2008. EUCOM, based in Germany, had 42 African countries in its AOR; CENTCOM, based in Florida, covered eight countries in East Africa, including those that make up the Horn of Africa; and PACOM, based in Hawaii, was responsible for the islands of Comoros, Madagascar, and Mauritius. The creation of a new combatant command requires changes by the President to a classified executive document, the Unified Command Plan (UCP), which establishes responsibilities and areas of responsibilities for the commanders of combatant commands. Changes to the UCP are usually initiated by the Chairman of the Joint Chiefs of Staff (CJCS), who presents a recommendation to the Secretary of Defense. After the Secretary's review, a proposal is presented to the President for approval. Prior to the advent of AFRICOM, the most recent geographic command to be established was NORTHCOM, which was created in 2002, after the September 11 terrorist attacks, to protect the U.S. homeland. The UCP is reviewed at least every two years, as required by the Goldwater-Nichols DOD Reorganization Act of 1986 ( P.L. 99-433 ). The 2006 review recommended the establishment of an Africa Command, and the 2008 review codified the command. Congress has, on occasion, taken legislative action that has led to changes in the UCP. Some DOD officials have referred to Africa Command as a combatant command "plus." This implies that the command has all the roles and responsibilities of a traditional geographic combatant command, including the ability to facilitate or lead military operations, but also includes a broader "soft power" mandate aimed at building a stable security environment and incorporates a larger civilian component from other U.S. government agencies to address those challenges. According to the 2002 U.S. National Security Strategy, "America is now threatened less by conquering states than we are by failing ones." The Department of Defense, identifying instability in foreign countries as a threat to U.S. interests, issued DOD Directive 3000.05 in 2005, defining stability operations as a "core U.S. military mission" that "shall be given priority comparable to combat operations." The 2008 National Defense Strategy further argues that "the inability of many states to police themselves effectively or to work with their neighbors to ensure regional security represents a challenge to the international system" and that "if left unchecked, such instability can spread and threaten regions of interest to the United States, our allies, and friends." The 2010 Quadrennial Defense Review (QDR) reiterates these points, noting, "preventing conflict, stabilizing crises, and building security sector capacity are essential elements of America's national security approach." Although U.S. forces have traditionally focused on "fighting and winning wars," defense strategy is now evolving to look at conflict prevention, or "Phase Zero," addressing threats at their inception through increased emphasis on theater security cooperation (TSC) and capacity building of allies. The 2010 QDR placed strategic importance on security assistance, an emphasis that was reiterated in the FY2011 DOD budget request: U.S. security is inextricably tied to the effectiveness of our efforts to help partners and allies build their own security capacity…. Although security assistance is not new, what has fundamentally changed is the role that such assistance can play in providing security in today's environment. Threats to our security in the decades to come are more likely to emanate from state weakness than from state strength. The future strategic landscape will increasingly feature challenges in the ambiguous gray area that is neither fully war nor fully peace. In such an environment, enabling our partners to respond to security challenges may reduce risk to U.S. forces and extend security to areas we cannot reach alone. Based on the 2010 QDR, DOD has defined three strategic goals that represent the Department's "primary warfighting missions": prevail in today's wars; prevent and deter conflict; and prepare for a wide range of contingencies. As General Bantz Craddock noted in 2006 when he was Commander of EUCOM, Africa in recent years had posed "the greatest security stability challenge" to EUCOM, and "a separate command for Africa would provide better focus and increased synergy in support of U.S. policy and engagement." In the view of AFRICOM's architects and proponents, if U.S. agencies, both military and civilian, are able to coordinate more efficiently and effectively both among themselves as well as with their African partners and other international actors, they might be more successful at averting more complex emergencies on the continent. The 2008 National Defense Strategy stresses the military's commitment to the concept of a new "Jointness," with emphasis on developing a "whole-of-government" approach toward meeting national security objectives, including greater civilian participation in military operations and greater harmonization of best practices among interagency partners. The 2010 QDR repeats the need to strengthen interagency partnerships. AFRICOM's first commander, General Kip Ward, viewed the U.S. military's role in Africa as part of a "three-pronged" U.S. government approach, with DOD, through AFRICOM, taking the lead on security issues, but playing a supporting role to the Department of State, which conducts diplomacy, and the U.S. Agency for International Development (USAID), which implements development programs. AFRICOM have stressed that despite playing a greater role in development activities has been traditional among most other commands, its role remains, in relation to USAID's development and humanitarian objectives, a supporting one. Command guidance for AFRICOM's humanitarian and civic assistance activities stresses that such activities should complement, not duplicate, other U.S. government activities, and should be used to strengthen security sector relationships. AFRICOM policies also require such activities to meet both U.S. foreign policy objectives and AFRICOM theater strategic interests, and they must be approved by the Ambassador and USAID Mission Director in the host country. The mission of Africa Command has been most closely compared to that of Southern Command (SOUTHCOM), which is responsible for U.S. military efforts in Central and South America. SOUTHCOM's mission, as defined by DOD, is to ensure the forward defense of the United States through security cooperation, counter-narcotics operations, humanitarian assistance, and monitoring and support for human rights initiatives in the region. Like SOUTHCOM, AFRICOM supervises an array of operations that relate to U.S. strategic interests but are not combat-related, unlike EUCOM, CENTCOM and PACOM, which have traditionally been more focused on preparing for potential warfighting operations. One DOD official suggested that the U.S. government could consider the command a success "if it keeps American troops out of Africa for the next 50 years." AFRICOM's proactive approach to deterring or averting conflict reflects an evolution in DOD strategy that has been outlined extensively in government documents, but operationalizing that broad mandate may prove difficult. As one foreign policy expert points out, "the mission of AFRICOM will necessarily require a major break with conventional doctrinal mentalities both within the armed services themselves and between government agencies." One former DOD official described the mandate in the following words, "We want to help develop a stable environment in which civil society can be built and that the quality of life for the citizenry can be improved." The prospect that the Department of Defense will focus less on fighting wars and more on preventing them engenders mixed feelings elsewhere in the government. While many at the State Department and USAID welcome the ability of DOD to leverage resources and to organize complex operations, there also is concern among some in those agencies that the military may overestimate its capabilities as well as its diplomatic role, or pursue activities that are not a core part of its mandate. Some argue that the highly unequal allocation of resources between the Departments of Defense, State, and USAID, hinder their ability to act as "equal partners" and could lead to the militarization of development and diplomacy. In August 2009, the State Department's Office of Inspector General (OIG) published a report assessing the capacity of the Department's Bureau of African Affairs (AF). In that report, the OIG found that cuts in State Department resources and personnel after the end of the Cold War led to a decline in management and experienced staffing at U.S. missions on the African continent. The subsequent dramatic increase in funding for HIV/AIDS programs and new development initiatives, like the Millennium Challenge Corporation, combined with an increase in funding for military programs in many African countries, left U.S. embassy personnel overwhelmed and acutely understaffed. Among the OIG's many findings, the report determined that the U.S. military "is stepping into a void created by a lack of resources for traditional development and public diplomacy." The report also suggested that the creation and role of AFRICOM was "misunderstood at best, if not resented and challenged by AF." Inadequate communication between the Bureau and embassies led to confusion about AFRICOM's role and the parameters of U.S. ambassadors' authority in the beginning, although the OIG found that "there is every indication that the new Assistant Secretary and the AFRICOM Commander are working cooperatively." Other reports produced recently by non-governmental organizations like Refugees International mirror the OIG's findings, and, like the OIG, provide an array of recommendations for resolving what they view as an imbalance between civilian and military capacity in U.S. foreign affairs. DOD references the current disparity in capacities in the 2010 QDR, noting that: the lack of adequate civilian capacity has made prevailing in current conflicts significantly more challenging. Unfortunately, despite a growing awareness of the need and real efforts throughout the government to address it, adequate civilian capacity will take time and resources to develop and is unlikely to materialize in the near term. The Bush Administration suggested that its proposal for AFRICOM represented an evolution in the involvement of other U.S. government agencies in the DOD planning process. Interagency coordination of U.S. security policy involves a variety of offices and actors in Washington, DC, and in the field. In Washington, the State Department's Bureau of Political-Military Affairs (PM) serves as the primary liaison for the Department with DOD. Its counterpart at DOD is the Office of the Assistant Secretary of Defense for International Security Affairs (ISA). USAID created the Office of Military Affairs (OMA) within the Bureau for Democracy, Conflict and Humanitarian Assistance (DCHA) in 2005 to coordinate agency policy with DOD and the State Department for humanitarian relief and post conflict reconstruction efforts. USAID's Office of U.S. Foreign Disaster Assistance (OFDA), Operations Liaison Unit (OLU), and the geographic bureaus' missions manage the operational coordination with DOD for those activities. At the regional level, State's PM Bureau appoints senior officials known as Foreign Policy Advisors (POLADs) to serve as advisors to combatant commanders and other military leaders to "provide policy support regarding the diplomatic and political aspects of the commanders' military responsibilities." Like the State Department, USAID places OFDA military liaison officers with combatant commands that routinely provide humanitarian and disaster relief coordination; OMA also currently has policy advisors known as Senior Development Advisors (SDAs) in several commands, including AFRICOM. At the country level, DOD assigns senior defense officials/defense attachés (SDO/DATT) to serve as military liaisons at embassies around the world. These officials serve on interagency embassy Country Teams, which are led by the U.S. ambassador in each country. Many embassies also have an Office of Security Cooperation (OSC), which reports to the ambassador and the combatant commander, to coordinate security assistance activities with the host country's defense forces. USAID OFDA deploys military liaison officers as part of a Disaster Assistance Response Team (DART) to affected countries during humanitarian assistance and disaster relief operations when there is a civil-military component involved. AFRICOM has sought greater interagency coordination with the State Department, USAID, and other government agencies, including a larger non-DOD civilian staff (initially proposed at as much as one quarter of the total staff), than has been traditional with other combatant commands. Those involved in the creation of AFRICOM aimed to build upon initiatives in NORTHCOM and SOUTHCOM to improve the interagency process, but a former EUCOM Commander suggested that this command could be "the pioneer" for a new approach that the other commands might later adopt. In the development of AFRICOM's first theater strategy and supporting campaign plan, for example, the leadership sought to involve other U.S. government agencies at the earliest stages of the planning process, an effort that DOD hopes to employ more broadly as its new planning approach. Non-DOD civilian staff positions within AFRICOM include senior leadership positions, senior advisors or liaisons (including the Foreign Policy Advisor, a Senior Development Advisor, an OFDA liaison, and a senior Treasury Department representative), and subject-matter experts embedded with the headquarters staff. AFRICOM officials report that filling interagency positions has been more challenging than first anticipated. Although lawyers from several departments have worked to facilitate the assignment of non-DOD civilians to AFRICOM, only roughly 40 have been permanently assigned. A senior U.S. diplomat, Ambassador Mary Carlin Yates, served as AFRICOM's first Deputy to the Commander for Civil-Military Activities (DCMA), a new post equivalent to that of a deputy commander. Yates, who had previously served as U.S. ambassador to Burundi and Ghana and more recently as the Foreign Policy Advisor to EUCOM, was the first non-DOD civilian to be integrated into the command structure of a unified command. The DCMA directs many of AFRICOM's civil-military plans and programs, as well as its various security cooperation initiatives, and is responsible for ensuring that policy development and implementation are consistent with U.S. foreign policy. Ambassador Yates left AFRICOM to become the Senior Director for Strategic Planning and Institutional Reform at the National Security Council in 2009 (she now serves as Senior Director for Africa); J. Anthony Holmes, a senior U.S. diplomat, replaced Yates as DCMA. In August 2010, Vice Admiral Charles J. Leidig, Jr. assumed the post of the DCMA's military equivalent, Deputy to the Commander for Military Operations (DCMO). The DCMO is responsible for the implementation and execution of AFRICOM's programs and operations. To maintain the military chain of command, the DCMO position will always be held by a military officer, but AFRICOM's architects envisaged that the DCMA role would continue to be held by a Senior Foreign Service Officer. Both Deputies have supervisory authority for the civilian and military personnel in their respective offices. DOD officials emphasize that AFRICOM remains under development; some details regarding the command's structure and footprint are still under review. A decision on AFRICOM's final headquarters location has been postponed to 2012 to allow the command to gain greater understanding of its long-term operational requirements. Moving the headquarters to Africa, as initially envisioned by DOD, may not occur for several years, if at all. DOD officials initially considered the establishment of sub-regional offices in Africa but reportedly received resistance from the State Department, based on concerns related to chief-of-mission authority. Officials stress that there are no plans to establish new military bases in Africa. As a Bush Administration defense official once asserted, the creation of AFRICOM reflected an "organizational change," rather than a change in "basing structure or troop positions on the continent." At present, DOD's Combined Joint Task Force-Horn of Africa (CJTF-HOA) has a semi-permanent troop presence at an enduring Forward Operating Site, Camp Lemonnier, in Djibouti with more than 2,000 U.S. military and civilian personnel in residence. The facility provides support for U.S. military operations in the Gulf of Aden area and supports DOD objectives in Yemen. The U.S. military is currently in a five-year lease with the Djiboutian government for Lemonnier, with the option to extend the lease through 2020. AFRICOM's other Forward Operating Site is on the United Kingdom's Ascension Island in the south Atlantic. U.S. military facilities in Rota, Spain; Sigonella, Italy; Aruba, Lesser Antilles; Souda Bay, Greece; and Ramstein, Germany, serve as logistic support facilities. The U.S. military also has access to a number of foreign air bases and ports in Africa and has established "bare-bones" facilities maintained by local troops in several locations. The U.S. military used facilities in Kenya in the 1990s to support its intervention in Somalia and continues to use them today to support counter-terrorism activities. DOD refers to these facilities as "lily pads," or Cooperative Security Locations (CSLs), and has access to locations in Algeria, Botswana, Gabon, Ghana, Kenya, Mali, Namibia, Sao Tome and Principe, Sierra Leone, Tunisia, Uganda, and Zambia. There has been considerable debate over where to ultimately base AFRICOM. Prior to AFRICOM's establishment, EUCOM was the only geographic combatant command with headquarters located outside of the United States. Given that the majority of countries in AFRICOM's AOR were previously under the responsibility of EUCOM, and that consequently a majority of the personnel working on Africa issues were already based in EUCOM's headquarters in Stuttgart, Germany, DOD determined that AFRICOM's headquarters would be initially located at the American base in Germany as well. In November 2008, the Secretary of Defense announced that the decision on whether to move the command would be postponed until 2012. Prior to Secretary Gates' announcement of the command's establishment, there was speculation that an Africa Command might be permanently located in Europe, or in the United States, like the other commands. Some DOD officials argued that AFRICOM's headquarters should be located in Africa. Locating the headquarters within the AOR would have several benefits in terms of proximity. Flight time from Germany to Nairobi, Kenya, for example, is approximately eight hours, and flight time from Germany to Johannesburg, South Africa, is approximately 11 hours. Flight time from Washington, DC, to the African Union (AU) headquarters in Addis Ababa, Ethiopia, is approximately 16-20 hours. Deploying AFRICOM's staff in close geographic proximity to their African counterparts and to U.S. diplomatic missions on the continent could enable more efficient interaction. Those in DOD who initially advocated locating Africa Command on the continent faced some negative reactions from Africans. There were concerns, both domestically and internationally, that moving the command to Africa might be the first step in an alleged U.S. military agenda to establish a larger footprint on the continent. DOD officials stressed early in the headquarters discussion that the location in question would be a staff headquarters rather than a troop headquarters, and suggested that they might consider a dispersed regional headquarters model, with several small locations spread across the continent to lessen the U.S. presence and burden in any one country. Some suggested that AFRICOM try to co-locate such dispersed facilities with the headquarters of the continent's regional and sub-regional organizations to link AFRICOM with the AU's nascent regional security architecture. General Ward reportedly found AFRICOM's dispersed presence among its Offices of Security Cooperation (OSCs) across the continent to be sufficient in terms of an on-continent presence. AFRICOM already has military liaison officers (LNOs) at the African Union headquarters in Ethiopia, at ECOWAS headquarters in Nigeria, at the Kofi Annan International Peacekeeping Training Center in Ghana, and at the International Peace Support Training Center in Kenya. Those posts may expand, and additional liaison offices may be attached to other regional organizations. The Department of Defense has developed criteria for determining the ultimate location(s) for AFRICOM in coordination with the Department of State, should a decision be made to move from Stuttgart. Several U.S. states have offered to host the command, and DOD has conducted preliminary assessments of some sites. Through regular consultations with African countries that have a security relationship with the United States, U.S. officials reportedly received offers to host the command from several governments, including, most publicly, Liberia, in 2007. Other strategic partners, such as South Africa and Algeria, expressed strong opposition to a command headquarters in Africa, possibly out of concern over a permanent foreign military presence within their borders. In some countries, there are concerns that an American military presence might embolden domestic terrorist groups. Some African governments that consider themselves to be regional hegemons may perceive a permanent American military presence, whether staffed by civilians or troops, to be a rival for political or military power in their sphere of influence. At the forefront of DOD considerations in determining a host country (or countries), were a decision made to move to Africa, would be providing for the safety and security of over 1,000 American personnel (and their families) who staff the command. Living standards in Africa are among the lowest in the world, and DOD would be expected to choose a politically stable location on the continent with good access to health care and schools and relatively low levels of corruption. Ease of access to regional and international transportation, along with proximity to the African Union, African regional organizations, and U.S. government hubs on the continent would also be considered. Locating U.S. soldiers permanently in a foreign country would be predicated on the host country's approval of a Status-of-Forces Agreement (SOFA), a legal document negotiated by the State Department to define the legal status of U.S. personnel and property while in that country, and a bilateral non-surrender agreement, commonly known as an Article 98 Agreement, to protect American servicemen from prosecution by the International Criminal Court. While AFRICOM officials have not entirely ruled out a move to the continent, they have stated that such a move is neither necessary nor sought after at this time. Manning the new command has been a challenge in a time when defense resources and personnel have been stretched thin by engagements in Iraq and Afghanistan. While the number of personnel needed to staff a combatant command headquarters varies, DOD officials estimate that the average command ranges from 500 to more than 1,000 personnel (exclusive of supporting intelligence architecture). AFRICOM was authorized to have just over 1,300 headquarters staff by October 2008, including intelligence and other support requirements. Sourcing manpower to facilitate the aggressive timeline to meet full operational capacity proved difficult, according to AFRICOM officials, and less than 75% of these positions were filled by the FOC date. An estimated 270 personnel for the command were transferred from EUCOM, CENTCOM, and PACOM. AFRICOM now has roughly 1,200 staff at its headquarters, and several hundred additional staff providing intelligence support. The armed services (Army, Navy, Air Force, and Marines) component headquarters each also have between 100-300 staff that support AFRICOM. In essence, the services must pay two manpower bills—they must fill AFRICOM headquarters requirements and also staff the service component headquarters. With the exception of a small Marine Air Ground Task Force (MAGTF), the service components currently have no assigned forces for activities in Africa and instead must rely on forces provided through the Global Force Management and Request for Forces system. AFRICOM estimates that the U.S. military footprint on the continent (exclusive of Egypt) averaged approximately 3,500 troops in 2010. This includes an estimated 2,000 troops at CJTF-HOA and the rotational presence of forces participating in various exercises, such as the annual communications interoperability exercise African Endeavor; operations, such as the counterterrorism effort Operation Enduring Freedom–Trans-Sahara; theater security cooperation activities, such as the Navy's Africa Partnership Station; and various conferences and meetings. Start-up costs for Africa Command in FY2007 were approximately $51 million, and the nascent command's budget for FY2008 was estimated at $154.6 million. DOD's FY2009 budget request included $389 million for the command. The command faced some opposition to certain items in its FY2009 budget and lost some requested funding to across-the-board cuts from the operations and maintenance account. Appropriators expressed support for AFRICOM in an explanatory statement accompanying the final legislation, but insisted that the State Department and USAID should "play a more important role in this new organization supported with the appropriate manpower and funding required." AFRICOM's budget for FY2010 was estimated at $295 million, slightly higher than the $278 million originally requested. Military construction at Camp Lemonnier is budgeted separately. The funding for CJTF-HOA operations, estimated at $80 million in FY2010, and for base operations at Camp Lemonnier, estimated at $238 million in FY2010, have been classified as Overseas Contingency Operations and have been funded separately from other AFRICOM activities, primarily by the Navy. To date, they have been funded through emergency supplemental appropriations, rather than in DOD's base budget. DOD's budget request for AFRICOM for FY2011, $296.2 million, was similar to that of FY2010. The FY2012 request is slightly more modest, at just under $290 million. Issues on the African continent have not historically been identified as strategic priorities for the U.S. military, and U.S. military engagement in Africa has been sporadic. According to one defense analyst, "during the Cold War, United States foreign policy toward Sub-Saharan Africa had little to do with Africa." After the fall of the Soviet Union, many U.S. policymakers considered the U.S. military's role and responsibilities on the continent to be minimal. In 1995, the Department of Defense outlined its view of Africa in its U.S. Security Strategy for Sub-Saharan Africa, asserting that "ultimately we see very little traditional strategic interest in Africa." In 1998, following terrorist attacks on two U.S. embassies in East Africa, the United States conducted a retaliatory attack against a pharmaceutical factory in Khartoum, Sudan, that Clinton Administration officials initially contended was producing precursors for chemical weapons for al Qaeda. The embassy bombings, and the retaliatory strike against Sudan, are considered by many analysts to be a turning point in U.S. strategic policy toward the region. The Bush Administration's National Security Strategy of 2002 reflected a need for a more focused strategic approach toward the continent: "In Africa, promise and opportunity sit side by side with disease, war, and desperate poverty. This threatens both a core value of the United States—preserving human dignity—and our strategic priority—combating global terror." To address these challenges, the document asserted that U.S. security strategy must focus on building indigenous security and intelligence capabilities through bilateral engagement and "coalitions of the willing." The 2006 National Security Strategy went further, identifying Africa as "a high priority" and "recogniz(ing) that our security depends upon partnering with Africans to strengthen fragile and failing states and bring ungoverned areas under the control of effective democracies." President Obama has affirmed his view of Africa's strategic importance in numerous policy documents and public statements. In a speech in Ghana in July 2009, he said: When there is genocide in Darfur or terrorists in Somalia, these are not simply African problems, they are global security challenges, and they demand a global response.... And let me be clear: our Africa Command is focused not on establishing a foothold on the continent, but on confronting these common challenges to advance the security of America, Africa, and the world. The Obama Administration's first National Security Strategy, issued in 2010, stresses the need to "embrace effective partnerships" on the continent, highlighting a number of priorities, including "access to open markets, conflict prevention, global peacekeeping, counterterrorism, and the protection of vital carbon sinks." The most recent Quadrennial Defense Review asserts that the United States' efforts to address transnational challenges in the region "will hinge on partnering with African states… to conduct capacity building and peacekeeping operations, prevent extremism, and address humanitarian crises." The 2011 National Military Strategy also stresses the importance of partnerships: The United Nations and African Union play a critical role in humanitarian, peacekeeping and capacity-building efforts, which help preserve stability, facilitate resolutions to political tensions that underlie conflicts, and foster broader development. To support this, the Joint Force will continue to build partner capacity in Africa, focusing on critical states where the threat of terrorism could pose a threat to our homeland and interests. We will continue to counter violent extremism in the Horn of Africa, particularly Somalia and the Trans-Sahel. We will work in other areas to help reduce the security threat to innocent civilians. We must identify and encourage states and regional organizations that have demonstrated a leadership role to continue to contribute to Africa's security. We will help facilitate the African Union's and the Regional Economic Communities' development of their military capacity, including the African Stand-by Force, to address the continent's many security challenges. The establishment of AFRICOM reflects an evolution in policymakers' perceptions of the continent's security challenges and U.S. strategic interests there. In 2004 an advisory panel of Africa experts authorized by Congress to propose new policy initiatives identified five factors that have shaped increased U.S. interest in Africa in the past decade: oil, global trade, armed conflicts, terror, and HIV/AIDS. They suggested that these factors had led to a "conceptual shift to a strategic view of Africa." The United States has sought to increase its economic relations with Sub-Saharan Africa, and trade between the United States and Africa has tripled since 1990. In 2000, the Clinton Administration introduced a comprehensive U.S. trade and investment policy for the continent in the African Growth and Opportunity Act (AGOA; Title I, P.L. 106-200 ). AGOA has been amended by Congress on several occasions. Natural resources, particularly energy resources, dominate the products imported from Africa under AGOA. Africa now supplies the United States with roughly the same amount of crude oil as the Middle East. Nigeria is Africa's largest supplier of oil, and is regularly the fifth-largest global supplier of oil to the United States. Instability in the country's Niger Delta region has reduced output periodically by over 25%. World oil prices have been affected by Nigerian political developments and by periodic attacks on pipelines and other oil facilities in the Delta. Oil prices have likewise been affected by recent instability in Libya. Former President Bush announced in his 2006 State of the Union Address his intention to "to replace more than 75 percent of our oil imports from the Middle East by 2025," echoing a commitment made in 2002 "to strengthen [U.S.] energy security and the shared prosperity of the global economy by working with our allies, trading partners, and energy producers to expand the sources and types of global energy supplied, especially in the Western Hemisphere, Africa, Central Asia, and the Caspian region." A senior DOD official reportedly commented in 2003 that "a key mission for U.S. forces (in Africa) would be to ensure that Nigeria's oil fields ... are secure." In spite of conflict in the Niger Delta and other oil producing areas, the potential for deep water drilling in the Gulf of Guinea is high, although not without challenges. Africa's coastlines, particularly along the Gulf of Guinea, the Gulf of Aden, and the west Indian Ocean, have been highly susceptible to illegal fishing, illegal trafficking, and piracy in recent years. The inability of African governments to adequately police the region's waters has allowed criminal elements to smuggle people, drugs, and weapons and dump hazardous waste, and has opened maritime commerce and off-shore oil production facilities to the threat of piracy and sabotage. The growing problem of narcotics trafficking in West Africa, estimated by the U.N. Office on Drugs and Crime (UNODC) to be a transit point for almost one-third of all cocaine annually consumed in Europe, has become an area of increasing concern to policymakers. In 2005, the Bush Administration introduced its National Strategy for Maritime Security, identifying the freedom of the seas and the facilitation and defense of commerce as top national priorities and indicating plans to fund border and coastal security initiatives with African countries. The United States government, represented by members of AFRICOM (and previously EUCOM), the U.S. Navy, the State Department, and the Africa Center for Strategic Studies (ACSS), has engaged its West African partners in a number of ministerial conferences on maritime security, and is currently conducting several activities to increase the capability of African navies to monitor and enforce maritime laws. AFRICOM coordinates with the Department of Homeland Security (DHS) to implement the African Maritime Law Enforcement Partnership (AMLEP), a cooperative effort in which African Law Enforcement Detachments (LEDET) embark on U.S. and host nation vessels to conduct boardings, search, seizure and arrests in African waters. The U.S. Navy has increased its operations in the Gulf of Guinea to enhance security in the region, although those operations have been sporadic. Through its Global Fleet Stations (GFS) concept, the Navy has committed itself to more persistent, longer-term engagement (see information on the African Partnership Station in " Security Assistance " below). In the waters off the coast of East Africa, the Combined Joint Task Force - Horn of Africa (CJTF-HOA) is working with the Navy and with coalition partners in CENTCOM's Coalition Task Force 151 (CTF-151), which conducts maritime security operations to protect shipping routes in the Gulf of Aden, Gulf of Oman, the Arabian Sea, Red Sea, and the Indian Ocean. Coalition and U.S. naval forces have had numerous engagements with pirates in these waters. AFRICOM also implements a number of train and equip programs to build the capacity of African navies to secure their waters. Political conflict and instability in parts of Africa have caused human suffering on a massive scale and have undermined economic, social, and political development. Although the number of conflicts in Africa has decreased in recent years, the continent is home to a majority of the United Nations' peacekeeping operations, with six missions currently underway (the African Union implements another peace operation, AMISOM, in Somalia). Four African countries—Ghana, Ethiopia, Nigeria, and South Africa—have consistently ranked in the top 10 troop contributing countries to U.N. peacekeeping operations. African militaries also contribute troops to peace operations conducted by the African Union and regional organizations like ECOWAS. Despite a willingness to participate in these operations, many African militaries lack the command and control, training, equipment, and logistics capability to effectively participate in such efforts. Instability in Africa has demanded substantial humanitarian and defense resources from the international community, and the United States and other donor countries have acknowledged the utility and potential cost-effectiveness of assisting African forces to enhance their capabilities to participate in these operations. In 2004, the G8 introduced the Global Peace Operations Initiative (GPOI), a multilateral program to train peacekeeping troops around the world. U.S. security policy has been driven largely in recent years by counterterrorism efforts, which the Bush and Obama Administrations have both identified as a top national security priority. Terrorist attacks on the U.S. embassies in Dar es Salaam, Tanzania, and Nairobi, Kenya, in 1998, on targets in Mombasa, Kenya, in 2002, and more recently in Algeria, Mauritania, Morocco, Somalia, and Uganda have highlighted the threat of violent extremism in the region. The Director of National Intelligence (DNI) has repeatedly expressed concern to Congress over Al Qaeda in the Islamic Maghreb (AQIM) and the increasing capabilities of Al Shabaab in East Africa. Al Shabaab is believed to have ties to Al Qaeda in the Arabian Peninsula (AQAP), although the extent of that relationship remains subject to speculation. In February 2011 hearings on national security threats by the House and Senate, the DNI testified that while the U.S. intelligence community considered most of these groups' members to be focused on regional objectives in the short-term, some of those now training and fighting in Somalia also aspire to attack the United States. DOD has emphasized the need to work with partner nations to counteract these threats, claiming, "Terrorists' abilities to remotely plan and coordinate attacks is growing, sometimes facilitated by global illicit trafficking routes, extending their operational reach while rendering targeting of their sanctuaries more difficult.... We must continue to support and facilitate whole-of-nation approaches to countering extremism that seek and sustain regional partnerships with responsible states to erode terrorists' support and sources of legitimacy." In testimony before Congress, AFRICOM officials have linked the threat posed by terror groups to regional conflicts, stating, "violent extremism by transnational terrorist organizations is a major source of regional instability." Of primary concern to policy makers is the possible challenge posed by "ungoverned spaces," defined as "physical or non-physical area(s) where there is an absence of state capacity or political will to exercise control." State Department officials have identified failed states as an "acute risk" to U.S. national security. In addition to failed states providing a potential "safe haven" for terrorists, there is evidence to suggest terrorist groups may profit from the limited capacity of state administrative and security institutions, particularly when in the midst of conflict. During Sierra Leone's civil war in the 1990s, for example, reports suggest that al Qaeda may have used the proceeds from the "conflict diamond" trade as a funding source for its operations. General Ward has testified that "terrorist activities, kidnapping, illicit trafficking of all types (humans, weapons, drugs), and the existence of under-governed spaces in the Sahel contribute to the region's vulnerability and make it susceptible to extremist influences." The Obama Administration's strategy for countering terrorism in Africa, as outlined in June 2011, focuses on dismantling Al Qaeda elements in the region and on empowering countries and local administrations "to serve as countervailing forces to the supporters of al-Qa'ida and the purveyors of instability that enable the transnational terrorist threat to persist." Under this overarching strategy, U.S. programs seek to build regional intelligence, military, law enforcement, and judicial capacities; strengthen aviation, port, and border security; stem the flow of terrorist financing; and counter the spread of extremist ideologies. According to the United Nations, there were over 22 million HIV-positive Africans in 2009, representing 67% of infected persons worldwide. HIV/AIDS is the leading cause of death on the continent and was identified by former Secretary of State Colin Powell as "the greatest threat of mankind today." The rate of infection in some African security forces is believed to be high, raising concerns that those forces may be unable to deploy when needed. The Bush Administration and Congress placed priority on efforts to combat HIV/AIDS, committing over $48 billion through the President's Emergency Plan for AIDS Relief (PEPFAR); President Obama has pledged to sustain that commitment. Twelve of PEPFAR's 15 focus countries are in Africa. As part of these efforts, DOD has established the DOD HIV/AIDS Prevention Program (DHAPP) with African armed forces, which is administered by the Naval Health Research Center in San Diego. DHAPP supports programs in approximately 40 countries. The Department of Defense conducts a wide variety of activities in Africa in support of U.S. national interests. Operational activities may include, but are not limited to, humanitarian relief, peacekeeping, counterterrorism efforts, sanctions enforcement, non-combatant evacuations (NEOs), and maritime interdiction operations (MIOs). In addition to traditional contingency operations, the U.S. military implements a number of efforts aimed at increasing African militaries' capacities to provide security and stability for their own countries and the region as a whole. Several of these DOD-implemented initiatives are part of foreign military assistance programs funded by the State Department that "help to promote the principles of democracy, respect for human rights, and the rule of law." In addition to providing funding, the State Department gives overall guidance and direction for the programs. The United States military also occasionally provides advisors to peacekeeping missions on the continent; U.S. military advisors from CJTF-HOA have assisted peacekeepers deployed to Sudan and Somalia. U.S. forces routinely conduct a variety of bilateral and multilateral joint exercises with African militaries through such programs as Joint Combined Exchange Training (JCET). U.S. forces also conduct joint exercises as part of disaster assistance and maritime security training. The Africa Center for Strategic Studies (ACSS) was created in 1999 as one of DOD's five regional centers for strategic studies. It conducts a variety of academic activities for African, American, and European military and civilian officials aimed promoting good governance and democratic values, countering ideological support of terrorism, and fostering regional collaboration and cooperation in the African defense and security sectors. ACSS, which is based in Washington, DC, has offices on the continent in Dakar, Senegal and Addis Ababa, Ethiopia. The United States sells military equipment to African governments through the Foreign Military Sales (FMS) program, implemented by the U.S. Defense Security Cooperation Agency (DSCA). The U.S. government also provides loans (the United States waives repayment of these loans for African countries) to foreign governments to finance the purchase of such equipment through the Foreign Military Financing (FMF) program. Equipment is also provided to select African countries through the African Coastal and Border Security Program (ACBSP) and the Excess Defense Articles (EDA) program, and through special DOD authorities. U.S. counterterrorism strategy on the continent is addressed through a number of these initiatives, but U.S. counterterrorism efforts may also include, at one end of the spectrum, programs to address the root causes of terrorism, and, at the other end, military operations to destroy terrorist targets through military strikes. The United States is placing increasing emphasis on Information Operations (IO) in Africa, which use information to improve the security environment and counter extremist ideology through military information support teams deployed to U.S. embassies. IO activities in Africa have included website initiatives such as Maghrebia.com and AFRICOM's Operation Objective Voice (OOV), an interagency effort to counter extremist messaging. Some question whether activities such as these should be a part of DOD's mandate, or whether they might be more appropriately managed by other U.S. agencies. DOD officials argue that AFRICOM not only allows the U.S. military to better coordinate these operations and programs, but that it also allows DOD to better coordinate with other U.S. agencies, like the State Department, USAID, the Department of Justice, the Central Intelligence Agency, the Federal Bureau of Investigation and others, as well as with other governments, like those of Britain and France, which are also providing training and assistance for African security forces. DOD suggests that Africa Command builds on the experiences of the U.S. military's only forward presence in the region, the Combined Joint Task Force—Horn of Africa. In October 2002, the United States Central Command (CENTCOM) developed a joint task force to focus on "detecting, disrupting and ultimately defeating transnational terrorist groups operating in the region," and to provide a forward presence in the region. Under AFRICOM, the task force's mission has evolved to more broadly reflect a strategy of "cooperative conflict prevention." Between 2,000 and 2,500 short-term rotational U.S. military and civilian personnel make up CJTF-HOA, which covers the land and airspace in Djibouti, Ethiopia, Eritrea, Kenya, Seychelles, Somalia, and Sudan, as well as the coastal waters of the Red Sea, the Gulf of Aden, and the Indian Ocean. CJTF-HOA has named Burundi, Chad, Comoros, the Democratic Republic of the Congo (DRC), Madagascar, Mauritius, Mozambique, Rwanda, Tanzania, Uganda, and Yemen as "areas of interest." CJTF personnel, approximately half of whom are reservists, train the region's security forces in counterterrorism and other areas of military professionalization, serve as advisors to peace operations, and oversee and support humanitarian assistance efforts. Although U.S. Central Command maintains primary responsibility for naval operations against pirates in the waters off the Horn of Africa, CJTF-HOA personnel provide security assistance to several regional maritime security forces, few of which have "blue water capacity." The Task Force has provided military assistance and training to Burundian and Ugandan military forces deployed in support of the African Union Peacekeeping Mission in Somalia (AMISOM). As part of this effort, CJTF-HOA worked with non-governmental organizations to provide medical supplies to the AMISOM forces for assistance to the people of Mogadishu. CJTF-HOA has supported several humanitarian missions, including the airlift of humanitarian assistance supplies. CJTF-HOA also conducts civilian-military operations throughout East Africa as part of an effort to "win hearts and minds" and enhance the long-term stability of the region. These civil-military operations include digging wells and building and repairing schools, hospitals, and roads, and were initially part of a broader CENTCOM mission to "counter the re-emergence of transnational terrorism." Some observers question whether these activities might be more appropriately coordinated by a civilian agency or non-governmental organization than by the U.S. military. AFRICOM officials have suggested that the scope of these activities is being reexamined. The future role and structure of the task force itself are also under review. Building the defense capacities of partner nations is a key goal of U.S. military strategy in Africa and is consequently a key mandate for AFRICOM. At present, military experts believe that no African nation poses a direct threat to the United States or is expected to; consequently Africa Command is expected to focus less on preparing U.S. forces for major combat in the AOR. Instead, the command concentrates much of its energies and resources on training and assistance to professionalize local militaries so that they can better ensure stability and security on the continent. As one DOD official asserted during AFRICOM's establishment, "its principal mission will be in the area of security cooperation and building partnership capability. It will not be in warfighting." AFRICOM officials have stressed the need for persistent engagement, in line with the 2011 National Military Strategy, which states that "military-to-military relationships must be reliable to be effective, and persevere through political upheavals or even disruption." Officials stress that U.S. training programs aim to encourage respect for human rights and for civilian authority, key shortcomings for some African security forces. The U.S. government provides security assistance to African militaries through both bilateral and multilateral initiatives. During the 1990s, the United States provided military training through several programs, including the African Crisis Response Initiative (ACRI), the Enhanced International Peacekeeping Capabilities (EIPC) program, the African Regional Peacekeeping Program (ARP), and International Military Education and Training (IMET). Some of this training has been provided by U.S. Special Forces. Training has also been provided by contractors. Under the National Guard State Partnership Program (SPP), U.S. states' and territories' National Guard units have paired with several African countries to conduct a variety of security cooperation activities. The U.S. military has worked with the continent's regional security organizations, including the African Union (AU) and the Economic Community of West African States (ECOWAS). U.S. military efforts also aim to support the development of the African Union's African Standby Force (ASF), a multinational peacekeeping force composed of regional brigades organized by the continent's Regional Economic Communities. The AU aims for the force to have a standby capacity of 15,000 to 20,000 peacekeepers. The ASF and its regional brigades are not intended to be standing forces, but will instead draw from pre-identified forces of member states. AFRICOM continues to conduct annual training exercises begun under EUCOM, such as African Endeavor, a communications and interoperability exercise with more than 30 African nations conducted annually. U.S. military assistance also includes efforts to improve information sharing networks between African countries through programs such as the Multinational Information Sharing Initiative, which donor and aid organizations can in turn use to warn of and be warned of possible crises. AFRICOM also supports U.S. security sector reform initiatives in post-conflict countries like the DRC, Liberia, and Sudan. Several of the other major current bilateral and multilateral security assistance programs implemented by DOD in Africa are listed below (the list is not inclusive). These programs fall under the mission of Africa Command. In October 2007, U.S. Naval Forces Europe launched a new initiative, the African Partnership Station (APS). Under the initiative, a navy ship, the USS Fort McHenry, was deployed to the Gulf of Guinea from fall 2007 to spring 2008 to serve as a continuing sea base of operations and a "floating schoolhouse" from which to provide assistance and training to the Gulf nations. Training focused on maritime domain awareness and law enforcement, port facilities management and security, seamanship/navigation, search and rescue, leadership, logistics, civil engineering, humanitarian assistance and disaster response. Other Navy and Coast Guard vessels have subsequently deployed to the region under the APS banner, and APS began conducting similar activities in East Africa in 2009. European partners, NGOs, and U.S. government agencies, including the Coast Guard and the National Oceanic and Atmospheric Administration (NOAA), have partnered with the Navy to use the station, which is considered by the Navy to be a "delivery vehicle for interagency, international, and NGO assistance" to West, Central, and East Africa, for their own training and development initiatives. Humanitarian outreach activities have included Project Handclasp and Project Hope. The APS vessels have had a minimal footprint onshore and have conducted repeat visits to ports along the African coast. The cost for APS in FY2010 was initially estimated at $10.5 million for deployments in West and Central Africa and $9.96 million for East Africa. In 2002, the Department of State launched the Pan-Sahel Initiative (PSI) program to increase border security and counterterrorism capacities of four West African nations: Mali, Chad, Niger, and Mauritania. In 2005, the Bush Administration announced a "follow-on" interagency program to PSI. According to the State Department, the Trans Sahara Counterterrorism Partnership (formerly Initiative) aims combat violent extremism and defeat terrorist organizations operating in the Maghreb and Sahel by strengthening regional counterterrorism capabilities and coordination and by discrediting terrorist ideology. Under the American military component, Operation Enduring Freedom-Trans Sahara, for which AFRICOM took responsibility in late 2008, U.S. forces work with their African counterparts from Algeria, Burkina Faso, Chad, Mali, Mauritania, Morocco, Niger, Nigeria, Senegal, and Tunisia to improve intelligence, command and control, logistics, and border control, and to execute joint operations against terrorist groups. U.S. and African forces have conducted joint exercises, such as Exercise Flintlock, to improve security partnerships initiated under PSI and TSCTP. These military efforts are designed to support complementary development activities led by the State Department and USAID. To counter the recruitment efforts of terrorist groups, for example, USAID supports job creation initiatives for disadvantaged youth. Young people are a key demographic in Africa, where high unemployment rates and scarce education opportunities compound the challenges posed by a growing "youth bulge." Such programs are coordinated with the efforts of U.S. military personnel working in the region. The United States has allocated over $500 million for TSCTP since FY2005. The State Department's Partnership for Regional East Africa Counterterrorism (PREACT), formerly known as the East Africa Regional Security Initiative (EARSI), has been designed to build upon the best practices of TSCTP. In 1949 the U.S. government began providing training to foreign militaries under the Military Assistance Training Program (MAP) and through Foreign Military Sales (FMS), which allows countries to pay for their own training. MAP was succeeded in 1976 by IMET, which provides training at U.S. military schools and other training assistance for foreign military personnel on a grant basis through funding from the Department of State. A subset of IMET training, Expanded IMET (E-IMET), provides courses on defense management, civil-military relations, law enforcement cooperation, and military justice for military as well as civilian personnel. The State Department also provides training through its Foreign Military Financing (FMF) program. Sub-Saharan African countries received approximately $13.8 million in IMET assistance and $6.8 million in FMF in FY2008, $15.3 million in IMET and $8.3 million in FMF in FY2009, and $15.1 million in IMET and $18 million in FMF in FY2010. The FY2012 request includes $15.5 million in IMET and $18.8 million in FMF for Sub-Saharan Africa. In 1996, the Clinton Administration proposed the creation of an African Crisis Response Force (ACRF), an African standby force that would be trained and equipped by the United States and other donor nations. The initiative was not well received on the continent, and was later reintroduced as the African Crisis Response Initiative (ACRI), a bilateral training program designed to improve the capabilities of individual African countries' militaries to participate in multilateral peacekeeping operations. ACOTA, which replaced ACRI in 2002, aims to upgrade the peace-enforcement capabilities of African militaries. ACOTA provides Peace Support Operations training, including light infantry and small unit tactics, and focuses on training African troops who can in turn train other African units. In 2004, ACOTA became a part of GPOI. GPOI attempts to address some of the factors limiting African militaries' ability to contribute to peace operations by conducting a variety of programs, events, and activities oriented on peacekeeping capacity building. Among these programs is an effort to foster an international transport and logistics support system for African and other region's forces. The United States coordinates its peacekeeping training and assistance programs with other G8 countries through a G8 Africa Clearinghouse. While the State Department is the executive agent of GPOI and ACOTA, DOD provides small military teams for special mentoring assistance to ACOTA training events. According to the State Department, over 154,500 peacekeepers from over 20 African countries have received training under ACOTA and its predecessor, ACRI. U.S. reaction to the creation of a new command for Africa has been largely positive, although concerns have been raised. In Africa, on the other hand, perceptions of the command are more mixed. There has been considerable apprehension over U.S. motivations for creating AFRICOM, and some Africans worry that the move represents a neocolonial effort to dominate the region militarily. U.S. military efforts on the continent have been seen as episodic, leading some to question the motivation for a more sustained focus from DOD now. Reports of U.S. air strikes in Somalia in recent years and U.S. support for Ethiopia's military intervention there have added to those concerns. Many view U.S. counterterrorism efforts in Africa with skepticism, and there appears to be a widespread belief that the command's primary goals are to hunt terrorists and to secure U.S. access to African oil. U.S. foreign policy analysts have focused increased attention on China's role in Africa in recent years, and such attention has led some to question whether AFRICOM might be part of a new contest for influence on the continent. AFRICOM has been received with cautious optimism among several African governments and militaries. They view increased American attention to the continent's problems as a positive development, potentially bringing increased resources, training, and assistance. U.S. foreign military assistance has increased in recent years, and military training programs in Africa have steadily been on the rise. In the first years of the command, DOD and State Department officials consulted regularly with African nations on AFRICOM, seeking to solicit African views and explain the rationale behind the command's creation and its programs. In April 2007, senior officials visited Nigeria, South Africa, Kenya, Ethiopia, Ghana, and Senegal. Following their visit, one DOD official noted that despite some initial "misconceptions," they had not encountered "any specific resistance to the idea." In June 2007, they visited Algeria, Morocco, Libya, Egypt, and Djibouti, and held discussions with African Union officials. The delegation also held meetings with 40 foreign defense attachés serving in Paris. African officials reportedly gave "positive feedback about the design and mission of AFRICOM" and advised the delegation that DOD should consider how AFRICOM could complement the AU's regional security structure. In September 2007, DOD hosted representatives from the African Union, African regional security organizations, and over 35 African governments to further explain its plans for the command and to solicit input from attendees; a similar event was held in April 2008. Analysts suggest U.S. officials should continue to closely consult with these governments to ensure that AFRICOM reflects a mutual exchange of interests and is seen to foster a closer alliance rather than serving as an avenue for the U.S. to dictate policy to African governments. In October 2007, members of the Pan-African Parliament, the legislative body of the African Union, voted in favor of a motion to "prevail upon all African Governments through the African Union (AU) not to accede to the United States of America's Government's request to host AFRICOM anywhere in the African continent." West African military chiefs, following a conference the following month in Liberia, issued a cautious response to U.S. government plans, saying that AFRICOM "had not been fully understood" by African countries and requesting "further sensitization by the United States authorities at the highest political level." ECOWAS's Commissioner for Political Affairs, Peace, and Security did suggest that "everybody welcomes and supports the idea, but we want that direction to come from the heads of state." Several African heads of state publicly expressed preliminary views on the command. Some advised DOD to consider how AFRICOM could complement the AU's regional security structure. Former Nigerian President Umaru Yar'Adua, during his December 2007 visit to Washington, DC, commented, "We shall partner with AFRICOM to assist not only Nigeria, but also the African continent to actualize its peace and security initiative, which is an initiative to help standby forces of brigade-size in each of the regional economic groupings within the African continent." Yar'Adua's statements were criticized by several Nigerian opposition parties and civil society organizations. In response, Nigeria's Minister of Foreign Affairs remarked, "Nigeria's position on AFRICOM remains that African governments have the sovereign responsibility for the maintenance of peace and security on the continent.... President Yar'Adua's statement on the proposed AFRICOM is consistent with Nigeria's well-known position on the necessity for Africa to avail itself of opportunities for enhanced capacity for the promotion of peace and security in Africa." During President Bush's second official visit to Africa in February 2008, Ghana's President John Kufour announced, "I am happy, one, for the President dispelling any notion that the United States of America is intending to build military bases on the continent of Africa. I believe the explanation the President has given should put fade to the speculation, so that the relationship between us and the United States will grow stronger and with mutual respect." Liberia's President Ellen Johnson-Sirleaf has been vocal in her support from AFRICOM, and has offered to host its headquarters. As AFRICOM has assumed ongoing security engagement operations from EUCOM and CENTCOM and initiated new programs, its officials have stressed the need to continue strategic communications efforts to increase understanding of the command among African governments and their people. Congress has followed the evolution of U.S. military engagement on the African continent with interest and continues to engage the Executive Branch on issues related to AFRICOM's development. Several Members of Congress expressed interest in the creation of a combatant command for Africa prior to the Bush Administration decision to establish AFRICOM. In 2006, Senator Russ Feingold introduced S.Amdt. 4527 to S. 2766 , the Senate version of the FY2007 National Defense Authorization Act (hereafter these authorization bills are referred to as NDAAs) requiring a feasibility study on establishing a new command for Africa. In December 2007, Representative Ileana Ros-Lehtinen introduced H.Res. 897 , recognizing the strategic importance of the African continent and welcoming AFRICOM's establishment. Senator James Inhofe introduced similar legislation, S.Res. 480 , in March 2008. These resolutions also urged the Departments of Defense and State, as well as USAID, to consult with African partners to address concerns regarding the command's mandate. Multiple committees held hearings on the command during its first year. General Carter Ham delivered AFRICOM's most recent posture statement to the House and Senate Armed Services Committees in April 2011. Congress has addressed issues associated with the command's development in report language accompanying several authorization and appropriations bills. In the command's first year, the Senate Armed Services Committee expressed its support for AFRICOM in S.Rept. 110-77 (accompanying S. 1547 , the Senate version of the FY2008 NDAA), but raised questions regarding authorities needed to stand up and staff the command; authorities and funding mechanisms for interagency staff; location; planned staffing levels; and anticipated costs. The committee repeated its support in S.Rept. 110-335 ( accompanying the FY2009 NDAA; P.L. 110-417 ), but expressed concern that other U.S. government agencies may not have the resources to support the command's "whole of government" approach. Congress has focused some of its attention on AFRICOM on the command's headquarters location. In 2008, the House Appropriations Committee raised concern with unanswered questions related to the headquarters location in H.Rept. 110-775 (accompanying H.R. 6599 , the House version of the FY2009 Military Construction and Veterans Affairs Appropriations Act). The House Armed Services Committee, in H.Rept. 112-78 (accompanying H.R. 1540 , the FY2012 NDAA), has directed the Secretary of Defense to report to Congress on the conclusions of an alternative basing review for AFRICOM by April 2012, noting the committee's view that AFRICOM's location should "provide the maximum military value to the realigned command and at the minimum cost required to implement the relocation." In July 2011, Senator Kay Bailey Hutchison introduced S.Amdt. 562 to H.R. 2055 , the FY2012 Military Construction and Veterans Affairs Appropriations bill, which would restrict the use of funds for a permanent AFRICOM headquarters outside the United States until the Secretary of Defense provides the congressional defense committees with an analysis of the military construction costs associated with establishing a permanent location overseas versus in the United States. DOD has used military construction funds in previous years to update the headquarters facilities currently used by AFRICOM in Stuttgart and is not currently requesting funds for further headquarters construction. Several committee reports have raised questions associated with military construction in Djibouti associated with AFRICOM's Combined Joint Task Force–Horn of Africa. In S.Rept. 111-35 (accompanying S. 1390 , the Senate version of the FY2010 NDAA), the Senate Armed Services Committee expressed support for the persistent regional engagement activities conducted by CJTF-HOA, but requested clarification from DOD on the future role of the Task Force on the continent. In the final version of the FY2011 NDAA ( H.R. 6523 , P.L. 111-383 ), the House Armed Services Committee required DOD to submit a report evaluating CJTF-HOA's activities to counter violent extremism on the continent and the extent to which the Task Force's activities are aligned with AFRICOM's mission. Most recently, in S.Rept. 112-29 (accompanying the Senate version of the FY2012 Military Construction and Veterans Affairs Appropriations bill), the Senate Appropriations Committee reiterated support for maintaining a military presence in the Horn of Africa at Camp Lemonnier, given the region's strategic importance in the war against terrorism, but repeated concerns about "the long range mission of AFRICOM at Camp Lemonnier and the planned development and security of the installation," as well as about the long-term funding options for CJTF-HOA. AFRICOM's mandate has also been considered by Congress within the broader context of DOD's role in U.S. foreign affairs. In 2008, AFRICOM was the focus of a series of hearings by the House Committee on Oversight and Government Reform's Subcommittee on National Security and Foreign Affairs. The command has also been discussed in hearings on foreign assistance and national security reform, on interagency cooperation, and on the concept of "smart power." The House Armed Services Committee, which commissioned a Panel on Roles and Missions (of not only the various military branches, but also of the various civilian agencies involved in protecting U.S. security), found that shortcomings in the interagency process have led the military to take on missions that are not part of its core responsibilities. The FY2008 NDAA required the military to examine its core competencies, a review which may ultimately have implications for AFRICOM, as may a requirement in H.Rept. 111-288 accompanying the FY2010 NDAA for DOD to evaluate the relationship between DOD's authorities to conduct security cooperation and the Department of State's authorities for security assistance. Some observers have cautioned that AFRICOM could develop independent institutional imperatives that demand resources regardless of need, rather than reflecting genuine strategic interests. Given that a large part of AFRICOM's mandate is to build the indigenous capacity of African defense forces, the ease with which the command can conduct security cooperation programs will be key to its success. DOD officials suggest that inefficiencies exist in the authorities through which funding is provided for the U.S. military's security cooperation activities. Some military officials have argued that the applicable laws need simplification to allow the combatant commands greater flexibility to respond to emerging threats and opportunities. Others have raised concerns, though, that modifying the administrative authorities could interfere with the Department of State's diplomatic decisions or bilateral relationships. The National Security Council is currently conducting a Security Sector Assistance Review that may address some of these issues. The U.S. military has faced other policy restrictions in its operations with some African governments and militaries. The establishment of a new unified command requires both financial and human resources, and although some have been redirected from other commands, military resources have been stretched by major theater operations in Iraq and Afghanistan, making troop readiness and costs associated with AFRICOM's development a key issue for Congress. A June 2011 DOD report on the organizational structure of combatant commands noted that AFRICOM's headquarters staffing is not currently sufficient for full-time operational capacity during an extended crisis. The report states that during Operation Odyssey Dawn in Libya, AFRICOM headquarters was augmented by 90 personnel, and additional personnel would have been required to maintain continuous operations if Odyssey Dawn had continued longer than it did. The June 2011 report also notes that the command is open to increasing State Department and USAID staffing at AFRICOM above current levels "if, and when, these departments are able to provide additional manpower resources." Additional staffing of interagency personnel at AFRICOM may require additional resources from Congress. The Secretary of Defense has advocated on behalf of the civilian agencies, emphasizing that the State Department is critically understaffed. The development of AFRICOM's interagency staffing has been of interest to Congress. In the House Report to accompany H.R. 2082 , the Intelligence Authorization Act of FY2008, the Permanent Select Committee on Intelligence expressed concern with interagency coordination on Africa, calling it "flawed" and suggesting that the intelligence community needed to realign its resources to "better understand the threats emanating from this region." DOD officials point out that there are no legally binding requirements for agencies to coordinate their activities, which could make AFRICOM's "pioneering" interagency process more challenging, should other agencies not have the resources to participate adequately. Because AFRICOM's role is to support U.S. foreign policy objectives in Africa, close coordination with the State Department will be critical to its success. As U.S. military activity on the continent has expanded in recent years, some observers have expressed concern with the idea that U.S. military efforts on the continent could overshadow U.S. diplomatic objectives. A 2006 Senate Foreign Affairs Committee Report found that: As a result of inadequate funding for civilian programs ... U.S. defense agencies are increasingly being granted authority and funding to fill perceived gaps. Such bleeding of civilian responsibilities overseas from civilian to military agencies risks weakening the Secretary of State's primacy in setting the agenda for U.S. relations with foreign countries and the Secretary of Defense's focus on war fighting. Former Senate Africa Subcommittee Chairman Russ Feingold, who was supportive of AFRICOM's creation, once cautioned that the command must "contribute to, not define, the U.S. Government's overall strategy and objectives for the continent." Likewise, Senator Richard Lugar has suggested that AFRICOM could help the U.S. military develop a "more sophisticated understanding of a region that is ever-changing and highly complex," but has also noted that, "with greater expertise created within a new regional command, the hope is that there would be few disagreements between the two Departments on the appropriateness of security assistance to specific African nations. But undoubtedly, some differences of opinion will occur." As AFRICOM continues to develop, Congress may exert its oversight authority to monitor the command's operations to ensure that they support, rather than guide, U.S. political, economic, and social objectives for the continent. Appendix . Appendix A. History of U.S. Military Involvement in Africa The United States maintained Wheelus Air Base in Libya from the 1940s until 1971 with some 4,000 American personnel. Wheelus served primarily as a bomber base for missions to Europe and as an Air Force training location, although U.S. forces from the base did provide emergency humanitarian assistance to earthquake and flood victims in Libya and Tunisia in the 1960s. Africa was not included in the U.S. military command structure until 1952, when several North African countries, including Libya, were added to the responsibilities of U.S. European Command because of their historic relationship with Europe. The rest of the continent remained outside the responsibility of any command until 1960, when Cold War concerns over Soviet influence in newly independent African countries led DOD to include Sub-Saharan Africa in the Atlantic Command (LANTCOM), leaving North Africa in EUCOM. The Unified Command Plan was revised again in 1962 by President John F. Kennedy, and responsibility for Sub-Saharan Africa was transferred to a newly-created Strike Command (STRICOM), which was responsible for operations in the Middle East, Sub-Saharan Africa, and South Asia and located at McDill Air Force Base in Tampa, FL. STRICOM was redesignated as Readiness Command (REDCOM) in 1971, and its responsibility for Africa was dissolved, leaving Sub-Saharan Africa out of the combatant command structure until 1983. Under the Reagan Administration, U.S. military involvement in Africa was largely dominated by Cold War priorities, and the Administration's "containment" policy led DOD to divide responsibility for Africa into its current configuration. In the 1980s, the U.S. military was involved in repeated skirmishes with Libyan jets in territorial disputes over the Gulf of Sidra, and those engagements later escalated as Libya was implicated for supporting international terrorism. On April 15, 1986, the United States initiated air strikes against multiple military targets in Libya under the code name Operation El Dorado Canyon to "inflict damage to Qadhafi's capability to direct and control the export of international terrorism;" several civilian targets including the French Embassy in Tripoli were also inadvertently hit. After the end of the Cold War, U.S. policy toward Africa was driven by President George H. W. Bush's vision of a "New World Order" and later by President Bill Clinton's policy of "assertive multilateralism." U.S. military involvement in Africa was dominated by the deployment of U.S. forces to Somalia to secure humanitarian operations, first in 1992 under the U.S.-led Unified Task Force (UNITAF), also known as Operation Restore Hope, and later under the United Nations Operation in Somalia (UNOSOM) II. U.S. military efforts in Somalia were unprecedented on the continent—over 25,000 U.S. soldiers were deployed by President George H.W. Bush under UNITAF, which was led by CENTCOM and included forces from 24 other countries. The number of U.S. troops was significantly reduced under President Clinton as operational responsibility was shifted from UNITAF to UNOSOM II. In October 1993, U.S. Special Operations soldiers in the U.S.-led Task Force Ranger engaged Somali militia forces in the battle of Mogadishu, which ultimately resulted in the deaths of 18 American soldiers and hundreds of Somalis. President Clinton ultimately ordered the withdrawal of U.S. forces from Somalia in March 1994, the same month that a limited U.S. deployment of 3,600 soldiers was dispatched to Central Africa to assist in humanitarian efforts for Rwandan refugees and to provide protection for humanitarian supplies in Rwanda. In 1995, DOD outlined its view of Africa in its U.S. Security Strategy for Sub-Saharan Africa, asserting that "ultimately we see very little traditional strategic interest in Africa." While the U.S. military was deployed almost annually during the 1990s to conduct Non-Combatant Evacuation and Repatriation Operations (NEO) in African countries that had become politically unstable, other contingency operations involving U.S. forces in Africa in latter half of the 1990s were limited. In 1998, following the attacks on two U.S. embassies in East Africa, the United States conducted retaliatory cruise missile attacks against a pharmaceutical factory in Khartoum, Sudan, that Clinton Administration officials initially contended was producing precursors for chemical weapons for al Qaeda. In 2003, the United States responded to calls to intervene in Liberia's civil war by deploying a U.S. Amphibious Ready Group (ARG) off the coast of Liberia to provide assistance to the ECOWAS mission in Liberia (ECOMIL) through Joint Task Force Liberia, under the command of EUCOM. Out of an estimated 5,000 U.S. forces deployed to the area under Operation Sheltering Sky, only approximately 200 U.S. soldiers came ashore. More recently, U.S. military personnel have provided training and logistical support for African peacekeepers in both Sudan and Somalia and counterterrorism training to select African military units in the Sahel and East Africa. As discussed above, the U.S. Navy continues to conduct anti-piracy patrols off the coast of East Africa. According to media reports, the U.S. military also has, in recent years, engaged in air strikes against suspected terrorist targets in Somalia. AFRICOM officials have acknowledged that the command provided logistical and advisory support for a joint military operation between the armies of Uganda, the DRC, and Southern Sudan in December 2008 against the Ugandan insurgent group known as the Lord's Resistance Army (LRA). The U.S. government is currently reviewing its strategy to address the LRA threat. In March 2011, the United States commenced military operations in Libya under Operation Odyssey Dawn, the U.S. contribution to a multilateral military effort to enforce a no-fly zone and protect civilians in Libya, in support of U.N. Security Council Resolution 1973. NATO assumed the lead for military operations in Libya on April 1 under Operation Unified Protector. Appendix B. Instances of the Use of U.S. Armed Forces in Africa, 1950-2009 Appendix C. Acronyms
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In recent years, analysts and U.S. policymakers have noted Africa's growing strategic importance to U.S. interests. Among those interests are the increasing importance of Africa's natural resources, particularly energy resources, and mounting concern over violent extremist activities and other potential threats posed by under-governed spaces, such as maritime piracy and illicit trafficking. In addition, there is ongoing concern for Africa's many humanitarian crises, armed conflicts, and more general challenges, such as the devastating effect of HIV/AIDS. In 2006, Congress authorized a feasibility study on the creation of a new command for Africa to consolidate current operations and activities on the continent under one commander. Congress has closely monitored the command since its establishment. On February 6, 2007, the Bush Administration announced the creation of a new unified combatant command, U.S. Africa Command or AFRICOM, to promote U.S. national security objectives in Africa and its surrounding waters. Prior to AFRICOM's establishment, U.S. military involvement on the continent was divided among three commands: U.S. European Command (EUCOM), U.S. Central Command (CENTCOM), and U.S. Pacific Command (PACOM). The command's area of responsibility (AOR) includes all African countries except Egypt. AFRICOM was officially launched as a sub-unified command under EUCOM on October 1, 2007, and became a stand-alone command on October 1, 2008. DOD signaled its intention to locate AFRICOM's headquarters on the continent early in the planning process, but such a move is unlikely to take place for several years, if at all. The command will operate from Stuttgart, Germany, for the foreseeable future. DOD has stressed that there are no plans to have a significant troop presence on the continent. The East African country of Djibouti, home to the Combined Joint Task Force–Horn of Africa (CJTF-HOA) at Camp Lemonnier, provides the U.S. military's only enduring infrastructure in Africa. As envisioned by the Department of Defense (DOD), AFRICOM aims to promote U.S. strategic objectives and protect U.S. interests in the region by working with African states and regional organizations to help strengthen their defense capabilities so that they are better able to contribute to regional stability and security. AFRICOM also has a mandate to conduct military operations, if so directed by national command authorities. In March 2011, for example, AFRICOM commenced Operation Odyssey Dawn to protect civilians in Libya as part of multinational military operations authorized by the U.N. Security Council under Resolution 1973. The 1998 bombing of U.S. embassies in East Africa and more recent attacks have highlighted the threat of terrorism to U.S. interests on the continent. Political instability and civil wars have created vast under-governed spaces, areas in which some experts allege that terrorist groups may train and operate. The upsurge in piracy in the waters off the Horn of Africa has been directly attributed to ongoing instability in Somalia. Instability also heightens human suffering and retards economic development, which may in turn threaten U.S. economic interests. Africa's exports of crude oil to the United States are now roughly equal to those of the Middle East, further emphasizing the continent's strategic importance. This report provides a broad overview of U.S. strategic interests in Africa and the role of U.S. military efforts on the continent as they pertain to the creation of AFRICOM. A discussion of AFRICOM's mission, its coordination with other government agencies, and its basing and manpower requirements is included.
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The wars in Iraq and Afghanistan brought renewed attention to the needs of veterans, including the needs of homeless veterans. Homeless veterans initially came to the country's attention in the 1970s and 1980s, when homelessness generally was becoming a more prevalent and noticeable phenomenon. The first section of this report defines the term "homeless veteran," discusses attempts to estimate the number of veterans who are homeless, and presents the results of studies regarding the demographic characteristics of homeless veterans as well as those surveyed as part of HUD's Annual Homeless Assessment Report to Congress. At the same time that the number of homeless persons began to grow, it became clear through various analyses of homeless individuals that homeless veterans were overrepresented in the homeless population. The second section of this report summarizes research regarding the overrepresentation of both male and female veterans, who have been found to be present in greater percentages in the homeless population than their percentages in the general population. This section also reviews research regarding possible explanations for why homeless veterans have been overrepresented. In response to the issue of homelessness among veterans, Congress has created numerous programs to fund services, transitional housing, and permanent housing specifically for homeless veterans. The third section of this report discusses these programs. The majority of programs are funded through the Department of Veterans Affairs. Within the VA, the Veterans Health Administration (VHA), which is responsible for the health care of veterans, operates all but one of the programs for homeless veterans. The Veterans Benefits Administration (VBA), which is responsible for compensation, pensions, educational assistance, home loan guarantees, and insurance, operates the other. In addition, the Department of Labor (DOL) and the Department of Housing and Urban Development (HUD) operate programs for homeless veterans. Several issues regarding homelessness among veterans have become prominent since the beginning of the conflicts in Iraq and Afghanistan. The fourth section of this report discusses three of these issues. The first is the VA's plan to end homelessness among veterans. A second issue is ensuring that an adequate transition process exists for returning veterans to assist them with issues that might put them at risk of homelessness. Third is the concern that adequate services might not exist to serve the needs of women veterans. Homelessness has always existed in the United States, but only in recent decades has the issue come to prominence. In the 1970s and 1980s, the number of homeless persons increased, as did their visibility. Experts cite various causes for the increase in homelessness. These include the demolition of single room occupancy dwellings in so-called "skid rows" where transient single men lived, the decreased availability of affordable housing generally, the reduced need for seasonal unskilled labor, the reduced likelihood that relatives will accommodate homeless family members, the decreased value of public benefits, and changed admissions standards at mental hospitals. The increased visibility of homeless persons was due, in part, to the decriminalization of actions such as public drunkenness, loitering, and vagrancy. Homelessness occurs among families with children and single individuals, in rural communities as well as large urban cities, and for varying periods of time. Depending on circumstances, periods of homelessness may vary from days to years. Researchers have created three categories of homelessness based on the amount of time that individuals are homeless. First, transitionally homeless people are those who have one short stay in a homeless shelter before returning to permanent housing. In the second category, those who are episodically homeless frequently move in and out of homelessness but do not remain homeless for long periods of time. Third, chronically homeless individuals are those who are homeless continuously for a period of one year or have at least four episodes of homelessness in three years. Chronically homeless individuals often suffer from mental illness and/or substance use disorders. Although veterans experience all types of homelessness, some evidence exists that they may be chronically homeless in higher numbers than nonveterans. Homeless veterans began to come to the attention of the public at the same time that homelessness generally was becoming more common. News accounts chronicled the plight of veterans who had served their country but were living (and dying) on the street. The commonly held notion that the military experience provides young people with job training, educational and other benefits, as well as the maturity needed for a productive life, conflicted with the presence of veterans among the homeless population. While the statutory definition of "homeless veteran" may seem straightforward, there has been some confusion in recent years over veteran eligibility for VA programs targeted to homeless veterans. Title 38 of the United States Code defines the term "homeless veteran" as "a veteran who is homeless (as that term is defined in section 103(a) of the McKinney-Vento Homeless Assistance Act)." The following subsections discuss the meaning of the terms veteran and homeless. The definition of "veteran" for purposes of Title 38 benefits (the title of the United States Code that governs veterans benefits) is a person who "served in the active military, naval, or air service, and who was discharged or released therefrom under conditions other than dishonorable." In addition, there may be more specific length-of-service and character-of-discharge criteria required for veterans to qualify for VA benefits and health care. Certain minimum length-of-service requirements apply to people who enlisted on or after September 8, 1980. The general requirement is the "full period" for which the servicemember was called or ordered to active duty or, if less, 24 months of continuous active duty. (For more information, see CRS Report R42324, Who Is a "Veteran"?—Basic Eligibility for Veterans' Benefits , by [author name scrubbed].) Regarding discharge status, the VA accepts discharges that are characterized as honorable or general (under honorable conditions) as "other than dishonorable" for VA benefit purposes. A dishonorable discharge disqualifies a veteran from eligibility for benefits. In between honorable and dishonorable discharges are other-than-honorable or bad-conduct discharges adjudicated by a special court martial, for which VA may make a character-of-discharge determination about a veteran's eligibility for benefits and health care. (For more information, see CRS Report R43928, Veterans' Benefits: The Impact of Military Discharges on Basic Eligibility , by [author name scrubbed] and [author name scrubbed].) Both length-of-service and character-of-discharge criteria have become issues in determining veteran eligibility for two VA homeless veteran programs administered by public entities or private nonprofit grantees (versus direct VA administration): the Homeless Providers Grant and Per Diem (GPD) program and the Supportive Services for Veteran Families (SSVF) program. In 2014, the VA office of General Counsel advised that VA GPD providers not serve homeless veterans unless they met eligibility criteria for VA health care (including length-of-service and character-of-discharge criteria). Similar guidance had been given to SSVF grantees. Previously, these criteria had not been required in determining eligibility for the GPD program, with the GPD program handbook basing eligibility on the definition of veteran and not further specifying length-of-service or character-of-discharge criteria. For about a month in 2014, the VA imposed a moratorium that only allowed veterans who qualified for VA health care to participate in the GPD program. Advocacy groups raised concerns that veterans most needing assistance, including those whose discharges may have resulted from mental health issues, would no longer have access to services. The VA quickly lifted the moratorium while awaiting an opinion from the Office of General Counsel about eligibility for the GPD program. As of the date of this report, the VA had not released an opinion as to eligibility. In both the 113 th and 114 th Congresses, legislation has been introduced to clarify veteran eligibility for the GPD and SSVF programs. In the 114 th Congress, S. 1731 , the Homeless Veterans Services Protection Act, which has been passed by the Senate, would waive the minimum continuous period of active duty requirement and allow other-than-honorably discharged veterans to qualify for services through the GPD and SSVF programs. Second, veterans are considered homeless if they meet the definition of "homeless individual" codified as part of the McKinney-Vento Homeless Assistance Act ( P.L. 100-77 ). Specifically, the statute defining homeless veteran refers to Section 103(a) of McKinney-Vento. McKinney-Vento lays out several ways in which someone may be considered homeless. Literal Homelessness: An individual or family is homeless if they lack a fixed, regular, and adequate nighttime residence, defined to mean: Having a primary nighttime residence that is a public or private place not designed for, nor ordinarily used as, a regular sleeping accommodation for human beings. These may include a car, park, abandoned building, bus or train station, or campground. Living in a supervised publicly or privately operated shelter designed to provide temporary living accommodations. These include transitional housing and hotels or motel rooms paid for by charitable institutions or government entities. Exiting an institution (such as a jail or hospital) after a stay of 90 days or fewer, and having resided in an emergency shelter or place not meant for human habitation prior to entering the institution. Imminent Loss of Housing: Individuals and families who meet all of the following criteria are considered homeless: They will "imminently lose their housing," whether it be their own housing, housing they are sharing with others, or a hotel or motel not paid for by a government entity. Imminent loss of housing is evidenced by an eviction notice requiring an individual or family to leave their housing within 14 days; a lack of resources that would allow an individual or family to remain in a hotel or motel for more than 14 days; or credible evidence that an individual or family would not be able to stay with another homeowner or renter for more than 14 days. They have no subsequent residence identified. They lack the resources or support networks needed to obtain other permanent housing. Other Federal Definitions: Unaccompanied youth and homeless families with children who are defined as homeless under other federal statutes are considered homeless if they meet all of the following criteria: They have experienced a long-term period (defined in regulation as 60 days) without living independently in permanent housing. They have experienced instability as evidenced by frequent moves (two moves or more during the 60-day period). They can be expected to continue in unstable housing due to factors such as chronic disabilities, chronic physical health or mental health conditions, substance addiction, histories of domestic violence or childhood abuse, the presence of a child or youth with a disability, or multiple barriers to employment. Domestic Violence: Note that the domestic violence provision of the McKinney-Vento definition does not apply to VA programs. When the McKinney-Vento statute was amended in 2009, Section 103(b) was added to the law. The section includes as homeless anyone who is fleeing a situation of domestic violence or some other life-threatening condition. The VA definition of homeless veteran only refers to subsection 103(a) of McKinney-Vento. As a result, unless the reference to "homeless veteran" in Title 38 is changed to include subsection (b), this part of the definition is not part of the definition of homeless veteran. At least three bills in the 114 th Congress, H.R. 627 , H.R. 2256 , and S. 1885 , contain provisions that would update the definition of homeless veteran to include Section 103(b) of McKinney-Vento. The exact number of homeless veterans is unknown, although the methods used to estimate their numbers have been improving in recent years. Through 2009, both the VA and HUD conducted separate assessments of the number and percentage of homeless veterans over a period of years (the VA beginning in 1998, and HUD in 2006). However, beginning in 2011, the two agencies announced that they would coordinate their efforts to produce estimates. HUD produces two types of estimates, with the VA collaborating on those involving veterans. The first is a point-in-time count and the second is an estimate of the total number of people who experience homelessness at some point during the year. The point-in-time counts began in 2005, with HUD requiring local jurisdictions called "Continuums of Care" (CoCs) to conduct a count of sheltered and unsheltered homeless persons on one night during the last week of January every other year (though many CoCs conduct counts every year). As part of these point-in-time counts, CoCs are to collect information about homeless individuals, including veteran status. For the last seven years, from 2009 through 2015, HUD has released reports containing point-in-time counts of homeless veterans. The estimates of people who experience homelessness at some point during the year are released as part of HUD's Annual Homeless Assessment Reports (AHARs) to Congress. HUD uses a sample of homelessness data from CoCs across the country to arrive at an estimate. HUD and the VA issued two Veteran-Specific AHARs to Congress, for 2009 and 2010, which contain estimates of the number of veterans who experienced homelessness at any point during the year. After 2010, estimates of homeless veterans have been included as separate sections within the AHARs. Each of the estimates―point-in-time and full year―has caveats and limitations in what they represent. These include differences in the time periods in which estimates are made, the living situations of those who are considered homeless, and the method used to arrive at a number. Point-in-Time Count: Time Period: The point-in-time counts generally occur on one day during the last week of January. Therefore the counts are a snapshot of the number of people who are homeless on a given day, and they are not meant to represent the total number of people who experience homelessness over the course of a year. Living Situation: The point-in-time estimates are meant to capture all homeless individuals and families who are unsheltered (living on the street or other place not meant for human habitation), as well as those living in emergency shelters and transitional housing. Note that until 2011, communities were not required to count unsheltered individuals, although most communities did (approximately 84% conducted both a sheltered and unsheltered count in 2010). Beginning in 2011, all communities were required to count those living on the streets or other places not meant for human habitation. Method of Arriving at a Number: In general, the point-in-time count is meant to capture all individuals who are homeless and is not an estimate based on a sample. However, HUD has adjusted the number to account for (1) cases where beds for homeless veterans were missing from HUD's inventory of service providers, (2) instances where data on sheltered veteran status were missing, (3) instances where CoCs did not count sheltered veterans, and (4) instances of missing data on unsheltered veterans or reports of zero unsheltered veterans. Estimate of the Number of People Homeless at Any Point During the Year: Time Period: The second HUD estimate is an ongoing process to produce an annual estimate of the number of people who are homeless, including homeless veterans, through Homeless Management Information Systems (HMIS). As part of the HMIS initiative, local jurisdictions collect and store information about homeless individuals they serve, and the information is aggregated in computer systems at the community level. The estimates based on HMIS data differ from point-in-time estimates in that they are based on a full year's worth of information (rather than one day). Living Situation: The estimates only include individuals who were residing in emergency shelters or transitional housing during the relevant time periods (i.e., estimates do not include those persons living on the street or in other places not meant for human habitation). Method of Arriving at a Number: The estimates are based on a sample of communities (rather than an aggregation of all communities). Data may be excluded for providers with low reporting rates, may be adjusted for missing data, and finally, the data are weighted. Table 1 , below, contains estimates of homeless veterans from 2009 through 2015. The first columns of the table contain results of the annual point-in-time counts of homeless veterans and, using that number, the percentage of homeless adults who are homeless veterans. The last columns of the table contain the results of the HMIS estimates of homeless veterans from FY2009 through FY2014, as well as the percentage in the adult homeless population. Until recently, the best data available regarding the demographics of homeless veterans preceded the wars in Iraq and Afghanistan. However, HUD and the VA, in the Annual Homeless Assessment Reports to Congress, include demographic data about veterans living in shelter (the data do not include information about those living on the streets or other places not meant for human habitation). The 2014 AHAR presented demographic information about veterans experiencing homelessness who were living in shelter, and who were included in local Homeless Management Information Systems (HMIS) efforts to learn more about those who are homeless. See Table 2 . Gender: Homeless veterans are predominantly men (91.6%), with women making up 8.4% of homeless veterans. These percentages are similar to the overall percentages of men and women veterans (91.5% and 8.5% respectively). Race and Ethnicity: African American veterans make up 36.2% of the homeless veteran population, compared to 11.1% of all veterans. Hispanic veterans represent 6.9% of homeless veterans compared to 6.0% of all veterans. Non-Hispanic white veterans make up 52.4% of homeless veterans (compared to 79.3% of all veterans). Age: While more than half of all veterans are age 62 and older (54.5%), veterans in the 31-50 and 51-61 age groups have the greatest percentages of homelessness. They represent 33.9% and 43.5% of the homeless veteran population, respectively. Veterans between 18 and 30 make up 9.1%, and veterans age 62 and older make up 13.5% of the homeless veteran population. Until the advent of the Veterans Supplement to the Annual Homeless Assessment Report, research that captures information about homeless veterans had not been conducted on a regular, systematic basis. However, in addition to HUD's ongoing efforts to collect information about homeless individuals, the VA's relatively new National Center for Homelessness Among Veterans is conducting a variety of research studies. One of the studies released by the VA research center builds on earlier research about whether veterans are overrepresented in the homeless population using 2009 data from Homeless Management Information Systems (HMIS). This section discusses previous studies regarding the overrepresentation of veterans in the homeless population and the VA's more recent findings. There are several prominent homelessness surveys from which much of the data regarding homeless veterans is drawn. Possibly the most comprehensive national data collection effort regarding persons experiencing homelessness prior to HMIS took place in 1996 as part of the National Survey of Homeless Assistance Providers and Clients (NSHAPC), when researchers interviewed thousands of homeless assistance providers and homeless individuals across the country. Prior to the NSHAPC, in 1987, researchers from the Urban Institute surveyed nearly 2,000 homeless individuals and clients in large cities nationwide as part of a national study. The data from the NSHAPC and Urban Institute surveys served as the basis for more in-depth research regarding homeless veterans, but did not include veterans of the conflicts in Iraq and Afghanistan. In 2012, the VA released research using 2009 HMIS data from seven communities, called "Continuums of Care," which included veterans from the wars in Iraq and Afghanistan. Results from a total of five studies using these and other data are presented here. The studies all looked at veterans as a percentage of the general population compared to veterans as a percentage of the homeless population and determined the likelihood of veterans to be homeless compared to non-veterans. The data in each of the studies relied on samples of homeless individuals, and adjustments were made for such factors as age and race. In each of the studies, both male and female veterans were more likely to be homeless than their nonveteran counterparts. This was not always the case, however. Although veterans have always been present among the homeless population, the studies from the 1980s and 1990s found that cohorts serving in the Vietnam and post-Vietnam eras were overrepresented while veterans of World War II and Korea were less likely to be homeless than their nonveteran counterparts. The VA study using 2009 HMIS data also found that Vietnam and post-Vietnam veterans were overrepresented. Two earlier national studies—one published in 1994 using data from the 1987 Urban Institute survey (as well as data from surveys in Los Angeles, Baltimore, and Chicago), and the other published in 2001 using data from the 1996 NSHAPC—found that male veterans were overrepresented in the homeless population. In addition, researchers in both studies determined that the likelihood of homelessness depended on the ages of veterans. During both periods of time, the odds of a veteran being homeless were highest for veterans who had enlisted after the military transitioned to an all-volunteer force (AVF) in 1973. These veterans were age 20-34 at the time of the first study, and age 35-44 at the time of the second study. In the first study, researchers found that 41% of adult homeless men were veterans, compared to just under 34% of adult males in the general population. Overall, male veterans were 1.4 times as likely to be homeless as nonveterans. Notably, though, veterans who served after the Vietnam War were four times more likely to be homeless than nonveterans in the same age group. Vietnam era veterans, who are often thought to be the most overrepresented group of homeless veterans, were barely more likely to be homeless than nonveterans (1.01 times). (See Table 3 for a breakdown of the likelihood of homelessness based on age.) In the second study, researchers found that nearly 33% of adult homeless men were veterans, compared to 28% of males in the general population. Once again, the likelihood of homelessness differed among age groups. Overall, male veterans were 1.25 times more likely to be homeless than nonveterans. However, the same post-Vietnam cohort as that in the 1994 study was most at risk of homelessness; those veterans in the cohort were more than three times as likely to be homeless as nonveterans in the same cohort. Younger veterans, those age 20-34 in 1996, were two times as likely to be homeless as nonveterans. And Vietnam era veterans were approximately 1.4 times as likely to be homeless as their nonveteran counterparts. (See Table 3 .) The study produced by the VA using 2009 HMIS data from seven jurisdictions similarly found higher rates of homelessness for male veterans than their presence in the general population would indicate (13.6% of homeless adult men were veterans compared to 13.4% of the general population), and that they were 1.3 times more likely to be homeless than males generally. In addition, the study noted similar cohort effects to the earlier research. Veterans age 45-54, those who served in the early years of the AVF, were generally at a higher risk of homelessness compared to male veterans in other cohorts—African American veterans age 45-54 were 1.4 times more likely to be homeless, and non-Black veterans were 2.0 times as likely to be homeless as their nonveteran counterparts. Table 3 contains results from the VA study, broken down by age, race, and gender. As with male veterans, research has shown that women veterans are more likely to be homeless than women who are not veterans. A study published in 2003 examined two data sources, one a survey of mentally ill homeless women, and the other the NSHAPC, and found that 4.4% and 3.1% of homeless persons surveyed were female veterans, respectively (compared to approximately 1.3% of the general population). Although the likelihood of homelessness was different for each of the two surveyed populations, the study estimated that female veterans were between two and four times as likely to be homeless as their nonveteran counterparts. Unlike male veterans, all birth cohorts were more likely to be homeless than nonveterans. However, with the exception of women veterans age 35-55 (representing the post-Vietnam era), who were between approximately 3.5 and 4.0 times as likely to be homeless as nonveterans, cohort data were not consistent between the two surveys. (See Table 3 for a breakdown of likelihood of homelessness by cohort.) The VA study that used 2009 HMIS data to determine the likelihood of homelessness among veterans contains more detailed data on women veterans, including risk of homelessness broken down by age and race (Black and non-Black). All women veterans, regardless of age or race, face an increased risk of homelessness, according to the study. Overall, women veterans are 2.1 times more likely to be homeless than their nonveteran counterparts. While women veterans of older ages were more likely to be homeless than their age-group counterparts, researchers found that, in general, younger women veterans, especially African American women, were more likely to be homeless than older women veterans. While data collection regarding the number and prevalence of veterans in the homeless population has improved, information about why homeless veterans are more likely to be homeless than nonveterans has been less investigated. The recent VA report about the risk and prevalence of homelessness among veterans noted that [t]he presence of additional risk for homelessness specifically associated with Veteran status is puzzling in that it occurs among a population that shows better outcomes on almost all socioeconomic measures and that has exclusive access to an extensive system of benefits that include comprehensive healthcare services, disability and pension assistance, and homeless services. Explanations to account for this risk go beyond the basic demographic factors explained here, and underscore the need for identifying other correlates of homelessness among the Veteran population as the basis for prevention efforts. Until recently, most of the evidence about factors associated with homelessness among veterans came from The National Vietnam Veterans Readjustment Study (NVVRS), conducted from 1984 to 1988, and did not include veterans of the wars in Afghanistan and Iraq. However, in 2013 researchers from the VA released an examination of risk factors for homelessness among veterans separated from service between July 1, 2005, and September 30, 2006. The first two subsections below discuss the findings from the 2005-2006 separation data and NVVRS data. The third subsection specifically addresses Post Traumatic Stress Disorder (PTSD) as a risk factor. The VA examined outcomes of 310,685 veterans aged 17 to 64 who were separated from the military in 2005 and 2006, did not have evidence of a homeless episode in Department of Defense (DOD) or VA records, and who used DOD or VA services after separation. The sample included those in the Reserves and National Guard who did not serve on active duty. In a five-year period, 1.8% of veterans in the sample experienced a homeless episode (indicated either by lack of stable housing or receiving homeless services from the VA). Researchers broke down risk factors for homelessness by gender and whether veterans had served as part of Operation Enduring Freedom (OEF) in Afghanistan and Operation Iraqi Freedom (OIF) in Iraq. Following is a list of a number of factors that had a statistically significant relationship to homelessness for at least one of the four groups (OEF/OIF male veterans, OEF/OIF female veterans, non-OEF/OIF male veterans, and non-OEF/OIF female veterans). Military Pay Grade: There was a statistically significant relationship between pay grade and risk of homelessness for all categories of veterans, male and female with and without OEF/OIF service; those in the lowest pay grades were at greater risk of homelessness than those in higher pay grades. Active Duty Service: OEF/OIF male and female veterans who were in the Reserves or National Guard had a reduced risk of homelessness compared to those who served on active duty. Traumatic Brain Injury increased the risk of homelessness for male non-OEF/OIF veterans. Psychotic Disorders 48 and Substance Use increased the risk of homelessness for all four veteran categories. Adjustment Disorders and Mood Disorders increased the risk of homelessness for both categories of male veterans (those with and without OEF/OIF service) and non-OEF/OIF female veterans. Anxiety Disorders increased the risk of homelessness among non-OEF/OIF male veterans, while Personality Disorders increased risk for male veterans in both categories. Post-Traumatic Stress Disorder increased the risk of homelessness for male and female OEF/OIF veterans. Researchers for the NVVRS surveyed 1,600 Vietnam theater veterans (those serving in Vietnam, Cambodia, or Laos) and 730 Vietnam era veterans (who did not serve in the theater) to determine their mental health status and their ability to readjust to civilian life. The NVVRS did not specifically analyze homelessness. However, a later study, published in 1994, used data from the NVVRS to examine homelessness specifically. Findings from both studies are discussed below. The 1994 study of Vietnam era veterans (hereinafter referred to as the Rosenheck/Fontana study) evaluated 18 variables that could be associated with homelessness. The study categorized each variable in one of four groups according to when they occurred in the veteran's life: pre-military, military, the one-year readjustment period, and the post-military period subsequent to readjustment. Variables from each time period were found to be associated with homelessness, although their effects varied. The two military factors—combat exposure and participation in atrocities—did not have a direct relationship to homelessness. However, those two factors did contribute to (1) low levels of social support upon returning home, (2) psychiatric disorders (not including Post Traumatic Stress Disorder (PTSD)), (3) substance use disorders, and (4) being unmarried (including separation and divorce). Each of these four post-military variables, in turn, contributed directly to homelessness. In fact, social isolation, measured by low levels of support in the first year after discharge from military service, together with the status of being unmarried, had the strongest association with homelessness of the 18 factors examined in the study. According to the Rosenheck/Fontana study, factors that predate military service also play a role in homelessness among veterans. It found that three variables present in the lives of veterans before they joined the military had a significant direct relationship to homelessness. These were exposure to physical or sexual abuse prior to age 18; exposure to other traumatic experiences, such as experiencing a serious accident or natural disaster, or seeing someone killed; and placement in foster care prior to age 16. The researchers also found that a history of conduct disorder had a substantial indirect effect on homelessness. Conduct disorder includes behaviors such as being suspended or expelled from school, involvement with law enforcement, or having poor academic performance. Another pre-military variable that might contribute to homelessness among veterans is a lack of family support prior to enlistment. The conditions present in the lives of veterans prior to military service, and the growth of homelessness among veterans, have been tied to the institution of the all volunteer force (AVF) in 1973. As discussed earlier in this report, the overrepresentation of veterans in the homeless population is most prevalent in the birth cohort that joined the military after the Vietnam War. It is possible that higher rates of homelessness among these veterans are due to "lowered recruitment standards during periods where military service was not held in high regard." Individuals who joined the military during the time after the implementation of the AVF might have been more likely to have characteristics that are risk factors for homelessness. Findings on the relationship between PTSD and homelessness depend on both the sample and time period of service. Among the group of veterans separated from the military in 2005 and 2006 who were included in the VA analysis, post-traumatic stress disorder increased the risk of homelessness among male and female veterans who served in OEF/OIF. However, there was not an increased risk among veterans, male or female, who did not serve in OEF/OIF. The Rosenheck/Fontana study "found no unique association between combat-related PTSD and homelessness." However, the NVVRS found that PTSD was significantly related to other psychiatric disorders, substance abuse, problems in interpersonal relationships, and unemployment. These conditions can lead to readjustment difficulties and are considered risk factors for homelessness. The federal response to the needs of homeless veterans, like the federal response to homelessness generally, began in the late 1980s. Congress, aware of the data showing that veterans were disproportionately represented among homeless persons, began to hold hearings and enact legislation in the late 1980s. Among the programs enacted were Health Care for Homeless Veterans, Domiciliary Care for Homeless Veterans, and the Homeless Veterans Reintegration Program. Also around this time, the first national group dedicated to the cause of homeless veterans, the National Coalition for Homeless Veterans, was founded by service providers that were concerned about the growing number of homeless veterans. While homeless veterans are eligible for and receive services through programs that are not designed specifically for homeless veterans, the VA funds multiple programs to serve homeless veterans. The majority of homeless programs are run through the Veterans Health Administration (VHA), which administers health care programs for veterans. The Veterans Benefits Administration (VBA), which is responsible for compensation and pensions, education assistance, home loan guarantees, and insurance, operates one program for homeless veterans. In addition, the Department of Labor (DOL) is responsible for programs that provide employment services for homeless veterans while the Department of Housing and Urban Development (HUD) collaborates with the VA on two additional programs. Many of these programs are summarized in this section. The majority of programs that serve homeless veterans are part of the Veterans Health Administration (VHA), one of the three major organizations within the VA (the other two are the Veterans Benefits Administration (VBA) and the National Cemetery Administration). The VHA operates hospitals and outpatient clinics across the country through 21 Veterans Integrated Service Networks (VISNs). Each VISN oversees between 5 and 11 VA hospitals as well as outpatient clinics, nursing homes, and domiciliary care facilities. Many services for homeless veterans are provided in these facilities. In addition, the VBA has made efforts to coordinate with the VHA regarding homeless veterans by placing Homeless Veteran Outreach Coordinators (HVOCs) in its offices in order to assist homeless veterans in their applications for benefits. The first federal program to specifically address the needs of homeless veterans, Health Care for Homeless Veterans (HCHV), was initially called the Homeless Chronically Mentally Ill veterans program. The program was created as part of an emergency appropriations act for FY1987 ( P.L. 100-6 ) in which Congress allocated $5 million to the VA to provide medical and psychiatric care in community-based facilities to homeless veterans suffering from mental illness. The law was amended in 2012 so that all homeless veterans, whether suffering from mental illness or not, are eligible for the program ( P.L. 112-154 ). Through the HCHV program, VA medical center staff conduct outreach to homeless veterans, provide care and treatment for medical, psychiatric, and substance use disorders, and refer veterans to other needed supportive services. Although P.L. 100-6 provided priority for veterans whose illnesses were service-connected, veterans with non-service-connected disabilities were also made eligible for the program. Within two months of the program's enactment, 43 VA Medical Centers had initiated programs to find and assist mentally ill homeless veterans. Currently, about 132 VA sites have implemented HCHV programs. The HCHV program is authorized through FY2016. The HCHV program itself does not provide housing for veterans who receive services. However, the VA was initially authorized to enter into contracts with non-VA service providers to place veterans in residential treatment facilities so that they would have a place to stay while receiving treatment. In FY2003, the VA shifted funding from contracts with residential treatment facilities to the VA Grant and Per Diem program (described later in this section). Local funding for residential treatment facilities continues to be provided by some VA medical center locations, however. According to data from the VA, in FY2014 there were 4,061 beds available and 15,696 veterans stayed an average of 73 days. The HCHV program as a whole served approximately 185,949 veterans in that same year. Domiciliary care consists of rehabilitative services for physically and mentally ill or aged veterans who need assistance, but are not in need of the level of care offered by hospitals and nursing homes. Congress first provided funds for the Domiciliary Care program for homeless veterans (DCHV) in 1987 through a supplemental appropriations act ( P.L. 100-71 ). Prior to enactment of P.L. 100-71 , domiciliary care for veterans generally (now often referred to as Residential Rehabilitation and Treatment programs) had existed since the 1860s. The program for homeless veterans was implemented to reduce the use of more expensive inpatient treatment, improve health status, and reduce the likelihood of homelessness through employment and other assistance. Congress has appropriated funds for the DCHV program since its inception. The DCHV program operates at 45 VA medical centers and has 2,367 beds available. In FY2013, the number of veterans completing treatment was 7,177 with an average length of stay of about three months. Veterans received medical, psychiatric, and substance abuse treatment, as well as vocational rehabilitation during their time in the DCHV program. The Compensated Work Therapy (CWT) Program has existed at the VA in some form since the 1930s. The program was authorized in P.L. 87-574 as "Therapeutic and Rehabilitative Activities," and was substantially amended in P.L. 94-581 , an act that amended various aspects of veteran health care programs. The CWT program is permanently authorized through the VA's Special Therapeutic and Rehabilitation Activities Fund. The goal of the CWT program is to give veterans with disabilities work experience and skills so that they may re-enter the workforce and maintain employment on their own. The VA either employs veterans directly (in FY2012, nearly 49% of veterans in the CWT program worked for the VA), finds work for veterans at other federal agencies, or enters into contracts with private companies or nonprofit organizations that then provide veterans with work opportunities. Veterans must be paid wages commensurate with those wages in the community for similar work, and through the experience the goal is that participants will improve their chances of living independently and reaching self-sufficiency. In 2003, the Veterans Health Care, Capital Asset, and Business Improvement Act ( P.L. 108-170 ) added work skills training, employment support services, and job development and placement services to the activities authorized by the CWT program. In 1991, as part of P.L. 102-54 , the Veterans Housing, Memorial Affairs, and Technical Amendments Act, Congress added the Therapeutic Transitional Housing component to the CWT program. The housing component is authorized through FY2016. The purpose of the program is to provide housing to participants in the CWT program who have mental illnesses or chronic substance use disorders and who are homeless or at risk of homelessness. Although the law initially provided that both the VA itself or private nonprofit organizations, through contracts with the VA, could operate housing, the law was subsequently changed so that only the VA now owns and operates housing. The housing is transitional—up to 12 months—and veterans who reside there receive supportive services. As of FY2013, the VA operated 42 transitional housing facilities with 579 beds. During that same year, 1,056 veterans completed treatment with an average stay of five months. In FY2012, 17,407 veterans were admitted into the CWT program, 55% of whom were homeless. Similar to those veterans who enter into the VA's Health Care for Homeless Veterans and Domiciliary Care for Homeless Veterans programs, large percentages of veterans engaged in the CWT program in FY2012 suffered from serious mental illness and substance use disorders. Of those admitted to the CWT program, 62% of veterans had a substance use disorder, 63% had serious mental illness, and nearly 41% were dually diagnosed (i.e., had both a substance use disorder and mental illness). In addition, 79% of participants were found to have a disabling medical condition, with nearly all participants (97%) having a psychiatric disorder or disabling medical condition or both. Initially called the Comprehensive Service Programs, the Grant and Per Diem program was introduced as a pilot program in 1992 through the Homeless Veterans Comprehensive Services Act ( P.L. 102-590 ). The law establishing the Grant and Per Diem program, which was made permanent in the Homeless Veterans Comprehensive Services Act of 2001 ( P.L. 107-95 ), authorizes the VA to make grants to public entities or private nonprofit organizations to provide services and transitional housing to homeless veterans. The Grant and Per Diem program is authorized at $250 million for FY2015 and each fiscal year thereafter ( P.L. 113-175 ). Prior to 2011, the program had been permanently authorized at $150 million per year ( P.L. 110-387 ). However, Congress increased the authorization level in subsequent years to comport with amounts that the VA estimated were needed for the program in each of these fiscal years. The program has two parts: grant and per diem. Eligible grant recipients may apply for funding for one or both parts. The grants portion provides capital grants to acquire, construct, expand, or remodel facilities so that they are suitable for use as either service centers or transitional housing facilities. The capital grants will fund up to 65% of the costs of acquisition, construction, expansion, or remodeling of facilities. Grants may also be used to procure vans for outreach and transportation of homeless veterans. The per diem portion of the program reimburses grant recipients for the costs of providing housing and supportive services to homeless veterans. The supportive services that grantees may provide include outreach activities, food and nutrition services, health care, mental health services, substance abuse counseling, case management, child care, assistance in obtaining housing, employment counseling, job training and placement services, and transportation assistance. Organizations may apply for per diem funds alone (without capital grant funds), as long as they would be eligible to apply for and receive capital grants. As part of the FY2012 Grant and Per Diem application process, the VA encouraged providers to enter into a new arrangement with veterans called "transition in place." Rather than dedicating transitional housing to homeless veterans who move on after 24 months, under the transition in place concept, providers own or lease apartments that are used by eligible veterans, with the idea that veterans remain there and take over the lease once the transition period ends. The VA awarded grants to 31 organizations that plan to use the transition in place model. The per diem portion of the Grant and Per Diem program pays organizations for the housing and services that they provide to veterans at a fixed dollar rate for each bed that is occupied. Organizations apply to be reimbursed for the cost of care provided, not to exceed the current per diem rate for domiciliary care. The per diem rate increases periodically; the FY2014 rate was $43.32 per day. The per diem portion of the program also compensates grant recipients for the services they provide to veterans at service centers. Grantee organizations are paid at an hourly rate of one-eighth of either the cost of services or the domiciliary care per diem rate. Any per diem payments are offset by other funds that the grant recipient receives, so the per diem program can be thought of as a payer of last resort, covering expenses after grantees have used funds from other sources. The Advisory Committee on Homeless Veterans recommended that the per diem reimbursement system be revised to take account of service costs and geographic disparities instead of using a capped rate, and to allow use of other funds (such as those authorized under the McKinney-Vento Homeless Assistance Grants) without offset. The Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 ( P.L. 112-154 ) directed VA to study the per diem payment method, and develop "more effective and efficient procedures" for grantees' fiscal control and fund accounting, as well as for adequately reimbursing grantees that provide services to homeless veterans. The VA issued a report to Congress in October 2013. The report analyzed current per diem rates and recommended that an "alternate methodology be developed in establishing the annual maximum per diem rate so that it is commensurate with the cost of care to providers." However, the report did not recommend tying reimbursement to geographic areas, noting that some areas receiving the maximum reimbursement rate are not necessarily high-cost areas, and that reimbursement rates may depend on a provider's ability to access other sources of funding. According to VA data, more than 650 Grant and Per Diem programs were funded in FY2013. These providers had more than 15,500 beds available for veterans and discharged 23,039 veterans during the fiscal year with an average length of stay of 188 days (approximately six months). The maximum amount of time a veteran may remain in housing is 24 months, with three total stays, though clients may stay longer "if permanent housing for the veteran has not been located or if the veteran requires additional time to prepare for independent living." Of those discharged, 60% moved to permanent housing, and 25% had full- or part-time employment. In 2001, Congress created a demonstration program to target grant and per diem funds to specific groups of veterans ( P.L. 107-95 ). The groups initially included women, women with children, frail elderly veterans, veterans with terminal illnesses, and those with chronic mental illnesses. Later, male veterans with children were added as part of the Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012 ( P.L. 112-154 ). The program was most recently authorized at $5 million per year through FY2016 as part of the Department of Veterans Affairs Expiring Authorities Act of 2015 ( P.L. 114-58 ). In the 110 th Congress, the Veterans' Mental Health and Other Care Improvements Act of 2008 ( P.L. 110-387 ) authorized a program of supportive services to assist very low-income veterans and their families who either are residing in permanent housing, making the transition from homelessness to housing (sometimes called rapid rehousing), or who are moving from one location to another. Entities eligible for funds are private nonprofit organizations and consumer cooperatives, and funds are made available through a competitive process. Organizations that assist families transitioning from homelessness to permanent housing are given priority for funding under the law. Among the eligible services that recipient organizations may provide are outreach; case management; assistance with rent, utility, and moving costs; and help applying for VA and mainstream benefits such as health care services, daily living services, financial planning, transportation, legal assistance, child care, and housing counseling. Most recently, the program was authorized at $300 million through FY2015 as part of the Department of Veterans Affairs Expiring Authorities Act of 2015 ( P.L. 114-58 ). Since the Supportive Services for Veteran Families (SSVF) program was enacted, the VA has awarded grants available for use from FY2011 through FY2016 for a total of more than $1.3 million to grantees in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and Guam. In FY2012 and FY2013, the SSVF program served more than 59,000 veterans and their family members (totaling nearly 98,000 people and 61,000 households). The majority of households (39,000) received rapid rehousing assistance, with 23,000 households receiving assistance for homelessness prevention. The VA allowed grantees to use 50% of funding for temporary financial assistance for veteran families. The majority of financial assistance in each year went for rental assistance (57% and 61%). The Homeless Veterans Comprehensive Assistance Act of 2001 ( P.L. 107-95 ) provided that dental care for certain homeless veterans shall be considered medically necessary (and therefore provided by the VA) if needed to gain employment, relieve pain, or treat certain conditions. Veterans are eligible if they are receiving care in the Domiciliary Care for Homeless Veterans program, the Compensated Work Therapy Transitional Housing program, in Community Residential Care Facilities, or in a Grant and Per Diem program. Congress authorized dental care based on surveys of VA staff and community providers as part of the VA CHALENG report indicating that dental care was one of homeless veterans' greatest unmet needs. The law governing Enhanced Use Leases (EULs), long a method for the VA to make productive use of underutilized real property, was changed in 2012 to make homeless veterans and veterans at risk of homelessness the sole beneficiaries of the program. Prior to 2012, and beginning in 1991, Congress gave the VA the authority to enter into EULs with outside developers to improve, maintain, and make use of VA property for a period of time. The arrangement was made possible as part of the Veterans' Benefits Programs Improvement Act ( P.L. 102-86 ). Until 2012, the VA was able to enter into any lease that furthered the mission of the VA and enhanced the use of the property or that would result in the improvement of medical care and services to veterans in the geographic area. The maximum lease term was 75 years, and the VA was to charge "fair consideration" for the lease, including in-kind payment. While EULs involved non-housing purposes (e.g., child care centers, golf courses, and parking facilities), a number of the EULs awarded prior to 2012 involved housing for homeless veterans. In 2012, as part of the Honoring America's Veterans and Caring for Camp Lejeune Families Act ( P.L. 112-154 ), Congress limited the circumstances under which the VA may enter into EULs to "the provision of supportive housing." Supportive housing is defined as housing combined with supportive services for veterans or their families who are homeless or at risk of homelessness. Among the types of housing that qualify are transitional, permanent, and single room occupancy housing, congregate living, independent living, or assisted living facilities. Leases that were entered into prior to January 1, 2012, will be subject to the law as it existed previously. While the VA does not have to receive consideration for an EUL under the amended law, if it does receive consideration, it may only be "cash at fair value," and not in-kind payment. Each year, the VA is to release a report about the consideration received for EULs. Even prior to enactment of P.L. 112-154 , the VA had made a commitment to use the EUL process to benefit homeless veterans through the Building Utilization Review and Repurposing (BURR) Initiative, the purpose of which is to provide housing for homeless veterans by identifying underutilized VA properties. The VA identified 34 properties suitable for use as transitional or permanent housing for homeless veterans in which it will enter into EULs. The Acquired Property Sales for Homeless Veterans program is operated through the Veterans Benefits Administration (VBA). The program was enacted as part of the Veterans' Home Loan Program Improvements and Property Rehabilitation Act of 1987 ( P.L. 100-198 ). The current version of the program was authorized in P.L. 102-54 (a bill to amend Title 38 of the U.S. Code), and is authorized through FY2016. Through the program, the VA is able to dispose of properties that it has acquired through foreclosures on its loans so that they can be used for the benefit of homeless veterans. Specifically, the VA can sell, lease, lease with the option to buy, or donate, properties to nonprofit organizations and state government agencies that will use the property only as homeless shelters primarily for veterans and their families. The HUD-VA Supported Housing (HUD-VASH) program began in 1992 as a collaboration between the VA and HUD whereby HUD provided housing to homeless veterans through a set-aside of tenant-based Section 8 vouchers and the VA provided supportive services. (Section 8 vouchers are a portable housing subsidy where tenants find rental housing on the private market and HUD pays a portion of their rent.) The program targeted veterans with severe psychiatric or substance use disorders and distributed approximately 1,753 Section 8 vouchers to veterans over three years. Through the program, local Public Housing Authorities (PHAs) administered the Section 8 vouchers while local VA medical centers provided case management and clinical services to participating veterans. After the initial voucher distributions, no new vouchers were made available to homeless veterans for approximately 15 years—until FY2008—when HUD-VASH was revived by Congress. This section of the report discusses the program's progression. HUD initially distributed Section 8 vouchers to PHAs through three competitions, in 1992, 1993, and 1994. Prior to issuing the vouchers, HUD and the VA had identified medical centers with Domiciliary Care and Health Care for Homeless Veterans programs that were best suited to providing services. PHAs within the geographic areas of the VA medical centers were invited to apply for vouchers. In the first year that HUD issued vouchers, 19 PHAs were eligible to apply, and by the third year the list of eligible VA medical centers and PHAs had expanded to 87. HUD has not separately tracked these Section 8 vouchers, and, over the years, when veterans have left the program and returned their vouchers to PHAs, the vouchers have not necessarily been turned over to other veterans. In 2001, Congress codified the HUD-VASH program ( P.L. 107-95 ) and authorized the creation of an additional 500 vouchers for each year from FY2003 through FY2006. A bill enacted at the end of the 109 th Congress ( P.L. 109-461 ) also provided the authorization for additional HUD-VASH vouchers. However, it was not until FY2008 that Congress provided funding for additional vouchers. The FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) included $75 million to fund Section 8 vouchers for homeless veterans for one year (after the first year, funding for the vouchers is absorbed into the tenant-based Section 8 account). Congress continued to fund new vouchers in each year from FY2009 through FY2015 as well, appropriating $75 million each of those years except FY2011, when $50 million was appropriated. Language in each of the appropriations acts specifies that the VA and HUD determine the allocation of vouchers based on geographic need as determined by the VA, PHA administrative performance, and other factors that HUD and the VA may specify. In a notice dated March 23, 2012, HUD reported three data sources that the two agencies rely on in distributing vouchers: (1) HUD point-in-time estimates of veteran homelessness, (2) VA medical center data on contacts with homeless veterans, and (3) performance data from local Public Housing Authorities and VA medical centers. The appropriations laws for HUD-VASH allow HUD to waive any statutory or regulatory provision regarding the vouchers if it is necessary for the "effective delivery and administration" of assistance. Pursuant to this provision, in the notice implementing the HUD-VASH program, HUD waived the statutory requirement that vouchers be made available only to veterans with mental illnesses and substance use disorders. In administering the vouchers, local VA medical centers determine veteran eligibility for the program and veterans are then referred to partnering PHAs. The PHAs review applicants only for income eligibility and to ensure that they are not subject to lifetime sex offender registration. The VA provides case management and services to participating veterans. The VA may also contract with state or local government agencies, tribal organizations, or nonprofits to help veterans find suitable housing and supportive services. The contract between the VA and the outside service provider may occur in circumstances where (1) there is a shortage of affordable rental housing and a veteran needs more assistance than the VA can provide, (2) a veteran does not live near a local VA facility and it is impractical for the VA to provide assistance, or (3) veterans in the area have lower than average success in obtaining housing when compared to veterans participating in HUD-VASH overall. For the number of new vouchers funded in each fiscal year, see Table 5 . HUD allows PHAs to project base their HUD-VASH vouchers. When vouchers are project based, they are attached to a specific unit of housing and do not move when the tenant moves. This may be desirable in housing markets where it is difficult to find housing providers who accept vouchers, and it may be a more efficient arrangement for providing supportive services. Initially, HUD limited the number of project-based vouchers to 50% of a PHA's total VASH allocation, but on September 15, 2011, HUD released a notice removing the 50% limit. However, PHAs must still adhere to the requirements that the funding allocated for project-based vouchers does not exceed 20% of the PHA's total tenant-based voucher budget (for all vouchers, not just those used by veterans), and that the local VA medical center must agree to the plan. If a veteran lives in a unit where HUD-VASH vouchers have been project based and wants to move, the PHA must provide the tenant with a Section 8 voucher or other tenant-based assistance. HUD has set aside project-based vouchers in five fiscal years: FY2010, FY2011, FY2013, FY2014, and FY2015. In each case, the vouchers were awarded competitively. In FY2010, 676 vouchers were awarded to PHAs in 18 states. Another three PHAs that had applied for vouchers from the FY2010 appropriation received 99 vouchers funded through the FY2011 allocation. In FY2013 956 vouchers were awarded to PHAs in 16 states, in FY2014 730 vouchers to PHAs in 15 states, and in FY2015, 821 vouchers were awarded to PHAs in 15 states. In the FY2015 Consolidated and Further Continuing Appropriations Act ( P.L. 113-235 ), Congress directed that a portion of funds be used to support a demonstration program for Native American veterans living on or near reservations or Indian areas. Veterans who are homeless or at risk of homelessness are eligible for rental assistance and supportive services. The demonstration program addresses the fact that Indian tribes are not eligible to administer Section 8 vouchers and have not participated in HUD-VASH. The appropriations language provides that the funds for rental assistance are to be administered by Indian tribes and Alaska Native villages that are eligible to receive block grants pursuant to the Native American Housing Assistance and Self-Determination Act (NAHASDA). On October 21, 2015, HUD released a notice setting out program requirements and the application process for vouchers. As part of the FY2009 Omnibus Appropriations Act ( P.L. 111-8 ), Congress appropriated $10 million through the HUD Homeless Assistance Grants account to be used for a pilot program to prevent homelessness among veterans. The appropriation law required that the program be operated in a limited number of sites, at least three of which were to have a large number of individuals transitioning from military to civilian life, and at least four of which were to be in rural areas. In July 2010, HUD issued a notice of implementation of the new demonstration program. HUD, in consultation with the VA and DOL, selected five geographic areas in which local Continuums of Care (CoCs) would assign a grantee to carry out the prevention program. CoCs are planning entities formed at the local level to determine how the community will address homelessness. The areas were chosen based on the number of homeless veterans reported by the local CoC and VA Medical Center, the number of Operation Iraqi Freedom and Operation Enduring Freedom veterans accessing VA health care, the presence and diversity of military sites in the area (e.g., representation of different branches of the military, National Guard, and Reserves), availability of VA health care, type of geographic area (urban versus rural), and the community's capacity to administer the prevention program. The five areas and corresponding military bases selected were (1) San Diego, CA (Camp Pendleton); (2) Killeen, TX (Fort Hood); (3) Watertown, NY (Fort Drum); (4) Tacoma, WA (Joint Base Lewis-McChord); and (5) Tampa, FL (MacDill Air Force Base). The prevention program operates much like the Homelessness Prevention and Rapid Re-Housing Program that was created as part of the American Recovery and Reinvestment Act ( P.L. 111-5 ). Funds may be used for short-term rental assistance (up to three months) or medium-term rental assistance (4-18 months), for up to six months of rental arrears, for security or utility deposits, utility payments, and help with moving expenses. Recipients may also use funds for supportive services that help veterans and their families find and maintain housing such as case management, housing search and placement, credit repair, child care, and transportation. To be eligible, veterans and their families must meet the following criteria: have income at or below 50% of the area median income; be experiencing short-term homelessness or be at risk of losing housing; lack the resources or support networks to obtain housing or remain housed; and be experiencing instability as evidenced by one of the following: (1) living on the street or in shelter for less than 90 days, (2) being at least one month behind in rent, (3) facing eviction within two weeks, (4) being discharged from an institution, (5) living in condemned housing, (6) being behind on utility payments by at least a month, (7) paying greater than 50% of income for housing, or (8) facing a sudden and significant loss of income. In 2013, HUD released an interim report on the Homelessness Prevention Demonstration. During the program's first year, 574 households were served at the five sites (lower than was expected). The demonstration program served a high percentage of younger veterans, with 50% between ages 25 and 44 (compared to 19% of veterans who are in this age group), and a high percentage of women veterans, 26% (compared to 8% of the veteran population). Of households served, 45% were families with children. At the time of program entry, 76% of adult participants were unemployed and 38% had no income. Of the households served, 14% were homeless at the time they entered the program, 68% were at imminent risk of losing their housing with no resources for temporary or permanent housing, and 18% were considered unstably housed (but having options for temporary housing). In the first year, 82% of households received assistance with homelessness prevention and 19% received rapid rehousing. The most common direct financial assistance provided was rental assistance, received by 85% of households. Other assistance included help with utilities (44% of households), security and utility deposits (38% of households), hotel and motel vouchers (9% of households), and moving costs (5% of households). Households also received supportive services, including outreach (18% of households), case management (98% of households), help with housing search (11% of households), and legal assistance and credit repair (each at less than 1%). The Department of Labor (DOL) contains an office specifically dedicated to the employment needs of veterans, the office of Veterans' Employment and Training Service (VETS). In addition to its program for homeless veterans—the Homeless Veterans Reintegration Program (HVRP)—VETS funds employment training programs for all veterans. These include the Veterans Workforce Investment Program and the Transition Assistance Program. Established in 1987 as part of the McKinney-Vento Homeless Assistance Act ( P.L. 100-77 ), the HVRP was authorized most recently at $50 million through FY2016 as part of the Department of Veterans Affairs Expiring Authorities Act of 2015 ( P.L. 114-58 ). In 2010, the Veterans' Benefits Act of 2010 ( P.L. 111-275 ) created a separate HVRP for women veterans and veterans with children. The program, which includes child care among its services, is authorized through FY2016 at $1 million per year. The HVRP program has two goals. The first is to assist veterans in achieving meaningful employment, and the second is to assist in the development of a service delivery system to address the problems facing homeless veterans. Eligible grantee organizations are state and local Workforce Investment Boards, local public agencies, and both for- and nonprofit organizations. Grantees receive funding for one year, with the possibility for two additional years of funding contingent on performance and fund availability. The DOL awards grants separately for urban and non-urban areas. HVRP grantee organizations provide services that include outreach, assistance in drafting a resume and preparing for interviews, job search assistance, subsidized trial employment, job training, and follow-up assistance after placement. Recipients of HVRP grants also provide supportive services not directly related to employment such as transportation, provision of assistance in finding housing, and referral for mental health treatment or substance abuse counseling. HVRP grantees often employ formerly homeless veterans to provide outreach to homeless veterans and to counsel them as they search for employment and stability. In fact, from the inception of the HVRP, it has been required that at least one employee of grantee organizations be a veteran who has experienced homelessness. In program year (PY) 2012 (from July 1, 2012, through June 30, 2013), grantees through the HVRP program served a total of 17,480 homeless veterans, of whom 11,317 (or 65%) were placed in employment. The average wage of veterans who were placed in employment was $11.22 per hour, and the average cost of placing a veteran in employment was $3,034. The Homeless Veterans Comprehensive Assistance Act of 2001 ( P.L. 107-95 ) instituted a demonstration program to provide job training and placement services to veterans leaving prison. The Veterans' Mental Health and Other Care Improvements Act of 2008 ( P.L. 110-387 ) removed the program's demonstration status, expanded the number of sites able to provide services to 12, and changed the name slightly to "Referral and Counseling Services: Veterans at Risk of Homelessness Who Are Transitioning from Certain Institutions." The program was most recently authorized through FY2016 as part of the Department of Veterans Affairs Expiring Authorities Act of 2015 ( P.L. 114-58 ). A battlefield stand down is the process in which troops are removed from danger and taken to a safe area to rest, eat, clean up, receive medical care, and generally recover from the stress and chaos of battle. Stand Downs for Homeless Veterans are modeled on the battlefield stand down and are local events, staged annually in many cities across the country, in which local Veterans Service Organizations, businesses, government entities, and other social service organizations come together for up to three days to provide similar services for homeless veterans. Items and services provided at stand downs include food, clothing, showers, haircuts, medical exams, dental care, immunizations, and, in some locations where stand downs take place for more than one day, shelter. Another important facet of stand downs, according to the National Coalition for Homeless Veterans, is the camaraderie that occurs when veterans spend time among other veterans. Although stand downs are largely supported through donations of funds, goods, and volunteer time, the DOL VETS office may award both HVRP grant recipient organizations or other organizations that would be eligible up to $10,000 to fund stand downs. Table 4 , below, shows historical funding levels for seven programs that target services to homeless veterans. Following Table 4 , Table 5 shows funding for housing provided through the HUD-VA collaboration known as HUD-VASH. HUD has funded Section 8 vouchers for homeless veterans since FY1992, but after the initial appropriation for the vouchers, HUD does not separately report the amount of funds necessary to provide rental assistance for each of the vouchers in subsequent years. Unlike programs included in Table 4 , then, it is not possible to provide annual budget authority or obligations for HUD-VASH. Table 5 contains information regarding the initial budget authority needed to support the vouchers in the first year of appropriations. On November 3, 2009, the VA announced a plan to end homelessness among veterans within five years. The VA outlined six areas of focus for the new plan in its FY2011 budget justifications: (1) outreach and education, (2) treatment, (3) prevention, (4) housing and supportive services, (5) employment and benefits, and (6) community partnerships. In the FY2011 through FY2013 budget documents, the VA laid out plans to expand existing programs and to implement two new programs, the VA-HUD pilot to prevent veteran homelessness and the SSVF program. Since FY2009, VA obligations for targeted homeless veterans programs have increased from approximately $376 million to $1.5 billion in FY2014. During the same period, healthcare obligations for homeless veterans have increased from $2.5 billion to about $4.8 billion. In October 2015, the U.S. Interagency Council on Homelessness, HUD, and the VA released guidance on what it means for a community to end veteran homelessness. There are five criteria: the community has identified all veterans experiencing homelessness; the community provides shelter immediately to any veteran experiencing unsheltered homelessness who wants it; the community only provides service-intensive transitional housing in limited circumstances; the community has capacity to assist veterans to move swiftly into permanent housing; and the community has resources, plans, and system capacity in place should any veteran become homeless or be at risk of homelessness in the future. During the last several years, estimates of homeless veterans have fallen. The most recent point-in-time count of homeless veterans, from 2015, reported not-quite 48,000 homeless veterans, a reduction of more than 25,000 since 2009. (For more information, see the section of this report entitled " Estimates of the Number of Homeless Veterans .") During this same time period, the need for permanent housing, as reported by homeless veterans and those who provide services, has also declined. The VA's annual "Community Homelessness Assessment, Local Education and Networking Groups" (CHALENG) report surveys homeless veterans, as well as government and community service providers, about the most pressing unmet needs among homeless veterans. Through FY2006, the highest priority unmet need according to all respondents in the CHALENG reports was long-term permanent housing. However, in the FY2007 report, permanent housing was the second-highest unmet need, behind child care. In FY2008 and FY2009, it fell to the fourth-highest unmet need, in FY2010, long-term housing was the ninth in the list of unmet needs for veterans, and in FY2011, it was 16 th on the list. One of the reasons that estimates of homeless veterans are declining and that the highest unmet need is no longer housing is an increasing emphasis on permanent supportive housing for veterans. The permanent supportive housing model promotes stability by ensuring that residents receive services tailored to their particular needs, including health care, counseling, employment assistance, help with financial matters, and assistance with other daily activities that might present challenges to a formerly homeless individual. Historically, homeless programs targeted to veterans did not provide permanent supportive housing (although veterans were eligible for housing through HUD's homeless programs). Instead, programs such as Grant and Per Diem offered transitional housing to help veterans become stable, find employment, and eventually transition to permanent housing. However, after leaving transitional housing, veterans competed with other needy groups—including elderly residents, persons with disabilities, and families with young children—for government assisted housing. With the advent of HUD-VASH (discussed earlier in this report), tens of thousands of units of permanent supportive housing funded through the federal government have been targeted to homeless veterans for the last seven fiscal years. Congress has appropriated $575 million for the program, an amount sufficient to fund 79,000 vouchers for one year. The additional Section 8 vouchers, as well as increased funding through VA program interventions (see Table 4 ), could be making a difference in the number of veterans experiencing homelessness. In addition to funding increases, the numbers of veterans served in VA homeless programs have increased in the years since the plan was announced, as shown in Table 6 . In the year prior to the plan's announcement, about 118,000 veterans were served in DCHV, HCHV, CWT/TR, GPD, and HUD-VASH. By FY2013, the number had increased to nearly 223,000. (Note that veterans may have been served by more than one program.) As veterans return from Operation Iraqi Freedom (OIF), Operation Enduring Freedom (OEF), and Operation New Dawn (OND), just as veterans before them, they face risks that could lead to homelessness. In FY2013, the VA reported that 14% of the more-than 260,000 veterans served in VA homeless programs were those from OIF/OEF/OND. Approximately 1.76 million OEF/OIF/OND troops have been separated from active duty and become eligible for VA health benefits since 2003. If the experiences of the Vietnam War are any indication, the risk of becoming homeless continues for many years after service. One study found that after the Vietnam War, 76% of Vietnam era combat troops and 50% of non-combat troops who eventually became homeless reported that at least 10 years passed between the time they left military service and when they became homeless. A number of studies have examined the mental health status of troops returning from Iraq and Afghanistan. According to one study of troops returning from Iraq published in the New England Journal of Medicine, between 15% and 17% screened positive for depression, generalized anxiety, and PTSD. Another study, conducted by the RAND Corporation, found that, of veterans surveyed, 14% reported screening positive for PTSD and 14% for major depression. Veterans returning from Iraq also appear to be seeking out mental health services at higher rates than veterans returning from other conflicts. Research has also found that the length and number of deployments of troops in Iraq result in greater risk of mental health problems. Access to VA health services could be a critical component of reintegration into the community for some veterans, and there is concern that returning veterans might not be aware of available VA health programs and services. The VA has multiple means of reaching out to injured veterans and veterans currently receiving treatment through the Department of Defense (DOD) to ensure that they know about VA health services and to help them make the transition from DOD to VA services. However, for some veterans, health issues, particularly mental health issues, may arise later. A study of Iraq soldiers returning from deployment found that a higher percentage of soldiers reported mental health concerns six months after returning than immediately after returning. The number and percentage of women enlisted in the military have increased since previous wars. In FY2012, approximately 14.3% of enlisted troops in the active components of the military (Army, Navy, Air Force, and Marines) were female, up from approximately 3.3% in FY1974 and 10.9% in FY1990. The number of women veterans can be expected to grow commensurately. According to the VA, there were approximately 1.2 million female veterans in 1990 (4% of the veteran population) and 1.6 million in 2000 (6%). In 2010, approximately 1.8 million veterans were women. The VA predicted that there would be 1.9 million female veterans (10% of the veteran population) in 2020. At the same time, the number of male veterans is expected to decline. Women veterans face challenges that could contribute to their risks of homelessness. A study of women veterans in the Los Angeles area compared homeless women veterans to women veterans who were housed and found that the characteristics most associated with homelessness were unemployment, having a disability, and being unmarried. Additional factors associated with homelessness were screening positive for PTSD, experiencing military sexual trauma, suffering from an anxiety disorder, and having fair or poor health. Experts have found that female veterans report incidents of sexual assault that exceed rates reported in the general population. One study of all returning OEF/OIF veterans who used VA mental and/or primary health care found that 15.1% of female veterans reported experiencing sexual assault or harassment while in the military (referred to by the VA as military sexual trauma, MST). Another study of MST among homeless veterans who were using VHA care in FY2010 found that 39.1% of homeless women veterans experienced MST. In the two studies, women veterans who had experienced military sexual trauma were more likely than other veterans to have been diagnosed with a mental health conditions. In the study of returning OEF/OIF veterans, women veterans were more likely to have been diagnosed with depressive disorders, PTSD, anxiety disorders, alcohol and substance use disorders, and adjustment disorders. In particular, the relationship between military sexual trauma and PTSD among women was stronger than it was for men. In the study of homeless veterans, women veterans who had experienced MST were more likely than women veterans without a history of MST to have depressive disorders, PTSD, substance use disorders, anxiety disorders, bipolar disorders, personality disorders, and behaviors associated with suicide. These factors can increase the difficulty with which women veterans readjust to civilian life, and could be risk factors for homelessness (see earlier discussion in this report). Women veterans are estimated to make up a relatively small, but growing, proportion of the homeless veteran population. According to the 2012 Annual Homeless Assessment Report, homeless women veterans represented 8% of veterans living in shelter. As a result, programs serving homeless veterans may not have adequate facilities for female veterans at risk of homelessness, particularly transitional housing for women and women with children. In FY2010, 4.5% of individuals placed in Grant and Per Diem programs were women while 4.9% of veterans served in the Domiciliary Care for Homeless Veterans program in FY2010 were women. The program that serves the highest percentage of female veterans is HUD-VASH; approximately 11% of veterans who have received vouchers are women. The need for assistance among younger women veterans, in particular, appears to be increasing. A report released by the VA about the risk and prevalence of homelessness among veterans noted the increased risk of homelessness among young, female veterans, and that intervention upon return from service and during the transition to civilian life could benefit this group. It is also noteworthy that child care was the highest unmet need reported by homeless veterans and service providers in four of the last five VA CHALENG reports (in the most recent CHALENG report, for FY2011, child care is the third-highest unmet need). In the 110 th Congress, the Veterans' Mental Health and Other Care Improvements Act of 2008 ( P.L. 110-387 ) added a provision to the statute governing the Domiciliary Care for Homeless Veterans program requiring the Secretary to "take appropriate actions to ensure that the domiciliary care programs of the Department are adequate, with respect to capacity and with respect to safety, to meet the needs of veterans who are women." In the 111 th Congress, the Veterans' Benefits Act of 2010 ( P.L. 111-275 ), signed into law on October 13, 2010, created an HVRP grant program specifically targeted to serve women veterans and veterans with children. The program, like HVRP, provides job training, counseling, and job placement services, but also provides child care for participants. The program is authorized through FY2016 at $1 million per year.
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The wars in Iraq and Afghanistan brought renewed attention to the needs of veterans, including the needs of homeless veterans. Researchers have found both male and female veterans to be overrepresented in the homeless population, and, as the number of veterans increased due to these conflicts, there was concern that the number of homeless veterans could rise commensurately. The 2007-2009 recession and the subsequent slow economic recovery also raised concerns that homelessness could increase among all groups, including veterans. Congress has created numerous programs that serve homeless veterans specifically, almost all of which are funded through the Veterans Health Administration of the Department of Veterans Affairs (VA). These programs provide health care and rehabilitation services for homeless veterans (the Health Care for Homeless Veterans and Domiciliary Care for Homeless Veterans programs), employment assistance (Homeless Veterans Reintegration Program—a Department of Labor program—and Compensated Work Therapy program), and transitional housing (Grant and Per Diem program) as well as supportive services (the Supportive Services for Veteran Families program). The VA also works with the Department of Housing and Urban Development (HUD) to provide permanent supportive housing to homeless veterans through the HUD-VA Supported Housing Program (HUD-VASH). In the HUD-VASH program, HUD funds rental assistance through Section 8 vouchers while the VA provides supportive services. In addition, the VA and HUD have collaborated on a homelessness prevention demonstration program. Several issues regarding veterans and homelessness have become prominent, in part because of the Iraq and Afghanistan wars. One issue is ending homelessness among veterans. In November 2009, the VA announced a plan to end homelessness within five years. Both the VA and HUD have taken steps to increase housing and services for homeless veterans. Funding for VA programs has increased in recent years (see Table 4), Congress has appropriated funds to increase available units of permanent supportive housing through the HUD-VASH program (see Table 5), and the number of veterans served in many programs has increased (see Table 6). Congress has appropriated a total of $575 million to support initial funding of HUD-VASH vouchers in each year from FY2008 through FY2015, enough to fund approximately 79,000 vouchers. Since the VA announced its plan, the HUD and VA point-in-time estimates of the number of veterans experiencing homelessness has fallen from 73,367 in 2009 to 47,725 in 2015 (see Table 1). Another issue is the concern that veterans returning from Iraq and Afghanistan who are at risk of homelessness may not receive the services they need. In addition, concerns have arisen about the needs of female veterans, whose numbers are increasing. Women veterans face challenges that could contribute to their risks of homelessness. They are more likely to have experienced sexual trauma than women in the general population and are more likely than male veterans to be single parents. Historically, few homeless programs for veterans have had the facilities to provide separate accommodations for women and women with children. In recent years, Congress and the VA have made changes to some programs in an attempt to address the needs of female veterans, including funding set-asides and efforts to expand services.
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U nder federal law, local governments are compensated through various programs due to the presence of federal lands within their borders. Federally owned lands cannot be taxed by state or local governments but may create demand for services from state or local entities, such as fire protection, police cooperation, or longer roads to skirt the property. Counties with national forest lands or certain Bureau of Land Management (BLM) lands have historically received a percentage of agency revenues, primarily from timber sales. In the 1990s, timber sales declined substantially from the historic levels in the late 1980s—by more than 90% in some areas—which had led to substantially reduced payments to the counties. Congress enacted the Secure Rural Schools and Community Self-Determination Act of 2000 (SRS) to provide a temporary, optional system to supplant the revenue-sharing programs for the national forests managed by the Forest Service (FS) in the Department of Agriculture and for certain public lands administered by the BLM in the Department of the Interior. The law authorizing these payments (SRS) originally expired at the end of FY2006 but was extended an additional nine years through several reauthorizations: The 109 th Congress considered the program, but did not enact reauthorizing legislation. The 110 th Congress extended the payments for one year through FY2007, and it then enacted legislation to reauthorize the program for four years with declining payments and to modify the formula for allocating the payments. The 112 th Congress extended the program for one more year through FY2012 and amended the program to slow the decline in payments. The 113 th Congress again approved a one-year extension, reauthorizing the program through FY2013, but did not reauthorize the program for FY2014 prior to its expiration. After FS and BLM distributed the revenue-sharing payment for FY2014, the 114 th Congress reauthorized SRS for two years (through FY2015) and required the agencies to issue the FY2014 SRS payment within 45 days of enactment. SRS expired at the end of FY2015; payments were disbursed after the fiscal year ended, so the FY2015 payment was made in FY2016. This report provides background information on FS and BLM revenue-sharing and SRS payments and describes the issues that Congress has debated and may continue to debate in the 115 th Congress. In 1908, Congress directed FS to begin paying 25% of its gross receipts to states for use on roads and schools in the counties where national forests are located. Receipts come from sales, leases, rentals, or other fees for using national forest lands or resources (e.g., timber sales, recreation fees, and communication site leases). This mandatory spending program was enacted to compensate local governments for the tax-exempt status of the national forests, but the statutory compensation rate (10% of gross receipts in 1906 and 1907; 25% of gross receipts since) was not discussed in the 1906-1908 debates. This revenue- or receipt-sharing program is called Forest Service Payments to States (also referred to as the 1908 payment, or the 25% payment). The states have no discretion in assigning the funds to the county. FS determines the amount to be allocated to each county based on the national forest acreage in each county and provides that amount to the state. The states cannot retain any of the funds; they must be passed through to local governmental entities for use at the county level (but not necessarily to county governments themselves). Each state must spend the funds on road and school programs, and state law sets forth how the payments are to be allocated between road and school projects. The state laws differ widely, generally ranging from 30% to 100% for school programs, with a few states providing substantial local discretion on the split. Congress has also enacted numerous programs to share receipts from BLM lands for various types of resource use and from various classes of land. One program—the Oregon and California (O&C) payments—accounts for more than 95% of BLM receipt-sharing. The O&C payments are made to the counties in western Oregon containing the revested Oregon and California grant lands that were returned to federal ownership for failure of the states to fulfill the terms of the grant. The O&C counties receive 50% of the receipts from these lands. These mandatory payments go directly to the counties for any local governmental purposes. Concerns about, and proposals to alter, FS revenue-sharing payments also typically include the O&C payments, because both are substantial payments derived largely from timber receipts. Timber sale revenue—and, consequently, revenue-sharing payments—peaked in the late 1980s. The FY1989 FS 25% payments totaled $362 million, while O&C payments totaled $110 million. FS and O&C receipts have declined substantially since FY1989, largely because of declines in federal timber sales (see Figure 1 ) and other factors. The decline began in the Pacific Northwest, owing to a combination of forest management policies and practices, efforts to protect northern spotted owl habitat, increased planning and procedural requirements, changing public preferences, economic and industry factors, and other developments. Provisions in the Omnibus Budget Reconciliation Act of 1993 authorized FS and BLM to make so-called owl payments to several counties in Washington, Oregon, and California. These payments were set at a declining percentage of the average revenue-sharing payments made to those counties between FY1986 and FY1990. As federal timber sales—and revenue-sharing payments—began to decline nationwide, Congress replaced the regional owl payments with the nationwide SRS program in 2000. Similar to the owl payments for the Pacific Northwest, the SRS program was an optional payment that counties could elect to receive instead of receiving the 25% receipt-sharing payment. As originally enacted, the SRS payment was calculated as an average of the three highest payments made to counties between FY1986 and FY1999. With the program extension in FY2008, the SRS payment calculation was modified to also consider county population and per capita income, and it established an annually declining payment level. Payments under SRS (see Table 1 ) were substantial and significantly greater than the receipt-sharing payments. The FS payment rose from $194 million in FY2000 (all figures in nominal dollars) to a $346 million SRS payment in FY2001. For the initial six years SRS was authorized, the average FS SRS payment was $360 million annually, more than $130 million above the average annual FS payment for the six years prior to the enactment of SRS (FY1995-FY2000). Over the life of the program, the FS SRS payments have averaged $337 million and the BLM SRS payments have averaged $78 million per year. Figure 2 shows a comparison of the FS actual payments to estimates of what the payments would have been had SRS not been enacted. To illustrate, FS receipts (for revenue-sharing purposes) in FY2012 totaled $230 million. Without SRS, the revenue-sharing payment would have been around $58 million. With SRS, the payments totaled $274 million. Similarly, BLM timber receipts from western Oregon (which includes some non-O&C lands) totaled $28 million in FY2012. Without SRS, the 50% revenue-sharing payment would have been approximately $14 million, compared to the $34 million payment under SRS. SRS expired—temporarily—on October 1, 2014. With the expiration of SRS, the FY2014 payments were again to be based on a percentage of agency receipts (the rolling seven-year average of 25% for national forest lands and of 50% for O&C lands). As nonexempt, nondefense mandatory spending, the payments were subject to the annual sequestration of budgetary authority. The post-sequester revenue-sharing payment for FS was $50 million and $18 million for BLM. These payments were distributed in February 2015. P.L. 114-10 was enacted on April 16, 2015. It included provisions for a "make-up" FY2014 SRS payment, and it authorized an FY2015 SRS payment. The FY2014 payment was set at 95% of the FY2013 payment level, but for counties that opted to receive an SRS payment, the FY2014 payment was offset by the revenue-sharing payment already distributed. In effect, the counties received their FY2014 SRS payment in two installments. The total FS SRS payment for FY2014 was $274 million; for BLM it was $38 million. Because the payments were authorized after the sequestration amount was calculated for both FY2015 and FY2016, the payments were not subject to sequestration either year. SRS expired on October 1, 2016, without congressional reauthorization. Thus, counties received revenue-sharing payments for FY2016 (issued in early 2017). The post-sequester revenue-sharing payment was $54 million for the Forest Service and $19 million for BLM (see Figure 2 ). If SRS payments had been authorized, the FS payment to counties would have been approximately $248 million and the BLM payment would have been approximately $34 million. In addition to the FS and BLM receipt-sharing programs, Congress has enacted other programs to compensate for the presence of federal land. The most widely applicable program, administered by the Department of the Interior, is the Payments in Lieu of Taxes (PILT) Program. PILT payments to counties are calculated in dollars per acre of federal land and are based on eligible federal lands, as specified in statute. The eligible lands include national forests and O&C lands in each county (but total amounts are restricted in counties with very low populations). PILT payments are reduced (to a minimum payment per acre) by other payment programs—including FS Payments to States but not including BLM's O&C payments—so increases in FS payments may decrease a county's payments under PILT (and vice versa). This helps to explain why FY2012 PILT payments to Colorado were double the PILT payments to Oregon, even though there is more federal land in Oregon (32.6 million acres) than in Colorado (23.8 million acres). Before 2008, annual appropriations were necessary to fund PILT. When the appropriations were less than the authorized total payments, each county received its calculated pro rata share of the appropriation. However, the 2008 and 2012 SRS amendments also made PILT payments mandatory spending for FY2008-FY2013, and the Agricultural Act of 2014 ( P.L. 113-79 ) extended mandatory spending to FY2014. Thus, for those fiscal years, each county received 100% of its authorized PILT payment. For FY2015 , Congress provided $439.5 million for PILT payments, 97% of the total authorized payment of $451.5 million. The FY2015 payment was provided through both mandatory spending and discretionary appropriations. For FY2016, Congress provided $452 million in discretionary appropriations ( P.L. 114-113 ) for PILT payments, 98% of the total authorized payment. For FY2017, Congress provided $465 million in discretionary appropriations ( P.L. 115-31 ) for PILT payments, which are expected to be paid in June 2017. The amount paid to counties is likely to be near the total authorized funding amount. Congress, counties receiving SRS funding, and other observers have raised three principal concerns about FS and O&C revenue-sharing programs. These are the decline in FS and O&C receipts due to the decline in timber sales, the annual uncertainty about payment amounts, and the linkage between timber revenue and county payments. A primary concern about the revenue-sharing programs is the effect of declining revenue on counties. National forest receipts (subject to sharing) declined from their peak of $1.44 billion in FY1989 to a low of $182.3 million in FY2009—a drop of 87%. In FY2015, national forest receipts totaled $254.5 million. In some local areas, the decline was steeper; for example, payments to the eastern Oregon counties containing the Ochoco National Forest fell from $10 million in FY1991 to $309,000 in FY1998—a decline of 97% in seven years. The extent of declining revenues in individual counties is varied, ranging from minimal to substantial. Some counties in Oregon, for example, have begun exploring alternative options to generating revenue to replace the loss of timber receipts and declining SRS payments. Another concern has been annual fluctuations in the payments based on revenue generated. Even in areas with modest declines or increases in recent decades, payments have varied widely from year to year. From FY1985 to FY2000, the payments from each national forest fluctuated an average of nearly 30% annually—that is, on average, a county's payment in any year was likely to be nearly 30% higher or lower than its payment the preceding year. Such wide annual fluctuations imposed serious budgeting uncertainties on the counties. A third, longer-term concern is referred to as linkage. Some observers have noted that, because the counties receive a portion of receipts, they are rewarded for advocating receipt-generating activities (principally timber sales) and for opposing management decisions that might reduce or constrain such activities (e.g., designating wilderness areas or protecting commercial, tribal, or sport fish harvests). County governments have often been allied with the timber industry, and opposed to efforts of environmental and other interest groups to reduce timber harvests, in debates over FS management and budget decisions. Timber sales as the source of funds was deemed appropriate in 1906 when the FS program was created (albeit, prior to creation of federal income taxes). Some interests support retaining the linkage between county compensation and agency receipts; local support for receipt-generating activities is seen as appropriate by these constituencies, because such activities usually also provide local employment and income, especially in rural areas where unemployment is often high. Others assert that ending the linkage is important so that local government officials can be independent in supporting whatever management decisions benefit their locality, rather than having financial incentives to support particular decisions. In 2000, Congress enacted the Secure Rural Schools and Community Self-Determination Act (SRS) after extensive debates and several different bill versions. (See Appendix B for an overview of historic proposals to change the revenue-sharing system prior to the enactment of SRS.) The act established an optional alternative payment system for FY2001-FY2006. At each county's discretion, the states with FS land and counties with O&C land received either the regular receipt-sharing payments or the SRS payment. Each county's SRS payment was calculated as 100% of the average of the three highest payments between FY1986 and FY1999. Title I of the act directed that counties receiving an SRS payment less than $100,000 under the alternative system could distribute the entire payment to roads and schools in the same manner as the 25% payments. However, counties receiving over $100,000 under the alternative system were required to spend 15%-20% of the payment on either (1) federal land projects proposed by local resource advisory committees and approved by the appropriate Secretary (Secretary of the Interior or Secretary of Agriculture) if the projects met specified criteria, including compliance with all applicable laws and regulations and with resource management and other plans (identified in Title II of the act) or (2) certain county programs (specified in Title III of the act). Funds needed to achieve the full payment were mandatory spending, and came first from agency receipts (excluding deposits to special accounts and trust funds) and then from "any amounts in the Treasury not otherwise appropriated." SRS was originally enacted as a temporary program, expiring after payments were made for FY2006. However, SRS has been reauthorized five times, extending the payments an additional nine years (see Table 2 ). The following sections describe each reauthorization process and any enacted program modifications. SRS expired at the end of FY2006, with final payments made in FY2007. Legislation to extend the program was considered in the 110 th Congress; various bills would have extended the program for one or seven years. The Emergency Supplemental Appropriations Act for FY2007 extended SRS for one year, but the bill was vetoed by President George W. Bush. However, Congress passed and the President signed a new version of the Emergency Supplemental Appropriations for FY2007 which included a one-year extension of SRS payments. P.L. 110-28 authorized payments of $100 million from receipts and $425 million from discretionary appropriations, to "be made, to the maximum extent practicable, in the same amounts, for the same purposes, and in the same manner as were made to States and counties in 2006 under that Act." Thus, preliminary FY2007 payments were made at the end of September 2007, with final payments made at the end of December 2007. In October 2008, Congress passed the Emergency Economic Stabilization Act ( P.L. 110-343 ), which extended SRS payments for four years (through FY2011) and made several changes to the program. Changes included providing "full funding" that declined over four years; altering the basis for calculating payments; providing transition payments for certain states; and modifying the use of SRS funds for Title II and Title III activities. In addition, Section 601(b) modified the original FS 25% payment program by basing the payment on the average revenue generated over the preceding seven years. These provisions are discussed in more detail below. The act defined full funding for SRS in P.L. 110-343 , Section 3(11). For FY2008, full funding was defined as $500 million; for FY2009-FY2011, full funding was 90% of the previous year's funding. However, total payments exceeded the full funding amount in the first two years: payments under SRS totaled $572.9 million in FY2008 and $612.8 million in FY2009. This occurred because the calculated payments (discussed below) are based on full funding, as defined in the bill, but the act also authorized transition payments (discussed below) in lieu of the calculated payments in eight states. Since the transition payments exceeded the calculated payments for those states, the total payments were higher than the full funding amount. SRS payments to each state (for FS lands) or county (for O&C lands) differed significantly from the payments made under the original SRS; Table A-1 shows the dollars and share of total SRS payments in each state in FY2006 and FY2009. Title I payments were based on historic revenue-sharing payments (like SRS as originally enacted), but modified based on each county's share of federal land and relative income level. The revised payment calculations required multiple steps: Step 1. Determine the three highest revenue-sharing payments between FY1986 and FY1999 for each eligible county, and calculate the average of the three. Step 2. Calculate the proportion of these payments in each county (divide each county's three-highest average [ Step 1 ] by the total of three-highest average in all eligible counties, with separate calculations for FS lands and O&C lands). Step 3. Calculate the proportion of FS and O&C lands in each eligible county (divide each county's FS and O&C acreage by the total FS and O&C acreage in all eligible counties, with separate calculations for FS lands and O&C lands). Step 4. Average these two proportions (add the payment proportion [ Step 2 ] and the acreage proportion [ Step 3 ] and divide by 2, with separate calculations for FS lands and O&C lands). This is the base share for counties with FS lands and the 50% base share for counties with O&C lands. Step 5. Calculate each county's income adjustment by dividing the per capita personal income in each county by the median per capita personal income in all eligible counties. Step 6. Adjust each county's base share [ Step 4 ] by its relative income (divide each county's base share or 50% base share by its income adjustment [ Step 5 ]). Step 7. Calculate each county's adjusted share or 50% adjusted share as the county's proportion of its base share adjusted by its relative income [ Step 6 ] from the total adjusted shares in all eligible counties (divide each county's result from Step 6 by the total for all eligible counties [FS and O&C combined]). In essence, the new formula differed from the original SRS by basing half the payments on historic revenues and half on proportion of FS and O&C land, with an adjustment based on relative county income. This was done because of the concentration of payments under the original SRS to Oregon, Washington, and California (more than 75% of payments in FY2006; see Table A-1 ). Several counties opted out of the amended SRS system, while others opted in, because of the altered allocation. For example, in FY2006 100% of the payments to Pennsylvania were under SRS, but in FY2009 only 54% of the payments to Pennsylvania were under SRS. Conversely, in FY2006 none of the payments to New Hampshire were under SRS, but in FY2009, 44% of the payments to New Hampshire were under SRS. In addition, the act set a full payment amount allocated among all counties that chose to participate in the program (eligible counties). Thus, the fewer counties that participated (i.e., the more that opted for the revenue-sharing payment programs), the more each participating county received. In lieu of the payments calculated using the formula described above, counties in eight states—California, Louisiana, Oregon, Pennsylvania, South Carolina, South Dakota, Texas, and Washington—received transition payments for three fiscal years, FY2008-FY2010. These counties were included in the calculations, but received payments of a fixed percentage of the FY2006 payments under SRS, instead of their calculated payments. The schedule in the act specified FY2008 payments equaling 90% of FY2006 payments, FY2009 payments at 81% of FY2006 payments, and FY2010 payments at 73% of FY2006 payments. Because the transition payments were higher than the calculated payments (using the multi-step formula, above), total payments were greater than the "full funding" defined in the act. As with the original SRS, the amended version allowed counties with less than $100,000 in annual payments to use 100% of the payments for roads and schools (or any governmental purpose for O&C counties). However, it modified the requirement that counties with "modest distributions" (annual payments over $100,000 but less than $350,000) use 15%-20% of the funds for Title II projects (reinvestment in federal lands). Instead, these counties could use the required 15%-20% either for Title II projects or for Title III projects (county projects). Counties with payments of more than $350,000 were limited to a maximum of 7% of the payments for Title III programs. The amendment also modified the authorized uses of Title III funds, deleting some authorized uses (e.g., community work centers) while expanding authorized uses related to community wildfire protection. In addition to extending SRS funding through FY2011, P.L. 110-343 altered the FS revenue-sharing (25% payment) program. It changed the payment from 25% of current-year gross receipts to 25% of average gross receipts over the past seven years—essentially a seven-year rolling average of receipts. This reduced the annual fluctuation and provided more stability in the payments. Thus payments increase more slowly than in the past when and where national forest receipts are rising, but decline more slowly when and where receipts are falling. This change immediately affected counties with FS land that chose not to participate in the SRS payment program and all counties with FS land in FY2016. SRS was set to expire at the end of FY2011, with final payments made at the end of December 2012 (FY2012). Legislation to extend the program for five years was considered in the 112 th Congress but not enacted. However, the Moving Ahead for Progress in the 21 st Century Act (MAP-21) contained a one-year extension for SRS. MAP-21 authorized an FY2012 SRS payment set at 95% of the FY2011 level (approximately $344 million) and included requirements for the counties to select their payment option in a timely manner. SRS was again set to expire at the end of FY2012, with final payments made in February 2013 (FY2013). In the first session of the 113 th Congress, Congress enacted the Helium Stewardship Act of 2013, which included a one-year extension of SRS through FY2013 at 95% of the FY2012 SRS payment (approximately $329 million). The payments were disbursed in early 2014. The 113 th Congress also conducted oversight on the SRS program, particularly regarding the sequestration of the FY2012 SRS payment (see Appendix C ). SRS expired after the FY2013 payments were made in early 2014. Although the 113 th Congress considered options for reauthorizing or modifying SRS for FY2014, the program was not reauthorized prior to adjournment. In April 2015, Congress passed and the President signed into law the Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ), which included a two-year reauthorization of mandatory spending for SRS payments in Section 524. Payment amounts will continue at 95% of the funding level for the preceding fiscal year. P.L. 114-10 provided that counties that elected to receive an SRS payment for FY2013 would automatically receive SRS payments for FY2014 and FY2015. The FY2014 payment was to be made within 45 days of enactment and take into account the revenue-sharing payment already disbursed to the counties. The 114 th Congress considered, but did not enact, several additional options to extend or modify the expired SRS program. Two bills have been introduced in the 115 th Congress to address SRS. Both H.R. 2340 and S. 1027 would reauthorize SRS for two years (through FY2017, with the last payment to be issued in FY2018) and would provide a make-up payment for the FY2016 SRS payment. Options under congressional consideration include reauthorizing SRS, with or without modifications, implementing other legislative proposals to address the county payments, or taking no action (thus continuing the revenue-based system that took effect upon the program's expiration). Seven issues commonly have been raised about compensating counties for the tax-exempt status of federal lands: the geographic distribution of the payments; the lands covered; the basis for compensation; the source of funds; the authorized and required uses of the payments; and the duration of the new system. In addition, any new mandatory spending in excess of the baseline that would result in an increase in the deficit may be subject to budget rules such as congressional pay-as-you-go (PAYGO) rules, which generally require budgetary offsets. Although SRS has previously been authorized as mandatory spending, Congress might consider funding the program through the regular annual discretionary appropriations process. The original SRS authorization—and most subsequent reauthorizations—have been for mandatory spending. One policy issue concerns legislation with mandatory spending that would increase federal expenditures, and whether such spending should be offset so as not to increase the deficit. Congress has enacted a set of budget rules requiring that most legislation that creates new or extends existing mandatory spending (in excess of the baseline) be balanced—offset—by increases in receipts or decreases in other spending. Congress may choose to waive or set aside these rules in particular instances, but the increased deficit spending remains a consideration. Legislation to reauthorize SRS (with or without other modifications), or to enact a different alternative, would require an offset—increased revenues or decreased spending from other mandatory spending accounts—or a waiver to the budget rules. In 2000, Congress provided such a waiver by including a specific type of provision, called a reserve fund, in the budget resolution. In 2006, to fund a six-year reauthorization of SRS, the Bush Administration proposed selling some federal lands. To fund the O&C payments, the BLM would have accelerated its land sales under Section 203 of the Federal Land Policy and Management Act of 1976 (FLPMA; 43 U.S.C. §1713). For the FS payments, estimated at $800 million, the FS would have sold approximately 300,000 acres of national forest land. This would have required legislation, as the FS currently has only very narrow authority to sell any lands. The Administration offered draft legislation to authorize these land sales, but no bill to authorize that level of national forest land sales was introduced in the 109 th Congress. Instead, Congress again included a reserve fund for SRS payments in the budget resolution. In 2007, the Bush Administration again proposed selling national forest lands to fund a phase-out of SRS payments, with half of the land sale revenues to be used for other programs (including land acquisition and conservation education). Again, no legislation to authorize national forest land sales was introduced. Another issue for Congress is the geographic allocation of the SRS and PILT payments (see Figure 3 ). Table 3 shows the payments for FY2014 that were made in FY2015. The only BLM SRS payment is made to Oregon for the O&C lands, and Oregon also receives the largest FS SRS payment. With a total SRS payment of approximately $94 million, Oregon received nearly one-third of the total SRS payments made in FY2015. The next-largest SRS payments are in California and Idaho, which both received just under 10% of the total payment that year. PILT payments are more evenly distributed, with no state receiving more than 10% of the total payments. SRS includes payments only for national forests and the O&C lands. These compensation programs provide substantial funding for the specified lands, but other federal lands that are exempt from state and local taxation receive little or nothing. The easiest comparison is with the counties that contain national grasslands, which receive 25% of net receipts and were excluded from SRS. Both forests and grasslands are part of the National Forest System, although the laws authorizing their establishment differ. However, it is unclear why national forest counties are compensated with 25% of gross receipts and were protected from declines in receipts under SRS, whereas national grassland counties are compensated with 25% of net receipts and did not receive the option of receiving SRS payments. More significantly, many other tax-exempt federal lands provide little compensation to local governments. The BLM has numerous compensation programs, but generally the payments are quite small. (The O&C payments account for about 95% of BLM compensation payments, but O&C lands are only about 1% of BLM lands.) The National Park Service has two small compensation programs related to public schooling of park employees' children at two parks. PILT provides some compensation for most federal lands, but many lands—inactive military bases, Indian trust lands, and certain wildlife refuge lands, for example—are excluded, and the national forests and O&C lands get PILT payments in addition to other compensation. In 1992, the Office of Technology Assessment recommended "fair and consistent compensation for the tax exempt status of national forest lands and activities." Congress could consider several options related to extending a compensation program to all tax-exempt federal lands, although determining a fair and consistent compensation level likely would generate significant debate. The legislative histories of the agriculture appropriations acts establishing the FS payments to states (the last of which, enacted on May 23, 1908, made the payments permanent) indicate that the intent was to substitute receipt-sharing for local property taxation, but no rationale was discussed for the level chosen (10% in 1906 and 1907; 25% in 1908 and since). Similarly, the rationale was not clearly explained or discussed for the Reagan tax-equivalency proposal, for the owl payments (a declining percent of the historical average), or for the legislation debated and enacted by the 106 th Congress (generally the average of the three highest payments during a specified historical period). The proposals' intents were generally to reduce (Reagan Administration) or increase (more recently) the payments. The geographic basis has been raised as a potential problem for FS payments. FS revenue-sharing payments (25% payments) are made to the states, but are calculated for each county with land in each national forest. Depending on the formula used—the average of selected historical payments from each national forest or to each county or each state—the calculations could result in different levels of payments in states with multiple national forests. (This is not an issue for O&C lands, because the O&C payments are made directly to the counties.) As noted above, the FS revenue-sharing payments (25% payments) are permanently appropriated from agency receipts and were established prior to federal income taxes and substantial federal oil and gas royalties. Most of the proposals for change also would establish mandatory payments; lacking a specified funding source, funds would come from the General Treasury. SRS directed payments first from receipts, then from the General Treasury. Figure 4 shows the breakdown of FS SRS funding between receipts and the General Treasury. The amount of funding that came from the Treasury fluctuated in part due to the declining full funding level but also due to fluctuations in the level offset by receipts. Critics are concerned about the continued availability of General Treasury funds, given the current fiscal climate and some Members' desire to reduce government spending. On the other hand, recipients of these funds argue that continuing Treasury funding is fair compensation for the presence of FS lands in their jurisdiction. Another concern for some is that retaining the linkage between agency receipts (e.g., from timber sales) and county payments (albeit less directly than for the 25% payments) still encourages counties to support timber sales over other FS uses. Compared to the revenue-sharing programs, SRS modified how the counties could use the payments by requiring (for counties with at least $100,000 in annual payments) that 15%-20% of the payments be used for other specified purposes: certain local governmental costs (in Title III); federal land projects recommended by local advisory committees and approved by the Secretary (under Title II); or federal land projects as determined by the Secretary (under §402). Use of the funds for federal land projects has been touted as "reinvesting" agency receipts in federal land management, but opponents argue that this "re-links" county benefits with agency receipt-generating activities and reduces funding for local schools and roads. The Forest Counties Payments Committee recommended granting local governments more flexibility in their use of the payments. The committee also recommended that the federal government prohibit the states from adjusting their education funding allocations because of the FS payments. In practice, such a prohibition could be difficult to determine and enforce. The O&C payments are available for any local governmental purpose. Other policy questions that arise from the SRS payments include (1) how often Congress should review the payment systems (these or any other county compensation programs) to assess whether they still function as intended and (2) which options, if any, Congress might consider (e.g., a sunset provision) to induce future Congresses to undertake such a review. The FS revenue-sharing payments and the O&C payments are permanently authorized. SRS was originally enacted as a six-year program that expired on September 30, 2006, but was extended an additional nine years through five separate reauthorizations. As noted earlier, SRS expired on September 30, 2015, with the final payment made in FY2016. The last three reauthorizations have been for one or two years. The annual uncertainty about the continuation and funding level of the program concerns those interested in providing a consistent and predictable payment for local governments and also may concern those interested in reviewing federal spending more broadly. Appendix A. SRS Payments in FY2006 and FY2009 As described in the text (under " Four-Year Extension Through FY2011 Enacted in the 110th Congress "), P.L. 110-343 modified the SRS payment formula to include federal acreage and relative income in each county, as well as transition payments in some states. The result was a change in the payments and the allocation of total payments in the modified formula. These changes are shown in Table 2 . Note, however, that the change in the payment formula led some counties that had chosen 25% payments for FY2006 to opt for SRS payments for FY2009, and vice versa. Some of the increase in SRS payments in FY2009 is due to more counties opting for SRS payments in some states, such as Michigan, New Hampshire, Ohio, Puerto Rico, and Wisconsin. In at least one state—Pennsylvania—a portion of the decline is due to some counties opting for 25% payments in FY2009. Appendix B. Historical Proposals to Change the Revenue-Sharing System Concerns about the FS and BLM programs have led to various proposals over the years to alter the compensation system. Most have focused on some form of tax equivalency —compensating the states and counties at roughly the same level as if the lands were privately owned and managed. Many consider this to be a valid approach for fairly and consistently compensating state and county governments. However, most also note the difficulty in developing a tax equivalency compensation system, because counties and states use a wide variety of mechanisms to tax individuals and corporations—property taxes, sales taxes, income taxes, excise taxes, severance taxes, and more. Thus, developing a single federal compensation system for the tax-exempt status of federal lands may be very difficult if not impossible. In his 1984 budget request, President Reagan proposed replacing the receipt-sharing programs with a tax equivalency system, with a guaranteed minimum payment. The counties argued that the proposal was clearly intended to reduce payments, noting that the budget request projected savings of $40.5 million (12%) under the proposal. The change was not enacted. The FY1986 FS budget request included a proposal to change the payments to 25% of net receipts (after deducting administrative costs). Legislation to effect this change was not offered. In 1993, President Clinton proposed a 10-year payment program to offset the decline in FS and O&C timber sales, and thus payments, resulting from efforts to protect various resources and values including northern spotted owls in the Pacific Northwest. Congress enacted this program in Section 13982 of the 1993 Omnibus Budget Reconciliation Act ( P.L. 103-66 ). These "owl" payments began in 1994 at 85% of the FY1986-FY1990 average payments, declining by 3 percentage points annually, to 58% in 2003, but with payments after FY1999 at the higher of either this formula or the standard payment. In his FY1999 budget request, President Clinton announced that he would propose legislation "to stabilize the payments" by extending the owl payments formula to all national forests. The proposal would have directed annual payments from "any funds in the Treasury not otherwise appropriated," at the higher of (1) the FY1997 payment, or (2) 76% of the FY1986-FY1990 average payment. This approach would have increased payments in areas with large payment declines while decreasing payments in other areas, as well as eliminating annual fluctuations in payments and de-linking the payments from receipts. The Administration's proposed legislation was not introduced in Congress. The FY2000 and FY2001 FS budget requests contained similar programs, but no legislative proposals were offered. The National Association of Counties (NACo) proposed an alternative in 1999. The NACo proposal would have provided the counties with the higher of (1) the standard payment, or (2) a replacement payment determined by the three highest consecutive annual payments for each county between FY1986 and FY1995, indexed for inflation. NACo also proposed "a long-term solution ... to allow for the appropriate, sustainable, and environmentally sensitive removal of timber from the National Forests" by establishing local advisory councils. The NACo approach would have maintained or increased the payments and might have reduced the annual fluctuations, and would likely have retained the linkage between receipts and payments in at least some areas. Appendix C. FY2013 Sequestration Issues Section 302 of the Budget Control Act (BCA) required the President to sequester, or cancel, budgetary resources for FY2013, in the event that Congress did not enact a specified deficit reduction by January 15, 2012. Congress did not enact such deficit reduction by that date, and on March 1, 2013, the Office of Management and Budget (OMB) determined the amount of the total sequestration for FY2013 to be approximately $85 billion. Under the BCA, half of the total reduction for FY2013 was allocated to defense spending, and the other half to non-defense spending. Within each half, the reductions were further allocated between discretionary appropriations and direct spending. Discretionary appropriations are defined in the BCA as budgetary resources provided in annual appropriations acts. In contrast, direct spending was defined to include budget authority provided by laws other than appropriations acts. The BCA further required OMB to calculate a uniform percentage reduction to be applied to each program, project, or activity within the direct spending category. For the direct spending category, OMB determined this percentage to be 5.1% for FY2013. Section 102(d)(3)(e) of SRS directed that payments for a fiscal year were to be made to the state as soon as practicable after the end of that fiscal year, meaning that the FY2012 payment was made in FY2013. Because the authority to make these payments is not provided in an annual appropriations act, such payments are not discretionary spending for purposes of the BCA. These payments were classified as non-defense, direct spending for purposes of sequestration. The BCA exempts a number of programs from sequestration; however, the payments under SRS were not identified in the legislation as exempt. Consequently, these payments were subject to sequestration as non-defense, direct spending. However, BLM and FS managed the sequestration of the FY2013 payments in different ways. BLM Sequestration of SRS Funds BLM issues SRS payments only for the O&C lands in Oregon. In February 2013, BLM distributed $36 million to the 18 O&C counties in Oregon for FY2012 SRS payments. However, DOI had held back 10% of the scheduled payments across all three titles in anticipation of the possibility of sequestration. The reduction to DOI's SRS program required by sequestration was 5.1% of the total payment, or $2.0 million. Since the sequestered amount was less than the amount withheld, DOI-BLM owed an additional SRS payment for the difference. In May 2013, BLM distributed the remaining 4.9% of the payment, resulting in a total of $38 million for the SRS payment to the O&C counties for FY2012. Forest Service Sequestration of SRS Funds The Forest Service distributed the full FY2012 SRS payments in January and February 2013, without withholding any amount in preparation for the potential sequester order. On March 19, 2013, the Forest Service announced it would seek to recover from the states the 5.1% of the payments that were subject to sequestration. In letters sent to each affected governor, the Forest Service outlined two repayment options and asked for the states to respond by April 19, 2013, with how they planned to repay. Invoices for repayment were not included. In addition to repaying the 5.1%, the FS offered the states the option of having the full sequestered amount taken out of Title II funds (for those states with enough Title II money). Three states—Alaska, Washington, and Wyoming—publicly indicated their intention not to repay the SRS funds. In an April 16, 2013, hearing before the Senate Committee on Energy and Natural Resources, the FS indicated that invoices for the repayment would be sent in late April 2013. On August 5, 2013, the Forest Service sent additional letters which included invoices for the repayment to the governors of the 18 states with insufficient Title II money to cover the sequestered amount. The invoices outlined three options for the affected states to take within 30 days: pay the debt in full; agree to a payment plan; or petition for administrative review of the debt. The invoices also included a Notice of Indebtedness to the U.S. Forest Service and Intent to Collect by Administrative Offset, which describes the basis of the indebtedness and the Forest Service's intent to offset future payments—without assessing penalties—from future Forest Service and Department of Agriculture state payments. As of May 21, 2014, two states had remitted an SRS sequester-related payment—New Hampshire paid $27,884.17 and Maine paid $3,648—and no collection efforts have been initiated by the Forest Service or Treasury Department in the remaining 16 states. On August 20, 2013, the Forest Service sent additional letters to the governors of the 22 states that had sufficient Title II money to cover the sequestered amount. The letters informed the governors that the Title II allocations were reduced by the sequestered amount. To date, the last congressional action on the issue was a House Committee on Natural Resources oversight hearing on January 14, 2014.
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Counties containing federal lands often receive payments from the federal government based on the presence of such lands. Counties containing National Forest System lands and certain Bureau of Land Management (BLM) lands historically have received payments based on the revenue generated from those lands. Revenue-generating activities include recreation, grazing permits, and land use rentals, among other activities. Starting in the 1990s, federal timber sales began to decline substantially—by more than 90% in some areas—which led to substantially reduced payments to the counties. Thus, Congress enacted the Secure Rural Schools and Community Self-Determination Act of 2000 (SRS; P.L. 106-393) as a temporary, optional program of payments. SRS provided payments to counties based on historic rather than current revenues from land use activities, thus minimizing the effect of reduced revenue streams on those counties. The last authorized SRS payment was distributed in FY2016. Authorization for SRS payments originally expired at the end of FY2006, but Congress extended the program through FY2015 with several reauthorizations, starting with a one-year reauthorization for FY2007 (P.L. 110-28). In 2008, the Emergency Economic Stabilization Act (P.L. 110-343) enacted a four-year extension to SRS authorization through FY2011, with declining payments, a modified formula, and transition payments for certain areas. In 2012, Congress enacted a one-year extension through FY2012 and amended the program to slow the decline in payment levels and to tighten requirements that counties select a payment option promptly (P.L. 112-141). In 2013, Congress again enacted a one-year extension through FY2013 (P.L. 113-40). In 2014, the 114th Congress enacted a two-year extension through FY2015 (P.L. 114-10). SRS payments are disbursed after the fiscal year ends, so the FY2015 SRS payment—the last authorized payment—was made in FY2016. With the expiration of SRS, county payments returned to a revenue-based system and are significantly lower than previous years' payments. The 115th Congress may consider several options to address county payments, including reauthorizing SRS (with or without modifications), implementing other legislative proposals to address the county payments, and taking no action, among others. Congressional debates over reauthorization have considered the basis and level of compensation to counties (historical, tax equivalency, etc.); the source of funds (receipts, a new tax or other revenue source, etc.); the authorized and required uses of the payments; interaction with other compensation programs (notably Payments in Lieu of Taxes); and the duration of any changes (temporary or permanent). In addition, legislation with mandatory spending, such as SRS, raises policy questions about congressional control of appropriations. Current budget rules to restrain deficit spending typically impose a procedural barrier to such legislation, generally requiring offsets by additional receipts or reductions in other spending.
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Many Members of Congress receive complaints from constituents that the news, information, and even entertainment television programming available to them does not address the needs and interests of their local community. These constituents question, for example, why they cannot receive local news programming that focuses on the issues of importance in their locality or state or the football games of their state university. Sometimes desired programming cannot be provided because of private contractual network affiliation agreements between broadcast networks and local broadcast station affiliates. But at other times desired programming cannot be provided because the geographic boundaries of broadcast signal contours, audience viewing patterns, and governmental jurisdictions do not conform with one another; as a result, no methodology for allocating broadcast spectrum or for constructing rules about which viewers a broadcaster's programming must serve or which signals cable and satellite operators must or may carry will meet the needs of all viewers or communities. For example, millions of U.S. television households are located in the same metropolitan area as a major city, but across state lines from that city. Some of those households will have a stronger affinity for programming that focuses on issues relevant to the major city; others will have a stronger affinity for programming that focuses on relevant state issues. Using either metropolitan area hubs or state borders as the basis for determining the programming obligations of stations whose signals reach beyond city borders and state borders will inevitably disappoint some households. With or without government intervention, it is inevitable that some viewers and some communities will feel their needs and interests are not being met. At the same time, it may be possible to make the existing statutes and rules that affect the television programming available to consumers more flexible in order to foster the provision of television programming that better meets the needs of local communities. The purpose of this report is to explain how existing statutes and rules affect the television programming available to consumers and to discuss potential ways to foster the provision of television programming that better meets the needs of local communities. Each broadcast television license is assigned a community of license, in the form of a specific city. Most broadcast television stations' viewing areas extend far beyond the borders of their city of license, and in many cases extend beyond state borders. The local broadcast television stations that each cable system must carry are determined by the Nielsen Designated Market Area (DMA) in which the cable system is located. In the 1992 Cable Act, Congress amended the 1934 Communications Act to require, subject to certain exceptions, each cable system to carry the signals of all the local full power commercial television stations "within the same television market as the cable system," with that market determined by "commercial publications which delineate television markets based on viewing patterns." The DMAs represent the only nationwide commercial mapping of television audience viewing patterns. Each county in the United States is assigned to a television market based on the viewing habits of the residents in the county. Since viewing patterns are more closely aligned with the economic markets in which households participate than with state boundaries, some counties are assigned to DMAs for which the primary city is in a different state. In a DMA that straddles two states, with the major city and most of the broadcast stations located in one state, the cable systems in the other state may find that few or none of the broadcast station signals they must carry are from their own state. Until Congress passed the Satellite Home Viewer Extension and Reauthorization Act (SHVERA) in November 2004, a satellite system, when providing local service, could offer a subscriber only the signals of those local broadcast stations located within the same DMA as the subscriber (called "local-into-local" service); it was prohibited from offering broadcast signals that might have originated nearby but outside the subscriber's DMA. As a result, in many situations, those subscribers to satellite service who were located in DMAs in which all the broadcast television stations are in another state (typically because the primary city in the DMA is in another state) could not be provided the signals of any in-state local broadcast television stations. SHVERA expanded the scope of in-state television signals that satellite operators are permitted (and in some cases required) to offer subscribers. In addition to the signals of those broadcast television stations with city of license within the DMA in which the subscriber is located, satellite operators may offer (subject to certain limitations) signals from outside the DMA if those signals are "significantly viewed" by those households in the subscriber's geographic area that only receive their broadcast signals over-the-air (not via cable or satellite). In addition, under SHVERA, satellite operators may offer certain subscribers located in New Hampshire, Vermont, Mississippi, and Oregon certain in-state signals from outside the subscribers' DMA and must offer subscribers in Alaska and Hawaii certain in-state signals. Table 1 , which is appended to this report, presents a compilation of data from Nielsen Media Research and Television & Cable Factbook 2004 on the number and location of U.S. television households that are located in DMAs for which the primary city is in a different state. It identifies, for each state: the number of television households in the state; the counties in the state assigned to DMAs for which the primary city is outside the state; the number of television households in those counties; the percentage of television households in the state that are located in DMAs for which the primary city is outside the state; and the full power broadcast television stations with city of license or transmitting location inside the state that are located in DMAs for which the primary city is outside the state. These data provide the empirical basis for the discussion in this report. The information on city of license in Table 1 is very important. It shows whether television households in counties assigned to DMAs for which the primary city is outside the state nonetheless have in-state, in-DMA television stations available to them. For example, it shows that the approximately 55,000 Arkansas television households that are located in the Springfield, Missouri DMA receive service from two UHF analog stations in their DMA that have city of license in Arkansas and that therefore have the obligation to meet the needs and interests of Arkansas viewers. But approximately 77,000 Arkansas households that are located in the Memphis, Tennessee DMA have access to no broadcast television stations that have city of license in Arkansas (and thus have no access to broadcast television stations that have an obligation to serve the needs and interests of those Arkansas households). What Table 1 does not provide is information about whether and how well the needs and interests of these television households are being met by broadcast television stations with city of license in the other state (for example, how well the broadcast stations with city of license in Memphis, Tennessee are serving the needs and interests of those 77,000 television households in Arkansas). Localism has long been one of the three primary objectives of U.S. broadcast policy. Broadcasters are considered to be temporary trustees of the public's spectrum because the 1934 Communications Act instructs the Federal Communications Commission (FCC or Commission) to award licenses to use the airwaves expressly on the condition that licensees serve the public interest; section 309(a) requires the Commission to determine, in the case of applications for licenses, "whether the public interest, convenience, and necessity will be served by granting such application." As trustees of the public airwaves, broadcasters must serve the public interest by airing programming that is responsive to the interests and needs of their community of license. The concept of localism derives from Title III of the Communications Act; section 307(b) of the act explicitly requires the Commission to "make such distribution of licenses, frequencies, hours of operation, and of power among the several States and communities as to provide a fair, efficient, and equitable distribution of radio service to each of the same." In carrying out the mandate of Section 307(b), when the Commission allocates channels for a new broadcast service, its first priority is to provide general service to an area, but its next priority is for facilities to provide the first local service to a community. The Commission has long recognized that "every community of appreciable size has a presumptive need for its own transmission service." The Supreme Court has stated that "[f]airness to communities [in distributing radio service] is furthered by a recognition of local needs for a community radio mouthpiece." Once awarded a license, a broadcast station must place a specified signal contour over its community of license to ensure that local residents receive service. A station must maintain its main studio in or near its community of license to facilitate interaction between the station and the members of the local community it is licensed to serve. In addition, a station "must equip the main studio with production and transmission facilities that meet the applicable standards, maintain continuous program transmission capability, and maintain a meaningful management and staff presence." The main studio also must house a public inspection file, the contents of which must include "a list of programs that provided the station's most significant treatment of community issues during the preceding three month period." In practice, full power broadcast television signal contours almost always extend far beyond the borders of the community (city) of license. For a full power television station, the geographic boundaries of its city of license are narrower than the geographic area that can receive the signals of the station. As shown in Figure 1 , the Grade B contour for a hypothetical full power broadcast television station licensed to serve major city M, in state X, extends far beyond the borders of that city, and even into state Y. Under existing FCC rules, the licensee's explicit public interest obligation is limited to serving the needs of viewers within its city of license. Over the years, the Commission has interpreted its rules to carry a secondary obligation for the licensee to serve the needs of viewers outside the city of license but within the signal reach. But the FCC rules do not provide specific guidance about this secondary obligation. Yet, in many cases, the population residing within the city of license is only a small proportion of the total population receiving the station's signal. Many broadcast television stations have viewing areas that cross state borders. This is not surprising as cities often are located along rivers or other natural boundaries that act as state borders, but urban development often occurs on both sides of the border and a station's viewing radius around a central city will extend into suburbs and even into other cities across state borders. In many of these situations, the FCC has attempted to serve populations on both sides of the state borders by assigning some licenses to cities in each state. For example, in the Paducah, Kentucky-Cape Girardeau, Missouri-Mount Vernon, Illinois area, an NBC-affiliated VHF analog and digital station and a UHF analog and digital station have city of license in Paducah, Kentucky, a Fox-affiliated UHF analog and digital station and the CBS-affiliated VHF analog and digital station have city of license in Cape Girardeau, Missouri, an ABC-affiliated VHF analog and digital station has city of license in Harrisburg, Illinois, and a VHF analog station has city of license in Mount Vernon, Illinois. But some metropolitan areas are dominated by a single large city, with most of the television licenses (including those for all the stations affiliated with the four major broadcast networks) assigned to that city and the licenses for only a few stations assigned to cities in the neighboring state(s). For example, the licenses for the preponderance of stations serving the metropolitan New York City and Philadelphia areas are assigned to those cities, with very few licenses assigned to New Jersey, western Connecticut, or Delaware. The FCC has taken special notice of this situation with respect to the state of New Jersey by explicitly stating that all the New York and Philadelphia stations have the responsibility to serve the needs of their New Jersey viewers. As a result of television viewing areas extending beyond state borders, and the frequency of populations being concentrated along both sides of those borders, there are a number of situations in which, despite the efforts of the FCC, a significant proportion of the television households in a state are served primarily or entirely by broadcast television stations whose city of license—and hence primary service obligation—lies outside that state. There are 3,149,060 television households in New Jersey, but the vast majority of these households receive all or most of their over-the-air signals from stations licensed to New York City or Philadelphia. Only one television station with a city of license in New Jersey is affiliated with one of the major television networks, and that UHF analog NBC-affiliate serves the relatively sparsely populated southern tip of the state. Of the other eight commercial stations with city of license in New Jersey, only one is a VHF station and five are affiliated with Spanish language networks. Four of the New Jersey stations transmit from locations in New York City and their signals fully cover that city. As indicated earlier, at least at the policy level, the Commission has attempted to address the potential lack of coverage of New Jersey-specific issues by explicitly requiring the stations licensed to New York City and Philadelphia to offer programming that serves the New Jersey households within their viewing areas. There are 313,630 television households in Delaware, but there is only one UHF analog commercial station with city of license in the state, plus three UHF noncommercial stations. The bulk of the Delaware population is served by television stations in Philadelphia; those stations have primary obligations to serve the viewers of Philadelphia and suburban New Jersey. The remainder of the Delaware viewers are served by stations in Salisbury, Maryland. Similarly, the only major network with an affiliate in New Hampshire is ABC. The vast majority of New Hampshire's 498,150 television households receive broadcast service primarily from stations in Boston. This pattern exists around many large cities. More than 900,000 television households in Maryland are in the Washington, DC DMA. Although a small portion of these households are served by a UHF analog and digital ABC-affiliated station and a UHF analog independent station, both with city of license in Hagerstown, Maryland, and a UHF analog noncommercial station with city of license in Frederick, Maryland, most are primarily served by Washington, DC stations. The Baltimore stations provide a potential source of programming that addresses Maryland-specific issues, but although most of these households fall within those stations' Grade B contours, most households subscribe to cable or satellite service and therefore few of them have the antennas needed to bring in the Baltimore stations. While Washington, DC stations do address issues of interest to Maryland suburbanites, they have the burden of addressing the needs of three jurisdictions, with primary obligations to serve DC. In Virginia, as well, more than 900,000 television households are in the Washington, DC DMA, and are served primarily by Washington, DC stations, with only a UHF analog and digital independent station, a UHF analog Telefutura-affiliated station, a UHF analog and digital noncommercial station, and two UHF analog noncommercial stations located in that portion of Virginia. More than 300,000 Kansas television households are in the Kansas City, Missouri DMA and rely almost entirely on broadcast stations from that city. The only station in that DMA with city of license in Kansas is a UHF analog and digital station in Lawrence, Kansas. The Kansas City stations do not have explicit obligations to meet the needs of their Kansas viewers. Similarly, more than 330,000—or just under 35%—of the television households in Connecticut are in the New York City DMA and primarily served by New York City stations; more than 150,000 Kentucky television households are in the Cincinnati, Ohio DMA and there are no commercial stations in that DMA with city of license in Kentucky; almost 200,000 television households in northwestern Indiana are in the Chicago, Illinois DMA, served primarily by Chicago stations, with only one UHF analog and digital commercial station and one UHF analog noncommercial station located in that part of Indiana; and more than 300,000 television households in western Illinois are in the St. Louis, Missouri DMA, served primarily by St. Louis stations, with only one UHF analog and digital commercial station with city of license in Illinois. This problem is not limited to major metropolitan areas. As shown in Table 1 , 54.55% of the television households in Wyoming are located in television markets outside the state. The population centers around Casper and Cheyenne are served by broadcast stations with city of license in Wyoming, but most other parts of the state are served primarily or entirely by broadcast stations with city of license outside the state. Almost one-fourth of Idaho's television households are in DMAs whose principal city is outside the state and more than one-fifth of Arkansas' television households are in DMAs whose principal city is outside the state. As early as the 1960s, when households began receiving their broadcast signals over cable television rather than over the air, Congress became concerned both that local broadcasters could be harmed (either because they were not compensated for their programming or because local cable systems chose not to carry their programming, thus cutting off their access to a large segment of the viewing audience) and that there could be a diminution of programming that serves local needs and interests. Congress therefore enacted several laws intended to extend the policy goal of localism to the cable television industry, including the 1972, 1984, and 1992 Cable Acts. Most notable was the adoption of the "retransmission consent/must carry" election in the 1992 Cable Act. Every three years, each local commercial broadcast television station must choose between: negotiating retransmission consent agreements with the cable systems operating in its service area, whereby if agreement is reached the broadcaster is compensated by the cable system for the right to carry the broadcast signal, and if agreement is not reached, the cable system is not allowed to carry the signal; or requiring each cable system operating in its service area to carry its signal, but receiving no compensation for such carriage. With this mandatory election, broadcasters with popular programming that are confident the local cable systems will want to carry that programming can make the retransmission consent election and be assured compensation for such carriage, and broadcasters with less popular programming that the local cable systems might otherwise not choose to carry can make the must carry election and be assured that their signal will be carried by all local cable systems. The evolution of the must carry rules demonstrates the difficulty of constructing rules that safeguard local broadcasters and foster local programming without unduly burdening cable operators or undermining the exclusive distribution contracts between program content providers and program distributors. The initial rules required cable operators to carry all broadcast television signals whose Grade B signals reached into the cable service area. But this proved too expansive; for example, the Grade B contours of Washington, DC stations extend over Baltimore, and vice versa. The must carry requirements were then scaled back to those signals from stations located within certain mileage limits (for example, within 35 miles). There then was some concern that this would harm broadcast stations that did not meet these mileage limits but had historically been viewed by audiences beyond those mileage limits. The must carry rules were modified to apply to all broadcast stations that were "significantly viewed" by those households in the cable service area that did not receive service from cable or satellite providers. The specific threshold viewing levels were, for a network-affiliate station, a market share of at least 3% of total weekly viewing hours in the market and a net weekly circulation of 25%; for independent stations, 2% of total weekly viewing hours and a net weekly circulation of 5%. The share of viewing hours referred to the total hours that households that do not receive television signals from multichannel video program distributors ("MVPDs") viewed the subject station during the week, expressed as a percentage of the total hours these households viewed all stations during the week. Net weekly circulation referred to the number of households that do not receive television signals from multichannel video programming distributors that viewed the station for five minutes or more during the entire week, expressed as a percentage of the total households that do not receive television signals from multichannel video programming distributors in the survey area. But as more and more households subscribed to cable service, it became less reasonable to base must carry decisions on the behavior of the minority of households that continued to get their service over the air. In the 1992 Cable Act, Congress modified sections 614 and 615 of the 1934 Communications Act to base the must carry rules on a definition of local television markets explicitly based on viewing patterns, requiring each cable operator to carry the signals of local commercial television stations, qualified low-power stations, and qualified noncommercial educational stations, if the licensees of those stations chose to have their signals carried. This statutory language remains in place today. The exact number of broadcast signals that cable systems must carry varies with the size of the cable system, but includes at a minimum three local commercial stations and one local noncommercial educational station. Cable systems with more than 12 channels must carry local commercial broadcast stations on up to one-third of their channels and up to three qualified noncommercial educational stations. "Local" commercial stations are defined as all stations whose community of license is within the same television market as the cable system. Following the statutory directive to use television markets delineated by commercial publications, the FCC implemented a rule defining television markets according to the Nielsen DMAs. Cable systems must carry the entirety of the program schedule of every local television station carried pursuant to the mandatory carriage provisions (or the retransmission consent provisions) of the 1992 Cable Act, subject to the carriage restrictions in the network program non-duplication rules, syndicated exclusivity protection rules, and sports programming blackout rules. In practice, these rules are quite complex and result in significant amounts of programming from television stations within a cable operator's DMA not being carried because such carriage would be duplicative or would contravene exclusivity agreements. Interestingly, while the must carry rules are now based on DMAs, the non-duplication rules continue to be based on the old "significantly viewed" criteria. Consider a cable operator that sought to carry the broadcast signals of a network-affiliated station that is located nearby, but outside the DMA in which the cable system is located, and that successfully worked out a retransmission consent agreement with that affiliated station. For example, assume a Montgomery County, Maryland, cable operator, which is located in the Washington, DC DMA, sought to carry a Baltimore broadcast station, and successfully worked out a retransmission consent agreement with the Baltimore station. Then, if that Baltimore station met the "significantly viewed" criteria in the cable operator's location, its signals would not be subject to the non-duplication rules and the signals from both the Washington, DC network affiliate and the Baltimore network affiliate could be carried by the Montgomery County cable operator in their entirety, without blackouts of the network programming on the Baltimore station. Some industry observers claim, however, that such duplication does not occur very often because the national networks, rather than the affiliated stations, tend to make the determination (through language in the private contractual agreement between the network and each affiliate) about whether a station located outside a cable system's DMA should grant the cable system retransmission consent—and frequently these contracts effectively preclude retransmission consent. Copyright law also may tend to discourage cable systems from carrying the signals of broadcast stations located outside the DMA in which the cable system is located. Cable systems are required to pay royalties under a congressionally granted compulsory copyright license for the "secondary transmission" of the signals of broadcasters located outside the DMA within which the cable system is located. In contrast, cable systems enjoy a royalty-free permanent compulsory copyright license—that is, do not have to pay copyright fees—for the secondary transmission of broadcast signals of stations located in their DMAs. The royalty-free license extends to the secondary transmission of signals of out-of-DMA broadcast stations that meet the "significantly viewed" criteria discussed above. However, if an in-state, but out-of-DMA station does not meet the "significantly viewed" criteria, the requirement to pay the copyright royalties might tip the balance away from the cable system carrying the station's signals. The 1992 Cable Act includes explicit language authorizing the FCC to implement the must carry rules flexibly in order to foster the goal of localism. The language in Section 614(h)(1)(C) of the act (Carriage of Local Commercial Signals) explicitly allows for exceptions, requiring the carriage of "local commercial television stations," but providing flexibility on how those local stations would be determined: (i) For purposes of this section, a broadcasting station's market shall be determined by the Commission by regulation or order using, where available, commercial publications which delineate television markets based on viewing patterns, except that, following a written request, the Commission may, with respect to a particular television broadcast station, include additional communities within its television market or exclude communities from such station's television market to better effectuate the purpose of this section. In considering such requests, the Commission may determine that particular communities are part of more than one television market. (ii) In considering requests filed pursuant to clause (i), the Commission shall afford particular attention to the value of localism by taking into account such factors as— (I) whether the station, or other stations located in the same area, have been historically carried on the cable system or systems within such community; (II) whether the television station provides coverage or other local service to such community; (III) whether any other television station that is eligible to be carried by a cable system in such community in fulfillment of the requirements of this section provides news coverage of issues of concern to such community or provides carriage or coverage of sporting and other events of interest to the community; and (IV) evidence of viewing patterns in cable and noncable households within the areas served by the cable system or systems in such community. In a 2001 decision involving the attorney general of the state of Connecticut, the Commission found that only a broadcaster or a cable system has the standing to file a request to modify the signal carriage right of a broadcast station. The television industry is in the midst of another policy debate involving cable carriage of local broadcast signals during (and after) the congressionally mandated transition from analog transmission of broadcast signals to digital transmission. During the transition, television broadcasters have been given additional spectrum to allow them to broadcast using digital technology while retaining the spectrum they use for analog broadcasting. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) set the digital transition deadline at February 17, 2009, by which date the broadcasters will be required to return the spectrum used for analog transmission. During this transition, many broadcasters are providing both analog and digital broadcast signals. Therefore there has been a public policy debate over which broadcast signals cable systems should be obligated to carry. In January 2001, the FCC announced adoption of rules for cable carriage of digital television signals. The FCC ruling does not require cable systems to simultaneously carry both the analog and digital signals ("dual carriage") of local television stations. The FCC tentatively concluded that "such a requirement appears to burden cable operators' First Amendment interests more than is necessary to further a substantial governmental interest." While not approving a dual carriage mandate, the FCC did rule that a digital-only television station, whether commercial or noncommercial, can immediately assert its right to carriage on a local cable system. In addition, a television station that returns its analog spectrum and converts to digital operations must be carried by local cable systems. In April 2007, the FCC issued a notice of proposed rulemaking to address another issue: how to protect those households that subscribe to cable systems that have not fully deployed digital technology by the February 17, 2009, deadline for broadcasters to discontinue analog transmission. The Commission addressed the statutory requirement that cable operators must make the signal transmitted by a broadcaster electing mandatory carriage viewable by all of their subscribers, seeking comment on how cable operators can implement this requirement after the end of analog broadcasting. The Commission proposed that cable operators must comply with this "viewability" provision and ensure that cable subscribers with analog television sets are able to continue to view all must-carry stations after the end of the digital television transition by either (1) carrying the digital signal in analog format, or (2) carrying the signal only in digital format, provided that all subscribers have the necessary equipment to view the broadcast content. Although all the commissioners agreed that this was an important issue that the Commission should address, two of the commissioners raised several questions: whether it was premature to propose specific prescriptive rules in light of potentially strong market forces that could resolve any problem, whether all the constitutional issues had been fully vetted, whether it was premature to propose reversal of existing decisions without having had a chance to get public comment. On September 11, 2007, the FCC adopted final rules intended to ensure that cable customers continue to receive local television stations after the transition. Specifically, the FCC will require cable operators to comply with a "viewability requirement" by choosing to either (1) carry the "must carry" signal in analog as well as digital formats (dual carriage), or (2) carry the "must carry" signal in a digital-only format, provided that all subscribers have set-top boxes that will enable them to view digital broadcasts on their analog televisions. The viewability requirement extends to February 2012, at which time the FCC will reassess the need for the requirement. Small cable companies—which had sought an exemption—may request a waiver of the viewability requirement. Cable systems must carry "primary video," defined as a "single programming stream and other program-related content." With digital technology, broadcasters can divide their 6 MHz of spectrum into separate and discrete streams of content and broadcast multiple (as many as six) channels of programming. This is known as "multicasting." Broadcasters sought an FCC ruling requiring cable operators to carry any and all multicasted channels transmitted by commercial broadcasters, arguing that the incentive to develop additional programming streams is diminished if they have no guarantee that cable systems will carry that programming. Cable providers countered that their decision on whether or not to carry additional broadcaster programming streams should be dictated by the market, not mandated. In February 2005, the FCC affirmed its prior decision that cable operators are not required to carry more than a single digital programming stream from any particular broadcaster. Under the 1984 Cable Act, local franchising authorities may require cable operators to set aside channels for public, educational, or governmental (PEG) use. In addition, franchising authorities may require cable operators to provide services, facilities, and equipment for the use of these channels. Many cable systems include several PEG channels. In general, cable operators are not permitted to control the content of programming on PEG channels. Cable operators may impose non-content-based requirements, such as minimum production standards, and may mandate equipment user training. In addition, cable systems may make available "access channels" that typically provide community-oriented programming, such as local news, public announcements and government meetings. They are usually programmed by individuals or groups, on either public, educational or governmental access channels or on commercial leased access channels. The bottom line of the existing rules is as follows. Unless they have systems with very small capacity, local cable operators are required to carry the broadcast signals of all the full-power television stations (and certain qualified low-power television stations) located in their DMA and noncommercial stations that transmit from within 50 miles of the cable head-end whose grade B contours cover the cable system's service area. The cable operator is required to carry the entirety of the program schedule of each of these broadcast stations (subject to possible blackouts to conform with the non-duplication rules for those circumstances where more the broadcast programming is duplicated by a second or third station in the DMA). If a cable system is located in a DMA in which the primary city is in another state, and most or all of the television stations in that DMA have city of license in the other state, then the broadcast television signals it must carry will be primarily or entirely from out of state. This scenario is shown in Figure 2 . Although local cable operator Q's franchise is located in state Y, and the major nearby city, M, is located in state X, both are within the same DMA, F. If local cable operator Q wants to carry the signals of broadcasters that are located in state Y but outside of DMA F, it can negotiate with those broadcasters to carry their signals, but any carriage would be subject to the restrictions in the network program non-duplication, syndicated programming exclusivity protection, and sports programming blackout rules, and to copyright fees (though these rules and fees will not be in effect if the "significantly viewed" criteria can be met). All these factors may restrict the state-specific entertainment programming cable operator Q can carry and also could affect the local news programming carried. Cable operator Q is not likely to use one of its channels to offer a "Swiss cheese" program schedule with holes in it for blacked out programs or programs for which it does not choose to pay copyright fees. Nor is it likely to set aside a channel just for several hours a day of state news or one or two sports events per week. Some observers claim, however, that when cable operators do not carry the in-state programming of out-of-DMA broadcast signals, it is unlikely to be because of these rules, which frequently can be sidestepped through application of the exceptions for "significantly viewed" stations. Rather, these observers claim, it is likely to be because the in-state broadcasters are constrained by territorial exclusivity provisions in their network affiliation agreements, allegedly imposed by the broadcast networks. Whatever the cause of cable system reluctance to carry the signals of in-state, but outside-the-DMA broadcast signals, it is likely that the within-DMA, but out-of-state broadcasters (for example, the broadcasters with city of license M) will cover some issues of interest to the cable operator's subscribers (the subscribers to cable system Q). Their inclusion in the same DMA is based on the assumption that viewers in the county in which the cable system operates tend to view the signals from that DMA and are likely to have a marketplace connection that broadcasters will have an incentive to foster. But the coverage of issues specific to the viewers in that cable system's service area may be quite limited since the broadcasters are not subject to any explicit obligation to serve the needs of viewers outside their city of license and their close-in viewers are likely to be considered more valuable by advertisers. Whether or not this represents a problem to the cable system's subscribers will depend on their relative affinity toward news, information, and sports programming focused on the television market in which they are located, as defined by the DMA, vs. news, information, and sports programming focused on the political jurisdiction (state) in which they reside. For example, a cable subscriber in Montgomery County, Maryland, might have a preference for programming from Washington, DC stations that presents detailed traffic information on commuter routes between the subscriber's home and downtown Washington or, alternatively, might have a preference for programming from Baltimore, Maryland stations that presents more in-depth reporting of Maryland state politics. The current rules assume the preference is for the former because it is based on the statutory requirement that must carry requirements mirror existing viewing patterns. Until Congress passed the Satellite Home Viewer Improvement Act (SHVIA) of 1999, satellite television providers were not allowed to provide local broadcast television signals to their subscribers. SHVIA sought to promote competition between cable television and direct broadcast satellite, and to increase local program choices available to television households, by allowing satellite companies to provide local broadcast television signals to all subscribers who reside in the local television station's market. Local markets are explicitly defined in the statute as the Nielsen DMAs. This ability of satellite companies to provide local broadcast channels is commonly referred to as "local-into-local" service. Satellite companies are not required to offer local-into-local service, and they can charge for the service. Under copyright law, satellite companies enjoy a royalty-free permanent compulsory copyright license—exempting them from paying copyright royalties—for the secondary transmission of the broadcast signals of stations provided to subscribers as part of local-into-local service (the signals of broadcast stations located in the DMA of the subscriber). But if a satellite system chooses to provide local-into-local service in any DMA, it must provide subscribers in that DMA with all of the local broadcast television signals that are assigned to the DMA that ask to be carried on that satellite system. A satellite system is not required to carry more than one local broadcast television station that is affiliated with a particular television network unless the stations are licensed to communities in different states. Under SHVIA, local-into-local service was explicitly restricted by law to the provision of the signals of broadcast television stations with city of license within the DMA in which the customer is located. Satellite operators did not have the opportunity that cable operators have to negotiate carriage of the programming of broadcasters that are in-state, but outside the viewer's DMA, unless the satellite operator's customers were unable to receive over-the-air broadcast signals of a Grade B intensity and therefore qualified, under a different section of law, to receive distant network signals that may be (but need not be) from within state. This situation is shown in Figure 3 . Satellite subscriber Z is located in state Y and in DMA F. Under SHVIA, the satellite operator could provide subscriber Z local-into-local service consisting only of the signals of broadcast television stations located in DMA F, even if none of those stations are located in state Y. Nor could the satellite operator offer subscriber Z any distant network signals that originated from state Y because subscriber Z is within the Grade B contour of the broadcast stations in city M. Because of these rules, news or sports entertainment that was broadcast by a station in central Wyoming or Arkansas often was not available to satellite subscribers in more remote parts of those states that were within out-of-state DMAs. This restriction on local-into-local service was not based on technological constraints or lack of bandwidth (although the number of DMAs in which local-into-local service is offered may be affected by bandwidth and satellite capacity constraints). Once a satellite operator has uplinked the programming of a particular broadcast station to a satellite, there are no technical constraints on making that signal available to all television households within the footprint of the satellite. (It is true, however, that the greater use of spot beams has resulted in smaller footprints so there may now be situations in which the broadcast signal of a station in a particular state is uplinked to a satellite with a spot beam that does not cover other portions of the state that are located in a different DMA.) But in most cases, the primary reason why a subscriber did not receive broadcast signals from stations located outside that subscriber's DMA was that the satellite operator, in order to conform with the law, had to set the subscriber's set-top box to exclude the out-of-DMA signals emanating from its satellite. The Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA) expanded the scope of in-state television signals that may be of local interest to subscribers that satellite operators are permitted (and, in the case of operators in Alaska and Hawaii, required) to offer subscribers. In addition to the signals of those broadcast television stations with city of license within the DMA in which the subscriber is located ("local-into-local" service), satellite operators may offer (subject to certain limitations) signals from outside the DMA if those signals are "significantly viewed" by those households in the subscriber's geographic area that only receive their broadcast signals over-the-air (not via cable or satellite). In addition, satellite operators may offer certain subscribers located in New Hampshire, Vermont, Mississippi, and Oregon certain in-state signals from outside the subscribers' DMA and must offer subscribers in Alaska and Hawaii certain in-state signals. Specifically, the current restrictions on the retransmission of distant broadcast signals (i.e., signals from outside the DMA in which the satellite subscriber is located) have been reduced as follows: a satellite carrier may retransmit to a subscriber located in a community the signal of any station located outside the local market in which that subscriber is located if (1) the FCC had already determined, before the date of enactment of SHVERA, that the signal could be carried by a cable operator in that community because it was "significantly viewed" in that community, and such carriage was permissible under the FCC's network non-duplication and syndicated exclusivity rules; or (2) if the FCC determines, after the date of SHVERA enactment, that the signal is "significantly viewed" in the community in accordance with the same standards and procedures used to allow cable stations to carry "significantly viewed" signals. In a Report and Order implementing SHVERA, the FCC identified thousands of instances in which broadcast signals met the "significantly viewed" criteria. the retransmission (secondary transmission) of these "significantly viewed" broadcast signals are subject to a royalty-free compulsory copyright license—exempting satellite carriers from paying copyright royalties. the FCC, in implementing SHVERA, changed its rules covering retransmission consent to allow a broadcaster located in a local market into which a satellite carrier is retransmitting the distant signal of a station that is affiliated with the same network as the local station to choose between making its signal available to satellite carriers based on retransmission consent (receiving compensation) vs. mandatory carriage (without compensation) on a county-specific basis rather than DMA-wide, as currently required. This change was deemed necessary because satellite providers are now allowed to retransmit "significantly viewed" distant signals that may duplicate the network programming of a local station, but satellite carriage of those "significantly viewed" signals are determined on a county-by-county rather than DMA-wide basis, and thus it was felt that the local broadcaster should be able to make its retransmission consent/mandatory carriage election on a county-by-county basis. satellite carriers are allowed to retransmit the signal of WMUR, an ABC affiliate located in Manchester, New Hampshire, which is the only commercial station in that state affiliated with a major broadcast network, to any subscriber in that state, subject to obtaining retransmission consent and meeting the provisions of the FCC's network non-duplication and syndication exclusivity rules. Such carriage is subject to royalty payments under the compulsory copyright license for the secondary transmission of distant broadcast signals. satellite carriers are allowed to retransmit the four commercial, network-affiliated stations that are located in the Burlington, Vermont DMA (which are the only commercial stations in that state) to any subscriber in either of the counties in that state outside the Burlington DMA (Windham and Bennington counties), subject to obtaining retransmission consent and meeting the provisions of the FCC's network non-duplication and syndication exclusivity rules. Such carriage is subject to royalty payments under the compulsory copyright license for the secondary transmission of distant broadcast signals. satellite carriers are allowed to retransmit the signals of any network-affiliated broadcast television station in Oregon to the four counties in Oregon (Umatilla, Grant, Malheur, and Wallowa) that are assigned to DMAs whose primary city is outside that state. Also, a satellite carrier or cable company may elect to retransmit to subscribers in Umatilla, Grant, Malheur, and Wallowa counties in Oregon the broadcast signals of any television broadcast station in Oregon that any cable operator or satellite carrier was retransmitting to subscribers in those four counties on January 1, 2004. These retransmissions to those four counties are subject to obtaining retransmission consent, to meeting the provisions of the FCC's network non-duplication and syndication exclusivity rules, and to royalty payments under the compulsory copyright license for the secondary transmission of distant broadcast signals. satellite carriers are allowed to retransmit the signals of all network-affiliated television broadcast station in Jackson, Mississippi to any subscriber in two counties (Wilkinson and Amite) in that state; those counties are assigned to the Baton Rouge, Louisiana DMA. These retransmissions to those two counties are subject to obtaining retransmission consent, to meeting the provisions of the FCC's network non-duplication and syndication exclusivity rules, and to royalty payments under the compulsory copyright license for the secondary transmission of distant broadcast signals. the geographic areas in Alaska that are not in any Nielsen DMA are to be assigned by satellite carriers to one of the local markets (DMAs) in that state, in order to allow the carriers to offer subscribers in those areas the local-into-local service for the DMA to which they are assigned. In addition, satellite carriers with more than 5 million subscribers must retransmit all of the analog broadcast signals originating in Alaska and Hawaii within one year of the passage of SHVERA, and all of the digital broadcast signals originating in Alaska and Hawaii within 30 months of the passage of SHVERA. These signals must be made available to substantially all of the subscribers in their local markets (DMAs) and the signals from at least one of the local markets in the state must be made available to substantially all of the subscribers in the state not located in a DMA. The cost to subscribers of such transmission shall not exceed the cost of retransmission of local television stations in other states. Referring back to Figure 3 , SHVERA may expand upon the availability of programming of interest to subscriber Z if there are broadcast signals originating in state Y, but outside DMA F that meet the "significantly viewed" criteria, or if subscriber Z happens to be located in a state and county covered by one of the state-specific provisions in the act. Given the high likelihood that the satellite carrier already is uploading these broadcast signals to serve customers in the DMAs in which the signals originate (and the royalty-free compulsory copyright license for "significantly viewed" signals), it would appear that the only reasons that the satellite carrier might choose not to offer this additional programming to subscriber Z would be if it failed to negotiate a retransmission consent agreement with the license holder of the "significantly viewed" broadcast signal to cover subscriber Z (and other subscribers that previously could not be served) or if subscriber Z were not located in the footprint to which the signal was currently being beamed. In some situations, the provisions in SHVERA that expand the number of in-state signals potentially available to satellite subscribers will provide an additional public policy benefit. Candidates for public office who have had to reach many of the citizens of their state through high-priced advertising on out-of-state, big city stations may now be able to reach those citizens through lower-priced advertising on in-state stations. This could reduce the costs associated with political campaigns. Localism remains one of the cornerstones of U.S. media policy. There are a small number of broadcast television stations relative to the number of local governmental jurisdictions. Moreover, every full power television station broadcasts signals that extend far beyond the borders of its city of license. Thus, when a particular station is assigned a city of license to serve, there will always be many nearby local jurisdictions that the licensee has no explicit or specific obligation to serve. Where the broadcast coverage area extends across governmental boundaries, and especially state borders, it is difficult for a broadcaster to fully address the needs of all jurisdictions. Broadcasters, of course, have the incentive to meet the needs and interests of as many of its potential viewers as possible. Most television broadcasters attempt to reconcile this by covering issues of general interest, such as crime and weather, and/or regional interest, such as transportation systems. However, some current statutory and regulatory requirements do not provide incentives, or even make it more difficult, for broadcast, cable, and satellite providers of television to meet the needs and interests of their communities. If Congress wants the FCC to systematically review its rules to eliminate any disincentives to localism or to clarify licensee obligations, it could pass legislation instructing the Commission to do so. As explained earlier, the FCC's first priority when it assigns licenses is to provide general service to an area, and its second priority is to provide the first local service to a community. Most broadcast television stations are attentive to the needs and interests of the viewers in their city of license. It is in their self-interest to be responsive to their viewers. Their market incentives may diverge from this goal, however, if their city of license is an outlying city to a much larger city and their signal covers the larger city. As shown in Figure 4 , the grade B contour of the station licensed to outlying city O fully covers major city M. In this situation, the licensee may have a stronger incentive to serve the needs and interests of the larger city. This incentive may be stronger yet if the city of license is in a different state than the larger city. That incentive may affect how the station markets itself—for example, as a station in the outlying city of license or as a station in the larger city across the state line. This, in turn, may affect how the station is identified, geographically, by the industry. The Television & Cable Factbook is a widely used annual industry source book that presents data on each television station, by state. In the 2004 edition, seven television stations with city of license in one state, but located in a DMA whose principal city was in a neighboring state, were listed under the neighboring state. In the 2005 edition, five of those stations continued to be listed under the neighboring state; in the 2006 edition, none of them was listed under the neighboring state. Also, in the 2004 and 2005 editions, the city listings for all seven stations were hyphenated, with the large city listed first and the smaller city listed second. In the 2006 edition, each station was listed under the actual city of license only, with no reference to the larger city. According to the publishers of the Television & Cable Factbook , its editors, not the stations, determined how to list each station. In 2006, it made the decision to list the stations by city (and, hence, state) of license, rather than using hyphenated market designations with the major city listed first. During 2004, the FCC opened a proceeding on broadcast localism, but to date has not proposed or adopted any rules relating to localism. Congress might choose to direct the FCC, in that proceeding, to undertake a rulemaking to explicitly identify, or provide written guidance about, the obligations of licensees with city of license in an outlying city to a major city to specifically serve the needs and interests of the viewers in their city of license. It also might choose to direct the Commission to address how it would enforce those obligations. For example, under what circumstances, if any, could failure to serve the needs and interests of its community of license result in a license not being renewed (or being revoked)? At the same time, current FCC rules are not clear about the broadcast television licensees' obligations to serve viewers within their service area who are beyond the borders of the city of license, but not in a larger nearby city with its own licensed broadcast television stations. As shown in Figure 1 , in many situations, the television household population beyond the city of license exceeds that within the city of license. This, in itself, provides broadcasters with some economic incentive to be responsive to the needs and interests of these viewers. But news and information programming is relatively expensive to produce, and unless such programming is of general interest to a relatively broad portion of the potential viewing audience, there is always the risk of losing audience. Thus, Congress might choose to direct the Commission, as part of its current proceeding on broadcast localism, to explicitly identify, or provide written guidance about, the obligations of licensees to serve the portion of their viewership that lies outside the city of license but not in large nearby cities with their own licensed broadcast television station. It also might choose to direct the Commission to address how it would enforce those obligations. In 1999, the FCC issued a notice of inquiry concerning the public interest obligations of broadcast television licensees as they transition to digital television. The Commission subsequently has issued two notices of proposed rulemaking as well as periodic reviews of the Commission's rules and policies affecting the conversion to digital television, and in September 2004 voted to adopt children's programming obligations for digital television broadcasters. The Commission has incorporated the relevant portions of the comments received in those rulemakings and periodic reviews into its broadcast localism proceeding. Technological change has the potential to help broadcasters better meet the local needs of their viewers. With digital transmission, one option available to licensees is to use their 6 MHz of spectrum for multicasting—that is, to broadcast multiple programming streams. As the Commission develops rules addressing digital broadcast television public interest obligations, it might try to construct rules that foster programming that meets the possibly divergent needs of viewers within the city of license and viewers beyond the city of license. For example, it might consider modifying the current rule that requires cable operators to carry only the primary programming stream of each local television broadcaster by requiring cable operators to carry each programming stream that offers distinct programming aimed at a different, previously unserved geographic portion of the broadcaster's serving area. This could explicitly address those situations in which a broadcaster's serving area crosses state borders, awarding the broadcaster must carry rights for a second signal if the programming on that signal specifically addresses the needs and interests of the viewing households in the second state. If the FCC were to consider this approach, it would want to take into account the impact on cable systems of requiring them to carry additional broadcast channels. It also would want to determine how best to construct a rule that did not artificially encourage or discourage broadcasters from choosing multicasting over other potential applications of digital technology to their 6 MHz of spectrum, such as high definition television. Congress might choose to direct the FCC, in its current proceeding on implementation of the digital transition, to study and construct recommendations for rules (and, if necessary, statutory changes) to address the potentially related issues of mandatory carriage of multiple broadcast signals and better serving the needs and interests of viewers in different governmental jurisdictions. As explained earlier, the existing array of must carry and non-duplication rules and compulsory copyright license fees may restrict or discourage cable operators that happen to be located in a DMA that has its primary city in another state from carrying the signals of broadcasters in their own state that are located in a different DMA. This can decrease viewer access to both informational and entertainment programming of state-wide interest. The data presented in Table 1 suggest this may not be an isolated occurrence. In many states a substantial number and percentage of television households are in DMAs in which the primary city is located outside the state and in which most of the television stations have city of license outside the state. However, there is a degree of flexibility in the must carry rules (the statutory provision allowing cable operators to request that they be allowed to carry signals from outside their DMA that would foster localism), the non-duplication rules (allowing "significantly viewed" stations to be carried without having duplicated programming blocked), and the copyright laws (providing a royalty-free permanent compulsory copyright license for the secondary transmission of programming of broadcast stations that are "significantly viewed" in the cable system's service area). Congress might choose to direct the FCC, when reviewing its existing rules as part of its current broadcast localism proceeding, to heed the flexibility that Congress has given it to implement and administer its rules in a fashion that fosters localism. It might instruct the Commission to study whether there are narrowly-defined conditions under which the existing non-duplication rules can be loosened to foster the cable carriage of programming of state-wide interest without undermining the goals and objectives of those rules. It also might ask the Commission to explore how it could best allow exceptions to its current rule that uses DMAs to determine which broadcast television signals a cable company must carry. As indicated earlier, the Commission has ruled that only broadcast licensees and cable operators have standing to request exceptions to the current rule restricting must carry rights to stations within the DMA. The Commission might investigate whether it would be in the public interest for other parties, such as state officials, to be able to make such a request based on a demonstratively positive impact on localism. It also might investigate whether it would be in the public interest for the Commission, itself, to have the right to propose an exception to the rule on its own authority. If it were to reach the conclusion that such authority would be in the public interest, it might recommend to Congress that the statute be modified to give it that authority. The Commission already has concluded that the parties currently with standing to seek an exception—the broadcast licensee and the cable system operator—have knowledge of key relevant parameters (for example, the demand for particular types of programming, the programming available both on the specific broadcast station and on the cable system, the geographic reach of the broadcast station's grade B contours, etc.) not readily available to state officials or the FCC. Adding or deleting must carry stations will change the array of programming available to the cable system's subscribers and any party seeking to change the line-up of channels should have sufficient information on subscribers' preferences to be confident that consumers will be better served by the proposed change in programming. By passing SHVERA in November 2004, Congress expanded the scope of in-state television programming that satellite operators are permitted (but not required) to offer subscribers. In Alaska and Hawaii, that expansion in mandatory. The combination of a generic change in law—allowing satellite providers to offer programming that is "significantly viewed" by over-the-air television viewers—and several state-specific provisions intended to address restricted access to programming in six states may significantly reduce consumer complaints that they are not able to receive programming via satellite that meets their needs and interests. The effectiveness of SHVERA, however, will not be determined until it has been in operation long enough to find out if the criteria in the rules and limitations associated with the "significantly viewed" provision allow for a real expansion in the signals made available to satellite subscribers. If the "significantly viewed" provision does not provide relief for subscribers seeking programming that meets state-specific needs and interests, then it is likely that bills will be introduced in the 110 th Congress that seek state-specific or county-specific solutions analogous to the ones involving New Hampshire, Vermont, Mississippi, Oregon, Alaska, and Hawaii in SHVERA. Several such bills already have been introduced, as described below. To date, three bills that address cable and satellite carriage of local broadcast television station signals have been introduced in the 110 th Congress. Senator Allard has introduced S. 124 , which would allow satellite operators to offer subscribers located in two counties in the southwestern corner of Colorado the signals of broadcasters in Denver, even though those counties are not located in the Denver DMA (analogous to the provisions in SHVERA affecting subscribers in certain counties in New Hampshire, Vermont, Mississippi, and Oregon), and also would allow cable operators in those two counties to carry the primary signal of any network station located in Denver. Senator Salazar has introduced S. 760 , which, in addition to the two provisions in S. 124 , would waive the retransmission rules to allow a satellite carrier, cable system, or translator station to carry the primary signal of a network station located in a state to subscribers in that state who otherwise would not receive the primary signal of that network because those subscribers are located in a DMA outside of the state if two conditions are met: (1) the FCC determines that it is in the best interest of the public welfare, and (2) the satellite carrier, cable system, or translator station agrees to also carry the primary signal of the network station in the assigned DMA. Representative Boren has introduced H.R. 602 , which would modify the retransmission rules to allow a satellite carrier to provide the signals of network stations located in Oklahoma to subscribers who reside in Oklahoma but do not currently receive the signal of any network station located in that state because of their assignment to a DMA receiving network stations located outside Oklahoma, if those subscribers choose to receive the Oklahoma signals rather than the out-of-state signals. Representative Ross has introduced H.R. 2821 , which would: amend section 352(b)(2) of the Communications Act (47 U.S.C. § 352(b)(2)) to permit satellite carriers and cable operators to retransmit the signals of local television broadcast stations to any DMA that is adjacent to, and at least partially located in the same state as, the DMA in which the broadcast station is located; amend section 122 of the U.S. Copyright Act (17 U.S.C. § 122) to allow satellite operators to retransmit the signals of those local broadcast stations into those adjacent DMAs under a royalty-free statutory copyright license; and instruct the FCC to revise the regulations concerning network non-duplication protection, syndicated exclusivity protection, and sports blackout protection (47 CFR § 76) to permit retransmission if the subscriber receiving the signals is located in any of those adjacent DMAs.
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Most broadcast television stations' viewing areas extend far beyond the borders of their city of license, and in many cases extend beyond state borders. Under existing FCC rules, which are intended to foster "localism," the licensee's explicit public interest obligation is limited to serving the needs and interests of viewers within the city of license. Yet, in many cases, the population residing in the city of license is only a small proportion of the total population receiving the station's signal. Hundreds of thousands of television households in New Jersey (outside New York City and Philadelphia), Delaware (outside Philadelphia), western Connecticut (outside New York City), New Hampshire (outside Boston), Kansas (outside Kansas City, Missouri), Indiana (outside Chicago), Illinois (outside St. Louis), and Kentucky (outside Cincinnati) have little or no access to broadcast television stations with city of license in their own state. The same holds true for several rural states—including Idaho, Arkansas, and especially Wyoming, where 54.55% of television households are located in television markets outside the state. Although market forces often provide broadcasters the incentive to be responsive to their entire serving area, that is not always the case. This report provides, for each state, detailed county-by-county data on the percentage of television households located in television markets outside the state and whether there are any in-state stations serving those households. The Nielsen Designated Market Areas (DMAs) also often extend beyond state borders. Local cable operators are required to carry the broadcast signals of television stations located in their DMA. If they are located in a DMA for which the primary city is in another state, and most or all of the television stations in that DMA have city of license in the other state, then the broadcast television signals they must carry will be primarily or entirely from out of state. In some cases, they may not be allowed to carry signals from within the state but outside the DMA to provide news or sports programming of special interest in their state because of network non-duplication, syndicated exclusivity, or sports programming blackout rules or because of private network affiliation contract agreements, or may be discouraged to do so because these signals do not qualify for the royalty-free permanent compulsory copyright license for local broadcast signals. The Satellite Home Viewer Extension and Reauthorization Act of 2004 expanded the scope of in-state television signals that satellite operators are permitted (and in some cases required) to offer subscribers. In addition to the signals of those broadcast television stations with city of license within the DMA in which the subscriber is located ("local-into-local" service), satellite operators may offer (subject to certain restrictions) signals from outside the DMA if those signals are "significantly viewed" by those households in the subscriber's geographic area that only receive their broadcast signals over-the-air (not via cable or satellite). In addition, satellite operators may offer certain subscribers located in New Hampshire, Vermont, Mississippi, and Oregon certain in-state signals from outside the subscribers' DMA and must offer subscribers in Alaska and Hawaii certain in-state signals. This report will be updated as events warrant. To date, four bills on cable and satellite carriage of local broadcast television station signals have been introduced in the 110th Congress (S. 124, S. 760, H.R. 602, and H.R. 2821).
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In recent decades, the Treasury Department has played four specific roles: (1) formulating,recommending, and implementing economic, financial, tax, and fiscal policies; (2) serving as thesole financial agent for the federal government; (3) enforcing federal financial, tax, counterfeiting,customs, tobacco, alcoholic beverage, and gun laws; and (4) producing postage stamps, currency,and coinage. The creation of the Department of Homeland Security (DHS) in late 2002 and its assumptionof the authorities and duties transferred to it by executive order in March 2003 drastically reshapedTreasury's functional profile. (2) While Treasury still exerts a strong influence over economicpolicymaking within the executive branch and still serves as the government's financial manager,revenue collector, and producer of currency and coinage, its role in law enforcement is much morecircumscribed. At its most basic level of organization, the department is comprised of departmental officesand operating bureaus. In general, the departmental offices are responsible for the formulation andimplementation of policy initiatives and the management of departmental operations; the operatingbureaus, in contrast, carry out specific tasks assigned to the department, largely through statutorymandates. The bureaus typically account for more than 95% of the department's personnel andfunding. With one notable exception, the bureaus may be divided into those focused on financialmatters and those engaged in law enforcement. In recent decades, the following Treasury bureaushave all contributed to the management of federal finances or the daily operation of the U.S.financial system: Comptroller of the Currency, U.S. Mint, Bureau of Engraving and Printing,Financial Management Service, Bureau of Public Debt, Community Development FinancialInstitutions Fund (CDFI), and Office of Thrift Supervision. At the same time, law enforcement hasbeen central to the main responsibilities assigned to the following current or former Treasurybureaus: Bureau of Alcohol, Tobacco, and Firearms (BATF), U.S. Secret Service, Federal LawEnforcement Training Center, U.S. Customs Service, Financial Crimes Enforcement Network(FinCEN), and Treasury Forfeiture Fund. The exception to this simplified dichotomy is the InternalRevenue Service (IRS), which is involved in both the collection of tax revenue and the enforcementof federal tax laws and regulations. As noted above, the creation of DHS greatly diminished Treasury's role in law enforcement. Under the law establishing DHS ( P.L. 107-296 ), the Secret Service, Customs Service, and FederalLaw Enforcement Training Center were transferred from Treasury to DHS, while the TreasuryForfeiture Fund and many of the law enforcement duties of BATF were transferred to the JusticeDepartment (DOJ). In addition, in January 2003, the Treasury Department established a new bureauto administer laws governing the use of alcohol and tobacco and implement regulations formerlyhandled by BATF: the Alcohol and Tobacco Tax and Trade Bureau. Its main tasks do not involvelaw enforcement: collecting alcohol and tobacco excise taxes, classifying those products for taxpurposes, and regulating the operations of industrial users of distilled spirits. The operations of most Treasury bureaus are funded through annual appropriations passedby Congress. This is true of the IRS, Financial Management Service, Bureau of the Public Debt,departmental offices, FinCEN, Alcohol and Tobacco Tax and Trade Bureau, Office of InspectorGeneral, Treasury Inspector General for Tax Administration (TIGTA), CDFI, and Treasury'sinternational programs. But a handful of bureaus finance their operations largely through thecollection of fees for the services and products they provide. This funding arrangement applies tothe Treasury Franchise Fund, U.S. Mint, Bureau of Engraving and Printing, Office of theComptroller of the Currency, and the Office of Thrift Supervision. In FY2005, Treasury received $11.218 billion in appropriated funds, an amount that was1.1% more than it received in FY2004 (see Table 1 ). About 91% of these funds were used tofinance the operations of the IRS, whose budget was set at $10.236 billion. The remaining $982million was distributed in the following manner among Treasury's other bureaus and its departmentaloffices: departmental offices (including TFI), $156 million; OFAC, $22 million; department-widesystems and capital investments, $32 million; Office of Inspector General, $16 million; TIGTA,$128 million; Air Transportation Stabilization program, $2 million; CDFI, $55 million; Treasurybuilding and annex repair and restoration, $12 million; FinCEN, $72 million; Financial ManagementService, $229 million; Alcohol and Tobacco Tax and Trade Bureau, $82 million; and Bureau of thePublic Debt, $174 million. These amounts reflected an 0.83% across-the-board cut (or rescission)in non-defense discretionary spending that was included in the law funding the Treasury Departmentand most other federal agencies in FY2005: the Consolidated Appropriations Act, 2005 ( P.L.108-447 ). For FY2006, the Bush Administration asked Congress to provide $11.649 billion inappropriated funds for Treasury operations -- or 3.8% more than the amount enacted for FY2005 (see Table 1 ). Once again, the vast share of this requested amount was to go to the IRS, whose budgetwould have totaled $10.679 billion. The other departmental offices and bureaus would havereceived the following amounts: departmental offices, $195 million; departmental systems andcapital investments, $24 million; Office of Inspector General, $17 million; TIGTA, $133 million;Air Transportation Stabilization program, $3 million; CDFI, $8 million; Treasury building and annexrepair and restoration, $10 million; FinCEN, $74 million; Financial Management Service, $236million; Alcohol and Tobacco Tax and Trade Bureau, $62 million; and Bureau of the Public Debt,$177 million. All accounts -- except those for departmental systems and capital investments andTreasury building and annex repair and restoration -- would have been funded at higher levels thanin FY2005. The Administration also requested that funding for OFAC be treated not as a separateaccount but as part of the account for departmental offices. Under the Administration's budgetproposal, total full-time employment at Treasury was projected to rise to 113,242 from 113,002 inFY2005. (3) Congressional action on the Administration's budget request for FY2006 commenced in theHouse with a series of hearings held by the House Appropriations Subcommittee on Transportation,Treasury, Housing and Urban Development, the Judiciary, and District of Columbia in March, April,May, and June of this year. On June 15, the Subcommittee approved by voice vote a measure( H.R. 3058 ) to provide funding for Treasury and a handful of other federal agencies inFY2006. The Appropriations Committee also voted by voice vote to report favorably ( H.Rept.109-153 ) to the House an amended version of H.R. 3058 on June 21. Following theconsideration of 48 amendments spread over two days of floor debate, the House approved themeasure on June 30 by a vote of 405 to 18 and sent it on to the Senate. As passed by the House, H.R. 3058 would have given Treasury $11.529 billionin funding for FY2006, or $311 million more than the amount enacted for FY2005 but $120 millionless than the amount requested by the Bush Administration. The IRS was to receive $10.556 billion,or $320 million more than its budget in FY2005 but $123 million less than the amount requested bythe Administration. The House denied a request by the Administration to combine funding fortaxpayer service, tax law enforcement, and information systems into a new single account for taxadministration and operations. In addition, H.R. 3058 would have increased funding inFY2006 relative to FY2005 for the following accounts and in the following amounts: Alcohol andTobacco Tax and Trade Bureau, +$9 million; the Financial Management Service, +$7 million;TIGTA, +$5 million; Bureau of the Public Debt, +$3 million; FinCEN, +$2 million; anddepartmental offices (which includes OFAC and TFI) and Office of Inspector General, +$1 million. Three accounts would have been funded at lower levels in FY2006 than in FY2005: department-wide systems and capital investments, -$11 million; Treasury building and annex repairand restoration, -$2 million; and CDFI, -$0.1 million. One current account would have received nofunding under the measure: the Air Transportation Stabilization program. In the Senate, the Appropriations Committee favorably reported ( S.Rept. 109-109 ) anamended version of H.R. 3058 as passed by the House by a vote of 28 to 0 on July 21. Following three days of debate and the consideration of over 130 amendments, the Senate approvedby a vote of 93 to 1 on October 20 a version of H.R. 3058 that differed in some importantways from the House-passed version. Under the version of H.R. 3058 approved by Senate, the Treasury Departmentwould have received $11.698 billion in funding in FY2006 -- or $480 million more than the amountenacted for FY2005, $49 million more than the amount requested by the Bush Administration, and$169 million more than the amount approved by the House. The IRS would have received $10.679billion -- or $443 million more than the amount enacted for FY2005, the same amount requested bythe Administration, and $123 million more than the amount approved by the House. Like the House,the Committee rejected an Administration proposal to combine funding for taxpayer service, tax lawenforcement, and information systems into a new single account for tax administration andoperations. But unlike the House, the Senate elected to give the IRS the same amount for tax lawenforcement that was requested by the Administration: $4.726 billion. In addition, the followingaccounts would have received an increase in funding relative to their budgets for FY2005: departmental offices (including OFAC and TFI), +$42 million; Alcohol and Tobacco Tax and TradeBureau, +$9 million; the Financial Management Service, +$7 million; TIGTA, +$5 million; theBureau of Public Debt, +$3 million; FinCEN, +$2 million; and Office of Inspector General and AirTransportation Stabilization program, +$1 million. Funding for three Treasury accounts would havebeen cut relative to the amounts enacted for FY2005: department-wide systems and capitalinvestments, -$8 million; Treasury building and annex repair and restoration, -$2 million; and CDFI,$-0.1 million. Furthermore, the Senate-passed version of H.R. 3058 would also haverestored funding for two programs that were effectively eliminated in FY2005: expanded access tofinancial services ($4.0 million) and violent crime reduction ($1.2 million). The significant differences between the versions of H.R. 3058 passed by theHouse and Senate meant that a conference committee had to be formed in order to resolve thosedifferences. In late October, such a committee was formed, and it came to an agreement on the billthat was detailed in a conference report ( H.Rept. 109-307 ) released on November 18. Later the sameday, the House approved the report by a vote of 392 to 31, and the Senate did likewise through aprocedure known as unanimous consent. President signed the measure ( P.L. 109-115 ) on November30. Under the conference agreement on H.R. 3058 , Treasury is receiving $11.689billion in appropriated funds in FY2006 -- or $471 million more than it received in FY2005. Of thisamount, $10.672 billion goes to the IRS -- or $436 million more than it received in FY2005. Theconference report specifies that the IRS may reorganize or reduce its workforce only with the consentof the House and Senate Appropriations Committees. Moreover, Treasury's departmental officesare receiving $197 million, $40 million of which is to be used to combat financial crimes (includingthe financing of terrorist operations). The remaining accounts are funded at the following levels:department-wide systems and capital investments, $24 million; Office of Inspector General, $17million; TIGTA, $133 million; Air Transportation Stabilization program, $3 million; Treasurybuilding and annex repair and restoration, $10 million; FinCEN, $74 million; Financial ManagementService, $236 million; Alcohol and Tobacco Tax and Trade Bureau, $91 million; Bureau of PublicDebt, $177 million; and CDFI, $55 million (to be available until September 30, 2007). Table 1. Department of Treasury Appropriations, FY2004 toFY2006 (millions of dollars) Source: Figures are from a budget authority table provided by the House Committee onAppropriations with one exception. The figures for the Senate Committee on Appropriations comefrom S.Rept. 109-109 . Columns may not sum to the total shown at the bottom because of roundingor the exclusion of certain relatively small line-items. a. FY2004 figures reflect an across-the-board rescission of 0.59%. b. FY2005 figures reflect an across-the-board rescission of 0.83%. According to budget documents, the Administration's FY2006 budget request for theTreasury Department was intended to support a variety of strategic objectives. Heading the list wereimproving taxpayer compliance with tax laws; modernizing IRS's computer and managementsystems; enhancing Treasury's capability to analyze and disrupt terrorist financing and financialcrimes; maintaining and safeguarding the integrity of federal finances and the U.S. financial system;and increasing opportunities for economic development through policy initiatives such as enactingpermanent tax cuts and fundamental tax reform. This section examines some of the key policy issuesraised by the Administration's budget request for Treasury operations except the IRS. Many of theseissues are tied to the Department's strategic objectives. The policy issues raised by the budgetrequest for the IRS are examined in a subsequent section. Combating Terrorist Financing. Not surprisingly,recent congressional testimony by senior Treasury officials indicates that one of their highestpriorities is uncovering, monitoring, and disrupting or stopping the flow of funds to terroristgroups. (4) In the wake of the terrorist attacks of September 11, 2001, Treasury has taken severalnoteworthy steps to extend and restructure its involvement in the federal government's evolvingcampaign to uproot the financing of terrorist groups hostile toward the United States and otherfinancial crimes. In March 2003, the Treasury Secretary announced the establishment of the Executive Officeof Terrorist Financing and Financial Crimes (EOTF). From the outset, the Office's mission was tocoordinate and direct Treasury's efforts to uncover and dismantle terrorist financing networks,combat a variety of financial crimes, implement certain key provisions of the Bank Secrecy Act of1970 (BSA) and the USA Patriot Act, and represent the United States in international organizationsdedicated to fighting terrorist financing and financial crimes. In carrying out this task, EOTF wasauthorized to draw on the resources of FinCEN and the Office of Foreign Assets Control (OFAC). It appears, however, that these plans never came to fruition. About one year later, the Treasury Secretary announced the formation of another office tooversee and coordinate the department's contributions to the government's campaign against terroristfinancing and other financial crimes: the Office of Terrorism and Financial Intelligence (TFI). TFIseeks to integrate the operations and resources of the Office of Terrorist Financing and FinancialCrime (TF/FC), OFAC, FinCEN, the Office of Intelligence and Analysis (OIA), and the TreasuryExecutive Office for Asset Forfeiture. In essence, TFI has two basic responsibilities: (1) gatheringand evaluating financial intelligence and (2) enforcing various financial laws and regulations. OIAprovides the intelligence, mainly through the analysis of complex financial transactions. Enforcement is handled by TF/FC, OFAC, and FinCEN and includes such activities as identifyingand freezing the bank accounts of terrorists, leaders of drug smuggling operations and their supportnetworks; implementing U.S. sanctions policy; administering and enforcing the BSA; and fosteringclose working relationships between domestic law enforcement agencies and financial institutionsaround the aim of exposing or tracking illicit activities. Upon request, TFI also is authorized to assistIRS special agents in their investigations of allegations of terrorist financing, money laundering, andother financial crimes. The Administration's proposed budget for Treasury in FY2006 seeks to bolster the agency'srole in the campaign against terrorist financing. It asked Congress to increase funding for programswithin the Treasury Department dedicated to combating financial crimes (including terroristfinancing) from an estimated $25 million in FY2005 to $40 million in FY2006, a rise of 60%. Morethan half of this money ($22 million) was to be funneled into OFAC and the remainder to TFI. Congress evidently agreed with this approach: the enacted version of H.R. 3058 included $40 million for these programs. The Administration's request to increase substantially spending on Treasury programsto combat terrorist financing and other financial crimes raised significant questions about howthese additional funds would be spent, what they would mean for Treasury's role in the federalgovernment's campaign to combat terrorist financing networks, and whether the likely benefitsfrom the increased spending would outweigh the cost of expanding the programs. Morespecifically, would the proposed budget for countering financial crimes enhance Treasury'scapability to analyze and disrupt terrorist financing? How would the proposed budget fit intothe federal government's diversified and evolving campaign against terrorist financing? Would the activities to be undertaken by TFI in FY2006 duplicate any of the contributions ofother Treasury bureaus (particularly FinCEN) and other federal agencies (particularly theDepartment of Justice or the Federal Bureau of Investigation)? If so, to what extent? Whatare the expected benefits of expanding Treasury's programs to counter terrorist financing andhow do they compare to the additional cost of such an expansion? The Administration provided few details in its budget documents that addressed anyof these questions. (5) Some Members of Congress had similar questions about Treasury's plans to increaseits involvement in the campaign against terrorist financing. In its report to the House on H.R. 3058 , the Committee on Appropriations expressed concern about thepurpose of TFI and its role in the government's campaign against terrorist financing. (6) Future congressionaloversight of the TFI and related Treasury programs may wish to focus on these policyquestions. Administration of the Community Development FinancialInstitutions Fund. The Administration's FY2006 budget request for theTreasury Department included a reduction in funding for the Community DevelopmentFinancial Institutions Fund (CDFI) from $55.1 million in FY2005 to $7.9 million in FY2006. To say the least, the proposal provoked a controversy over its merits. Since its inception, the CDFI, which was created by the Riegle CommunityDevelopment and Regulatory Improvement Act of 1994, has sought to increase theavailability of credit, investment capital, and financial services in relatively poor urban andrural communities. The fund pursues these objectives by augmenting the private resourcesfor investment in economic development, affordable housing, and basic banking services inthese communities. It works with two sets of partners in boosting such investment: privatefinancial institutions certified by the CDFI as community development financial institutionsand private equity groups certified by the CDFI as community development entities (CDEs). Under the Administration's proposal, three core elements of the CDFI -- NativeInitiatives, Bank Enterprise Award Program, and Community Development FinancialInstitutions Program -- would have been consolidated within the Commerce Department withat least 17 other federal community and economic development programs. (7) In taking such a step,the Administration has said it was trying to "achieve greater results and focus on communitiesmost in need of assistance." No additional funding for loans and grants was proposed for theCDFI programs that were to be transferred to the Commerce Department. It was not clearfrom the Administration's budget documents whether funding for these programs would becut relative to spending on them in recent fiscal years. What was clear was that the $7.9million requested for CDFI in FY2006 would have enabled the fund to continue administeringthe so-called "new markets" tax credit created by the Community Renewal Tax Relief Act of2000 and manage its existing portfolio of loans and grants. The credit is intended to injectgreater private investment into poorer neighborhoods with relatively high rates of poverty andunemployment through the medium of CDEs. The Administration's proposal was sharply criticized on the grounds that it wouldundermine the prospects for needed economic development in poorer communities byeffectively eliminating the CDFI programs to be transferred to the Commerce Department. Some feared the proposal would lead to a substantial loss of seed capital for small banksclassified as community development financial institutions. (8) Among these criticswere some Members of Congress. Their views apparently proved decisive in thecongressional debate over the merits of the proposal: the enacted version of H.R. 3058 not only retained the current administrative structure for the CDFI but also provided itwith $55.0 million in funding in FY2006 and FY2007, $6 million of which is for direct loansand $4 million of which is for technical assistance for native American, Hawaiian, andAlaskan communities. A policy issue raised by the Administration's proposal -- one that may have contributedto its defeat -- was its impact on the communities that have benefitted from the CDFIprograms the Administration wanted to consolidate within the Commerce Department. Morespecifically, the proposal led some to ask whether the proposed reorganization of the CDFIwould trigger sharp declines in lending to small firms and investment in commercial realestate development and low-income housing and gradual retrenchments in the availability offinancial services in these communities. Future congressional oversight of the CDFI maywish to assess the effects of its programs in the communities directly affected by them. Funding for the Alcohol and Tobacco Tax and TradeBureau. The Administration's FY2006 budget request also sought to chargeuser fees for some of the services provided by the Alcohol and Tobacco Tax and TradeBureau. Two new fees were proposed: (1) an administrative fee for "drawbacks" frommanufacturers of non-beverage products and (2) a filing fee for Certificate of Label Approvalsfor distilled spirits, wine, and beer, American Viticultural Areas, proposed formulas, and newpermit applications. To make the adoption of the fees feasible, the Administration said itwould seek the enactment of legislation giving the bureau the authority to collect the proposedfees. The Administration said the fees were warranted because they would compel the firmsbenefitting from the bureau's regulatory activities to bear at least some of the cost of theseactivities. Among the benefits cited by the Administration were the assurance that alcoholand tobacco products sold domestically were unadulterated and fair competition among firmssubject to the regulations. The Administration estimated that the proposed fees would raise$28.6 million in revenue in FY2006. Some opposed the proposed fees on the grounds that they would prove undulyburdensome for smaller firms, especially family-owned wineries. The opponents includedsome lawmakers. Evidently more than a few Members of Congress found this line ofreasoning persuasive: the enacted version of H.R. 3058 rejected the proposeduser fees. In the minds of some, the Administration's proposal raised the broader policy questionof under what circumstances is it appropriate for a federal agency to rely on user fees ratherthan appropriated funds to cover the cost of providing specific services. In order to finance its operations and many of its programs, the federal governmentlevies individual and corporate income taxes, social insurance taxes, excise taxes, estate andgift taxes, customs duties, and miscellaneous taxes and fees. The federal agency responsiblefor administering and collecting these taxes and fees (except customs duties) is the InternalRevenue Service (IRS). In discharging this responsibility, the IRS receives and processesmillions of tax returns and related documents and payments; disburses refunds; enforcescompliance through audits and other methods; collects delinquent taxes; and provides avariety of services to taxpayers to help them understand their rights and responsibilities andresolve problems. In FY2004, the IRS collected $2.035 trillion before refunds, the largestcomponent of which was individual income tax revenue of $990 billion. In FY2005, the IRS received $10.236 billion in appropriated funds (see Table 2 ). Thisamount was 0.5% more than the amount enacted for FY2004. Of the amount enacted forFY2005, $4.057 billion was designated for processing, assistance, and management; $4.364billion for tax law enforcement; $1.578 billion for information systems management; $203million for the business systems modernization program (BSM); and $35 million toadminister the health insurance tax credit established by the Trade Act of 2002. Of the fundsappropriated for processing, assistance, and management, Congress specified that $4 millionbe used to operate the Tax Counseling for the Elderly program, and that $7.5 million be usedas grants for low-income taxpayer clinics. None of the funds appropriated for the BSMprogram could be spent without the consent of the House and Senate AppropriationsCommittees. In addition, the IRS Commissioner was required to submit quarterly reports inFY2005 to both committees assessing the agency's "progress, status, and results inimplementing its proposed compliance initiatives" during the fiscal year. (9) The Bush Administration requested that IRS operations be funded at $10.679 billionin FY2006 -- or 4.3% more than the funding the agency received in FY2005 (see Table 2 ). To bring its proposed budget into closer alignment with IRS's major programs and most recentstrategic plan, the Administration proposed that the agency's budget be restructured beginningin FY2006. Under the proposal, the number of appropriations accounts in the IRS budgetwould be reduced from six to three: tax administration and operations (TAO), BSM, andadministration of the health insurance tax credit. TAO would be equivalent to the existingaccounts for tax law enforcement; processing, assistance, and management; and informationsystems. For FY2006, the Administration sought $10.460 billion in appropriated funds forTAO -- or about 5% more than was spent for this purpose in FY2005; $199 million for BSM-- or 2% less than the amount enacted for FY2005; and $20 million for administration of thehealth insurance tax credit -- or 43% less than the amount enacted for FY2005. Comparedto the FY2005 budget, the Administration sought $500 million more for enforcement but $38million less for taxpayer service and $4 million less for BSM. The Administration estimatedthat its budget proposal would have boosted total full-time employment at the IRS from97,440 in FY2005 to 97,679 in FY2006. In the first few months of 2005, the IRS disclosed how it planned to achieve therequested $38 million reduction in spending on taxpayer service. Most of the savings, theagency revealed, would come from the closure of 68 out of 400 Taxpayer Assistance Centers(TACs) and a reduction in the weekly hours of operation for toll-free telephone assistance fortaxpayers by the end of 2005. These disclosures sparked howls of protest from some, whofeared that the planned cutbacks in service would make it much harder for many individualand business taxpayers to comply with the tax laws. In a bid to ensure that the IRS got the requested funding for tax law enforcement of$6.893 billion, the Administration proposed that Congress fund IRS operations through abudgetary mechanism known as a contingency appropriation in FY2006. Under this method,caps are imposed on discretionary spending for all federal agencies in accordance with Section302(a) of the Congressional Budget Act of 1974 and Section 251 of the Balanced Budget andEmergency Deficit Control Act of 1985. The Administration asked Congress to increase thecap on funding for the IRS in FY2006 by $446 million. According to existing budgetaryrules, Congress could do so only if it specified that all additional funds be used forenforcement and approved a base level of funding for enforcement in FY2006 of $6.446billion. Otherwise, the added $446 million could not be appropriated or made available to theIRS. (10) A key player in the annual budget cycle for the IRS is the IRS Oversight Board. Underthe Internal Revenue Service Restructuring and Reform Act of 1998 (RRA98, P.L. 105-206 ),the Board is authorized to review the agency's annual budget request, submit its own budgetrecommendation to the Treasury Department, and determine whether the budget submittedby the President to Congress is adequate to support the annual and long-term strategic plansof the IRS. (11) The Board recommended a budget of $11.629 billion for the IRS in FY2006, anamount that was about 14% greater than the agency's budget in FY2005 and 9% greater thanthe budget requested by the Bush Administration for FY2006. (12) Whileacknowledging that the IRS had made significant progress in improving customer service andcombating tax evasion in the past few years, the Board argued that more money should beappropriated than the Administration requested for enforcement (an additional $35 million),taxpayer service (an additional $111 million), BSM (another $140 million), and expectedincreases in IRS operating costs (another $87 million). Congressional action on the Administration's FY2006 budget request for the IRScommenced in the House with a series of hearings held by the House AppropriationsSubcommittee on Transportation, Treasury, Housing and Urban Development, the Judiciary,and District of Columbia in March, April, May, and June of 2005. On June 15, theSubcommittee approved by voice vote a measure ( H.R. 3058 ) to provide fundingfor the Treasury Department (including the IRS) and certain other executive agencies inFY2006. The Appropriations Committee also voted by voice vote to report favorably( H.Rept. 109-153 ) to the House an amended version of H.R. 3058 on June 21. Following the consideration of a total of 48 amendments spread over two days of floor debate,the House approved the measure on June 30 by a vote of 405 to 18 and sent it on to theSenate. As passed by the House, H.R. 3058 would have appropriated $10.556billion for IRS operations in FY2006 (see Table 2 ), an amount that was $319 million morethan the agency's budget in FY2005 but $123 million less than the amount requested by theBush Administration. The House did not endorse the Administration's proposed restructuringof the IRS budget. As a result, it was difficult to make meaningful comparisons between theAdministration's budget request and the funding for IRS operations included in theHouse-passed version of H.R. 3058. Nonetheless, it was possible to compare thefunding approved by the House with the amounts enacted for FY2005. Of the $10.556 billionin funding for the IRS approved by the House, $4.182 billion (or $125 million above the levelfor FY2005) would have gone to processing, assistance, and management; $4.580 billion (or$216 million above the level for FY2005) to tax law enforcement; $1.575 billion (or $3million below the level for FY2005) to information systems; $199 million (or $4 millionbelow the level for FY2005) to the BSM program; and $20 million (or $15 million below thelevel for FY2005) to administering the health insurance tax credit. The measure also specifiedthat of the funds recommended for processing, assistance, and management, $4 million wasto be set aside for the Tax Counseling for the Elderly program, $8 million for grants tolow-income taxpayer clinics, and $1.5 million for the IRS Oversight Board. In addition, themeasure included a provision prohibiting the IRS from closing or consolidating any TACsuntil TIGTA had completed a "thorough study" that assessed the "impact of (planned) closureson taxpayer compliance." (13) In the Senate, the Appropriations Committee favorably reported ( S.Rept. 109-109 ) anamended version of H.R. 3058 by a vote of 28 to 0 on July 21. The Senateapproved the bill with a few changes by a vote of 93 to 1 on October 20. The version of H.R. 3058 passed by the Senate granted the IRS the samelevel of funding in FY2006 requested by the Administration: $10.679 billion, or $443 millionmore than the amount enacted for FY2005 and $123 million more than the amount approvedby the House (see Table 2 ). Like the House, the Senate rejected the Administration'sproposed restructuring of the IRS budget on the grounds that it was "overly simplistic" andhampered the ability of the Appropriation Committee to hold the IRS accountable for how itused appropriated funds. Under the Senate-passed version of H.R. 3058, the IRSwould have received $4.137 billion for processing, assistance, and management (or $80million more than the amount enacted for FY2005 but $45 million less than the amountapproved by the House); $4.726 billion for tax law enforcement (or $362 million more thanthe amount enacted for FY2005 and $145 million more than the amount approved by theHouse); $1.598 billion for information systems (or $20 million more than the amount enactedfor FY2005 and $23 million more than the amount approved by the House); $199 million forthe BSM program (or $4 million less than the amount enacted for FY2005 but the sameamount requested by the Administration and approved by the House); and $20 million foradministering the health insurance tax credit (or $15 million less than the amount enacted forFY2005 but the same amount requested by the Administration and approved by the House). Like the House-passed version of H.R. 3058, the Senate-passed version alsoincluded a provision that would have barred the IRS from using any of the funds appropriatedby the bill to implement any planned reduction in taxpayer services TIGTA had completeda study "detailing the impact of the IRS's plans to reduce services on taxpayer compliance andtaxpayer assistance." (14) The Senate also agreed with the House in specifying that$4.1 million be set aside for the Tax Counseling for the Elderly program and $8 million forgrants to low-income taxpayer clinics. But unlike the House-passed bill, the version passedby the Senate would have removed the cap imposed by the FY1995 Treasury, Postal Serviceand General Government Appropriations Act on the amount of user fees collected by the IRSin a fiscal year that it is allowed to retain and would have prevented the IRS from competingwith the private sector in developing tax return preparation software by requiring the agencyto continue the Free File program begun in 2002. Table 2. IRS Appropriations, FY2004 toFY2006 (millions of dollars) Source: Figures are from a budget authority table provided by the House Committee onAppropriations. Columns may not sum to the total shown at the bottom because of roundingor the exclusion of relatively small line-items. a. FY2004 figures reflect a rescission of 0.59%. b. FY2005 figures reflect a rescission of 0.83%. c. Under the Bush Administration's FY2006 budget request, three IRS appropriationsaccounts (i.e., processing, assistance and management; tax law enforcement, andinformation systems) would have been consolidated into a single account known astax administration and operations (TAO). The Administration asked Congress toappropriate $10.460 billion for TAO in FY2006, or about 5% more than was spent forthat purpose in FY2005. d. Includes a rescission of $9 million. The differences between the House-passed and Senate-passed version of H.R. 3058 must be resolved by a conference committee before a version of thebill can be sent to the President for his signature. Such a committee was formed in lateOctober. On November 18, it released a conference report ( H.Rept. 109-307 ) spelling out theterms of the agreement it reached. Later the same day, the House approved the conferenceagreement on H.R. 3058 by a vote of 392 to 31, and the Senate did likewise througha procedure known as unanimous consent. President Bush signed the measure on November30. Under the enacted version of H.R. 3058 , the IRS is receiving $10.672billion in FY2006, or $435 million more than it received in FY2005. Of this amount, $4.137billion is being used for processing, assistance, and management; $4.726 billion for tax lawenforcement; $1.599 billion for information systems; $199 million for BSM; and $20 millionfor administering the health insurance tax credit. The act specifies that the IRS may notreorganize or reduce its workforce without the consent of the House and SenateAppropriations Committees, and that the IRS may not eliminate or reduce any of the servicesit provides to taxpayers until TIGTA completes a study of the likely impact of any suchcutbacks on taxpayer compliance. It also directs the IRS to abide by the terms of the newfour-year agreement it signed with the Free File Alliance, which bars the IRS from competingin the market for tax return preparation software. Moreover, under the act, the IRS OversightBoard, and the National Taxpayer Advocate are required to develop a five-year plan fortaxpayer services that balances strategic goals for enforcement and service and submit thereport to the Committees no later than April 14, 2006. The Administration's budget request for the IRS in FY2006 raised several policyissues. Each issue was tied in some way to the three principal aims of the agency's currentfive-year strategic plan, which was issued in July 2004: (1) continued improvement oftaxpayer service; (2) strengthened enforcement of the tax laws; and (3) continuedmodernization of IRS's information systems. Taken together, the issues underscored thedifficult tradeoffs facing Congress as it allocated limited resources among programs intendedto advance the three aims at a time when the estimated tax gap and the federal budget deficitwere large and growing. Stronger Emphasis on Enforcement. Thebudget request made it clear that the Administration placed a high priority on improvingtaxpayer compliance and collecting overdue taxes. (15) It called for a rise in spending on enforcement of 8%relative to the amount enacted for FY2005 but decreases in spending of 1.1%for taxpayerservice, 2.1% for the BSM program, and 41.5% for administering the health insurance taxcredit. FY2006 marked the sixth fiscal year in a row that the IRS asked Congress to fund anincrease in enforcement staff. There were no increases in staffing before FY2005 because therises in funding for enforcement enacted in FY2001 through FY2004 was used largely tocover unbudgeted increases in operating expenses or to address other priorities. (16) In testimony beforethe House Ways and Means Subcommittee on Oversight, IRS Commissioner Mark Eversonstated that if his agency's requested budget for enforcement were enacted, the IRS would beable to increase the audit rate for mid-size corporations from 7.6% in FY2004 to 16% inFY2008, close 50% more delinquent accounts in FY2008 than in FY2004, and raise the auditrate for individual taxpayers with taxable incomes between $250,000 and $1 million from1.5% in FY2004 to 2.8% in FY2008. (17) The Administration sought more resources for tax law enforcement for severalreasons. First, a failure to pay taxes owed was becoming a significant problem. Accordingto the latest estimate by the IRS, the gross tax gap -- which is the difference between federaltaxes owed on legal sources of income and federal taxes on that income paid on time -- in the2001 tax year amounted to somewhere between $312 billion and $353 billion. (18) By contrast, thegross tax gap was estimated to have been about one-third that level in 1992: $110.1 billionto $127.0 billion. (19) Tax evasion is a serious policy issue because if leftunchecked, it can undermine the fairness and integrity of the tax system, waste considerableeconomic resources, and hamper the performance of the economy. Second, from the mid-1990s through the first few years of the third millennium, IRS'sresources for enforcing compliance with tax laws and regulations declined while the volumeof tax returns grew. From FY1996 to FY2003, the size of the IRS workforce engaged inenforcement activities steadily fell from 26,061 in FY1996 to 19,322 in FY2003, a drop of26%. (The downward trend ended in FY2004 when the total number of revenue agents,revenue offices, and special agents rose to 20,863.) Meanwhile, between 1995 and 2003, thenumber of individual income tax returns filed rose from 116.5 million to 130.8 million, a gainof 12%, and the typical return became more complex owing to new tax provisions and aproliferation of sophisticated new financial instruments. A predictable result of these trendswas a sharp drop in the share of individual and corporate tax returns subject to examinationover the same period: the overall audit rate for individual taxpayers was 0.65% in FY2003,down from 1.67% in FY1996; for all corporations with assets of $10 million or more, theaudit rate stood at 12.08% in FY2003, down from 25.33% in from FY1996. Third, spending on enforcement has the potential to generate a large return oninvestment. Through its enforcement activities, the IRS collects taxes that otherwise mightgo unpaid. In addition, the threat of investigation and prosecution inherent in enforcementactivities deters some individuals from engaging in tax evasion, leading to higher levels ofcurrent-year tax payments than otherwise would be the case. In FY2004, IRS's enforcementactivities yielded $43.1 billion in additional revenue, an increase of $5.5 billion (or 15%) fromFY2003. (20) Without providing supporting evidence, the Administration argued in its budget request forthe IRS in FY2006 that spending $265 million more on enforcement in FY2006 than inFY2005 would yield nearly $1.2 billion in additional revenue by FY2008. Research on theefficacy of tax law enforcement activities suggests there is no incontestable causal connectionbetween spending on enforcement and the amount of revenue collected. (21) A recent report byTIGTA questioned the methodology used by the IRS to project a return of $4.40 in FY2008for every dollar spent on enforcement in FY2006 above the level of FY2005. (22) The proposed increase in spending on enforcement raised at least three policyquestions that might be of interest to lawmakers: How much additional revenue would becollected as a result of the increase, and over what period would it be collected? Could of itsoverall budget devoted to enforcement without compromising taxpayer service or itscommitment to protect and uphold taxpayer rights? Should Congress set enforcement goalsfor the IRS and make its budget for enforcement contingent on tangible progress towardachieving those goals? Use of Private Debt Collection Agencies. As part of its strategy for improving taxpayer compliance and shrinking the gross tax gap, theBush Administration sought in its budget requests for FY2004 and FY2005 the legal authorityto hire private debt collection agencies (PCAs) to help the IRS collect certain delinquentindividual tax debt. (23) The IRS gained the authority with the passage of theAmerican Jobs Creation Act of 2004. Under the act, the IRS is authorized to enter intocontracts with PCAs to pursue such debt. Overdue taxes collected through the firms'collection activities are to be put into a revolving fund from which the PCAs will be paid fortheir services up to 25% of the amount collected. The IRS is soliciting bids for the first phaseof the private debt collection initiative. It intends to award three contracts in February 2006and launch a limited collection program involving the three contractors the following June. All firms approved by the General Services Administration to undertake debt collection forfederal agencies under Federal Supply Schedule 520-4 are eligible to submit bids. If noproblems arise in the first phase of the initiative, the number of contractors could be expandedto 12 in January 2008. The proposal to allow the IRS to use PCAs has been controversial since it was firstunveiled. Critics contend that the use of PCAs would violate the well-established and widelyaccepted principle that the collection of taxes is an inherently governmental function, threatentaxpayer privacy, undermine the security of IRS jobs, and serve as an invitation to taxpayerabuse by giving private debt collectors a financial incentive to use aggressive tactics with thetaxpayers they contact. Supporters of the proposal retort that these concerns are largelyunfounded, and that the proposed use of PCAs plan offers several advantages over hiringadditional IRS staff to pursue the targeted individual tax debt. First, no appropriated fundswould be used to pay for the services rendered by the PCAs. Second, the private collectionagencies would augment and not replace the IRS's own collection staff. Finally, the use ofPCAs would enable the IRS to focus its enforcement resources on more legally challengingcases of tax evasion with potentially higher payoffs. Some Members of Congress remain opposed to IRS's private debt collection initiativeeven though it is just beginning to take shape. In the House debate over H.R. 3058 , Representatives Chris Van Hollen and Rob Simmons introduced an amendment( H.Amdt. 418 ) that would have prohibited the IRS from using any appropriatedfunds to enter into, implement, or manage contracts with PCAs in FY2006. The amendmentwas withdrawn after a congressional supporter of the initiative threatened to raise a point oforder against it. A similar amendment did not surface during the Senate's debate over itsversion of H.R. 3058. The IRS initiative raised the important question of whether PCAs can collect this debtmore efficiently and effectively than IRS enforcement staff without violating taxpayer rights. Congress may wish to focus on this question as it oversees the implementation of theinitiative. Proposed Cuts in Taxpayer Service. Although the Administration said one of the major aims of its FY2006 budget request for theIRS was to improve taxpayer service, it called for a net reduction in spending on this serviceof $38.5 million in FY2006, or 1.1% below the amount enacted for FY2005. In reality, theAdministration sought a gross cut of $134 million in the budget for taxpayer service, but itintended to use more than $95 million of that savings to cover expected increases in the costof labor, materials, postage, and rent. (24) The proposed net reduction came on top of a drop inspending for this purpose of $104 million in FY2005 relative to FY2004. Senior IRS officialscontended that the proposed cut in spending on taxpayer service was justified for two reasons. First, usage of IRS taxpayer assistance centers (TACs), the IRS TeleFile service, and the IRStoll-free telephone help line had declined in recent years as more and more taxpayers accessthe IRS website to obtain needed tax forms and filing instructions and file tax returnselectronically. (25) Second, the cost of assisting taxpayers and processing returns was much lower online than inperson or over the telephone. Some were concerned that further cutbacks in the budget for taxpayer service wouldreverse some of the advances in taxpayer service that had occurred since the passage ofRRA98. (26) Theseadvances included improved responses by IRS staff to taxpayer questions over toll-freetelephone lines and expanded access to a number of self-serve options over the telephone andthrough the IRS website aimed at simplifying the filing of tax returns and payment of taxes. Over the first eight months of 2005, senior IRS officials announced or took severalsteps intended to cut $134 million from spending on taxpayer service in FY2006. One suchstep was a plan announced in May 2005 to close 68 out of 400 taxpayer assistance centers(TACs) nationwide by the end of 2005. IRS Commissioner Everson estimated that theclosures could result in a cost savings of $50 million to $55 million in FY2006. (27) TACs providetaxpayers with a wide variety of walk-in services, including interpreting tax laws andregulations, preparing individual tax returns, resolving concerns about taxpayer accounts, andaccepting payments. Two other planned steps were the elimination of electronic tax lawassistance for domestic taxpayers and practitioners and a 20% reduction in the weekly hoursof operation for toll-free telephone assistance; the estimated cost savings from these stepstotaled $18 million in FY2006. (28) In August 2005, the IRS ended its TeleFile service, whichmade it possible for taxpayers to file tax returns using a telephone; the measure is expectedto save up to $5 million in FY2006. The proposed reduction in spending on taxpayer service in general and the proposedclosure of a number of TACs in particular drew sharp criticism from a variety of players inthe annual appropriations cycle for the IRS, including the IRS Oversight Board, the NationalTaxpayer Advocate, the National Treasury Employees Union, and certain Members ofCongress. A major concern of critics was how the loss of 68 TACs and a reduction intoll-free telephone assistance would affect compliance by those in greatest need of assistance,especially the elderly, low-income households, and immigrants. This concern so galvanizedcongressional critics that they inserted a provision (section 205) in the enacted version of H.R. 3058 that bars the IRS from using any of the funds appropriated for FY2006to reduce taxpayer services until TIGTA completes a study on how the proposed reductionswould affect taxpayer compliance. In addition, the FY2006 defense appropriations bill( H.R. 2863 ) passed by Congress in December 2005 contained a provision thatprohibits the IRS from reducing the hours of its toll-free telephone assistance "below thelevels in existence during the month October 2005." (29) Responding to congressional concerns, the IRS announced in late July that it wassuspending the decision to close 68 TACs by the end of 2005 until Congress had approveda budget for the agency in FY2006. (30) In early November, a senior IRS official disclosed thatthe agency would not close any TACs before March 1, 2006. (31) In addition, the IRSis reported to have abandoned its plan to reduce the daily hours of its toll-free telephoneassistance starting on January 23, 2006. (32) The Administration's proposed reduction in spending on taxpayer service in FY2006raised the issue of how the reduction would affect taxpayer compliance over time. Somelawmakers were concerned that the planned cuts in taxpayer service would lead to moreindividuals failing to fulfill their legal obligations under the tax code even if more moneywere spent on enforcement. Although senior IRS officials argued that compliance could onlyimprove by shifting funds from taxpayer service to enforcement, they provided no hardevidence to support this claim during congressional action on the Administration's budgetrequest for the IRS. One question lawmakers may wish to address as they oversee IRSoperations and its use of appropriated funds concerns what the proper balance between taxlaw enforcement and taxpayer service might be. Status and Future of the Business Systems ModernizationProgram. The Administration's budget request for the IRS in FY2006 alsowas intended to support the strategic goal of "modernizing the IRS through its people,processes, and technology." Critical to this effort, in the view of many, is the BSM program,which seeks to upgrade IRS's antiquated collection of computer systems through targetedinvestments in new information systems designed to handle with greater efficiency suchcrucial functions as financial management, the processing of tax returns, and the release ofrefunds. Congress first created an appropriations account for BSM in FY1998, and theprogram began the following year. Initially, it was envisioned as a 15-year venture whosetotal cost would not exceed $8 billion. Through FY2006, a total of $2.1 billion has beenappropriated for BSM. No appropriated funds may be spent until the House and SenateAppropriations Committees have approved an annual BSM expenditure plan submitted by theIRS. The annual appropriation for BSM has been declining since it peaked at $405.6 millionin FY2002: the amount enacted for FY2006, $199 million, is 2% below the amount enactedfor FY2005 ($203 million), which was 47.5% below the level of funding authorized forFY2004. The decline in funding for the program in recent fiscal years reflects considerabledoubt in Congress that IRS management is capable of taking the steps needed to improve theprogram's performance and rein in its cost. From the start, the BSM program has beenplagued by cost overruns and schedule delays for key projects. This doubt and relatedconcerns influenced congressional consideration of the Administration's FY2006 budgetrequest for the program. (33) Nonetheless, the BSM program is beginning to yield technological advances that couldyield significant benefits for taxpayers and the IRS. The advances should eventually enabletaxpayers to file and retrieve increasing volumes of information electronically and the IRS toreduce its backlog of collections cases and gain immediate access to financial informationneeded to enforce compliance with tax laws and regulations. Since 2004, the IRS hasdeployed the following information systems developed through the BSM: (1) the ModernizedE-File, which is intended to allow large and small firms and tax-exempt organizations to filetheir tax returns electronically; (2) E-Services, which allows most taxpayers and taxpractitioners to conduct business with the IRS electronically; (3) the Customer Account DataEngine, which will gradually replace the agency's outmoded computerized database oftaxpayer information and is currently used to process 1040EZ returns for single taxpayers withrefunds; and (4) the Integrated Financial System, which replaces key aspects of IRS's corefinancial systems and functions as its new internal accounting system. (34) Proposals to lower funding for the BSM program raise some interesting policy issues. Some analysts are concerned that continued reductions in the budget for BSM are bound tolessen IRS's chances of achieving its primary goals for the program and cause avoidabledelays in implementing certain planned technology improvements. (35) In addition, furtherreductions may adversely affect taxpayer service and IRS enforcement activities in the longrun. Raymond Wagner, the Chair of the IRS Oversight Board, stated in congressionaltestimony that the BSM program is the "key to improving customer service and enforcement,"and that the program should be expanded "not only to reduce costs and speed up deliverytime, but to avoid a catastrophic collapse of the IRS's archaic legacy computer systems. (36)
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The Treasury Department performs a host of critical functions as a federal agency. Foremostamong them are protecting the nation's financial system from a variety of financial crimes,administering the tax code and collecting tax revenue, managing and accounting for the public debt,administering the government's finances, and regulating and supervising financial institutions. This report examines the President's budget request for Treasury and the Internal RevenueService (IRS) in FY2006, some of the key policy issues it raised, and congressional action on therequest. It will not be updated again. For FY2006, the Bush Administration asked Congress to provide $11.648 billion inappropriated funds for Treasury, or 3.8% more than the amount enacted for FY2005. As usual, thevast share of the proposed budget was to go to the IRS, which would have received $10.679 billion. The remaining departmental offices and bureaus would have received the following amounts:departmental offices, $195 million; departmental systems and capital investments, $24 million;Office of Inspector General, $17 million; Inspector General for Tax Administration, $133 million;Air Transportation Stabilization program, $3 million; Community Development FinancialInstitutions Fund, $8 million; Treasury building and annex repair and restoration, $8 million;Financial Crimes Enforcement Network, $74 million; Financial Management service, $236 million;Alcohol and Tobacco Tax and Trade Bureau, $91 million; and the Bureau of the Public Debt, $177million. The Administration budget request for IRS operations ($10.679 billion) in FY2006 was 4.3%more than the amount enacted for FY2005. To better align the request with the IRS's currentfive-year strategic plan, the Administration sought to revise the agency's budget beginning inFY2006. Under its proposal, the number of accounts would be reduced from six to three: taxadministration and operations (TAO), business systems modernization (BSM), and administrationof the health insurance tax credit. For FY2006, the Administration asked that $10.460 billion bespent on TAO, or 4.6% more than was spent for this purpose in FY2005; $199 million on BSM, or2.3% less than the amount enacted for FY2005; and $20 million on administration of the health caretax credit, or 41.5% less than the amount enacted for the current fiscal year. Compared to theamounts enacted for FY2005, the Administration sought $500 million more for enforcement but $39million less for taxpayer service and $4 million less for BSM. The House and Senate approved somewhat differing versions of an FY2006 appropriationsbill ( H.R. 3058 ) that included Treasury and the IRS. As a result, the differences hadto be resolved in a conference committee. Under the conference agreement passed by the House andSenate on November 18, 2005, and signed by President Bush on November 30, Treasury is receiving$11.689 billion in funding (or about $40 million more than the amount requested by theAdministration); nearly 91% of that amount, or $10.671 billion, is set aside for the IRS.
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The legislation contains extensive changes to Medicare's FFS program, including paymentincreases and, in certain instances, decreases; development of competitive acquisition programs;implementation or refinement of other prospective payment systems (notably, the development ofan end-stage renal disease (ESRD) basic payment system); expansion of covered preventive benefits;establishment of demonstration programs; and required studies. The anticipated financial impactof these changes on any individual provider, physician, or supplier will vary depending on manyfactors, such as the unique characteristics of the individual or entity participating in Medicare as wellas the number and type of services provided to the Medicare beneficiaries they serve. Selectedhighlights of the FFS payment provisions and those establishing preventive care benefits anddemonstration programs will be briefly described. Selected Rural Provider Provisions. Generally, Medicare payments to certain rural providers are expected to increase; many of the rural provisions will benefit urban providers as well. CBO estimates that the rural provisions in TitleIV of the bill will increase Medicare's direct spending by $9.3 billion from 2004 through 2008 andby $19.9 billion from 2004 though 2013. It should be noted that other provider payment provisionsin H.R. 1 can impact rural providers, but their effect on Medicare payments to ruralproviders has not been specifically identified. Hospitals in rural areas and those in small urban areas will receive a permanent 1.6% increase to Medicare's base rate or per discharge payment; the payment limit for rural andsmall urban hospitals that qualify for disproportionate share hospital (DSH) adjustment will increasefrom 5.25% to 12%; hospitals in low-wage areas (those with wage index values below 1) willreceive additional payments through a decrease from 71% to 62% in the labor-related portion of thebase payment rate; and small rural hospitals with less than 50 beds will receive cost reimbursementfor outpatient clinical laboratory tests. In addition, rural hospitals with less than 100 beds will beprotected from payment declines associated with the hospital outpatient prospective payment system(OPPS) for an additional 2 years; these OPPS hold harmless provisions will be extended to solecommunity hospitals for services from 2004 through 2006. CBO estimates that these provisions willincrease direct Medicare spending by $15.6 billion over the 10-year period. Critical access hospitals (CAHs) will have their bed limit increased from15to 25; there will be no restriction on the number of these beds that can be used for acute care servicesat any one time. CAHs will be able to establish distinct part rehabilitation and psychiatric units ofup to 10 beds that will not be included in the CAH bed count. Cost reimbursement of CAH serviceswill increase to 101% of reasonable costs, starting January 1, 2004. Periodic interim payments forCAHs will be authorized. State authority to waive the 35-mile requirement for new entities toqualify as a CAH will be eliminated as of January 1, 2006. CBO estimates that these provisions willincrease direct Medicare spending by $900 million over the 10-year period. Physicians in newly established scarcity areas will receive a 5% increase inMedicare payments. Physicians in certain low-cost areas with geographic adjustment factors below1 will receive payment increases so as to increase this factor to 1, starting in 2004 through 2006. CBO estimates that these provisions will increase direct Medicare spending by $1.7 billion over the10-year period. Practitioners in rural health clinics and federally qualified health centers willbe able to bill separately for services provided to beneficiaries in skilled nursing facilities. CBOestimates that these provisions will increase direct Medicare spending by $100 million over the10-year period. Home health providers in rural areas will receive a 5% increase in Medicarepayments for one year beginning April 1, 2004. CBO estimates that this one-year increase willincrease direct Medicare spending by $100 million over the 10-year period. Selected Acute Hospital Provisions. Generally, Medicare payments to hospitals will increase under the conference report. Specifically, Acute hospitals paid under the inpatient prospective payment system (IPPS) will receive the full increase in the market basket (MB) index as an update in 2004. From 2005through 2007, hospitals that submit data on specified quality indicators will receive the MB as anupdate; those hospitals that do not submit such data will receive the MB minus 0.4 percentage pointsfor the year in question. CBO expects that this provision will reduce direct spending 0.2 billion from2004 through 2008. Teaching hospitals will receive an increase in their indirect medical educationadjustment from 2004 through 2006 that CBO projects will increase spending by $400 million. A one-time, geographic reclassification process to increase hospitals' wageindex values for 3 years that is expected to increase payments by $900 million from 2004 through2008 is established. Low volume hospitals with fewer than 800 discharges that are 25 road milesaway from similar hospitals may qualify for up to a 25% increase in Medicare payments for anexpected cost of $100 million from 2004-2013. Changes in payment methods for covered prescription drugs provided inoutpatient hospital departments is expected to increase payments by $700 million from FY2004through FY2008. A redistribution of unused resident positions will increase both direct andindirect graduate medical education spending by an anticipated $200 million from FY2004 thoughtFY2008 and by $600 million from FY2004 through FY2013. Certain teaching hospitals with high per resident payments will not receive apayment increase from FY2004 through FY2013; this provision was scored by CBO as a reductionin Medicare spending of $500 million from FY2004 through FY2008 and $1.3 billion from FY2004through FY2013. For 18 months from the date of enactment, physicians will not be able to referMedicare patients to specialty hospitals in which they have an investment interest. This provisionwill not apply to hospitals that are in operation or under development before November 18, 2003. Both MedPAC and HHS are to complete required studies on specialty hospitals within 15 monthsof enactment. Selected Physician Provisions. The impact of the legislation on Medicare's spending for physician spending is difficult to determine. Although physicians will receive a 1.5% update in 2004 and 2005 which is expected toincrease spending by $2.8 billion from FY2004 through FY2007; subsequently, from FY2008through FY2012, the provision is expected to result in a decline of $2.8 billion in Medicarespending. Over the 10 year period from 2004 through 2013, CBO expects the update provisions toincrease Medicare spending by $200 million. Medicare's payments for some practice expenses, particularly the administration of covered drugs, will increase starting in 2004. A transitional adjustment to the drug administration paymentsof 32% in 2004 and 3% in 2005 is also established. These payment increases are expected to becounterbalanced by a decrease in Medicare's payments for covered outpatient drugs provided in adoctor's office. Medicare's payment for covered outpatient drugs furnished incident to a physician's service will change during 2004 as follows: Many covered outpatient drugs furnished in 2004 will be reimbursed at 85% of the average wholesale price (AWP). Certain of these drugs may be paid as low as 80% of theAWP (in effect as of April 1, 2003). Blood clotting factors and other blood products, drugs or biologicals (drugproducts) that were not available for payment by April 1, 2003, covered vaccinations, drug productsfurnished in during 2004 in connection with renal dialysis services, drugs provided through covereddurable medical equipment will be paid at a higher rate during 2004. The decline in payments for covered outpatient drugs in 2004 can only be implemented concurrently with the increased payments for the administration of the drugs. Starting in 2005, Medicare's payment for many covered outpatient drugs will be based on average sales price methodology, that uses different pricing and cost data, depending on theprescription drug. Generally, multiple source drugs will be paid 106% of the average sales price;single source drugs will be paid 106% of the lower of the average sales price or the wholesaleacquisition costs, unless the widely available market price or the average manufacturer price forthose drugs exceeds a certain threshold. Starting in 2006, physicians will have the option ofobtaining covered Part B drugs from selected entities awarded contracts for competitively biddabledrug products under a newly established competitive acquisition program. Selected Provisions Affecting Other Providers and Practitioners. The follow provisions affecting other providers and practitioners are included in the legislation: Ambulatory Surgical Centers. Payments to ambulatory surgical centers (ASCs) are expected to be lower by $800 million from FY2004 throughFY2008 and by $3.1 billion from FY2004 through FY2013 as a result of the legislation. ASCs willreceive an update of the consumer price index for all urban consumers (CPI-U) minus 3.0 percentagepoints starting April 1, 2004 and will receive a O percent update for services provided startingOctober 1, 2004 through December 31, 2009. Therapy Caps. Application of the caps on outpatient therapy services provided by non-hospital providers is suspended from the date of enactment and forthe remainder of 2003, in 2004 and 2005. CBO estimates that the therapy cap moratorium willincrease direct Medicare spending by $700 million over the 10-year period. Durable Medical Equipment (DME). Competitive bidding for DME will be phased-in beginning in 2007 in 10 of the largest metropolitan statisticalareas and may be phased in first for the highest cost and highest volume items and services. Theupdate for most DME items and services and for prosthetics and orthotics is 0 in 2004, 2005, 2006,2007, and 2008. For 2005, payment for certain items, oxygen and oxygen equipment, standardwheelchairs, nebulizers, diabetic lancets and testing strips, hospital beds and air mattresses will bereduced by an amount calculated using 2002 payment amounts and the median price paid by theFederal Employees Health Benefit Program. (2) Beginning January 1, 2009, items and servicesincluded in the competitive acquisition program will be paid as determined under that program andthe Secretary can use this information to adjust the payment amounts for DME, off-the-shelforthotics, and other items and services that are supplied in an area that is not a competitiveacquisition area. Class III items (devices that sustain or support life, are implanted, or presentpotential unreasonable risk, e.g., implantable infusion pumps and heart valve replacements, and aresubject to premarket approval, the most stringent regulatory control) receive the full increase in theconsumer price index for all urban consumers (CPI-U) in 2004, 2005, 2006 , 2008 and subsequentyears. The Secretary will determine the update in 2007. CBO scored the DME provisions of thebill as reducing spending by $6.8 billion over the 10-year period. Home Health. Home health agency payments are increased by the full market basket percentage for the last quarter of 2003 (October, November, andDecember) and for the first quarter of 2004 (January, February, and March). The update for theremainder of 2004 and for 2005 and 2006 is the home health market basket percentage increaseminus 0.8 percentage points. CBO estimates that this provision will reduce direct Medicarespending by $6.5 billion over the 10-year period. The legislation suspends the requirement thathome health agencies must collect the Outcome and Assessment Information Set (OASIS) data onprivate pay (non-Medicare, non-Medicaid) until the Secretary reports to Congress and publishes finalregulations regarding the collection and use of OASIS. Selected Fee-for Service Demonstration Projects. The legislation establishes numerous demonstration projects for the Medicare program. Several demonstrations address aspects of disease management for beneficiaries with chronic conditions. Chronic Care Improvement under Fee-For-Service. The legislation requires the Secretary to establish and implement chronic care improvementprograms under fee-for-service Medicare to improve clinical quality and beneficiary satisfaction andachieve spending targets specified by the Secretary for Medicare for beneficiaries with certainchronic health conditions. Participation by beneficiaries is voluntary. The contractors are requiredto assume financial risk for performance under the contract. CBO has estimated that thisdemonstration will increase direct Medicare spending by $500 million over the 10-year period. Chronically Ill Beneficiary Research, Demonstration. The legislation requires the Secretary to develop a plan to improve quality of care and to reduce thecost of care for chronically ill Medicare beneficiaries within 6 months after enactment. The plan isrequired to use existing data and identify data gaps, develop research initiatives, and proposeintervention demonstration programs to provide better health care for chronically ill Medicarebeneficiaries. The Secretary is required to implement the plan no later than 2 years after enactment. Coverage of Certain Drugs and Biologicals Demonstration. The Secretary is required to conduct a 2-year demonstrationwhere payment is made for certain drugs and biologicals that are currently provided as "incident to"a physician's services under Part B. The demonstration is required to provide for cost-sharing in thesame manner as applies under Part D of Medicare. The demonstration is required to begin within90 days of enactment and is limited to 50,000 Medicare beneficiaries in sites selected by theSecretary. Homebound Demonstration. The Secretary is required to conduct a 2-year demonstration project where beneficiaries with chronic conditions would bedeemed to be homebound in order to receive home health services under Medicare. Adult Day Care. The Secretary is required to establish a demonstration where beneficiaries could receive adult day care services as a substitute for a portion of home health services otherwise provided in a beneficiary's home. Expansion of Covered Benefits. The legislation contains a number of provisions that expand coverage beginning January 1, 2005, including the following: Initial Physical Examination. Medicare coverage of an initial preventive physical examination is authorized for those individuals whose Medicarecoverage begins on or after January 1, 2005. CBO estimates that this provision will increase directMedicare spending by $1.7 billion over the 10-year period. Cardiovascular Screening Blood Tests. Medicare coverage of cardiovascular screening blood tests is authorized. CBO estimates that this provisionwill increase direct Medicare spending by $300 million over the 10-year period. Diabetes Screening Tests. Diabetes screening tests furnished to an individual at risk for diabetes for the purpose of early detection of diabetes areincluded as a covered medical service. In this instance, diabetes screening tests include fastingplasma glucose tests as well as other tests and modifications to those tests deemed appropriate bythe Secretary. CBO estimates that this provision will increase direct Medicare spending less than$50 million over the 10-year period. Screening and Diagnostic Mammography. Screening mammography and diagnostic mammography will be excluded from OPPS and paid separately. CBO estimates that this provision will increase direct Medicare spending by $200 million over the10-year period. Intravenous Immune Globulin. The bill includes intravenous immune globulin for the treatment in the home of primary immune deficiency diseasesas a covered medical service under Medicare. CBO estimates that this provision will increase directMedicare spending by $100 million over the 10-year period. The bill contains two provisions which change the beneficiary premiums and deductibles. Income-Relating the Part B Premium. The legislation increases the monthly Part B premiums for higher income enrollees beginning in 2007. Beneficiaries whose modified adjusted gross income exceed $80,000 and couples filingjoint returns whose modified adjusted gross income exceeds $160,000 will be subject to higherpremium amounts. The increase will be calculated on a sliding scale basis and will be phased-inover a five-year period. The highest category on the sliding scale is for beneficiaries whose modifiedadjusted gross income is more than $200,000 ($400,000 for a couple filing jointly). Those amountsare increased beginning in 2007 by the percentage change in the consumer price index. CBOestimates that direct Medicare spending will be reduced by $13.3 billion over the 10-year period2004 through 2013. Indexing the Part B Deductible. The Medicare Part B deductible will remain $100 through 2004, increase to $110 for 2005, and in subsequent years the deductible will be increased by the same percentage as the Part B premiumincrease. Specifically, the annual percentage increase in the monthly actuarial value of benefitspayable from the Federal Supplementary Medical Insurance Trust Fund will be used as the index. Title X of the legislation makes some changes to Medicaid and other programs. Omitted fromthe agreement were two provisions contained in S. 1 , including a provision to amendthe Age Discrimination in Employment Act of 1967 to allow an employee benefit plan to offerdifferent benefits to their Medicare eligible employees than to their non-Medicare eligibleemployees, and a provision to allow states to cover certain lawfully residing aliens under theMedicaid program. CBO estimates the Medicaid and other provisions included in the bill to increase direct spending by $5.7 billion between FY2004 and FY2013. The following general points can be madeabout the Medicaid and Miscellaneous provisions included in Title X of the bill: The legislation temporarily increases states' disproportionate share hospital (DSH) allotments to erase the decline in these Medicaid amounts that occurred after a special rulefor their calculation expired. The legislation includes several other Medicaid provisions, including raisingthe floor on DSH allotments for "extremely low DSH states," providing DSH allotment adjustmentsimpacting Hawaii and/or Tennessee, increasing reporting requirements for DSH hospitals, andexempting prices of drugs provided to certain safety net hospitals from Medicaid's best price drugprogram. Miscellaneous provisions in Title X of the legislation include funding federalreimbursement of emergency health services furnished to undocumented aliens, and fundingadministrative start-up costs for Medicare reform, various research projects, work groups andinfrastructure improvement programs for the health care system. This report contains a detailed side-by-side comparison of the relevant provisions of the legislation, S. 1 , as passed the Senate, and H.R. 1 , as passed the House. Certain of the provisions can be found in one or more of the sections. For example, the home healthhomebound demonstration (section 702) is listed in the home health section and the demonstrationprojects section. Also included in this side-by-side, are provision that were included in the Houseand/or Senate bill which were dropped in conference. Hospital Services. Allied Health and Graduate Medical Education Payments. Skilled Nursing Facility (SNF) and Hospice Services. Other Part A Provisions. Physician and Practitioner Services. Hospital Outpatient Department (HOPD), Ambulatory Surgery Center (ASC), and Clinic Services. Covered Part B Outpatient Drugs (Not Provided by a HOPD). Covered Drugs and Services at a Dialysis Facility. Durable Medical Equipment (DME) and Related Outpatient Drugs. Ambulance Services. Other Part B Services and Provisions. Home Health Services. Chronic Care Improvement. Medicare Secondary Payor (MSP). Other Medicare A and B Provisions. Medicare Demonstration Projects and Studies.
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On November 22, the House of Representatives voted 220 to 215 to approve the conference report on H.R. 1 , the Medicare Prescription Drug, Improvement, and Modernization Actof 2003. The Senate, on November 24, voted 54 to 44 to approve the conference report. Earlier, theconferees of the Medicare prescription drug and modernization legislation announced an agreementon November 16 and the legislative text was released November 20. The legislative language canbe downloaded from the House Committee on Ways and Means website at: http://waysandmeans.house.gov . The bill was signed into law by the President on December 8,2003. As well as establishing a prescription drug benefit for Medicare beneficiaries, the legislation contains provisions that involving significant payment increases, payment reductions, an expansionof covered benefits, new demonstration projects and new beneficiary cost-sharing provisions for thetraditional Medicare fee-for-service (FFS) program. The bill includes a measure that would requirecongressional consideration of legislation if general revenue funding for the entire Medicare programexceeds 45%. Provisions affecting the State Childrens' Health Insurance Program (SCHIP) andMedicaid programs are included in the legislation as well. Earlier this year, under Congress' FY2004 budget resolution, $400 billion was reserved for Medicare modernization, creation of a prescription drug benefit, and, in the Senate, to promotegeographic equity payment. The Congressional Budget Office (CBO) has estimated that thelegislation for H.R. 1 would increase direct (or mandatory) spending by $394.3 billionfrom FY2004 through FY2013. Prescription drug spending is estimated at $409.8 billion over the10-year period and Medicare Advantage spending at $14.2 billion. Overall, the fee-for-serviceprovisions which change traditional Medicare are estimated to save $21.5 billion over the 10-yearperiod and adjusting the Part B premium to beneficiaries' income is estimated to save $13.3 billionover the period. Some fee-for-service provisions will increase spending over this 10-year periodincluding the provisions affecting hospitals and physician. Other fee-for-service provisions areprojected to save money over the period including those affecting durable medical equipment,clinical laboratories and home health agencies. The CBO estimate is available on the CBO websiteat ftp://ftp.cbo.gov/48xx/doc4808/11-20-MedicareLetter.pdf .
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In the 113 th Congress, Members have introduced multiple bills that include provisions that would directly or indirectly address climate change. This report describes and compares the bills and provisions that directly address climate change, as opposed to those that primarily address other issues (e.g., energy efficiency) but could have ancillary impacts on climate. In some cases, it is difficult to distinguish between direct and indirect climate change bills, because a specific bill or action may seek to achieve multiple objectives. This report focuses on legislative actions—including comprehensive bills with individual climate change titles, sections, or provisions—that explicitly address climate change issues. The provisions in these bills fall into six general categories: 1. carbon price (i.e., tax or fee) on greenhouse (GHG) emissions; 2. other mechanisms intended to encourage mitigation of GHG emissions (e.g., sequestration of emissions); 3. research on climate change-related issues; 4. adaptation activities related to expected climate change impacts; 5. support for international climate change-related activities; and 6. action that limits or prohibits climate change-related authorities, efforts, or considerations. Table 1 lists the proposals in the 113 th Congress by these six broad categories. These categories are not mutually exclusive, and several bills address more than one of the above categories. Other reviews of the same legislation may identify a different list of bills with different categorization. Table 2 provides a brief summary about each bill, including the primary sponsor, short title, major actions, and key climate change-related provisions. As of the date of this report, one bill— S. 332 (Sanders)—would attach a price to GHG emissions. Table 3 compares that carbon price proposal with selected state and international programs. In addition, Representative Waxman and Senator Whitehouse offered a carbon tax "discussion draft" on March 12, 2013.
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In the 113th Congress, Members have introduced multiple bills that include provisions that would directly or indirectly address climate change-related issues. In some cases, it is difficult to distinguish between direct and indirect climate change bills, because a specific bill or action may seek to achieve multiple objectives. The bills listed in this report include provisions that directly address climate change, as opposed to those that primarily address other issues (e.g., energy efficiency) but could have ancillary impacts on climate. Observations about the climate change-related proposals in the 113th Congress include the following: a large number of the identified bills include provisions to encourage or require climate change adaptation activities; a considerable number of proposals include provisions to prohibit federal agencies, particularly the Environmental Protection Agency (EPA), from taking action to require greenhouse gas (GHG) emission reductions; and as of the date of this report, one bill (S. 332) would attach a price to GHG emissions. As of the date of this report, the President has signed one bill into law (P.L. 113-79) that includes climate change-related provisions. Among other provisions, this act (often referred to as the "Farm Bill") reauthorizes the Office of International Forestry through FY2018 and directs the Secretary of Agriculture to revise the strategic plan for forestry inventory to include information on renewable biomass supplies and carbon stocks. In addition, the House has passed three bills: H.R. 367 (passed on August 2, 2013) would require any rule that implements or provides for the imposition or collection of a carbon tax to be submitted to Congress for an affirmative vote and presentment to the President before the regulation could take effect; H.R. 2641 (passed on March 6, 2014) would prohibit a lead agency from using the social cost of carbon in an environmental review or decision-making process; and H.R. 3826 (passed on March 6, 2014) would prohibit EPA from issuing a rule that would establish GHG performance standards at electric generators unless specific conditions are met.
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The 114 th Congress opened with the introduction of a number of proposals that address human trafficking, particularly sex trafficking. Among them were proposals to amend existing federal criminal law, which would expand the coverage of federal sex trafficking laws; amend bail provisions; raise the limits on supervised release; authorize more extensive wiretapping; and adjust the application of federal forfeiture and restitution laws. The legislation includes the following: Justice for Victims of Trafficking Act ( H.R. 181 ) (Representative Poe) (House passed); Justice for Victims of Trafficking Act ( S. 178 ) (Senator Cornyn) ( P.L. 114-22 ); Justice for Victims of Trafficking Act ( H.R. 296 ) (Representative Poe); Stop Advertising Victims of Exploitation Act (SAVE Act) ( H.R. 285 ) (Representative Wagner) (House passed); Stop Advertising Victims of Exploitation Act (SAVE Act) ( S. 572 ) (Senator Kirk); Combat Human Trafficking Act ( H.R. 1201 ) (Representative Granger); Combat Human Trafficking Act ( S. 140 ) (Senator Feinstein); Human Trafficking Fraud Enforcement Act ( H.R. 1311 ) (Representative Carolyn B. Maloney); Military Sex Offender Reporting Act ( S. 409 ) (Senator Burr); and Military Track Register and Alert Communities Act (Military TRAC Act) ( H.R. 956 ) (Representative Speier). The legislation would amend federal substantive law in three areas: commercial sex trafficking (18 U.S.C. 1591); the Mann Act, which outlaws transportation and travel for unlawful sexual purposes; and federal tax crimes. All but the tax crime proposal appears in P.L. 114-22 . The proposals would amend §1591 to (1) confirm the coverage of the customers of a commercial sex trafficking enterprise; (2) outlaw advertising of a commercial sex trafficking enterprise; (3) clarify the government's burden of proof with regard to the age of the victim; and (4) enlarge the permissible term of supervised release for commercial sex trafficking conspirators. Prior to amendment, §1591 outlawed commercial sex trafficking. More precisely, it outlawed: knowingly recruiting, enticing, harboring, transporting, providing, obtaining, or maintaining another individual knowing or with reckless disregard of the fact that the individual will be used to engage commercial sexual activity either as a child or virtue of the use of fraud or coercion when the activity occurs in or affects interstate or foreign commerce, or occurs within the special maritime or territorial jurisdiction of the United States. It continues to outlaw separately profiting from such a venture. Offenders face the prospect of life imprisonment with a mandatory minimum term of not less than 15 years (not less than 10 years if the victim is between the ages of 14 and 18). The same penalties apply to anyone who attempts to violate the provisions of §1591. There were suggestions to expand §1591 to cover advertisers and to more explicitly cover the customers of a commercial sex trafficking scheme. At first glance, §1591 did not appear to cover the customers of a sex trafficking enterprise. Moreover, in the absence of a specific provision, mere customers ordinarily are not considered either co-conspirators or accessories before the fact in a prostitution ring. Nevertheless, the U.S. Court of Appeals for the Eighth Circuit found that the language of §1591(a) applied to the case of two customers caught in a law enforcement "sting" who attempted to purchase the services of what they believed were child prostitutes. "The ordinary and natural meaning of 'obtains' and the other terms Congress selected in drafting section 1591 are broad enough to encompass the actions of both suppliers and purchasers of commercial sex acts," the court declared. S. 178 (Senator Cornyn), H.R. 181 (Representative Poe), and a number of other bills would explicitly confirm this construction by amending §1591(a) to read, in part, "Whoever knowingly ... recruits, entices, harbors, transports, provides, obtains, maintains, or patronizes, or solicits by any means any person ..." (language of the proposed amendment in italics). P.L. 114-22 adopts the proposal. The same bills often amend the "knowledge of age" element in §1591(c) to reflect the clarifying amendment with respect to the customers of a commercial sex trafficking venture. The law already absolved the government of the obligation to prove that the defendant knew the victim was a child, if it could show that the defendant had an opportunity to "observe" the victim. The proposal, and now P.L. 114-22 , makes it clear that the government remains absolved regardless of whether the defendant is a consumer or purveyor of a child's sexual commercial services, provided the defendant had an opportunity to observe the child: "In a prosecution under subsection (a)(1) in which the defendant had a reasonable opportunity to observe the person so recruited, enticed, harbored, transported, provided, obtained, maintained, patronized, or solicited the Government need not prove that the defendant knew , or recklessly disregarded the fact , that the person had not attained the age of 18 years," (language of the proposed amendment in italics). Section 1591 consists of two offenses: commercial sex trafficking and profiting from commercial sex trafficking. A few bills, S. 178 (Senator Cornyn), H.R. 285 (Representative Wagner), and S. 572 (Senator Kirk), for example, suggested amending §1591(a)(1) to outlaw knowingly advertising a person, knowing the victim would be used for prostitution. Even before amendment, however, there was some evidence that advertising might constitute a crime under either offense. Aiding and abetting would have provided the key to prosecution in both instances. Anyone who aids and abets the commission of a federal crime by another merits the same punishment as the individual who actually commits the crime. Liability for aiding and abetting requires that a defendant embrace the crime of another and consciously do something to contribute to its success. Anyone who knowingly advertised the availability of child prostitutes might have faced charges of aiding and abetting a commercial sex trafficking offense. An advertiser who profited from such activity might face charges under the profiteering prong of §1591. Yet §1591 might have presented a technical obstacle. One of §1591's distinctive features was that its action elements—recruiting, harboring, transporting, providing, obtaining—were activities that might be associated with aiding and abetting the operation of a prostitution enterprise. Section 1591, read literally then, did not outlaw operating a prostitution business; it outlawed the steps leading up to or associated with operating a prostitution business—recruiting, harboring, transporting, etc. Strictly construed, advertising in aid of recruitment, harboring, transporting, or one of the other action elements might have qualified as aiding and abetting a violation of §1591, while advertising the availability of a prostitute might not have. Nevertheless, at least one court suggested that §1591 did outlaw operating a prostitution business, at least for purposes of aiding and abetting liability, and thus by implication advertising might have constituted aiding and abetting a violation of the section: Pringler first argues that the evidence is insufficient to support his conviction for aiding and abetting the sex trafficking of a minor [in violation of Section 1591].... We disagree. The record is not devoid of evidence to support the jury's verdict and show Pringler's integral role in the criminal venture. Pringler took the money that Norman and B.L. earned from their prostitution and used some of it to pay for hotel rooms where the women met their patrons. Pringler bought the laptop Norman and B.L. used to advertise their services. He drove Norman and B.L. to "outcall" appointments, and he took photographs of Norman, which he had planned for use in advertisements. P.L. 114-22 resolves the uncertainty by adding advertising to the prostitution-assisting element of the commercial sex trafficking offense. The offense now reads in pertinent part: Whoever knowingly- (1) in or affecting interstate or foreign commerce, or within the special maritime and territorial jurisdiction of the United States, recruits, entices, harbors, transports, provides, obtains, advertises, or maintains by any means a person; ... knowing, or ... in reckless disregard of the fact, that means of force, threats of force, fraud, coercion described in subsection (e)(2), or any combination of such means will be used to cause the person to engage in a commercial sex act, or that the person has not attained the age of 18 years and will be caused to engage in a commercial sex act, shall be punished as provided in subsection (b) [language added by the amendment in italics]. After amendment, the knowledge element of §1591's trafficking and profiteering offenses are slight different. Advertising traffickers are liable if they knew of or recklessly disregarded the victim's status. Advertising profiteers are liable only if they knew of the victim's status: Whoever knowingly- (1) in or affecting interstate or foreign commerce, or within the special maritime and territorial jurisdiction of the United States, recruits ... advertises ... ; or (2) benefits, financially or by receiving anything of value, from participation in a venture which has engaged in an act described in violation of paragraph (1), knowing, or , except where, in an offense under paragraph (2), the act constituting the violation of paragraph (1) is advertising , in reckless disregard of the fact, that means of force, threats of force, fraud, coercion described in subsection (e)(2), or any combination of such means will be used to cause the person to engage in a commercial sex act, or that the person has not attained the age of 18 years and will be caused to engage in a commercial sex act, shall be punished as provided in subsection (b) [language added by the amendment in italics]. Knowledge is obviously a more demanding standard than reckless disregard, but the dividing line between the two is not always easily discerned, in part because of the doctrine of willful blindness. The doctrine describes the circumstances under which a jury may be instructed by the court that it may infer knowledge on the part of a defendant. Worded variously, the doctrine applies where evidence indicates that the defendant sought to avoid the guilty knowledge. Since the element was worded in the alternative—knowing or in reckless disregard of the fact—the courts have rarely distinguished the two. One possible interpretation comes from comparable wording in an immigration offense which outlaws transporting an alien knowing or acting in reckless disregard of the fact that the alien is in this country illegally: "To act with reckless disregard of the fact means to be aware of but consciously and carelessly ignore facts and circumstances clearly indicating that the person transported was an alien who had entered or remained in the United States illegally." The courts refer to a similar unreasonable indifference standard when speaking of the veracity required for the issuance of a warrant. Defendants sentenced to prison for federal crimes are also sentenced to a term of supervised release. Supervised release is comparable to parole. It requires a defendant upon his release from prison to honor certain conditions—such as a curfew, employment requirements and restrictions, limits on computer use, drug testing, travel restrictions, or reporting requirements—all under the watchful eye of a probation officer. As a general rule, the court may impose a term of supervised release of no more than five years. For several crimes involving sexual misconduct—commercial sex trafficking, for example—the term must be at least five years and may run for the lifetime of the defendant. S. 178 and a number of other bills heralded the provision in P.L. 114-22 , with a proposal to add conspiracy to engage in commercial sex trafficking to the list of offenses punishable by this not-less-than-five-years-nor-more-than-life term of supervised release. Section 1595 establishes a cause of action for victims of human trafficking. The cause of action is subject to a 10-year statute of limitations. S. 178 would extend the statute of limitations in cases in which the victim is a child. Under those circumstances, the statute of limitations is 10 years after the child reaches the age of 18 years of age. P.L. 114-22 adopts the same position. P.L. 114-22 extends the reach of a number of the Mann Act's prohibitions to encompass activities involving child pornography. Section 2423(b) of the Mann Act outlaws travel in U.S. interstate or foreign travel with intent to engage in "illicit sexual conduct." Section 2423(c) prohibits U.S. citizens or U.S. permanent resident aliens from engaging in illicit sexual conduct overseas. Section 2423(d) outlaws commercially facilitating overseas travel in order to engage in illicit sexual conduct. Each of the offenses is punishable by imprisonment for not more than 30 years, and the same punishment attaches to any attempt or conspiracy to commit any of the three. Prior to the enactment of P.L. 114-22 , §2423 defined "illicit sexual conduct" as either (1) conduct that would be sexual abuse of a child if committed in U.S. maritime or territorial jurisdiction or (2) commercial sex trafficking of a child. P.L. 114-22 adds production of child pornography as an alternative third definition. Thus, it is a federal crime (1) under §2423(b) to travel in U.S. interstate or foreign travel with the intent to produce child pornography; or (2) under §2423(c) for a U.S. citizen or permanent resident alien to produce child pornography overseas; or (3) under §2423(d) to commercially facilitate overseas travel in order to produce child pornography. Defendants previously enjoyed an affirmative defense in "illicit sexual activity" cases involving commercial sex trafficking, if they could establish by a preponderance of the evidence that they reasonably believed that the victim was over 18 years of age. P.L. 114-22 limits the defense to cases in which the defendant establishes the reasonableness of his belief by clear and convincing evidence. The difference between preponderance of the evidence and clear and convincing is the difference between more likely than not and highly probable. The final Mann Act amendment involves prosecutors. Section 2421 outlaws transporting another in interstate or foreign commerce for purposes of prostitution or other unlawful sexual activity. Section 303 of P.L. 114-22 instructs the Attorney General to honor the request of a state attorney general to cross-designate a state prosecutor to handle a §2421 prosecution or to explain in detail why the request has not been honored. The designated state prosecutor—or prosecutors, should the Attorney General receive requests from both the state from which, and the state into which, the victim was transported—presumably operates under the direction of the U.S. Attorney. P.L. 114-22 's Mann Act amendments reflect the position taken in the earlier bills. The Internal Revenue Code makes taxable income from any source lawful or unlawful. H.R. 1311 (Representative Carolyn B. Maloney) would increase the penalties associated with various tax offenses committed by sex traffickers, and would direct the creation of an office of tax law enforcement to invest tax offenses committed by sex traffickers. The enhanced enforcement would be focused on tax offenses relating to crimes proscribed in: 18 U.S.C. 1351 (foreign labor contracting fraud); 18 U.S.C. 1589 (forced labor); 18 U.S.C. 1590 (peonage, slavery, involuntary servitude, or forced labor trafficking); 18 U.S.C. 1591(a) (commercial sex trafficking); 18 U.S.C. 1952 (Travel Act); 18 U.S.C. 2421 (transporting an individual for unlawful sexual purposes); 18 U.S.C. 2422 (coercing or enticing travel for unlawful sexual purposes); 18 U.S.C. 2423(a) (transporting a child for unlawful sexual purposes); 18 U.S.C. 2423(d) (trafficking in travel to engage in unlawful sex with a child); 18 U.S.C. 2423(e) (attempting or conspiring to transport a child or to travel and engage in unlawful sex with a child); 8 U.S.C. 1328 (importing aliens for immoral purposes); and state or territorial laws prohibiting promotion of prostitution or commercial sex acts. Among other offenses, the Internal Revenue Code outlaws (1) attempting to evade or defeat a federal tax; (2) willfully failing to file a return; and (3) making false statements in a tax matter. H.R. 1311 would increase the maximum terms of imprisonment and the maximum fines for each of these offenses when one or more of the designated sex trafficking offenses generated the income involved: H.R. 1311 would also expand liability for those who provide their employees with false W2 forms and other required forms. Existing law limits employer liability for furnishing employees with a false statement to the misdemeanor provisions of §7204 and §6674. H.R. 1311 would add §7201 and §7203, which would increase potential liability for providing false statements to employees to imprisonment for not more than 10 years, where the misconduct involved income generated by one or more of the sex trafficking offenses. H.R. 1311 would direct the Secretary of the Treasury to create an Internal Revenue Service office specifically for the investigation and prosecution of designated sex trafficking-related tax offenses. The bill anticipates that the office would work cooperatively with the Justice Department's Child Exploitation and Obscenity Section and the Federal Bureau of Investigation's Innocence Lost National Initiative. The bill would authorize an appropriation of $4 million for FY2016 supplemented with an appropriation equal to the amounts collected as a consequence of its activities. It would also make sex trafficking victims eligible for the whistleblower/informant rewards, which can top out at 30% of the amounts collected as a consequence of their disclosures. Section 3771 provides victims of federal crimes and victims of crime under the District of Columbia Code with certain rights, including the right to confer with the prosecutor and to be heard at public proceedings concerning pleas and sentencing in the case. The rights are reinforced by a right to notice from federal officials of available services. Victims may appeal a failure to honor their rights by seeking a writ of mandamus, and the appellate court must decide the matter within three days (72 hours), or in the case of a stay or continuance within five days. Most often, mandamus is an extraordinary remedy awarded only on rare occasions and only if at least three prerequisites can be satisfied. "First, the party seeking issuance of the writ must have no other adequate means to attain the relief he desires.... Second, the petitioner must satisfy the burden of showing that his right to issuance of the writ is clear and indisputable. Third, even if the first two prerequisites have been met, the issuing court, in the exercise of its discretion, must be satisfied that the writ is appropriate under the circumstances." The federal appellate courts, however, cannot agree on whether this stringent traditional mandamus standard or the usual appellate standard (abuse of discretion or legal error) should apply in Crime Victims' Rights Act appeals. P.L. 114-22 resolves the dispute in favor of the less demanding abuse of discretion or legal error standard used for most appeals. It allows the parties to extend the three-day deadline for the appellate court to take up the petition for a writ of mandamus, but not the five-day limitation on stays or continuances in appellate mandamus cases concerning victims' rights. Finally, P.L. 114-22 creates two new additional rights—the right to timely notice of a plea bargain or deferred prosecution agreement and the right to be informed of the rights under the Crime Victims' Rights Act and the benefits under the Victims' Rights and Restitution Act. The House committee report indicates that the amendment was designed to "clarif[y] Congress' intent that crime victims be notified of plea agreements or deferred prosecution agreements, including those that may take place prior to a formal charge." Here, too, in its victims' rights treatment, P.L. 114-22 follows the path laid out in earlier bills. Federal criminal convictions come with a special assessment ranging from $5 to $100 for individuals and from $25 to $400 for organizations, depending on the seriousness of the offense. Receipts are deposited in the Crime Victims Fund and used for victims' assistance and compensation. P.L. 114-22 establishes a second Fund, the Domestic Trafficking Victims Fund, and second special assessment, this one for $5,000 directed to the Fund for the assistance and compensation of victims of trafficking and sexual abuse. The assessment is imposed on those convicted offenses under: 18 U.S.C. ch. 77 (peonage, slavery, and human trafficking); 18 U.S.C. ch. 109A (sexual abuse in U.S. special maritime and territorial jurisdiction); 18 U.S.C. ch. 110 (child pornography); 18 U.S.C. ch. 177 (interstate or foreign transportation for unlawful sexual purposes); or 8 U.S.C. 1324 (smuggling aliens other than immediate family members). The Fund is to receive two types of transfers. The first is to be a transfer from the general fund of the Treasury in amounts equal to those collected from these assessments. These transferred amounts are to be appropriate and made available to the Attorney General, in coordination with the Secretary of Health and Human Services, through FY2019 for the services and benefits (other than health care services and benefits) under: 42 U.S.C. 14044c (grants for enhanced state and local anti-trafficking enforcement); 42 U.S.C. 13002(b)(grants for child advocacy centers); 22 U.S.C. 7105(b)(2)(grants to state, tribes, and local governments to enhance trafficking; victims' services); and 22 U.S.C. 7105(f)(assistance for U.S. victims of severe forms of trafficking). The second transfer is to be from appropriations under the Patient Protection and Affordable Care Act, as amended, in amounts equal to those generated by the special assessments, but not less than $5 million or more than $30 million per fiscal year. The amounts are also to be available to the Attorney General, in coordination with the Secretary of Health and Human Services, for health care services under: 42 U.S.C. 14044a (grants for trafficking victims' assistance programs); 42 U.S.C. 14044b (residential treatment for victims of child trafficking); 42 U.S.C. 14044c (grants for enhanced state and local anti-trafficking enforcement); 42 U.S.C. 13002(b)(grants for child advocacy centers); 22 U.S.C. 7105(b)(2)(grants to state, tribes, and local governments to enhance trafficking; victims' services); and 22 U.S.C. 7105(f)(assistance for U.S. victims of severe forms of trafficking). Forfeiture is the confiscation of property based on its proximity to a criminal offense. Confiscation may be accomplished either as a consequence of the property owner's conviction (criminal forfeiture) or in a civil proceeding conducted against the property in rem (civil forfeiture). In either case, the proceeds from most federal forfeitures are deposited either in the Justice Department's Asset Forfeiture Fund or the Department of the Treasury's Forfeiture Fund, and are available for law enforcement purposes. The forfeiture-triggering relationship between property and confiscation varies from one crime to another. Forfeitures relating to financial crimes sometimes apply to property "involved in" the offense. For example, property "involved in" a money laundering transaction is subject to confiscation. In the case of human trafficking, property that constitutes the proceeds from, that was used, or that was intended for use, to commit or facilitate, a trafficking offense is subject to criminal and civil forfeiture. As S. 178 and H.R. 296 suggested, P.L. 114-22 makes property "involved in" or proceeds "traceable to" a trafficking offense subject to criminal and civil forfeiture as well. Defendants convicted of human trafficking offenses must be ordered to pay victim restitution. As a general rule, the Attorney General may transfer forfeited property to pay victim restitution. S. 178 and H.R. 296 proposed, and P.L. 114-22 requires, such a transfer, without reducing or mitigating the defendant's restitution obligations. Subject to annual appropriations, the Attorney General may use the Justice Department Asset Forfeiture Fund for informants' fees in drug and money laundering cases. The Secretary of the Treasury enjoys comparable authority with respect to the Treasury Fund, although apparently without the need for annual appropriations. P.L. 114-22 , as S. 178 and H.R. 296 proposed, expands the authority to include access to the Justice Department Fund for informants' fees in human trafficking cases, and to the Department of the Treasury Fund for informants' fees paid by Immigration and Customs Enforcement in human trafficking cases. Existing federal law states that an individual charged with a federal offense should be released on his own recognizance, unless the magistrate is convinced that certain conditions must be imposed to insure individual or community safety or to insure the appearance of the accused at subsequent judicial proceedings. The government may seek pretrial detention of an accused charged with a crime of violence, a federal crime of terrorism, or with commercial sex trafficking. H.R. 296 , S. 178 , and ultimately P.L. 114-22 amended the definition of "a crime of violence" for these purposes to include any of the human trafficking offenses. In the investigation of certain serious federal and state crimes, the Electronic Communications Privacy Act, sometimes referred to in part as Title III, authorizes federal and state law enforcement officials to engage in court-supervised surreptitious interception of telephone, face-to-face, or electronic communications. The list of these federal crimes includes commercial sex trafficking (18 U.S.C. 1591), but not the other offenses outlawed in the slavery, peonage, and forced labor chapter of the federal criminal code. The list of state crimes includes murder, robbery, kidnaping, etc., but not prostitution or human trafficking. P.L. 114-22 , as proposed in S. 178 and H.R. 181 , permits federal court-ordered interceptions in connection with investigations involving peonage (18 U.S.C. 1581 (peonage), 1584 (involuntary servitude), 1589 (forced labor), and 1592 (trafficking-related document misconduct)). It also permits state prosecutors to engage in state court-supervised interceptions in cases of human trafficking, child pornography production, and child sexual exploitation to the extent that state law permits. The federal Sex Offender Registration and Notification Act (SORNA), as the name implies, requires individuals convicted of a federal, state, tribal, foreign, or military sex offense to register with, and continue to provide current information to, state or tribal authorities (jurisdictions) in any location in which they live, work, or attend school. The reporting obligations apply to those convicted of qualifying sex offenses either before or after the enactment of SORNA. SORNA accomplishes its notification goal through the creation of a system which affords public online access to state and tribal registration information. The system allows the public to determine either where a particular sex offender lives, works, and attends school, or the names and location of sex offenders who live, work, or attend school within a particular area. SORNA requires jurisdictions to satisfy minimum standards for the information they collect and maintain. Section 114 of SORNA requires registrants to provide (1) their name and any alias; their Social Security number; (2) their place of residence; (3) the name and address of their employer; (4) the name and address of any school they are attending; (5) the description and license plate number of any vehicle they own or operate; and (6) any other information the Attorney General requires. Section 114 requires jurisdictions to include within their registries (1) a physical description of the offender; (2) the text of the statute defining the crime which requires the offender to register; (3) the offender's criminal history; (4) a current photograph of the offender; (5) a set of the offender's fingerprints; (6) a sample of the offender's DNA; (7) a copy of the offender's driver's license or other identification card; and (8) any other information the Attorney General requires. As previously proposed in S. 178 (Senator Cornyn), S. 409 (Senator Burr), and H.R. 956 (Representative Speier), P.L. 114-22 directs the Secretary of Defense to provide the Attorney General with information described in §114 relating to military sex offenders whom SORNA requires to register with state or tribal authorities. The requirement would presumably apply to those convicted of registration-requiring offenses both before and after the enactment of SORNA. H.R. 956 (Representative Speier) would further amend SORNA to increase the role of the Department of Defense (DOD) by establishing a separate sex offender registry. Military sex offenders, who are obligated to maintain current registration information with state or tribal authorities any place where they live, work, or attend school, would also be required to register with the Secretary of Defense upon their release from custody or entry into the United States. The proposal makes no explicit provision for military sex offenders convicted prior to the enactment of SORNA. SORNA requires states and certain tribes to maintain a jurisdiction-wide sex offender registry that meets SORNA requirements. H.R. 956 would impose the same obligation on the Secretary of Defense, but without the fiscal sanctions which attend a state's failure to comply. In addition to the demand to register where they live, work, or attend school, sex offenders being released from custody must also register with the jurisdiction in which they were convicted. H.R. 956 would require military sex offenders to register upon release in addition with the Secretary of Defense. H.R. 956 , like S. 178 and S. 409 , would require the Secretary of Defense to include the same information within his registry regarding a recently released sex offender that states and tribes are required to capture: physical description of the sex offender; text of the law proscribing the conduct for which the sex offender was convicted; the sex offender's criminal history; fingerprints, a DNA sample, and a photograph of the sex offender; a copy of the offender's driver's license or other official identification of the sex offender; and any additional information required by the Attorney General. The Secretary would have to make this information publicly available online, and would be required to report the information to the Attorney General, appropriate law enforcement, and educational, public housing, social service officials, as well as assorted related public and private entities. The Attorney General would be required to include the information in the national registry and to forward updated information received from various jurisdictions relating to a military sex offender to the Secretary of Defense. The national registry would be required to include military sex offender information available on the Secretary's website. SORNA mandates that "appropriate officials" and "appropriate law enforcement agencies" take action when a sex offender fails to comply with the requirements of a state or tribal registry. H.R. 956 would establish a comparable command for action when a military sex offender fails to comply with the requirements of the DOD registry. It is unclear whether the amendment is intended to expand the terms "appropriate official" and "appropriate law enforcement agencies" to encompass DOD officials and law enforcement agencies, giving them authority over discharged military sex offenders over whom they would otherwise have no jurisdiction. SORNA obligates the Attorney General to develop and support the computer software necessary for jurisdictions to comply with SORNA's standards. H.R. 956 would enlarge the obligation to enable establishment and maintenance of a DOD registry. Finally, H.R. 956 would require military sex offenders entering the United States to register with the Secretary of Defense.
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Existing federal law outlaws sex trafficking and provides a variety of mechanisms to prevent it and to assist its victims. Members have offered a number of proposals during the 114th Congress to bolster those efforts. Several clarify, expand, or supplement existing federal criminal law. For instance, Senator Cornyn's S. 178, which was packaged with Representative Poe's H.R. 181 and several proposals and enacted as the Justice for Victims of Trafficking Act of 2015 (P.L. 114-22), confirms that federal commercial sex trafficking prohibitions apply to the customers of such enterprises. P.L. 114-22 also constricts the defense of those who engage in illicit sexual activities with children. In addition, it affords state and federal law enforcement officials greater access to court-supervised electronic surveillance in trafficking cases. It expands victims' statutory rights and removes stringent limits on appellate enforcement of those rights. As suggested in S. 178, Senator Kirk's S. 572, and Representative Wagner's H.R. 285, P.L. 114-22 brings culpable advertisers within the reach of the federal law which proscribes commercial sex trafficking. P.L. 114-22 lengthens the permissible term of supervised release for those convicted of plotting to engage in commercial sex trafficking, language reminiscent of Senator Feinstein's S. 140, Representative Poe's H.R. 296, and Representative Granger's H.R. 1201. S. 178 and Senator Burr's S. 409 proposed requiring Department of Defense (DOD) officials to provide the Attorney General with information relating to military sex offenders required to register under the federal Sex Offender Registration and Notification Act (SORNA). P.L. 114-22 requires them to do so. Representative Speier's H.R. 956 would establish a separate DOD sex offender registry. Representative Carolyn B. Maloney's H.R. 1311 would increase the penalties for tax evasion by sex traffickers and call for the establishment of a dedicated office within the Internal Revenue Service to investigate and prosecute tax-avoiding sex traffickers. See also CRS Report R44064, Justice for Victims of Trafficking Act: A Legal Analysis of the Criminal Provisions of P.L. 114-22, by [author name scrubbed].
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Within the Department of Homeland Security's (DHS's) Customs and Border Protection (CBP), the U.S. Border Patrol (USBP) is charged with securing our nation's land and maritime borders between official ports of entry (POE) to deter and interdict terrorists, weapons of mass destruction, and aliens attempting to enter the country unlawfully. In order to discharge its duties, the USBP deploys personnel, technology, and tactical infrastructure such as vehicle barriers and fencing. Fencing is erected on the border to impede the illegal entry of unauthorized aliens, while vehicle barriers are designed to impede the entry of vehicles but do not impede the entry of individuals. This report will analyze the barriers that are currently being constructed and maintained along the border by the USBP, including historical and future cost estimates and the policy issues involved. Because the current debate has largely focused on the deployment of fencing to the border, this report will focus on the policy issues surrounding the construction of border fencing. However, information concerning the kinds of vehicle barriers being deployed at the border will be provided where available. Using the broad powers granted to the Attorney General (AG) to control and guard the U.S. border, the USBP began erecting a barrier known as the "primary fence" directly on the border in 1990 to deter illegal entries and drug smuggling in its San Diego sector. The San Diego fence formed part of the USBP's "Prevention Through Deterrence" strategy, which called for reducing unauthorized migration by placing agents and resources directly on the border along population centers in order to deter would-be migrants from entering the country. The San Diego primary fence was completed in 1993, covering the first 14 miles of the border from the Pacific Ocean. The fence was constructed of 10-foot-high welded steel army surplus landing mats with the assistance of the Corps of Engineers and the California National Guard. In addition to the 14 miles of primary fencing erected in its San Diego sector, the USBP maintains stretches of primary fencing in several other sectors along the southwest border, including Campo, CA; Yuma, AZ; Nogales, AZ; Naco, AZ; Douglas, AZ; and El Paso, TX. In 1996, Congress passed the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA), which, among other things, explicitly gave the Attorney General broad authority to construct barriers along the border and authorized the Immigration and Naturalization Service (INS) to construct a secondary layer of fencing to buttress the completed 14-mile primary fence. Construction of the secondary fence stalled after 9.5 miles had been completed due to environmental concerns raised by the California Coastal Commission (CCC). In 2005, Congress passed the REAL ID Act, which, among other things, authorized the Secretary of the Department of Homeland Security (DHS) to waive all legal requirements to expedite the construction of border barriers. In 2006, Congress passed the Secure Fence Act, which, among other things, directed DHS to construct five separate stretches of fencing along the southern border, totaling 850 miles. This requirement was modified by provisions in Division E of H.R. 2764 , the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), which was enacted into law on December 26, 2007. The Secretary of Homeland Security is now required to construct reinforced fencing along not fewer than 700 miles of the southwest border, in locations where fencing is deemed most practical and effective. In addition to border fencing, the USBP deploys both permanent and temporary vehicle barriers at the border. Vehicle barriers are meant to stop the entry of vehicles, but not people, into the United States. Temporary vehicle barriers are typically chained together and can be moved to different locations at the USBP's discretion. Permanent vehicle barriers are embedded in the ground and are meant to remain in one location. The USBP's San Diego sector extends along the first 66 miles from the Pacific Ocean of the international border with Mexico, and covers approximately 7,000 square miles of territory. Located north of Tijuana and Tecate, Mexican cities with a combined population of more than two million people, the sector features no natural barriers to entry by unauthorized migrants and smugglers. As a result of this geographical reality and in response to the large numbers of unauthorized aliens crossing the border in the area, in 1990 the USBP began erecting a physical barrier to deter illegal entries and drug smuggling. The ensuing "primary" fence covered the first 14 miles of the border, starting from the Pacific Ocean, and was constructed of 10-foot-high welded steel. The primary fence, by itself, did not have a discernible impact on the influx of unauthorized aliens coming across the border in San Diego. As a result of this, Operation Gatekeeper was officially announced in the San Diego sector on October 1, 1994. The chief elements of the operation were large increases in the overall manpower of the sector, and the deployment of USBP personnel directly along the border to deter illegal entry. The strategic plan called for three tiers of agent deployment. The first tier of agents was deployed to fixed positions on the border. The agents in this first tier were charged with preventing illegal entry, apprehending those who attempted to enter, and generally observing the border. A second tier of agents was deployed north of the border in the corridors that were heavily used by illegal aliens. The second tier of agents had more freedom of movement than the first tier and were charged with containing and apprehending those aliens who made it past the first tier. The third tier of agents were typically assigned to man vehicle checkpoints further inland to apprehend the traffic that eluded the first two tiers. As the Department of Justice Inspector General report notes, "given Gatekeeper's deterrence emphasis, many agents were assigned to first-tier, fixed positions along the border. These agents were instructed to remain in their assigned positions rather than chase alien traffic passing through adjacent areas. Prior to Gatekeeper, such stationary positions were relatively rare." Operation Gatekeeper resulted in significant increases in the manpower and other resources deployed to San Diego sector. Agents received additional night vision goggles, portable radios, and four-wheel drive vehicles, and light towers and seismic sensors were deployed. According to the former INS, between October 1994 and June of 1998, San Diego sector saw the following increases in resources: USBP agent manpower increased by 150%; Seismic sensors deployed increased by 171%; Vehicle fleet increased by 152%. Infrared night-vision goggles increased from 12 to 49; Permanent lighting increased from 1 mile to 6 miles, and 100 portable lighting platforms were deployed; Helicopter fleet increased from 6 to 10. As a result of the increase in resources and the new strategy that were the main components of Operation Gatekeeper, the USBP estimated in 1998 that the entire 66 miles of border patrolled by the San Diego sector's agents could be brought under control in five years. According to CBP, the primary fence, in combination with various USBP enforcement initiatives along the San Diego border region (i.e., Operation Gatekeeper), proved to be successful but fiscally and environmentally costly. For example, as unauthorized aliens and smugglers breached the primary fence and attempted to evade detection, USBP agents were often forced to pursue the suspects through environmentally sensitive areas. It soon became apparent to immigration officials and lawmakers that the USBP needed, among other things, a "rigid" enforcement system that could integrate infrastructure (i.e., a multi-tiered fence and roads), manpower, and new technologies to further control the border region. The concept of a three-tiered fence system was first recommended by a 1993 Sandia Laboratory study commissioned by the former Immigration and Naturalization Service (INS). According to the Sandia study, the use of multiple barriers in urban areas would increase the USBP's ability to discourage a significant number of illegal border crossers, to detect intruders early and delay them as long as possible, and to channel a reduced number of illegal border crossers to geographic locations where the USBP was better prepared to deal with them. The Sandia study further noted that segments of the border could not be controlled at the immediate border due to the ruggedness of the terrain, and recommended the use of highway checkpoints in those areas to contain aliens after they had entered the country illegally. The study concluded that aliens attempting to enter the United States from Mexico had shown remarkable resiliency in bypassing or destroying obstacles in their path, including the existing primary fence, and postulated that "[a] three-fence barrier system with vehicle patrol roads between the fences and lights will provide the necessary discouragement." As previously mentioned, the INS constructed the primary fencing in San Diego using the broad authority granted to the AG in order to guard and control the U.S. border by the Immigration and Nationality Act (INA). In 1996, Congress expressly authorized the AG to construct barriers at the border for the first time in the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA). This legislation has subsequently been amended on several occasions. Section 102 of IIRIRA concerned the improvement and construction of barriers at our international borders. As originally enacted, § 102(a) appeared to give the AG broad authority to install additional physical barriers and roads "in the vicinity of the United States border to deter illegal crossings in areas of high illegal entry into the United States." The phrase "vicinity of the United States border" was not defined in the INA or in immigration regulations. The section also did not stipulate what specific characteristics would designate an area as one of "high illegal entry." As originally enacted, § 102(b) mandated that the AG construct a barrier in the border area near San Diego. Specifically, §102(b) directed the AG to construct a three-tiered barrier along the 14 miles of the international land border of the U.S., starting at the Pacific Ocean and extending eastward. Section 102(b) ensured that the AG will build a barrier, pursuant to his broader authority in §102(a), near the San Diego area, although there is some debate concerning whether IIRIRA required continuous triple fencing and roads for the entire 14-mile corridor. IIRIRA § 102(b) also provided authority for the acquisition of necessary easements, required certain safety features be incorporated into the design of the fence, and authorized a total appropriation not to exceed $12 million to carry out the section. The Secure Fence Act of 2006 ( P.L. 109-367 ) amended IIRIRA § 102(b) by removing the specific provisions authorizing construction of the San Diego fence (though not the provisions concerning fence safety features, easements, or appropriations) and adding provisions authorizing five stretches of two-layered reinforced fencing, totaling roughly 850 miles, along the southwest border. IIRIRA § 102(b) was again amended by the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ). The Secretary of Homeland Security is now required to construct reinforced fencing along not less than 700 miles of the southwest border, in locations where fencing is deemed most practical and effective. The Consolidated Appropriations Act also amended IIRIRA § 102(b) to authorize the appropriation of "sums as may be necessary to carry out this subsection." Although IIRIRA § 102(b) no longer contains a specific authorization for the San Diego fence, the project appears permissible under the general fence authorization contained in IIRIRA §102(a). As originally enacted, IIRIRA § 102(c) waived the Endangered Species Act (ESA) of 1973 (16 U.S.C. §§1531 et seq .) and the National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. §§4321 et seq .), to the extent the AG determined necessary, in order to ensure expeditious construction of the barriers authorized to be constructed under §102. The waiver authority in this provision appeared to apply both to barriers that may be constructed in the vicinity of the border and to the barrier that was to be constructed near the San Diego area. The INS (and CBP after 2003) never exercised this original waiver authority, instead choosing to comply with the NEPA and the ESA. The INS published a Final Environmental Impact Study pursuant to NEPA and received a non-jeopardy Biological Opinion from the U.S. Fish and Wildlife Service under the ESA. This waiver authority was expanded in the 109 th Congress by the REAL ID Act, which will be discussed in greater detail subsequently, and DHS has exercised this expanded waiver authority in order to continue construction of the San Diego border fence, as well as physical barriers and roads along the southwest border. Section 102(d) also provided the AG with various land acquisition authorities. In 2002, Congress authorized the AG to use INS funds to purchase land for enforcement fences and to construct the fences. As mentioned above, pursuant to the REAL ID Act of 2005 ( P.L. 109-13 , Division B), the Secretary of DHS was given broad authority to waive legal requirements that might otherwise delay the construction of the security barriers described under § 102 of IIRIRA. Specifically, the Secretary of DHS is authorized to waive all legal requirements necessary to ensure expeditious construction of these security barriers. Such waivers are effective upon publication in the Federal Register . Federal district courts are provided with exclusive jurisdiction to review claims alleging that the actions or decisions of the Secretary violate the U.S. Constitution, and district court rulings may be reviewed only by the Supreme Court. The scope of this waiver authority is substantial. Whereas IIRIRA had previously authorized the waiver of NEPA and ESA requirements, the REAL ID Act authorizes the waiver of all legal requirements determined necessary by the Secretary for the expeditious construction of authorized barriers, and only allows judicial review for constitutional claims. This waiver authority appears to apply to all barriers that may be constructed under IIRIRA—that is, both to barriers constructed in the vicinity of the border in areas of high illegal entry and to the barrier that is to be constructed near the San Diego area. Furthermore, these claims can only be appealed to the Supreme Court (i.e., there is no intermediate appellate review), whose review is discretionary. Some have expressed concern with the apparent breadth of the waiver provision and the limited scope of judicial review of waiver decisions. As passed into law, the REAL ID Act waiver provision begins with the arguably ambiguous notwithstanding any other law phrase and allows the waiver of all legal requirements . Although the term legal requirement is not defined, Congress does not have the constitutional authority to permit the Secretary to unilaterally waive a person's constitutional rights. The provision has been construed by Secretary Chertoff to apply to the waiver of laws in their entirety, along with regulations and requirements deriving from or relating to such laws. Congress commonly waives preexisting laws, but the new waiver provision uses language and a combination of terms not typically seen in law. Most waiver provisions have contained qualifying language that (1) exempts an action from other requirements contained in the Act that authorizes the action, (2) specifically delineates the laws to be waived, or (3) waives a grouping of similar laws. Also common are waiver provisions that contain reporting requirements or restrictions which appear to limit their breadth. One waiver authority that appears analogous to that contained in the REAL ID Act is § 203 of the Trans-Alaska Pipeline Authorization Act, as amended, which authorizes the Secretary of the Interior to waive all procedural requirements in law related to the construction of the Trans-Alaska pipeline and limits judicial review to constitutional claims. Although some argue that the waiver authority can extend to any law, including those seemingly unrelated to building a fence, the provision is tempered by the requirement that the Secretary must determine that waiving a particular law is necessary "to ensure expeditious construction" of the barriers. In other words, the Secretary may be confined to waiving only laws that, in effect, would impede the construction of the fence—not those that only tangentially relate to or do not necessarily interfere with construction. For example, because child labor laws would not prevent the Secretary from expeditiously constructing the fence, it follows that the Secretary would not have the authority to waive these protections. This interpretation is buttressed by the legislative history of the REAL ID Act, which indicates that several Members called for the waiver provision because of laws that were complicating and ultimately preventing the completion of the fence. The decision to waive a law, nonetheless, is solely in the Secretary's discretion. Until such time that DHS waives an applicable law, however, it must follow all legal requirements normally imposed on federal agencies. On September 22, 2005, a notice was issued in the Federal Register indicating that Secretary Chertoff, acting pursuant to the authority provided under the REAL ID Act, had exercised waiver authority over various legal requirements in order to ensure the expeditious construction of the San Diego border fence. A listing of laws waived by the Secretary can be found in Appendix H . A notice was also published on January 19, 2007, indicating that the Secretary was waiving various legal requirements in order to ensure the expeditious construction of physical barriers and roads in the vicinity of U.S. border area known as the Barry M. Goldwater Range (BMGR), in southwestern Arizona. A listing of the federal laws waived by the Secretary pursuant to this notice can be found in Appendix I . On October 5, 2007, Defenders of Wildlife and the Sierra Club brought suit in the U.S. District Court for the District of Columbia seeking a temporary restraining order enjoining DHS from border fence and road-building activities in the San Pedro Riparian National Conservation Area, located in the vicinity of the U.S. border in southeastern Arizona. On October 10, 2007, the presiding district court judge issued a temporary restraining order (TRO) halting fence construction activities in the Conservation Area, finding the relevant federal agencies had failed to carry out an environmental assessment as legally required. On October 26, 2007, a notice was published in the Federal Register indicating that the Secretary of Homeland Security had exercised waiver authority over various legal requirements in order to ensure the expeditious construction of physical barriers or roads through the San Pedro Riparian National Conservation Area (including any and all lands covered by the TRO), thereby enabling the DHS to resume fence construction. A listing of the federal laws waived by the Secretary pursuant to this notice can be found in Appendix J . On April 3, 2008, DHS published two separate notices in the Federal Register indicating that the Secretary of Homeland Security had exercised his waiver authority over a panoply of legal requirements regarding the construction of the border fence. The first notice announced the exercise of the waiver authority to ensure the construction of border fencing in Hidalgo County, Texas. A list of the waived laws can be found in Appendix K . The other notice waived laws to expedite the construction of fencing on certain lands along the border located in California, Arizona, New Mexico, and Texas. Appendix L enumerates the laws waived by the Secretary for this purpose. Legal suits challenging the constitutionality of this waiver authority have thus far proven unsuccessful. In December 2007, the U.S. District Court for the District of Columbia issued an opinion rejecting a constitutional challenge to DHS's waiver authority brought by Defenders of Wildlife, and granted DHS's motion to dismiss the case. The plaintiffs filed a petition for a writ of certiorari to the U.S. Supreme Court, but the Court denied this petition in June 2008. Courts have continued to uphold the constitutionality of DHS's waiver authority in the face of subsequent legal challenges brought in the U.S. District Courts for the District of Columbia and the Western District of Texas. The Secure Fence Act ( P.L. 109-367 ) was signed into law on October 26, 2006. The Act directed DHS to construct two-layered reinforced fencing and additional physical barriers, roads, lighting, cameras, and sensors along five stretches of the southwest border. CBP has estimated that these stretches of fencing total roughly 850 miles of the southern border. The five stretches of the border that DHS was required to fence were the 20 miles around Tecate, CA; from Calexico, CA to Douglas, AZ; from Columbus, NM to El Paso, TX; from Del Rio, TX to Eagle Pass, TX; and from Laredo, TX to Brownsville, TX. The Act designated the roughly 370 mile portion of the fence between Calexico, CA, and Douglas, AZ, a priority area and directed DHS to ensure that "an interlocking surveillance camera system" is installed along this area by May 30, 2007, and that the fence is completed in this area by May 30, 2008. The Act also designated a 30-mile stretch around Laredo, TX, as a priority area and directed DHS to complete this fencing by December 31, 2008. The requirements enacted by the Secure Fence Act were modified in the 110 th Congress by the Consolidated Appropriations Act, FY2008 ( P.L. 110-161 ), which was enacted on December 26, 2007. The Act makes a number of modifications to §102 of IIRIRA, significantly increasing the Secretary of Homeland Security's discretion as to where to construct fencing along the southwest border. Whereas the Secretary was previously required to install roughly 850 miles of reinforced fencing along five stretches of the southwest border, a more general requirement has now been imposed on the Secretary to construct reinforced fencing: along not less than 700 miles of the southwest border where fencing would be most practical and effective and provide for the installation of additional physical barriers, roads, lighting, cameras, and sensors to gain operational control of the southwest border. The Act further specifies that the Secretary of Homeland Security is not required to install: fencing, physical barriers, roads, lighting, cameras, and sensors in a particular location along an international border of the United States, if the Secretary determines that the use or placement of such resources is not the most appropriate means to achieve and maintain operational control over the international border at such location. The Act also amends the provisions of IIRIRA §102 concerning fence construction in priority areas, by requiring the Secretary of Homeland Security to identify either 370 miles or "other mileage" along the southwest border where fencing would be most practical and effective, and to complete construction of fencing in identified areas by December 31, 2008. This language replaces the prior language of IIRIRA §102 concerning priority areas, which had been added by the Secure Fence Act. The Consolidated Appropriations Act does not modify the existing waiver provision or limitation on judicial review contained in IIRIRA §102, but does impose new consultation requirements on the Secretary of Homeland Security when carrying out duties under this section, and conditions appropriations under the Act upon compliance with these requirements. Specifically, the Secretary is required to consult with the Secretaries of the Interior and Agriculture, state and local governments, Indian tribes, and property owners "to minimize the impact on the environment, culture, commerce, and quality of life" in areas near where fencing is to be constructed. The Act specifies that this consultation requirement does not create or negate any right to legal action by an affected person or entity. In 1996, construction began on the secondary fence that had been recommended by the Sandia study with congressional approval. The new fence was to parallel the fourteen miles of primary fence already constructed on land patrolled by the Imperial Beach Station of the San Diego sector, and included permanent lighting as well as an access road in between the two layers of fencing. Of the 14 miles of fencing authorized to be constructed by IIRIRA, nine miles of the triple fence had been completed by the end of FY2005. Construction of the remaining 4.5 miles was halted as a result of legal actions taken by the California Coastal Commission, which is discussed below. In order to finish the fence, the USBP proposed to fill a deep canyon known as "Smuggler's Gulch" with over two million cubic yards of dirt. The triple-fence would then be extended across the filled gulch. California's Coastal Commission (CCC), however, objected to and essentially halted the completion of the fence in February 2004, because it determined that CBP had not demonstrated, among other things, that the project was consistent "to the maximum extent practicable" with the policies of the California Coastal Management Program—a state program approved under the federal Coastal Zone Management Act (CZMA) (16 U.S.C. §§1451-1464). The CZMA requires federal agency activity within or outside the coastal zone that affects any land or water use or natural resource of the coastal zone to be carried out in a manner that is consistent to the maximum extent practicable with the policies of an approved state management program. If a federal court finds a federal activity to be inconsistent with an approved state program and the Secretary of DHS (Secretary) determines that compliance is unlikely to be achieved through mediation, the President may exempt from compliance the activity if the President determines that the activity is in the "paramount interest of the United States." According to the CCC, CBP did not believe that it could make further environmental concessions and still comply with IIRIRA. The CCC held that Congress did not specify a particular design in the IIRIRA, and that CBP failed to present a convincing argument that the less environmentally damaging alternative projects it rejected would have prevented compliance with the IIRIRA. Specifically, the CCC was concerned with the potential for significant adverse effects on (1) the Tijuana River National Estuarine Research and Reserve; (2) state and federally listed threatened and endangered species; (3) lands set aside for protection within California's Multiple Species Conservation Program; and, (4) other aspects of the environment. In response to the CCC's findings, Congress expanded the waiver authority in the REAL ID Act, described in more detail below, in order to allow DHS to waive the CZMA, among other things. As previously discussed, DHS announced in September 2005 that it was applying its waiver authority established by the REAL ID Act to facilitate the completion of the San Diego fence. The military has now begun the process of upgrading and rebuilding the San Diego border fence. Congress appropriated $31 million in FY2007 for construction of the remaining 4.5 miles of the San Diego fence. DHS has begun construction on the final 4.5 miles of the San Diego fence, filling in the area known as Smuggler's Gulch. Apprehension statistics have long been used as a performance measure by the USBP. However, the number of apprehensions may be a misleading statistic for several reasons, including the data's focus on events rather than people and the fact that there are no reliable estimates for how many aliens successfully evade capture. This makes it difficult to establish a firm correlation between the number of apprehensions in a given sector and the number of people attempting to enter through that sector. While caution should be taken when attempting to draw conclusions about the efficacy of policy initiatives based solely on apprehensions statistics, they remain the most reliable way to codify trends in illegal migration along the border. The San Diego fence spans two border patrol stations within the San Diego sector: Imperial Beach station and Chula Vista station. As previously noted, the primary fence was constructed in those two stations beginning in FY1990; the secondary fence was constructed beginning in FY1996. Figure 1 shows the stark decrease in apprehensions at the Imperial Beach station from FY1992 to FY2004. The majority of the decrease occurred in the four year period from FY1995 through FY1998 and coincided with Operation Gatekeeper, which as previously noted combined the construction of fencing along the border with an increase in agents and other resources deployed directly along the border. For the period from FY1998 to FY2004, apprehensions at the Imperial Beach station averaged about 14,000 each year. Figure 2 shows the apprehensions at the Chula Vista station over the same period of time. The trend in apprehensions at Chula Vista is somewhat similar to Imperial Beach, with overall apprehensions dropping significantly from FY1992 to FY2002. Apprehensions increased slightly from FY2002 to FY2004, but remain far below their early 1990s levels. Interestingly, the rate of decline in Chula Vista in the mid-1990s lagged behind the rate of decline in Imperial Beach station during this period. This suggests that as enforcement ramped up in Imperial Beach station, unauthorized migration shifted westward to Chula Vista. From FY1992 to FY1998, for example, apprehensions decreased by 92% in Imperial Beach, but only by 54% in Chula Vista. From FY1998 through FY2001, apprehensions leveled off in Imperial Beach, averaging around 16,000 a year, but continued to decline at Chula Vista, from 72,648 in FY1998 to 3,080 in FY2002. Overall, the trend indicates the following: as enforcement measures, in this case including fencing, were deployed—first focusing on Imperial Beach, and later extending to Chula Vista—the flow of unauthorized migration pushed eastward. The drop in apprehensions occurred first in Imperial Beach, and then later pushed eastward to Chula Vista. Figure 3 shows the aggregate apprehensions made at the other San Diego sector stations, excluding Imperial Beach and Chula Vista. Those stations are El Cajon, Campo, San Clemente, Temecula, and Brown Field. Figure 3 shows that at the time apprehensions were beginning to decline in Imperial Beach (starting in FY1995) and Chula Vista (starting in FY1996), apprehensions at other San Diego sector stations almost doubled. This suggests that as enforcement efforts increased in the two westernmost stations, including the installation of fencing and the deployment of additional agents, the flow of illegal migration pushed eastward to the other stations in the San Diego sector. While apprehensions declined in the non-fenced stations of the San Diego sector from FY1997 to FY2001, the rate of decline was not as steep as the rate of decline at the stations where fencing was deployed. Overall, the decline in apprehensions in the rest of the San Diego sector has lagged behind the decreases in Imperial Beach and Chula Vista: from FY1992 to FY2004, apprehensions in the other San Diego sector stations decreased by 42%, compared to decreases of 95% in Imperial Beach and 94% in Chula Vista. In FY2003 and FY2004, apprehensions increased slightly in the rest of San Diego sector, possibly in response to the increasing USBP focus on the Tucson sector in Arizona. It seems, then, that the installation of border fencing, in combination with an increase in agent manpower and technological assets, has had a significant effect on the apprehensions made in the San Diego sector. This in turn suggests that fewer unauthorized aliens are attempting to cross the border in the San Diego sector as a result of the increased enforcement measures, including fencing, manpower, and other resources, that were deployed to that sector. Figure 4 shows overall San Diego sector apprehensions, breaking out the Imperial Beach and Chula Vista stations, and compares them to the apprehensions made at the Tucson sector between FY1992 and FY2004. The data used to create this graph can be seen presented in table form in Appendix G . Figure 4 shows that in FY1992, Imperial Beach and Chula Vista accounted for 64% of all apprehensions made in the San Diego sector; by FY2004 the two stations accounted for only 14% of all apprehensions made in the sector. However, as apprehensions declined in Imperial Beach and Chula Vista stations and San Diego sector as a whole over the late 1990s and early 2000s, apprehensions in the Tucson sector in Arizona increased significantly over this period. Over the 12-year period between 1992 and 2004, overall apprehensions in the San Diego sector declined by 76%. However, as apprehensions were decreasing in the San Diego sector, they were increasing in other sectors further east. This increase was most notable within the Tucson sector in Arizona, where apprehensions increased six-fold (591%) between FY1992 and FY2004. As Figure 4 shows, overall apprehensions in the San Diego and Tucson sectors combined have averaged roughly 620,000 yearly since FY1992, with the San Diego sector accounting for the lion's share during the early 1990s and the Tucson sector accounting for the majority in the early 2000s. This provides further indication that the construction of the fence, combined with the increases in manpower in the San Diego sector, changed the patterns of migration for unauthorized aliens attempting to enter the country illegally from Mexico. As Figures 1-4 show, the increased deployment of agents, infrastructure, technology, and other resources within the San Diego sector has resulted in a significant decline in the number of apprehensions made in that sector. Nationally, apprehensions made by the USBP grew steadily through the late 1990s, only to decline in the early 2000s. However, in 1992 the USBP apprehended 1.2 million unauthorized aliens; in 2004, the USBP also apprehended 1.2 million unauthorized aliens. While the increased enforcement in the San Diego sector has resulted in a shift in migration patterns for unauthorized aliens, it does not appear to have decreased the overall number of apprehensions made each year by USBP agents. As previously noted, apprehensions statistics can be somewhat misleading, but they nevertheless remain the best way to codify trends in unauthorized migration along the border. However, it is impossible to ascertain solely by looking at apprehensions statistics how many unauthorized aliens are attempting to enter the country illegally, because it is unclear how many individuals evade being captured by the USBP each year. The USBP has been constructing and maintaining barriers along the international land border since 1991. These barriers have historically been limited to selected urban areas as part of the USBP's overall strategy of rerouting illegal migration away from urban areas towards geographically isolated areas where their agents have a tactical advantage over border crossers. Two main types of border fencing have been constructed: primary fencing located directly on the border along several urban areas; and Sandia fencing, also known as secondary or triple fencing, in San Diego. Additionally, the USBP has begun installing permanent vehicle barriers in various segments of the border. Vehicle barriers are designed to impede the entry of vehicles while allowing individuals and animals to cross the border freely. As such, they have a lower environmental footprint than border fencing. Several considerations come into play whenever the USBP contemplates construction along the border. There are a number of steps that must be taken before the construction process can begin. These steps include, but are not limited to, determining what the environmental impact of the construction will be; acquiring the land needed for the fence; acquiring the materials that will be used for the fence; and securing the assistance of the Corps of Engineers and the National Guard for the construction process. The role the Corps of Engineers plays in assisting the USBP with the entire process of constructing border fencing, including acquiring materials, will be discussed subsequently in the construction process section. This section will cover the issues associated with environmental assessments and land acquisition. Land along the southwest border supports a number of animals and plants and provides habitat to many protected species. The U.S. Fish and Wildlife Service, for example, reported that a total of 18 federally protected species have the potential to be found along certain sections of the California border. In Arizona, at least 39 federally endangered, threatened, or candidate species can be found living along its border. More than 85% of the lands directly along the Arizona border are federal lands, much of it set aside to protect wilderness and wildlife. For example, the Organ Pipe Cactus National Monument, the Cabeza Prieta National Wildlife Refuge, and the Buenos Aires National Wildlife Refuge can all be found adjacent to the border. The southwest border region is considered a fragile environment, susceptible to harm from even the slightest changes to the ecosystem. Many are concerned with the geographic footprint and subsequent environmental impacts of both illegal immigration and USBP activities. Until the early 1990s, the USBP's enforcement activities along the border were nominal and the environmental consequences of illegal crossings went largely unnoticed. As illicit trafficking escalated, however, so did the USBP's activities and enforcement footprint, including the construction of fencing and other barriers. Although the San Diego fence reportedly reduced the number of aliens attempting to drive across the open border (and consequently the enforcement footprint to stop such activities), it did little to block the flow of foot traffic. Illegal aliens often damage habitat by cutting vegetation for shelter and fire, causing wildfires, increasing erosion through repeated use of trails, and discarding trash. Environmentalists claim that the USBP's enforcement activities, including the pursuit of illegal aliens, use of off-road vehicles and construction of roads and fences, compound the degradation. The REAL ID Act will allow the DHS Secretary to waive any legal requirements needed to expedite the construction of border fencing. Until such time that DHS waives an applicable law, however, it must follow all legal requirements normally imposed on federal agencies, including, for example, NEPA documentary requirements. The construction of a fence along the border necessarily requires the government to acquire some type of interest in the land. The San Diego border fence, for example, is to extend approximately 150-feet north of the international boundary. Current immigration law authorizes the Secretary of DHS to contract for and buy any interest in land adjacent to or in the vicinity of the international land border when the Secretary deems the land essential to control and guard the border against any violation of immigration law. It also authorizes the Secretary to accept any interest in land along the border as a gift and to commence condemnation proceedings if a reasonable purchase price can not be agreed upon. With respect to the San Diego border fence, the law requires the Secretary to promptly acquire such easements as necessary to implement the statute. If DHS exercises its eminent domain powers, it must provide just compensation as required by the Constitution. In the case of the San Diego fence, construction of the final 4.5 miles continues to be held up as DHS acquires the necessary land. DHS is authorized to acquire new interests in lands under the INA. However, the federal government may already own some land along the border pursuant to presidential proclamations made long ago. In 1907, President Roosevelt reserved from entry and set apart as a public reservation all public lands within 60-feet of the international boundary between the United States and Mexico within the State of California and the Territories of Arizona and New Mexico. Known as the "Roosevelt Reservation," this land withdrawal was found "necessary for the public welfare ... as a protection against the smuggling of goods." The proclamation excepted from the reservation all lands, which, as of its date, were (1) embraced in any legal entry; (2) covered by any lawful filing, selection or rights of way duly recorded in the proper U.S. Land Office; (3) validly settled pursuant to law; or (4) within any withdrawal or reservation for any use or purpose inconsistent with its purposes. A similar reservation was made by President Taft in 1912, for all public lands laying within 60-feet of the boundary line between the United States and Canada. This proclamation states that the customs and immigration laws of the United States could be better enforced and the public welfare thereby advanced by the retention in the federal government of complete control of the use and occupation of lands abutting the international boundary lines. The proclamation also provides exceptions similar to those described in the Roosevelt Reservation. CBP has, in the past, constructed the majority of border fencing under a Memorandum of Agreement (MOA) with the ECSO (Engineering and Construction Support Office) of the U.S. Army Corps of Engineers (Corps). ECSO manages several components of the construction process for CBP, including planning and acquisition of real estate; drafting the environmental protection plan; designing the project and formulating the engineering costs; overseeing the construction process; and enforcing the appropriate warranties. On most of the tactical infrastructure projects, National Guard units and military units from the Department of Defense (DOD) Joint Task Force North provide the labor. DOD uses these projects as part of their training regimen, leveraging their ability to deploy tactical infrastructure and thereby providing zero labor costs to CBP. The funding for land acquisition and fence materials comes out of the CBP construction account within the DHS appropriation. Specific funding for fence construction is rarely identified in the conference reports, though it typically has been identified within the DHS (and previously the former INS) Congressional Budget Justifications. Table 1 shows the overall amount appropriated for the USBP construction account, and the specific amounts identified for tactical infrastructure within that account, since FY1996. Appropriations for fencing and other border barriers has increased markedly over the past five years, from $6 million in FY2002 to $647 million in FY2007. The FY2008 appropriation, according to CBP, included $196 million for fence construction. In FY2009, the Administration requested $775 million for the deployment of SBInet-related technologies and infrastructures, a decrease of $450 million over the FY2008-enacted level of $1,225 million. Within the FY2009 request, the Administration proposed allocating $275 million for developing and deploying additional technology and infrastructure solutions to the southwest border. An additional $410 million was requested for operations and maintenance of the cameras, sensors, and fencing that will have been constructed by the end of calendar year 2008 with prior-year funding. The Administration's request did not appear to include funding for new fencing or vehicle barriers at the border. Instead, the Administration noted that this funding would cover the costs associated with operating and maintaining the technologies that have been deployed to the border as part of the SBInet program, as well as the 370 miles of fencing and 300 miles of vehicle barriers, which were scheduled to be completed by the end of calendar year 2008 with funding appropriated in FY2007 and FY2008—as of the end of calendar year 2008, DHS had constructed 306 miles of fencing and 3001 miles of vehicle barriers. Most of the fencing that was constructed during 2008 was contracted out; the Corps and the National Guard were involved mainly in the project to finish the San Diego fence. P.L. 110-329 fully funded the President's request but withheld $400 million from obligation until an expenditure plan is submitted and approved by the House and Senate Committees on Appropriations. This spending plan should include 12 specific components, among them a detailed accounting of the program's implementation to date; a description of how the expenditure plan allocates funding to the highest priority border security needs, addresses northern border security needs, and works towards obtaining operational control of the entire border; certifications by the Chief Procurement Officer and the Chief Information Officer at DHS; an analysis, for each 15 miles of fencing or tactical infrastructure, of how the selected approach compares to other alternative means of achieving operational control; and a review by the Government Accountability Office. Under the MOA, once CBP purchases the materials and acquires the land, the Corps of Engineers undertakes the engineering studies. If the Corps is involved in the construction process, it provides the manpower and machinery that are used to install the fencing. The actual manpower is typically provided by the State National Guard (the California National Guard, for example, constructed much of the San Diego fence), although occasionally the military, and sometimes the USBP, are involved in the construction. As previously noted, however, DHS has been utilizing private contractors to undertake the construction of most of its new fencing in the last year. Even when private contractors are used to build the fencing, however, the Corps remains involved in the planning and engineering phases of the process. The Corps of Engineers funding comes from the Department of Defense Drug Interdiction and Counter-Drug Activities Account. Table 2 shows the funding for the "Southwest Border Fence" sub-account within this DOD Account, from FY1997 to FY2009. As previously noted, however, much of the new fence construction currently taking place is being done by private contractors. The USBP currently uses three main types of barriers along the border: primary fencing immediately on the international border, Sandia fencing behind the primary fencing, and vehicle barriers meant to stop vehicles, but not people on foot, from traversing the border. While other forms of primary fencing, such as bollard fencing and picket fencing, have been constructed in limited areas, historically the agency has largely focused on using the landing mat fencing as a primary fence and the Sandia fence as a secondary fence. Landing mat fencing is composed of army surplus carbon steel landing mats which were used to create landing strips during the Vietnam War. The landing mats form panels 12 feet long, 20 inches wide, and 1/4 inch thick, which are welded to steel pipes buried 8 feet deep every 6 feet along the fence. Each mile of fencing requires the use of 3,080 panels. There are about 5 miles of surplus landing mat fencing remaining as of 2006. According to the USBP, sites that feature landing mat fencing include the following USBP stations: Campo, CA; Yuma, AZ; Nogales, AZ; Naco, AZ; Douglas, AZ; and El Paso, TX. In a 1999 study which was commissioned by the INS and performed under a Memorandum of Understanding, the Corps of Engineers predicted that construction costs for the landing mat fencing would range from $388,005 to $431,117 per mile. This estimate includes the cost of materials, despite the fact that the landing mat fencing constructed to date has been comprised of army-surplus panels acquired by CBP at no cost. As previously noted, however, only about 5 miles of surplus landing mat fencing material remains available. Maintenance costs per year could vary widely depending on the number of breaches the fence undergoes. Low levels of damage to the fence would result in low annual repair costs, while a large number of breaches could result in stretches of fencing needing to be replaced. Per mile, the Corps of Engineers estimated that yearly maintenance costs would probably range from $1,742 to $17,753. The Corps of Engineers noted that the net present value of the fence after 25 years of operation would range from $5.4 million and $8.3 million per mile depending on the amount of damage sustained by the fencing each year. The secondary fence proposed by the Sandia study has only been constructed over roughly 9.5 miles of the 14 miles in the original plan due to environmental concerns voiced by the California Coastal Commission. As previously discussed, P.L. 109-13 included language that will allow waiver of all legal requirements determined necessary by the Secretary of DHS for the expeditious construction of authorized barriers and only allows judicial review for constitutional claims. On September 14, 2005, DHS announced it is applying its new waiver authority to complete the San Diego fence. DHS is currently estimating that it will cost an additional $66 million to finish the San Diego fence, bringing overall costs for this 14 mile-long project to $127 million. Additionally, DHS notes that it will use a mix of DOD resources and private contractors to finish the fence, and that the cost of using contractors is included in the request. The Sandia fence, as it has been constructed in the San Diego sector, is a secondary fence constructed behind the primary fence. Enough space is left between the two fences to accommodate an access road. The secondary fence is an angled two-piece fence. The fence is vertical up to ten feet high, and then extends out at an angle towards the climber. This prevents climbing by using gravity and the weight of the climber against them. The Corps of Engineers estimated that Sandia fencing costs per mile would range from $785,679 to $872,977 for construction and $953 to $7,628 per mile yearly for maintenance. Additionally, the Corps of Engineers study notes that the Sandia fence would possibly need to be replaced in the fifth year of operation and in every fourth year thereafter if man-made damage to the fence was "severe and ongoing." For this reason, in the study the Corps of Engineers noted that the net present value of the fence after 25 years of operation, per mile, would range from $11.1 million to $61.6 million. The USBP utilizes various different types of barriers to impede vehicles from crossing into the United States from Mexico. Some of these barriers are temporary and can be moved to different locations when needed, others are permanent barriers. The main purpose of vehicle barriers is to prevent smugglers from easily driving their vehicles across the border. Permanent vehicle barriers, as their name suggests, are not designed to be moved but rather are permanent installations. Permanent vehicle barriers are typically steel posts, or bollards, that are excavated 5 feet deep and inserted into a poured concrete base. The posts alternate in above-ground height in order to dissuade individuals from forming a ramp over the barrier. They are spaced so as to allow foot and animal traffic but not vehicular traffic. The USBP recently began building permanent vehicle barriers in the Yuma sector, with a substantial stretch slated to be built along the Organ Pipe Cactus National Monument. When linked with the 30 miles of vehicle barriers built by the National Park Service, a USBP spokesman reportedly noted that the total 123 mile length of the project "will form the largest continuous physical barrier along the border in the nation." In the FY2007 DHS Congressional Budget Justifications, DHS notes that the Yuma vehicle barrier project would take until at least 2010 (and possibly longer) to complete if CBP continued to use the Corps of Engineers and other military personnel to construct the barriers. Instead, CBP proposes hiring commercial contractors to build 39 miles of vehicle barriers in the Yuma sector, or almost half of the project's 93 mile total. CBP is projecting that the project will be completed by FY2011, and that the overall project costs will be $116 million. This means that, overall, the project will cost roughly $1.25 million per mile. The National Park Service has spent $11.1 million to construct 18 miles of permanent vehicle barriers in Organ Pipe Cactus National Monument, and has obligated, but not yet spent, an additional $6.6 million in FY2005 funding to complete the remaining 13 miles of the project. Temporary vehicle barriers are typically built from welded metal, such as railroad track, but can also be constructed from telephone poles or pipe. These barriers are built so that they cannot be rolled or moved manually; they can only be moved with a forklift or a front-end loader. They are usually built at USBP stations and transported to areas of high vehicle entry, where they are placed and chained together. The main advantage of the temporary vehicle barriers is their ability to be redeployed to different areas to address changes in smuggling patterns. The main disadvantage of these barriers is that they are easier to compromise than permanent vehicle barriers. In FY2007, DHS unveiled a new program, called SBInet, that will deploy a mix of personnel, technology, infrastructure, and response assets in order to "provide maximum tactical advantage in each unique border environment." While SBInet has been billed as a nationwide initiative, its initial rollout has been confined to the southwest border. As part of SBInet, DHS awarded a contract to Boeing to serve as the project's lead technology integrator. The SBInet program has included the construction of barriers as part of its approach to securing the border. Boeing, in conjunction with the Sandia National Laboratory, created a Fence Lab program to test the efficacy of 8 different fence designs. In FY2007, CBP constructed a total of 76 miles of border fencing bringing the overall fencing at the border to 154 miles. In FY2008 through the end of the calendar year, CBP is planning to construct an additional 216 miles of fencing; this would bring the overall fencing at the border to 370 miles by the end of calendar year 2008. Through early April, 2008, CBP had constructed an additional 18 miles of fencing, bringing the total mileage of fencing constructed at the border to 172. The fencing that has been constructed thus far as part of SBInet has been primary fencing, and a few different designs have been used, including bollard fencing. While the National Guard was involved in some of the construction in FY2007, much of it was undertaken by contractors. In 2008, the majority of the fence construction will be done by contractors. In FY2007, CBP constructed 110 miles of vehicle barriers. Through early April in 2008, CBP had constructed an additional 32 miles of vehicle barriers, bringing the total vehicle barrier mileage to 142. CBP plans to build 158 additional miles of vehicle barriers by the end of calendar year 2008; this would bring the overall total mileage of vehicle barriers at the border to 300. In testimony before the Appropriations Committee, the Government Accountability Office (GAO) noted that CBP's goal for fencing and vehicle barrier deployment in 2008 "will be challenging because of factors that include difficulties acquiring rights to border land and an inability to estimate costs for installation." Despite these challenges, as of the end of 2008 CBP had constructed 296 miles of pedestrian fencing and 282 miles of vehicle barriers. As of February 13, 2009, CBP had constructed 306 miles of fencing and 301 miles of vehicle barriers. This means that CBP has met its goal for vehicle barriers on the southern border and is roughly 64 miles short of its 370 mile goal for fencing. Roughly 90% of the fencing deployed to the border has been primary fencing; only about 32 miles of double layer fencing has been constructed in the San Diego and El Paso sectors. Congress may consider a number of issues concerning the construction of barriers along the border, including, but not limited to, their effectiveness, overall costs compared with benefits, possible diplomatic ramifications, unintended consequences, and the locations in which they are to be constructed. Although these issues apply to all potential barriers at the border, due to the focus on border fencing in the current congressional debate, this section will focus its analysis on the potential policy and legal issues surrounding the construction of fencing at the border. Proponents of border fences point to the substantial reduction in apprehensions along the San Diego sector as tangible proof that fences succeed in reducing cross-border smuggling and migration where they are constructed. Opponents attribute part of the decrease in apprehensions to the increase in manpower and resources in the sector and, pointing to the increase in apprehensions in less-populated sectors, contend that the fence only succeeds in re-routing unauthorized migration and not in stopping it. The USBP, for its part, states that border fencing is a force multiplier because it allows its agents to focus enforcement actions in other areas. The USBP has also stated that the fencing constructed in urban areas has helped reroute unauthorized migration to less populated areas where its agents have a tactical advantage over border crossers. As previously noted, the number of USBP apprehensions in 2004 were almost identical to the number of apprehensions in 1992; the main difference is that San Diego accounted for the majority of apprehensions in 1992, whereas in 2004 Tucson and Yuma sectors accounted for the majority of apprehensions. A possible issue for Congress concerns the overall effectiveness of border fencing, especially if it is not constructed across the entire border in question. In the limited urban areas where border fencing has been constructed, it has typically reduced apprehensions. However, there is also strong indication that the fencing, combined with added enforcement, has re-routed illegal immigrants to other less fortified areas of the border. Additionally, in the limited areas where fencing has been erected, there have been numerous breaches of the border fencing and a number of tunnels discovered crossing underneath the fencing. It stands to reason that even if border fencing is constructed over a significant portion of the land border, the incidences of fence breaches and underground tunnels would increase. Possible policy options to address these issues could include mandating that border fencing be highly tamper-resistant or directing CBP to invest in tunnel-detection technologies. Because border fencing is a relatively new and limited phenomenon along the U.S.-Mexico border, there is a dearth of information concerning its overall costs and benefits. The Corps of Engineers study predicted that the costs of constructing a double layer fence consisting of primary fencing and Sandia fencing would range from $1.2 million to $1.3 million a mile, excluding the costs of land acquisition. The Corps of Engineers also predicted that the 25-year life cycle cost of the fence would range from $16.4 million to $70 million per mile depending on the amount of damage sustained by the fencing. If significant portions of the border were to be fenced, reducing the areas along which individuals could cross the border, it may stand to reason that the fencing will be subjected to more breaches and other attempts to compromise than the fencing that has already been constructed. This may mean that the costs of maintaining border fencing that is widely deployed in the future will be higher than they have been thus far for the limited deployment. The Corps estimates do not include the costs of acquiring the land or most labor costs, since construction would be done by DOD; these could well turn out to be significant expenses if private contractors are used to construct the fencing as per DHS' FY2007 Congressional Budget Justifications. The Congressional Budget Office (CBO) has estimated that border fencing would cost $3 million a mile to construct and that maintenance would total roughly 15% of the overall project costs per year. However, the CBO does not elaborate on what is included in those estimates. DHS predicts that the San Diego fence will have a total cost of $127 million for its 14-mile length when it is completed—roughly $9 million a mile. Construction of the first 9.5 miles of fencing cost $31 million, or roughly $3 million a mile, while construction of the last 4.5 miles of fencing is projected to cost $96 million, or roughly $21 million a mile. However these costs may be somewhat misleading due to the following factors: construction of the fence was delayed for an extended period of time; the remaining construction involves filling a relatively large gulch which may be more complex than the average stretch of border; and DHS is proposing to use private contractors to expedite the construction process which may increase the labor costs and thus may increase the overall project costs. According to the Government Accountability Office (GAO), the border fencing constructed by the end of FY2007 (using mostly the Corps of Engineers and the National Guard to construct the fencing) cost about $2.8 million a mile. The fencing constructed in FY2008, using mostly private constructors, cost about $5.1 million a mile. Some have argued that building fences on the border is too expensive and would consume funding that would be better spent on hiring additional agents or deploying additional technologies to the border. Others maintain that the costs of fencing are negligible compared to the costs of illegal immigration, and that fencing has been proven effective at decreasing illegal immigration in those areas where it has been deployed. The USBP has testified that "for border control, for border security, we need that appropriate mix. It's not about fences. It's not about Border Patrol agents. It's not about technology. It's about all of those things." At issue for Congress is how best to allocate scarce border security resources while safeguarding homeland security. Does border fencing represent the best investment of border security funding, and what is the appropriate mix of border security resources? How much will maintaining border fencing cost in the future, and which agency will be responsible for this maintenance? Will using private contractors to expedite the construction of border fencing increase or decrease the costs? Congress mandated the design of the border fence in San Diego in IIRIRA. Many different fence designs could be deployed to the border, and each have their relative strengths and weaknesses. Concrete panels, for example, are among the more cost-effective solutions but USBP agents cannot see through this type of fencing; the USBP testified about their preference for fencing that can be seen through, so as to identify the activity occurring on the Mexican side of the border and thus preserve their tactical advantage over potential border crossers, and to better avoid potential rockings or other violent incidents. Sandia fencing has been effective in San Diego and can be seen through, but is among the more expensive fencing options. Bollard fencing has been effective in its limited deployment and can also be seen through, but is also expensive to install and to maintain. Chain link fencing is relatively economical, but more easily compromised. If fencing is to be constructed along the border, an issue concerns what kinds of fencing should be constructed in order to maximize its deterrent effect and its utility to the USBP while minimizing the costs associated with its construction and maintenance. The USBP has testified that border fencing is most effective for its operational purposes when deployed along urban areas. In these areas, individuals crossing the border have a short distance to cover before disappearing into neighborhoods; once they have entered neighborhoods it is much more difficult for USBP agents to identify and apprehend unauthorized aliens. Also, from populated areas it is relatively easy for unauthorized aliens to find transportation into the interior. For these reasons, all of the border fencing constructed by the USBP to date has been built in urban areas abutting the border, such as San Diego, Nogales, and El Paso. In rural areas, the USBP testified that it has a tactical advantage over border crossers because they must travel longer distances before reaching populated areas. According to CBP, fencing is manpower intensive because agents must continually check the fence for breaches and for illegal activity. This does not represent a problem in urban areas, because the USBP stations are typically located near the border in those areas. In some of the more rural areas of the border, where the nearest towns and USBP stations may be many miles away from the border, this would mean that agents would need to spend much of their working day commuting from the nearest USBP station to the fence location. Additionally, because the border fencing constructed to date has been built along urban areas it has been relatively easy to house the individuals involved in its construction. If border fencing is extended into the more remote areas of the border, the costs of its construction may increase due to the need to bring the individuals and goods needed to build the fence to these areas for extended periods of time. Lastly, some areas of the border are prone to severe weather effects, such as flash flooding, that could compromise any permanent structures constructed there. A very practical issue concerns what areas of the border should be fenced. Should fencing be restricted to urban or semi-urban areas in order to give the USBP a tactical advantage over border crossers, or should fencing be constructed along any geographical area of the border that features large numbers of unauthorized immigration? In rural areas, should fencing be limited to areas of high illegal entry in order to impede individuals from crossing the border, or should fencing be constructed as a deterrent in any area, even those featuring low levels of illegal entry? Should fencing be deployed in sectors where the distance between the nearest USBP station and the fence requires agents to spend most of their day commuting? Should fencing be deployed to the northern border as well as the southwest border? Will building fencing along more remote or environmentally harsher areas of the border increase the construction costs? There are a number of issues associated with the acquisition of the land that would be required for border fencing. Much of the land along the California and Arizona border is owned by the federal government; however most of the land along the Texas border is owned by private individuals. What will the costs of acquiring the land to construct border fencing be, and have these costs been factored into estimates of border fencing costs? Will eminent domain be used to confiscate land from individuals who do not wish to have fencing built on their lands? The reservations made by Presidents Roosevelt and Taft may have kept substantial parcels of land within the federal domain, depending mostly on the amount of public lands at the time and valid existing claims. CRS was not able to determine how many valid claims and land patents exist, if any, or the number of private developments that may be encroaching on the reservations. Nonetheless, it appears that only those who qualify under an exception or were provided land by statute have valid fee title claims within the reserved strip. If lands were mistakenly granted, sold, or transferred to private parties, these conveyances could be void because, as a general rule, rights can not be acquired in lands actually embraced in a legally valid withdrawal. Compensation under the Fifth Amendment for private landowners may not be owed if private claims are not legitimate. Because the proclamations do not cite any supporting authority, some question the President's implied or inherent constitutional powers to issue them. Others may argue that they conflict with the exclusive mandate given Congress by the Property Clause of the Constitution to regulate and dispose of federal property. An issue for Congress may include whether these proclamations are, in fact, valid, and if so what actions are appropriate to take in the instances where individuals own land within the reservation's boundaries. Assuming the proclamations are valid, the reservations may provide the first 60 feet of necessary space for fence construction in many areas. However, the two layer fencing constructed to date includes 150 feet of land between its layers. An issue for Congress may involve whether to confine border fencing to the 60-feet easement reserved by the proclamations, or whether to acquire the additional 90 feet of land that would be needed to construct Sandia-style fencing. A corollary issue may involve the authority of DHS to construct border fencing along tribal lands. The Arizona desert along the Tohono O'odham reservation has become one of the most heavily trafficked border areas in the country, and the USBP has been restricted in its operations in the reservation due to tribal concerns. The Tohono O'odham have reportedly vowed to fight the construction of fencing on tribe-owned land, citing environmental and cultural concerns. Under current law, the Secretary of the Interior may grant rights-of-way over and across tribal land, provided the Secretary receives prior written consent of the tribe. If the tribe does not consent, DHS may look to its new waiver authority to construct a fence across tribal lands. It is unclear, however, whether the expanded waiver that was given to the Secretary of DHS would allow (or was intended to allow) the Department to override the statutory authority given to another federal agency. Ultimately, federal government holds all Indian lands in trust, and Congress may take such lands for public purposes, as long as it provides just compensation as required by the Fifth Amendment. The governments of Mexico and Canada have both voiced concern about the United States constructing barriers along the international border. Mexican President Vicente Fox has come out strongly against the construction of border barriers on numerous occasions, stating his belief that these projects isolate the two nations, create frustration and misunderstandings, and do not solve the underlying problems that lead individuals to enter the United States illegally. Mexican Press Secretary Rubén Aguilar Valenzuela stated his government's belief that "history has also taught us that a wall is never the solution to problems and that all walls eventually get torn down." The Mexican government has reportedly forwarded numerous diplomatic notes to the White House registering its complaints against the possible expansion of border fencing. The Canadian government has also reportedly voiced concern over legislative proposals that would require a study of fencing options along the northern border, citing the difficulties of fencing the northern border and the fact that the U.S. government has never discussed such a plan with Canadian authorities. Deputy Assistant Secretary for Immigration and Customs Enforcement John P. Clark reportedly stated during Congressional testimony that the proposed expansion of border fencing "harkens back to the Chinese wall and the Berlin Wall, not the message we want to send to the Mexican government, the Canadian government, and the rest of the world." There are a number of possible issues for Congress to consider involving the potential diplomatic ramifications of constructing barriers along the border: Do the gains in border security outweigh the risk of alienating Mexico and Canada? Should the Mexican or Canadian government's opinions or wishes be taken into account when border fencing is concerned? Given the need to coordinate intelligence and law enforcement activities at the border, should maintaining cordial working relationships with Mexico and Canada take precedence over sealing the border with physical barriers? A great deal of debate has been around the environmental impacts of border fencing. The addition of fences along the southwest border, according to some, could harm sensitive environments, adversely affect critical habitat for protected species, and block migratory patterns for animals. Indeed, these concerns were among the many voiced by the CCC in its objection to the completion of the San Diego border fence. After immigration officials, the CCC, and the environmental community could not agree on a fence design, Congress passed waiver language in the REAL ID Act that allows the Secretary of DHS to waive all "legal requirements" necessary to ensure expeditious construction of the barriers and roads in the vicinity of the U.S. border. The Secretary used this provision to waive a number of primarily environmental laws (see Appendix H ) in order to complete the San Diego border fence. DHS maintains, however, that it will follow "best management practices" throughout construction and will be "mindful of the environmental impacts" that might occur. Nonetheless, the Secretary's broad waiver authority has many worried about potential fence projects along other areas of the southwest border. Some argue that a fence along the Arizona border could be especially destructive to endangered jaguar and Sonoran desert pronghorn populations that usually roam this area because it would fragment native habitat and ultimately reduce gene pools. Officials from the U.S. Fish and Wildlife Service, however, have said that it is too early to speculate about the potential impact of a border fence on wildlife migration. Others note that unauthorized migration negatively impacts the environment, and believe that the construction of fencing could actually have a beneficial impact for protected lands if it reduces the number of unauthorized migrants traversing through environmentally sensitive lands. As Congress debates immigration reform and the addition of new border fences, Members will undoubtedly be called upon to balance national security interests with environmental protections. Because there does not appear to be a clear consensus on the environmental impacts of border fencing, there is some interest in a study of the issue. The effects of the San Diego border fence, for example, may help scientists better understand and predict potential environmental consequences elsewhere. Should fencing be expanded along the southwest border, Congress may be interested in environmentally sensitive alternatives to normal fencing and whether they can effectively limit illegitimate cross-border traffic. Some argue that vehicle barriers may be less intrusive because they allow unimpeded wildlife movement but can limit damaging vehicular traffic. Congress may also call on the Secretary to cooperate or coordinate certain activities with the environmental community, since the Secretary could waive many environmental requirements. The building of barriers along the international border has raised a number of legal issues. Most stem from requirements posed by environmental laws. Before the passage of the REAL ID Act waiver provision, for example, the Sierra Club and other environmental groups challenged, under the National Environmental Policy Act, the federal government's plan to complete the San Diego border fence. The lawsuit alleged, among other things, that the government's final environmental impact statement did not address the entire 14-mile border infrastructure system and inadequately addressed the parts that were evaluated. After Secretary Chertoff exercised the waiver authority, the court dismissed the environmentalists' lawsuit in December 2005. With respect to the Secretary's use of the waiver authority, the provision allows legal redress only for constitutional violations and limits review to the district courts of the United States (though the Supreme Court retains discretionary appellate review over district court decisions). In essence, an individual could not sue DHS for bypassing the environmental impact statement requirements of the National Environmental Policy Act (a law it has waived) because that would be a statutory violation, but an individual could sue for the taking of property without "just compensation" as provided by the Fifth Amendment. Should a district court make a ruling, that decision can only be appealed if the petitioner files a petition for a writ of certiorari to the Supreme Court and the Court, in its discretion, chooses to grant certiorari. In other words, there is no intermediate appellate court review guaranteed as of right to a petitioner. Appeal directly from a district court to the Supreme Court rarely appears in law. Still, when Congress determines a particular class of cases to be of great public import, it is not unprecedented for it to require prompt review in the highest court of the land. As previously discussed, a few legal challenges have been brought in federal district courts challenging the constitutionality of the waiver authority provided to the Secretary of Homeland Security by the REAL ID Act, but these challenges have thus far been rejected. Considerable evidence shows that the USBP's historical strategy of "Prevention through Deterrence," whereby agents and resources including border fencing and other barriers have been concentrated along urban areas and areas traditionally featuring high levels of illegal entry, has succeeded in changing the flow of illegal migration. While San Diego, CA, and El Paso, TX, were historically the two sectors that featured the most apprehensions and the highest levels of illegal immigration, since the mid-1990s and the advent of Operations Gatekeeper and Hold the Line in those sectors, the more remote geographical areas of the Arizona border have become the hot-spots for illegal migration into the United States. One unintended consequence of this enforcement posture and the shift in migration patterns has been an increase in the number of migrant deaths each year; on average 200 migrants died each year in the early 1990s, compared with 472 migrant deaths in 2005. Another unintended consequence of this enforcement posture may have been a relative increase, compared with the national average, in crime along the border in these more remote regions. While crime rates in San Diego and El Paso have declined over the past 15 years, the reduction in crime rates along the more rural areas of the border have lagged behind the national trends. Another unintended consequence of the border fencing has been the proliferation of tunnels dug underneath the border. In San Diego, where the double-layer Sandia fencing has been constructed, smugglers have dug numerous tunnels underneath the border fence. One such tunnel was almost a kilometer long and was built from reinforced concrete—evidence of a rather sophisticated smuggling operation. A possible issue for Congress to consider as it debates expanding the existing border fencing is what the unintended consequences of this expansion could be. Given the re-routing of migration flows that have already occurred, are DHS and the relevant border communities prepared to handle the increased flow of illegal migration to non-reinforced areas? Is DHS prepared to deal with an increase in the phenomenon of cross-border tunnels and other attempts to defeat the purpose of the fencing? What will the impact on crime rates be along the unreinforced areas of the border? Will USBP agents be required to spend some of their patrolling time guarding the fence? Appendix A. Legislation in the 110 th Congress As previously noted, the Consolidated Appropriations Act of 2008 ( P.L. 110-161 ) made significant changes to the Secure Fence Act. The Act gives DHS discretion as to where fencing should be erected along the border, requires that 700 miles of reinforced fencing be constructed, and designates 370 miles as a priority area that must be constructed by December 31, 2008. In addition, the Act provided a total of $1,225 million for SBInet. This represented an increase of $225 million over the Administration's request, and the amounts recommended by the House- and Senate-passed versions of the bill. Of the $1,225 million provided by P.L. 110-161 , $1,053 million was designated as emergency funding, and $172 million comprises regular appropriations. The $1,225 million was apportioned as follows: $1,088 million for development and deployment ($1,053 million in emergency funding, and $35 million in regular appropriations); $73 million for operation and maintenance; and $64 million for program management. Funding for the construction of the border fence was included in the development and deployment activity in the BSFIT account. However, it is important to note that other items, such as the deployment of cameras and sensors to the border, are also funded under this activity. Currently available authoritative documentation does not provide funding details below the activity level. Therefore, the portion of this funding that would be specifically directed to the border fence cannot be precisely determined. However, according to CBP Congressional Affairs, the President's $1,000 million FY2008 request for BSFIT included $196 million in fence-related funding. P.L. 110-161 also withheld $650 million of the funding provided for SBInet until an expenditure plan is received and approved by the House and Senate Appropriations Committees. Proposed Legislation In addition to the Consolidated Appropriations Act, a number of bills were introduced in the 110 th Congress that included provisions relating to the construction of border fencing. Although the following analysis is not intended to provide a comprehensive list of every bill introduced that had fencing provisions, it does provide an overview of the main types of fence-related bills that have been introduced and their overarching themes. Prior to enactment of the Consolidated Appropriations Act, a number of other bills were introduced in the 110 th Congress that would have expanded or underlined the Secretary of Homeland Security's authority to construct fencing at the border. H.R. 4192 , H.R. 3638 , and H.R. 2954 would have directed the President to construct the fencing authorized by the Secure Fence Act. S. 2348 would have authorized $3 billion in emergency funding for a variety of border security purposes, including the construction of 700 miles of fencing. S. 2294 and S. 1984 would have called for the construction of 700 miles of fencing and 300 miles of vehicle barriers within two years of enactment. S. 1269 would have called for the construction of double layer fencing along the border from the Pacific Ocean to the Gulf of Mexico. S. 330 would have called for replacing existing fencing in Tucson and Yuma sectors with double layer fencing and constructing a total of 370 miles of fencing and 500 miles of vehicle barriers along the border. The issue of barriers at the border was also of interest to the 110 th Congress as a component of the larger immigration debate. During May and June 2007, the Senate considered a number of comprehensive immigration reform measures ( S. 1348 , S.Amdt. 1150 to S. 1348 , S. 1639 ), though cloture was unable to be achieved on any of these proposals. Both S.Amdt. 1150 , as amended, and S. 1639 , as introduced, included language concerning fencing at the border that was similar to that which was ultimately enacted as part of the Consolidated Appropriations Act for FY2008. Some comprehensive immigration reform proposals considered also included provisions that would have required that the construction of border barriers serve as a trigger mechanism for broader immigration reform to occur. S.Amdt. 1150 , as introduced, would have required the construction of 370 miles of fencing and 200 miles of vehicle barriers before some provisions relating to legalization, adjustment of status, and temporary workers could take effect. In addition, S.Amdt. 1150 would have amended §102 of IIRIRA to expressly authorize the construction of the San Diego fence. During the initial Senate floor debate for S.Amdt. 1150 , S.Amdt. 1172 was adopted by unanimous consent and amended the trigger mechanisms to require 300 miles of vehicle barriers. S. 1639 , as introduced, included similar language to S.Amdt. 1150 , as amended, concerning barriers at the border. S. 1639 would have required DHS to construct 370 miles of fencing and 300 miles of vehicle barriers as part of the trigger mechanisms required before some provisions relating to legalization, adjustment of status, and temporary workers could take effect. S. 1369 would also have expressly authorized the completion of the San Diego fence. A number of bills that were introduced in the second session of the 110 th Congress would have amended the changes to the Secure Fence Act that were enacted by the Consolidated Appropriations Act of FY2008. H.R. 5568 would have inserted the word "physical" before all previously enacted occurrences of the word "fencing" (e.g., in the Secure Fence Act and §102 of IIRIRA). S. 2712 would have required that the 700 miles of reinforced fencing authorized by the Consolidated Appropriations Act be completed by December 31, 2010. H.R. 5124 would have required that the fencing constructed under the Act's authorization be double layer, at least 14 feet tall, and be completed within six months of the bill's enactment. In addition, the bill would have prohibited DHS from counting fencing in existence prior to January 1, 2008, toward the 700-mile total. H.R. 4987 would have replaced the 700-mile requirement enacted by the Consolidated Appropriations Act and replaced it with language, similar to that in the original Secure Fence Act, requiring five specific stretches of fencing to be constructed. H.R. 4960 would have repealed the consultation requirement enacted by the Consolidated Appropriations Act. Lastly, several introduced bills included other fencing provisions not directly related to the construction of fencing. H.R. 5728 would have established a Border Improvement Trust Fund and allow taxpayers to designate $5 ($10 for joint filers) from their annual income tax returns for this fund. The fund could have been used to pay for costs associated with constructing and maintaining fencing and barriers at the border. S. 2709 would have imposed a minimum sentence of five years for any alien convicted of damaging fencing or infrastructure (including cameras and sensors) at the border. Appendix B. Legislation in the 109 th Congress The 109 th Congress enacted three pieces of legislation concerning border fencing, and considered several more. The REAL ID Act ( P.L. 109-13 ), as previously noted, expanded DHS's waiver authority to expedite the construction of border fencing. The Secure Fence Act of 2006 ( P.L. 109-367 ) directed DHS to construct five stretches of border fencing totaling roughly 850 miles. The FY2007 DHS Appropriations Act ( P.L. 109-295 ) provided $1.2 billion for the installation of fencing, infrastructure, and technology along the border; $31 million of this total was designated for the completion of the San Diego fence. In addition to these Acts, a number of bills with fencing related provisions were passed by the House and the Senate. H.R. 4437 , which would have directed DHS to construct five stretches of fencing along the border, was passed by the House on December 16, 2005. S. 2611 , which called for 370 miles of fencing to be constructed, was passed by the Senate on May 25, 2006. S.Amdt. 4788 was added to the Department of Defense Appropriation bill, H.R. 5631 , on August 2, 2006, and would have appropriated $1.8 billion to the National Guard for the construction of border fencing. H.R. 5631 was passed by the Senate on September 7, 2006; however, this fencing provision was stripped from the bill during conference. P.L. 109-295 , the FY2007 DHS Appropriations Act, provided $1.2 billion in funding for border fencing, infrastructure, and technology; combined with the supplemental appropriation provided by P.L. 109-234 , the conferees noted that DHS would have $1.5 billion for border infrastructure construction in FY2007. The conferees directed DHS to submit an expenditure plan for this funding within 60 days of the bill's enactment, and withheld $950 million of the funding until the plan is received and approved by the House and Senate Committees. However, the Act did not place any restrictions on how DHS is to apportion this appropriation between fencing, infrastructure, and technology. In addition to the bills discussed above, there were a number of bills in the 109 th Congress that would have expanded the current fencing and other forms of barriers at the international land border. Some of these bills would have required fencing to be constructed along the entire southwest border, others would have identified particular stretches of land which would receive fencing, and still others would have called for studies to determine whether fencing is a cost-effective way of securing the border. Appendix C. Examples of USBP Border Fencing Appendix D. The San Diego Fence Appendix E. Permanent Vehicle Barrier Schematic Appendix F. Permanent Vehicle Barriers Appendix G. Data from Figure 4 Appendix H. Legal Requirements Waived by DHS for the Construction of the San Diego Border Fence Appendix I. Legal Requirements Waived by DHS for the Construction of Physical Barriers and Roads in the Vicinity of the Barry M. Goldwater Range in Southwest Arizona Appendix J. Legal Requirements Waived by DHS for the Construction of Physical Barriers and Roads in the Vicinity of the San Pedro Riparian National Conservation Area in Southeast Arizona Appendix K. Legal Requirements Waived by DHS for the Construction of Physical Barriers and Roads in Hidalgo County, Texas Appendix L. Legal Requirements Waived by DHS for the Construction of Physical Barriers and Roads at Various Project Areas Located in California, Arizona, New Mexico, and Texas
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Congress has repeatedly shown interest in examining and expanding the barriers being deployed along the U.S. international land border. The United States Border Patrol (USBP) deploys fencing, which aims to impede the illegal entry of individuals, and vehicle barriers, which aim to impede the illegal entry of vehicles (but not individuals) along the border. The USBP first began erecting physical barriers in 1990 to deter illegal entries and drug smuggling in its San Diego sector. The ensuing 14-mile-long San Diego "primary fence" formed part of the USBP's "Prevention Through Deterrence" strategy, which called for reducing unauthorized migration by placing agents and resources directly on the border along population centers in order to deter would-be migrants from entering the country. In 1996, Congress passed the Illegal Immigration Reform and Immigrant Responsibility Act which, among other things, explicitly gave the Attorney General (now the Secretary of the Department of Homeland Security) broad authority to construct barriers along the border and authorized the construction of a secondary layer of fencing to buttress the completed 14-mile primary fence. Construction of the secondary fence stalled due to environmental concerns raised by the California Coastal Commission. In 2005, Congress passed the REAL ID Act that authorized the Secretary of the Department of Homeland Security (DHS) to waive all legal requirements in order to expedite the construction of border barriers. DHS has announced it will use this waiver authority to complete the San Diego fence. The Secure Fence Act of 2006 directed DHS to construct 850 miles of additional border fencing. This requirement was subsequently modified by the Consolidated Appropriations Act, 2008 (P.L. 110-161), which was enacted into law on December 26, 2007. The Act requires the Secretary of Homeland Security to construct fencing along not fewer than 700 miles of the southwest border. While the San Diego fence, combined with an increase in agents and other resources in the USBP's San Diego sector, has proven effective in reducing the number of apprehensions made in that sector, there is considerable evidence that the flow of illegal immigration has adapted to this enforcement posture and has shifted to the more remote areas of the Arizona desert. Nationally, the USBP made 1.2 million apprehensions in 1992 and again in 2004, suggesting that the increased enforcement in San Diego sector has had little impact on overall apprehensions. In addition to border fencing, the USBP deploys both permanent and temporary vehicle barriers to the border. Temporary vehicle barriers are typically chained together and can be moved to different locations at the USBP's discretion. Permanent vehicle barriers are embedded in the ground and are meant to remain in one location. A number of policy issues concerning border barriers generally and fencing specifically may be of interest to Congress, including, but not limited, to their effectiveness, costs versus benefits, location, design, environmental impact, potential diplomatic ramifications, and the costs of acquiring the land needed for construction. This report will be updated as circumstances warrant.
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On September 21, 1996, Congress passed P.L. 104-199 , the Defense of Marriage Act (DOMA). Section 2 of the law states that no state, territory, or possession of the United States "shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship." Section 3 of the law defines "marriage" for federal purposes as "only a legal union between one man and one woman as husband and wife," and specifies that spouse "refers only to a person of the opposite sex who is a husband or a wife." On November 4, 2008, California citizens passed Proposition 8, adding new Section 7.5 to Article I of the California Constitution that reads "Only marriage between a man and a woman is valid or recognized in California." Numerous legal challenges have been made to these laws, including petitions of certiorari that have been granted by the United States Supreme Court in two cases. This collection of resources is intended to assist in responding to a broad range of research questions and requests for assistance related to the same-sex marriage law, and its consequent litigation before the Supreme Court. H.R. 3396 was introduced in the House of Representatives on May 7, 1996. The bill was approved by the Judiciary Committee on June 12, 1996, and the House as a whole on July 12, 1996. The legislation passed the Senate on September 10, 1996. It was signed by the President on September 21, 1996, and designated P.L. 104-199 . Below are links to selected legislative history documents from the 104 th Congress on the Defense of Marriage Act. Defense of Marriage Act , P.L. 104-199 , 110 Stat. 2419 (1996). http://www.gpo.gov/fdsys/pkg/PLAW-104publ199/pdf/PLAW-104publ199.pdf H.R. 3396 , 104 th Congress (as introduced May 7, 1996). http://www.gpo.gov/fdsys/pkg/BILLS-104hr3396ih/pdf/BILLS-104hr3396ih.pdfH.R. 3396 , 104 th Congress (as reported by the House Committee on the Judiciary, July 9, 1996). http://www.gpo.gov/fdsys/pkg/BILLS-104hr3396rh/pdf/BILLS-104hr3396rh.pdfH.R. 3396 , 104 th Congress (as passed by the House, July 12, 1996). http://www.gpo.gov/fdsys/pkg/BILLS-104hr3396eh/pdf/BILLS-104hr3396eh.pdfH.R. 3396 , 104 th Congress (as placed on the Senate Calendar, July 17, 1996). http://www.gpo.gov/fdsys/pkg/BILLS-104hr3396pcs/pdf/BILLS-104hr3396pcs.pdfH.R. 3396 , 104 th Congress (as passed by the House and Senate). http://www.gpo.gov/fdsys/pkg/BILLS-104hr3396enr/pdf/BILLS-104hr3396enr.pdfH.Res. 474 , 104 th Congress (as passed by the House, July 11, 1996). http://www.gpo.gov/fdsys/pkg/BILLS-104hres474eh/pdf/BILLS-104hres474eh.pdfS. 1740 , 104 th Congress (as introduced May 8, 1996). http://www.gpo.gov/fdsys/pkg/BILLS-104s1740is/pdf/BILLS-104s1740is.pdf Defense of Marriage Act , H.Rept. 104-664 (1996). http://www.gpo.gov/fdsys/pkg/CRPT-104hrpt664/pdf/CRPT-104hrpt664.pdfProviding for the Consideration of H.R. 3396 , Defense of Marriage Act , H.Rept. 104-666 (1996). http://www.gpo.gov/fdsys/pkg/CRPT-104hrpt666/pdf/CRPT-104hrpt666.pdf Defense of Marriage Act: Hearing on H.R. 3396 Before the Subcomm. on the Constitution of the H. Comm. on the Judiciary , 104 th Congress (1996), available at http://www.gpo.gov/fdsys/pkg/CHRG-104hhrg25728/pdf/CHRG-104hhrg25728.pdfThe Defense of Marriage Act: Hearing on S. 1740 Before the S. Comm. on the Judiciary, ProQuest Congressional, 104 th Congress, 1996, available at http://congressional.proquest.com/congressional/docview/t29.d30.hrg-1996-sjs-0002? Lobbying, Homosexual Marriages , Constitution Subcommittee of the House Judiciary Committee Consideration and Mark-up, CQ Markup and Vote Coverage, 104 th Congress, 1996, available at http://www.cq.com/doc/committees-COMM107050?wr=bzR2QWhQbmtjMGxPcU9zVWFaT25odwPending Legislation, Full House Judiciary Committee Consideration and Mark-up , CQ Markup and Vote Coverage, 104 th Congress, 1996, available at http://www.cq.com/doc/committees-COMM108454?wr=bzR2QWhQbmtjMGxPcU9zVWFaT25odwSame-Sex Marriage , Full House Judiciary Committee Consideration and Mark-up , CQ Markup and Vote Coverage, 104 th Congress, 1996, available at http://www.cq.com/doc/committees-COMM108594?wr=Q1U4djBRbm5MbW1FQkR4b1dQSXZLZw Same-Sex Marriage Bill, House Rules Committee Mark-up on H.Res. 474 , Rules for Floor Debate, CQ Markup and Vote Coverage, 104 th Congress, 1996 available at http://www.cq.com/doc/committees-COMM111319?wr=bzR2QWhQbmtjMGxPcU9zVWFaT25odw 142 Cong. Rec. S4869 (daily ed. May 8, 1996) (Statements on Introduced Bills and Joint Resolutions). http://www.gpo.gov/fdsys/pkg/CREC-1996-05-08/pdf/CREC-1996-05-08-pt1-PgS4851-2.pdf 142 Cong. Rec. S4947 (daily ed. May 9, 1996) (Additional Statements- Defense of Marriage Act). http://www.gpo.gov/fdsys/pkg/CREC-1996-05-09/pdf/CREC-1996-05-09-pt1-PgS4947-3.pdf 142 Cong. Rec. H7270 (daily ed. July 11, 1996) (Providing for the Consideration of H.R. 3396 , Defense of Marriage Act). http://www.gpo.gov/fdsys/pkg/CREC-1996-07-11/pdf/CREC-1996-07-11-pt1-PgH7270-4.pdf 142 Cong. Rec. H7441 (daily ed. July 11, 1996) (Defense of Marriage Act). http://www.gpo.gov/fdsys/pkg/CREC-1996-07-11/pdf/CREC-1996-07-11-pt1-PgH7441-2.pdf 142 Cong. Rec. H7480 (daily ed. July 12, 1996) (Defense of Marriage Act). http://www.gpo.gov/fdsys/pkg/CREC-1996-07-12/pdf/CREC-1996-07-12-pt1-PgH7480-5.pdf 142 Cong. Rec. S9926 (daily ed. September 5, 1996) (The Defense of Marriage Act; Cloture Motion). http://www.gpo.gov/fdsys/pkg/CREC-1996-09-05/pdf/CREC-1996-09-05-pt1-PgS9926-2.pdf 142 Cong. Rec. S10100 (daily ed. September 10, 1996) (Defense of Marriage Act). http://www.gpo.gov/fdsys/pkg/CREC-1996-09-10/pdf/CREC-1996-09-10-pt1-PgS10100-2.pdf 142 Cong. Rec. S10129 (daily ed. September 10, 1996) (Defense of Marriage Act). http://www.gpo.gov/fdsys/pkg/CREC-1996-09-10/pdf/CREC-1996-09-10-pt1-PgS10129.pdf House Roll Call Vote 316 on H.R. 3396 (July 12, 1996). http://clerk.house.gov/evs/1996/roll316.xml Senate Roll Call Vote 280 on H.R. 3396 (September 10, 1996). http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=104&session=2&vote=00280 Presidential Statement on Same-Gender Marriage , 2 Pub. Papers 1635 (September 20, 1996). http://www.gpo.gov/fdsys/pkg/PPP-1996-book2/pdf/PPP-1996-book2-doc-pg1635.pdf In March 2000, California citizens passed Proposition 22, adding Section 308.5 to the Family Code, which reads "Only marriage between a man and a woman is valid or recognized in California." On May 15, 2008, the California Supreme Court found the statute to be unconstitutional and issued their opinion In re Marriage Cases , 183 P. 3d 384 (Cal. 2008). On November 4, 2008, California citizens passed Proposition 8, which added new Section 7.5 to Article I of the California Constitution, and reads "Only marriage between a man and a woman is valid or recognized in California." Below are links to selected resources from the California secretary of state that offer history and further information on California Proposition 22 and Proposition 8. Official Title and Summary prepared by the Attorney General http://primary2000.sos.ca.gov/VoterGuide/Propositions/22.htm Text of Proposition 22 http://primary2000.sos.ca.gov/VoterGuide/Propositions/22text.htm Analysis by the Legislative Analyst http://primary2000.sos.ca.gov/VoterGuide/Propositions/22analysis.htm Official Title and Summary prepared by the Attorney General http://voterguide.sos.ca.gov/past/2008/general/title-sum/prop8-title-sum.htm Text of Proposition 8 http://vig.cdn.sos.ca.gov/2008/general/text-proposed-laws/text-of-proposed-laws.pdf#prop8 Analysis by the Legislative Analyst http://voterguide.sos.ca.gov/past/2008/general/analysis/prop8-analysis.htm On November 9, 2010, Edith Windsor filed a complaint in the Southern District of New York over the estate tax levied on her after the death of her partner, whom she had married in Canada. The complaint stated that the estate tax should be refunded as it had been "levied on a married same-sex couple, which would not have applied to a married straight couple, and which consequently violates the United States Constitution." On February 23, 2011, Attorney General Eric Holder sent a letter to congressional leadership informing them that "recent lawsuits that challenge the constitutionality of DOMA Section 3 have caused the President and the Department to conduct a new examination of the defense of this provision" and that the Department of Justice will cease defense of Section 3. As a result, the Bipartisan Legal Advisory Group of the House of Representatives filed a motion to intervene in the case, "for the limited purpose of defending the constitutionality of Section III of the Defense of Marriage Act." On June 6, 2012, the district judge ruled that "section 3 of the Defense of Marriage Act, 1 U.S.C. 7, is unconstitutional as applied to Plaintiff" and the Second Circuit Court of Appeals subsequently upheld the lower court's ruling, stating "Section 3 of DOMA violates equal protection and is therefore unconstitutional." On December 7, 2012, the Supreme Court granted certiorari in the case, U.S. v. Windsor , No. 12-307. According to the petition for a writ of certiorari, Section 3 of the Defense of Marriage Act (DOMA) defines the term 'marriage' for all purposes under federal law, including the provision of federal benefits, as 'only a legal union between one man and one woman as husband and wife.' 1 U.S.C. 7. It similarly defines the term 'spouse' as 'a person of the opposite sex who is a husband or a wife.' Ibid. The question presented is: whether Section 3 of DOMA violates the Fifth Amendment's guarantee of equal protection of the laws as applied to persons of the same sex who are legally married under the laws of their State. Additionally, the order granting certiorari states that in addition to the question presented by the petition, the parties are directed to brief and argue the following questions: Whether the Executive Branch's agreement with the court below that DOMA in unconstitutional deprives this Court of jurisdiction to decide this case; and whether the Bipartisan Legal Advisory Group of the United States House of Representatives has Article III standing in this case. For a more detailed legal analysis of this case, see CRS Report RL31994, Same-Sex Marriages: Legal Issues , by [author name scrubbed], and CRS Report R42976, Same-Sex Marriage and the Supreme Court: United States v. Windsor and Hollingsworth v. Perry , by [author name scrubbed] and [author name scrubbed]. Below are links to the documents related to this case before the Supreme Court and prior court history. Docket No. 12-307 http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-307.htm Petition for a Writ of Certiorari http://www.supremecourt.gov/docket/PDFs/12-307_Cert_Petition.pdf Response in Support of Writ of Certiorari Before Judgment http://www.supremecourt.gov/docket/PDFs/Brief_in_Opposition_filed_by_Edith_Windsor.pdf Brief in Opposition http://www.supremecourt.gov/docket/PDFs/12-307_BIO_Blag.pdf Supplemental Brief for the United States http://www.supremecourt.gov/docket/PDFs/Supplemental_Brief_For_The_United_States.pdf Supplemental Brief for Respondent Windsor http://www.supremecourt.gov/docket/PDFs/Supplemental_Brief_for_Edith_Windsor.pdf Supplemental Brief for Respondent the Bipartisan Legal Advisory Group of the U.S. House of Representatives http://www.supremecourt.gov/docket/PDFs/12-307_Supp_BLAG.pdf Reply Brief for the United States http://www.supremecourt.gov/docket/PDFs/Reply_Brief_of_the_United_States_12-307.pdf Brief on the Merits for Respondent the Bipartisan Legal Advisory Group of the U.S. House of Representatives http://www.supremecourt.gov/docket/PDFs/12-307_Brief_on_the_Merits_for_Respondent.pdf Brief for Court-Appointed Amica Curiae Addressing Jurisdiction http://www.supremecourt.gov/docket/PDFs/12-307_tsacCourtAppointed.pdf Brief on the Jurisdictional Questions for Respondent Edith Schlain Windsor http://www.supremecourt.gov/docket/PDFs/Brief_of_respondent_Edith_Windsor_%28Jurisdiction%29.pdf Brief for the United States on the Jurisdictional Questions http://www.supremecourt.gov/docket/PDFs/Brief_of_Petitioner_United_States_%28Jurisdiction%29.pdf Brief for the United States on the Merits Question http://www.supremecourt.gov/docket/PDFs/Brief_of_Petitioner_United_States_%28Merits%29.pdf Brief on Jurisdiction for Respondent the Bipartisan Legal Advisory Group of the U.S. House of Representatives http://www.supremecourt.gov/docket/PDFs/Brief_of_BLAG.pdf Brief on the Merits for Respondent Edith Schlain Windsor http://www.supremecourt.gov/docket/PDFs/Brief_of_Respondent_Edith_Merits.pdf Reply Brief on Jurisdiction for Respondent the Bipartisan Legal Advisory Group of the U.S. House of Representatives http://www.supremecourt.gov/docket/PDFs/No_12-307_rb_BLAG_jur.pdf Reply Brief on the Merits for Respondent the Bipartisan Legal Advisory Group of the U.S. House of Representatives http://www.supremecourt.gov/docket/PDFs/No_12-307_rb_BLAG_Merits.pdf Reply Brief for Court-Appointed Amica Curiae on Jurisdiction http://www.supremecourt.gov/docket/PDFs/No-12-307_rb_ac.pdf Reply Brief on the Jurisdictional Questions for Respondent Edith Schlain Windsor http://www.supremecourt.gov/docket/PDFs/12-307_bsrb_Windsor_%28jurisdiction%29.pdf Reply Brief for the United States on the Jurisdictional Questions http://www.supremecourt.gov/docket/PDFs/12-307_rb_UnitedStates.pdf Amicus Briefs (as compiled by the American Bar Association) http://www.americanbar.org/publications/preview_home/12-307.html Calendar of Oral Arguments http://www.supremecourt.gov/oral_arguments/argument_calendars/Monthly%20ArgumentCalMar2013.pdfOral Arguments http://www.supremecourt.gov/oral_arguments/argument_audio_detail.aspx?argument=12-307 Decision, Windsor v. United States , F. 3d 169 (2d Cir. 2012). http://www.ca2.uscourts.gov/decisions/isysquery/436f323b-5e40-411a-9026-98fa59ffb645/1/doc/12-2335_complete_opn.pdf Amended Complaint, Windsor v. United States , 833 F. Supp. 2d 394 (S.D. N.Y. 2010) (No. 10-8435). http://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2010cv08435/370870/9/0.pdf?1303768111Windsor v. United States , 833 F. Supp. 2d 394 (S.D. N.Y.). http://www.clearinghouse.net/chDocs/public/PB-NY-0017-0002.pdf In 2008, California citizens voted on a proposed constitutional amendment titled "Eliminates Rights of Same-Sex Couples to Marry." Better known as "Proposition 8" or "Prop 8," the ballot initiative sought to add new Section 7.5 to Article I of the California Constitution, which reads "Only marriage between a man and a woman is valid or recognized in California." Voters passed the proposition on November 4. On November 19, 2008, the California Supreme Court agreed to hear three cases: Strauss v. Horton , Tyler v. California , and City and County of San Francisco v. Horton . On May 26, 2009, the court upheld the ban on same-sex marriage in Strauss v. Horton , concluding Prop 8 "constitutes a permissible constitutional amendment," "does not violate the separation of powers doctrine," and "does not apply retroactively . " On May 22, 2009, several plaintiffs filed a complaint in the Northern District of California to "enjoin, preliminarily and permanently, all enforcement of Proposition 8 and any other California statutes that seek to exclude gays and lesbians from access to civil marriage." In August 2010, the District Judge ruled that Proposition 8 "fails to advance any rational basis in singling out gay men and lesbians for denial of a marriage license," and "because Proposition 8 prevents California from fulfilling its constitutional obligation to provide marriages on an equal basis, the court concludes that Proposition 8 is unconstitutional." In February 2012, the Ninth Circuit Court of Appeals denied the petition for rehearing en banc, stating that the People of California "may not employ the initiative power to single out a disfavored group for unequal treatment and strip them, without a legitimate justification, of a right as important as the right to marry," and "accordingly, we affirm the judgment of the district court." On July 30, 2012, the Supreme Court granted certiorari in the case, Hollingsworth v. Perry , No. 12-144. According to the petition for a writ of certiorari, the question presented by the case is whether the Equal Protection Clause of the Fourteenth Amendment prohibits the state of California from defining marriage as the union of a man and a woman. In addition, the order granting certiorari states that "in addition to the question presented by the petition, the parties are directed to brief and argue the following question: Whether petitioners have standing under Article III, § 2 of the Constitution in this case." For a more detailed legal analysis of this case, see CRS Report RL31994, Same-Sex Marriages: Legal Issues , by [author name scrubbed], and CRS Report R42976, Same-Sex Marriage and the Supreme Court: United States v. Windsor and Hollingsworth v. Perry , by [author name scrubbed] and [author name scrubbed]. Below are links to the documents related to this case before the Supreme Court and prior court history. Docket No. 12-144 http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-144.htm Petition for a Writ of Certiorari http://www.supremecourt.gov/docket/PDFs/12-144_Petition_for_Certiorari.pdf Brief in Opposition http://www.supremecourt.gov/docket/PDFs/Brief_in_Opposition_of_Respondents_Perry.pdfCity and County of San Francisco's Brief in Opposition http://www.supremecourt.gov/docket/PDFs/Brief_in_Opposition_of_Respondent_San%20Francisco.pdf Reply Brief for Petitioners http://www.supremecourt.gov/docket/PDFs/Reply_Brief_for_Petitioners.pdf Brief of Petitioners http://www.supremecourt.gov/docket/PDFs/12-144_Brief_of_Petitioners.pdf Brief for Respondents http://www.supremecourt.gov/docket/PDFs/Brief_of_Respondents_Kristin_M._Perry.pdf Brief of Respondent City and County of San Francisco http://www.supremecourt.gov/docket/PDFs/Brief_of_Respondent_City_and_County_of_San_Francisco.pdf Reply Brief of Petitioners http://www.supremecourt.gov/docket/PDFs/Reply_Brief_12-144.pdf Amicus Briefs (as compiled by the American Bar Association) http://www.americanbar.org/publications/preview_home/12-144.html Calendar of Oral Arguments http://www.supremecourt.gov/oral_arguments/argument_calendars/Monthly%20ArgumentCalMar2013.pdfOral Argumentshttp://www.supremecourt.gov/oral_arguments/argument_audio_detail.aspx?argument=12-144 Perry v. Brown , 671 F. 3d 1052 (9 th Cir. Cal. 2012). http://cdn.ca9.uscourts.gov/datastore/opinions/2012/06/08/10-16696o.pdf Perry v. Schwarzenegger , 704 F. Supp. 2d 921 (N.D. Cal. 2010). https://ecf.cand.uscourts.gov/cand/09cv2292/files/09cv2292-ORDER.pdf In addition to the cases above, information is provided on five other cases in which a petition for a writ of certiorari has been filed and that contain legal arguments related to the same-sex marriage question. In this petition for a writ of certiorari, the questions presented are "whether Section 3 of DOMA violates the equal protection component of the Due Process Clause of the Fifth Amendment," and "whether the lower court erred by inventing and applying to Section 3 of DOMA a previously unknown standard of equal protection review." Docket No. 12-13 http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-13.htm Petition for Writ of Certiorari http://sblog.s3.amazonaws.com/wp-content/uploads/2012/08/12-13-House-Cert-Petition.pdf Response of the Commonwealth of Massachusetts in Support of Certiorari http://sblog.s3.amazonaws.com/wp-content/uploads/2012/08/12-13-12-15-BLAG-v-Gill-HHS-v-Massachusetts-Cert-Response-July-2012.pdf Brief in Response of Nancy Gill et al . http://sblog.s3.amazonaws.com/wp-content/uploads/2012/08/12-13-12-15-08-02-2012-gill-v-opm-response-to-blag-cert-petition.pdf Reply Brief for Petitioner http://sblog.s3.amazonaws.com/wp-content/uploads/2012/10/12-13-Reply-OK-TO-PRINT-9-11-12.pdf List of Amicus Briefs http://www.scotusblog.com/case-files/cases/bipartisan-legal-advisory-group-of-the-united-states-house-of-representatives-v-gill/ Massachusetts v. U.S. Dept. of Health and Human Services , 682 F. 3d 1 (1 st Cir. 2012). http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=10-2204P.01A Docket No. 09-10309 http://www.gpo.gov/fdsys/pkg/USCOURTS-mad-1_09-cv-10309Gill v. Office of Personal Management , 699 F. Supp. 2d 374 (D. Mass. 2010). http://www.gpo.gov/fdsys/pkg/USCOURTS-mad-1_09-cv-11156/pdf/USCOURTS-mad-1_09-cv-11156-4.pdf In this petition for certiorari, the question presented is "whether Section 3 of DOMA violates the Fifth Amendment's guarantee of Equal Protection of the laws as applied to persons of the same sex who are legally married under the laws of their State." Docket No. 12-15 http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-15.htm Petition for Writ of Certiorari http://sblog.s3.amazonaws.com/wp-content/uploads/2012/08/12-15-Mass-Gill-Petition-final.pdf Response of the Commonwealth of Massachusetts in Support of Certiorari http://sblog.s3.amazonaws.com/wp-content/uploads/2012/08/12-13-12-15-BLAG-v-Gill-HHS-v-Massachusetts-Cert-Response-July-2012.pdf Brief in Response of Nancy Gill et al . http://sblog.s3.amazonaws.com/wp-content/uploads/2012/08/12-13-12-15-08-02-2012-gill-v-opm-response-to-blag-cert-petition.pdf Brief in Opposition http://sblog.s3.amazonaws.com/wp-content/uploads/2012/09/12-15-Brief-in-Opp-OK-TO-PRINT-8-31-12.pdf Reply Brief for the Federal Petitioners http://sblog.s3.amazonaws.com/wp-content/uploads/2012/11/12-15-Mass-Gill-cert-reply.pdf Massachusetts v. U.S. Dept. of Health and Human Services , 682 F.3d 1 (1 st Cir. 2012). http://www.ca1.uscourts.gov/pdf.opinions/10-2204P-01A.pdf Docket No. 09-11156 http://www.gpo.gov/fdsys/pkg/USCOURTS-mad-1_09-cv-11156Massachusetts v. U.S. Dept. of Health and Human Services , 698 F. Supp. 2d 234 (D. Mass. 2010). http://www.gpo.gov/fdsys/pkg/USCOURTS-mad-1_09-cv-11156/pdf/USCOURTS-mad-1_09-cv-11156-4.pdf This is a conditional cross-petition filed by the Commonwealth of Massachusetts in response to the First Circuit decision in Massachusetts v. U.S. Dept. of Health and Human Services . While the petitions in 12-13 ( BLAG v. Gill ) and 12-15 ( HHS v. Massachusetts ) seek review of whether DOMA violates equal protection, in this petition for certiorari, the questions presented are "whether Section 3 of the Defense of Marriage Act (DOMA), P.L. 104-199 , 110 Stat. 2419 (1996) (codified at 1 U.S.C. § 7) violates the Tenth Amendment," and "whether Section 3 of DOMA violates the Spending Clause, U.S. Const. art. I, § 8, cl. 1." Massachusetts filed the conditional cross petition "out of an abundance of caution, to ensure that there is no impediment to the Court's consideration of the full scope of DOMA's constitutional infirmities." Docket No. 12-97 http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-97.htm Petition for Writ of Certiorari http://sblog.s3.amazonaws.com/wp-content/uploads/2012/09/12-97-DOMA-Mass.-cross-petition-7-20-121.pdf Brief in Opposition http://sblog.s3.amazonaws.com/wp-content/uploads/2012/09/12-97-Brief-in-Opp-OK-TO-PRINT-8-23-12.pdf Reply Brief for Conditional Cross-Petitioner http://sblog.s3.amazonaws.com/wp-content/uploads/2012/09/12-97-Reply-Mass-vs-HHS-OK-To-Print.pdf In this petition for certiorari before judgment, the question presented is "whether Section 3 of DOMA violates the Fifth Amendment's guarantee of equal protection of the laws as applied to persons of the same sex who are legally married under the laws of their State." Docket No. 12-16 http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-16.htm Petition for Writ of Certiorari Before Judgment http://sblog.s3.amazonaws.com/wp-content/uploads/2012/08/12-16-Golinski-Petition-final.pdf Brief of the Respondent in Support of Petition for Certiorari Before Judgment http://sblog.s3.amazonaws.com/wp-content/uploads/2012/08/12-16-Brief-of-the-Respondent-in-Support-of-Cert.pdf Brief in Opposition http://sblog.s3.amazonaws.com/wp-content/uploads/2012/09/12-16-Brief-in-Opp-OK-TO-PRINT-8-31-12.pdf Reply Brief for the Federal Petitioners http://sblog.s3.amazonaws.com/wp-content/uploads/2012/11/12-16-Golinski-cert-reply.pdf Golinski v. U.S. Office of Personal Mgmt ., Docket Nos. 12-15388, 12-15409. http://www.ca9.uscourts.gov/content/view.php?pk_id=0000000591 Golinksi v. U.S. Office of Personal Mgmt ., 824 F. Supp. 2d 968 (N.D. Cal. 2012). http://www2.bloomberglaw.com/desktop/public/document/Golinski_v_US_Office_of_Personnel_Mgmt_No_C_1000257_JSW_2012_BL_4 In this petition for certiorari before judgment, the question presented is "whether Section 3 of DOMA violates the equal protection guarantee of the Fifth Amendment to the U.S. Constitution as applied to legally married same-sex couples." Docket No. 12-231 http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-231.htm Petition for a Writ of Certiorari Before Judgment http://sblog.s3.amazonaws.com/wp-content/uploads/2012/11/12-231-Pedersen-petition-8-21-12.pdf Brief for the Office of Personnel Management, et al. http://sblog.s3.amazonaws.com/wp-content/uploads/2012/11/12-231-OPM-BIO.pdf Brief in Opposition http://sblog.s3.amazonaws.com/wp-content/uploads/2012/11/12-231-2012-10-19-Pedersen-I-Filing-Final-bio.pdf Reply in Support of Petition for Writ of Certiorari Before Judgment http://sblog.s3.amazonaws.com/wp-content/uploads/2012/11/12-231-12-302-Pedersen-Reply-ISO-CBJ-10-31-12.pdf Pedersen v. Office of Personnel Mgmt., No. 12-3273 (2 nd Cir. filed August 21, 2012). Pedersen v. Office of Personnel Mgmt . (D. Conn. 2012). http://www2.bloomberglaw.com/desktop/public/document/Pedersen_v_Office_of_Personnel_Mgmt_No_310cv01750VLB_2012_BL_1941 The following are selected links to statutes, laws, and cases that are relevant to the issues before the Court. The Constitution of the United States of America: Analysis and Interpretation http://crs.gov/analysis/Pages/constitutionannotated.aspx?source=QuickLinks Also known as "The Constitution Annotated" or "CONAN," this resource contains legal analysis and interpretation of the United States Constitution, based primarily on Supreme Court case law. It is especially useful when researching the constitutional implications of a specific issue or topic. Some of the commonly referenced constitutional provisions related to DOMA are below: Constitution of the United States, Amendment V No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. Constitution of the United States, Amendment X The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people Constitution of the United States, Amendment XIV, Section 1 All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. Constitution of the United States, Article I, Section 8, Clause 1 The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises to pay the Debts and provide for the common Defence and general Welfare of the United States. Constitution of the United States, Article III Section 1 The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services, a Compensation, which shall not be diminished during their Continuance in Office. Section 2 Clause 1 . The Judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority;—to all Cases affecting Ambassadors, other public Ministers and Consuls;—to all Cases of admiralty and maritime Jurisdiction; to Controversies to which the United States shall be a Party;—to Controversies between two or more States; between a State and Citizens of another State; between Citizens of different States,—between Citizens of the same State claiming Land under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects. Clause 2 . In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be a Party, the Supreme Court shall have original Jurisdiction. In all other Cases before mentioned, the Supreme Court shall have appellate Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations as the Congress shall make. Clause 3. The Trial of all Crimes, except in Cases of Impeachment, shall be by Jury; and such Trial shall be held in the State where the said Crimes shall have been committed; but when not committed within any State, the Trial shall be at such Place or Places as the Congress may by Law have directed. Section 3 Clause 1. Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the testimony of two Witnesses to the same overt Act, or on Confession in open court. Clause 2. The Congress shall have Power to declare the Punishment of Treason, but no Attainder of Treason shall work Corruption of Blood, or Forfeiture except during the Life of the Person attainted. Listed below are existing CRS products on the Defense of Marriage Act, litigation, and related policy issues. Additional titles are available on the CRS.gov website, http://www.crs.gov , by searching or browsing the Civil Rights and Discrimination Issues in Focus page. CRS Report RL31994, Same-Sex Marriages: Legal Issues , by [author name scrubbed]. CRS Report R42976, Same-Sex Marriage and the Supreme Court: United States v. Windsor and Hollingsworth v. Perry , by [author name scrubbed] and [author name scrubbed]. CRS Report WSLG349, Same-Sex Marriage and the Supreme Court: Does the House Bipartisan Legal Advisory Group have standing to Challenge the DOMA Ruling? , by [author name scrubbed]. CRS Report WSLG344, Same-Sex Marriage and The Supreme Court: Is the Defense of Marriage Act Unconstitutional? , by [author name scrubbed]. CRS Report WSLG342, Same-Sex Marriage and The Supreme Court: Do Proponents of California's Proposition 8 Have Standing to Challenge the Ruling Below? , by [author name scrubbed]. CRS Report WSLG340, Same-Sex Marriage and The Supreme Court: Is California's Proposition 8 Unconstitutional? , by [author name scrubbed]. CRS Report WSLG53, First Circuit Strikes Down DOMA , by [author name scrubbed]. CRS Report R41998, Same-Sex Marriage and Employee Benefit Plans: Legal Considerations , by Jennifer Staman. CRS Report R42873, Federal Benefits and the Same-Sex Partners of Federal Employees , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21897, The Effect of State-Legalized Same-Sex Marriage on Social Security Benefits, Pensions, and Individual Retirement Accounts (IRAs) , by [author name scrubbed]. CRS Report WSLG239, DOMA (the Defense of Marriage Act) Meets the IRC (Internal Revenue Code) , by [author name scrubbed]. CRS Report WSLG89, Religious Freedom and Solemnization of Same-Sex Marriages , by Cynthia Brougher. Listed below are useful secondary sources related to same-sex marriage. Please note, CRS has not verified the information in these resources. Defining Marriage: Overview of Defense of Marriage Acts and Same-Sex Marriage Laws (Updated February 2013) http://www.ncsl.org/issues-research/human-services/same-sex-marriage-overview.aspx State Survey of Same-Sex Marriage Laws (Updated February 14, 2013) http://www.ncsl.org/issues-research/human-services/same-sex-marriage-laws.aspx State Survey of Civil Union and Domestic Partnership Statutes (Updated February 2013) http://www.ncsl.org/issues-research/human-services/civil-unions-and-domestic-partnership-statutes.aspx Same-Sex Marriage and Domestic Partnerships on the Ballot- Statewide Votes on Same-Sex Marriage, 1998-Present (Updated November 7, 2012) http://www.ncsl.org/legislatures-elections/elections/same-sex-marriage-on-the-ballot.aspx In researching these cases, those less accustomed with court proceedings may encounter unfamiliar terms. Below are definitions, taken from Black's Law Dictionary, Ninth Edition , for some common words used in litigation. CRS Legal, Policy, and Research Experts
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On September 10, 1996, the Senate passed H.R. 3396, the Defense of Marriage Act (DOMA), which had been cleared on July 12 by the House. On September 21, 1996, President Clinton signed DOMA and it became P.L. 104-199. On November 4, 2008, California citizens passed Proposition 8, which added new Section 7.5 to Article I of the California Constitution that reads "Only marriage between a man and a woman is valid or recognized in California." Petitions of certiorari have been granted by the United States Supreme Court in two cases resulting from these events. This report contains resources for retrieving legislative and background information for the Defense of Marriage Act, as well as the Proposition 8 ballot initiative in California. It also contains selected legal materials relevant to the cases. In addition, it includes information on CRS products and experts to assist in understanding the related legislative, legal, and policy issues. This report will be updated as needed.
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Active Protection Systems (APSs) are subsystems integrated into or installed on a combat vehicle to automatically acquire, track, and respond with hard or soft kill capabilities to a variety of threats, including rocket-propelled grenades (RPGs) and anti-tank guided missiles (ATGMs). APS technologies are not new, and a number of nations have already employed APS on the battlefield. The U.S. military is now beginning to include APS as part of its formal combat vehicle modernization plans and, if the initial deployment of APS proves successful, could expand the use of APS to potentially thousands of tactical military vehicles—a complex and potentially costly undertaking. Congress, in its oversight and authorization and appropriations roles, has expressed interest in past and current U.S. military APS efforts and will likely continue to be actively involved as these technologies mature and possibly are integrated onto U.S. combat vehicles. A combination of evolving threats, advances in technology, experiences in combat, and the possibility of future conflicts has served to heighten the perceived need to pursue APS for U.S. military use more aggressively. Some of the factors affecting current U.S. APS efforts are discussed in the following sections. The proliferation of advanced RPGs and ATGMs is of concern to some defense officials and policymakers alike. Recently, the conflict in Syria has brought this concern into greater focus. These weapons—RPGs in particular—have been especially popular with insurgents because they are readily available, relatively inexpensive, and require little training. RPGs are basically single man-portable, shoulder-fired, unguided rockets. RPGs have been widely proliferated but can be mitigated to a degree by installing passive nets and bar armor on vehicles and by tactics, techniques, and procedures. The Lexington Institute notes: The threats aren't standing still. Both Hezbollah and Hamas have acquired advanced Russian rocket-propelled grenades (RPGs) and anti-tank guided missiles (ATGMs), some with tandem warheads designed to defeat the reactive armor on most Western tanks. In its 2006 operation against Hezbollah, the Israeli Defense Forces lost a number of its top-of-the-line Merkava tanks and the lives of soldiers to these ATGMs. These same weapons have shown up in the hands of Ukrainian separatists. Figure 1 depicts a Russian RPG-30, which reportedly has a 105 mm tandem warhead supposedly capable of penetrating over 650 mm of steel armor, even if it is located behind reactive armor —a central armor protection feature on a number of modern tanks. The RPG-30's special feature is a second tube that fires a smaller-caliber decoy rocket a fraction of a second before the main rocket fires. This design is intended to cause an APS to engage the decoy rocket instead of the main rocket. A wide variety of both traditional, less sophisticated RPGs (such as the RPG-7) and advanced RPGs are being employed on battlefields throughout the world by both armed forces and non-state actors. Figure 2 depicts a Russian Konkurs ATGM. Open-source U.S. military analysis reports there are eight types of ATGM systems currently in use by non-state groups operating in Syria—including the U.S-made Tube-Launched, Optically Wire-Guide (TOW) ATGM. It is estimated by U.S. military sources that 130 countries and various non-state groups—including Jabhat al-Nusrah and the Islamic State in Iraq and Syria—have ATGMs. ATGMs have some tactical advantages over weapons such as Improvised Explosive Devices (IEDs) and RPGs, as ATGM gunners can attack targets from several thousands of meters outside the range of direct fire. They also have some disadvantages. For example, the Konkurs ATGM in Figure 2 has a 4 kilometer range, which, while providing a great deal of standoff protection, can also reduce the accuracy of the ATGM as the operator could lose track of the intended target at such an extended range. Most ATGMs in use require little operator training—due to the effectiveness of the link between the missile and its launcher—and operators tend to build proficiency with their systems relatively quickly. Some experts cite Israeli combat experiences in 2006 and 2014 as demonstrative of the value of APS. In July 2006, after Hezbollah rocket and missile attacks killed and wounded a number of Israeli soldiers, Israel launched a series of air and ground attacks against a number of Lebanese towns and villages. Some analysts believe the war ended inconclusively and later characterized Israeli ground operations as "ineffective." Hezbollah's use of RPGs and ATGMs was considered a major factor in the conflict. One study notes Israel's "armored forces [were] not prepared for swarming of Hezbollah ATGMs and other anti-tank weapons [RPGs]." Specifically, about 50 Israeli Merkava tanks were reportedly hit by ATGMs and about 20 of these tanks were penetrated, resulting in 23 crew casualties. ATGMs also reportedly produced major casualties among dismounted infantry forces who were occupying buildings. Anti-tank weapons were credited with causing the majority of Israeli casualties during the war. These lessons and others were apparently not lost on the Israeli Defense Forces (IDF). In late 2010, Israel began to install the Trophy APS on Merkava tanks and Namer armored personnel carriers (APCs). In July 2014, after rocket attacks against Israeli cities and infrastructure targets, Israel undertook military operations in the Gaza Strip designed to stop the rocket attacks. The operation lasted until the end of August 2014. Hamas anti-armor operations were deemed less effective than in 2006. One report suggests: Hamas was less effective with these tactics. Not a single IDF tank was confirmed destroyed, nor were any Namer heavy APCs lost in combat. Other armored vehicles appeared more vulnerable, including the aging M113 APC, in which seven Israeli troops were killed in an RPG blast. Armored corps personnel were killed and wounded by sniping and mortar fire, but by and large Hamas anti-tank weapons and tactics were not of great effect. This was due to the Trophy anti-ATGM system employed on Merkava Mk 4 tanks, the protection provided by Merkava tanks and Namer APCs, and probably Israeli tactics that employed heavy firepower against ATGM threats. Given the contrast between Israel's combat experiences in 2006 and 2014, U.S. defense officials, who might have originally been skeptical about the effectiveness of APS, may have taken a renewed interest in adapting APS for use on U.S. combat vehicles. According to one defense expert: In the aftermath of the Ukraine invasion, Western military planners no longer think they can predict how Russian leader Vladimir Putin might react to perceived provocations or opportunities. So the possibility of war in Europe is back on the table as a priority concern, and that means land warfare in which the U.S. Army would have to carry most of the burden. Some senior U.S. military leaders have suggested a "resurgent" Russia is the "nation's top national security threat," with some claiming the U.S. Army is "outranged and outgunned by many potential adversaries." Others contend, however, that the heavy emphasis placed on the Russian threat is merely a ploy by the Army to gain "a bigger chunk of the budget." Aside from these competing views, the Army, Marines, and the Department of Defense (DOD) have expressed concerns about the vulnerability of U.S. armored vehicles to evolving anti-tank threats. It has been suggested that an APS should meet both technical and operational criteria to be effective, including be able to work under extremely demanding circumstances and compressed timelines; be robust against countermeasures; minimize the threat to friendly forces and civilians; fit in the space and power allocated to it on the vehicle; and be affordable. An effective APS requires a capability to detect and classify incoming projectiles. The means by which this is accomplished is small on-board radars and/or sensors such as optical sensors. Once detected and classified in very short order, the system calculates an intercept point away from the vehicle and, if the projectile poses a threat to the vehicle, countermeasures (soft kill and/or hard kill) are employed to defeat the incoming threat. This entire transaction is accomplished almost simultaneously; the closer the point of attack, the more critical this becomes. This sequence of events is depicted in the following figure: Ideally, an APS should provide "hemispheric" coverage to combat vehicles. This is particularly important, as some advanced countries have designed weapons that can use advanced infrared or radar sensors and guidance to attack the tops or engine compartments of vehicles, which are usually less armored than the front, sides, and underside of armored fighting vehicles (AFVs). However, absent hemispheric coverage, APS coverage of certain aspects of a vehicle might still be sufficiently effective to justify its adoption for use. Another important aspect of coverage is the APS's ability to address multiple incoming attacks. Common enemy tactics involve using multiple RPGs and/or ATGMs against a single vehicle, as was seen in Gaza in 2006. The aim of these "swarm" attacks is to overwhelm a vehicle's defenses and improve the chances of disabling or destroying the vehicle with multiple hits. APSs that cannot respond to multiple, incoming threats from different directions are considered by some experts as of limited utility. Also, it is considered an important capability that, after being attacked, an APS can quickly be reloaded or "reconstituted" to respond to further attacks. CBO's 2012 report on "Technical Challenges of the U.S. Army's Ground Combat Vehicle Program" defines APS "hard kill" as follows: A hard-kill active protection system detects, engages, and destroys or neutralizes an incoming threat before it can hit a protected vehicle, actively firing some type of projectile to intercept the threat. CBO's 2012 report also provides a comprehensive treatment of the "soft kill" features of the APS: Soft-kill countermeasures include infrared jammers, laser spot imitators, and radar jammers. They may prevent missile guidance from remaining locked onto the GCV [Ground Combat Vehicle], protecting the vehicle by causing the missile to miss the target or preventing the weapon warhead from fusing. However, countermeasures have proven difficult to implement in practice because they must be tailored to a particular threat; they are not an umbrella defense that would work on a wide range of threats. For example, a millimeter wave radar jammer will not work against an infrared tracker. Furthermore, when jammers offer umbrella coverage (broadband or barrage jamming), they can also have negative effects on friendly communications and electronic systems. That drawback limits their usefulness in some situations. For example, some barrage jammers used to counter IEDs in Iraq and Afghanistan disrupted normal radio communications for U.S. soldiers. Employing defensive electronic countermeasures in ground combat can have unexpected consequences: small changes in some parameters, such as radio frequencies, antenna shapes, or orientation, can cause large changes in effectiveness. In recent conflicts, the enemy has proven adaptive and agile in employing new techniques to stymie the Army's countermeasures. As a result, defensive electronic countermeasures cannot be relied on for complete protection. Although some tend to focus on the "hard kill" aspects of APS, Army officials note that for the majority of ATGMs in use, most of these systems are highly susceptible to "soft kill" APS, which underlies the importance of both soft and hard kill capabilities. In addition, current Army "soft kill" efforts focus on defeating electro-optical/infrared (OE/IR) ATGMs. Furthermore, Army officials contend EO/IR jammers that operate in the communications and electronic spectrum widely employed by remotely detonated Improvised Explosive Devices (IEDs) are not effective against ATGMs, and the use of smoke and obscurants can also be effective against ATGMs. As noted in the previous sections, the basic science and engineering of APS present a number of challenges. These challenges are exacerbated by the possibility that an enemy may employ tactics and techniques, as well as defensive measures, to neutralize the effectiveness of the APS. Those measures may vary "from sophisticated jammers and decoys to simply firing a volley of cheap and widely available rocket-propelled grenades to overwhelm the defense." A general description of armored vehicle survivability challenges, as well as additional developmental challenges (in no particular order of priority), is discussed in the following sections. Avoidance of unintended casualties—U.S. and allied soldiers and civilians—is a fundamental U.S. military principle. As CBO explains: Most of the active protection systems under development use explosive rounds as the intercepting device. The size of the intercepting projectiles varies from 105 mm high-explosive fragmenting warheads similar to artillery shells to smaller shaped charges. The risk of injury that the fragments and blast from those intercepting rounds would present to nearby soldiers, civilians, or other vehicles is a great concern. The fact that the intercepting rounds must be launched automatically without human intervention in order to meet the required timelines increases that concern. The United States and Israel have studied this problem and have tended to select interceptors for their systems that minimize—but do not eliminate—the hazard to people outside the vehicle. Army officials further note the long-standing nature of the unintended casualties vs. effectiveness debate and point out that in a similar manner, reactive armor also can pose a hazard to dismounted troops and civilians. It is possible the threat posed to friendly soldiers and civilian non-combatants by the APS can only be reduced and not entirely eliminated, which poses a dilemma for the U.S. military. The desire to avoid unnecessary casualties could result in having to "switch off" the APS when vehicles and dismounted soldiers are operating in close proximity or when operating around civilians, such as in urban environments. Such constraints could limit the usefulness of APS in certain combat scenarios. In a manner similar to unintended casualties, the U.S. military goes to great lengths—even in combat—to avoid collateral damage to private and public property. Provisions addressing collateral damage are frequently included in the Rules of Engagement (ROE) under which U.S. and allied forces routinely operate. Hard-kill APS carries an inherent risk of collateral damage, with the primary hazard being the automatic launch of an explosive counter-munition against an incoming high-velocity explosive threat. In this regard, hard-kill APS may pose a threat to private property—including religious and historically significant property. If the avoidance of collateral damage is of overriding military concern, the employment of APS in and around structures and property could be limited, adding another level of restriction to APS use and potentially further reducing its utility in a growing list of combat scenarios. Army officials contend, however, due to the relatively small size of counter-munitions, that incoming threat projectiles might pose a much more significant collateral damage threat. In addition to limiting effectiveness, operational APS limitations could present tactical opportunities to potential adversaries who could take advantage of self-imposed APS restrictions. Although technologies under development might show promise in the laboratory or the testing range, how APS functions on the battlefield is the final determinant of effectiveness. CBO's 2012 report raises a number of battlefield-related considerations related to APS effectiveness: The available time [for the APS to activate] may be shortened further if the control system has trouble detecting the incoming rounds. Battlefield clutter (man-made objects or natural features that create false signal echoes) can reduce the detection range of the system and create false targets. Enemy radar jammers may have the same effect. As a result, the active protection system may be delayed in detecting, or not ever detect, the less time it has to react. Once the active protection system detects an incoming round, it must track the round for a period of time to determine if the trajectory poses a danger to the vehicle. Most systems do this by calculating whether the round will pass through a zone it deems a protected area. The system will attempt to intercept any incoming round that it predicts will enter this area. Demonstrations by contractors suggest that the systems may be capable of doing this in simple one-on-one situations, but how the systems will work in a situation where many active protection systems are operating side by side, with overlapping sectors of coverage and with multiple incoming threats, remains to be seen [emphasis added by CRS]. What will happen when multiple vehicles classify an incoming round as a threat? How do they coordinate a response? Those questions remain largely unanswered. Coordinating the defensive fire among vehicles implies that the systems communicate with each other. Can the communications networks handle that traffic in the very short time required? Furthermore, there is the potential for mutual interference from having many radar systems transmitting in close proximity. Will the systems end up jamming each other? How to address mutual interference and how to allot defensive fire from multiple systems that might be in the protected area are technical issues whose solutions have not yet been determined. APS might also have an impact on a combat vehicle's overall electro-magnetic "signature." Based on the number of APS sensors employed in a given area, the Army might need to limit the number of systems in that area to avoid mutual interference. These considerations are illustrative of the challenges of integrating APS for use on the battlefield. It is not just enough that the system functions as the scientists and engineers envision, but it must successfully operate in a complex physical and electronic combat environment as well, where, all too often, the "fog of war" greatly affects the actual performance of weapon systems. The components of an APS include some form of threat detection, a tracking system, signal processing systems, and the actual countermeasures systems. These components are mounted both outside and inside of the protected vehicle. In addition, these components require power—either from batteries or power generated from the vehicle. Because U.S. APS systems could initially be retrofitted to existing combat vehicles, there could be difficulties in installing APS components inside already space-constrained vehicles. How to power the APS, particularly if it relies on power generated from the vehicle, is another question for retrofits. It is possible that size, weight, and power constraints (referred to as SWAP) could dictate what type of APS is adopted for use, which could result in a less than optimal design and a decreased level of protection. The Army notes legacy combat vehicles, such as the M-1 Abrams tank, were not designed to support the additional size, weight, and power that APS would require. In the case of vehicles under development, it is likely APS size and power requirements will be incorporated into the vehicle's design so SWAP requirements should be less of a factor when selecting an APS system. In this regard, Army officials point out that the Israeli Merkava Mark 4 tank was designed around the Trophy APS. The Army's Modular Active Protection System (MAPS) effort, described below, is intended to address these issues. Whether the Army and Marines adopt a non-developmental APS for use and/or develop an APS, the decision to employ closed or open architecture systems will likely be a key issue for defense officials and policymakers. Closed APS systems are described as being "hard-wired" together, which, while having certain attributes such as lower initial development costs and high levels of performance, are not considered by some officials as adaptable as open or "modular" systems. For example, in an open architecture APS, if the enemy figures out how to jam radars or defeat countermeasures, theoretically affected sensors and countermeasures can be removed and new sensors and/or countermeasures can be "plugged" in their place; in a closed system, the entire system might have to be redesigned or upgraded. U.S. defense officials are said to favor an open architecture for any new APS development so that "new features can be fielded quickly as new anti-vehicle threats emerge." The Army notes their emphasis on open architecture is derived from broad DOD guidance issued in the Defense Acquisition Guidebook and DOD Instruction 5000.02, Operation of the Defense Acquisition System. The Army also has contracts and is working with industry to develop standards for implementing an open systems approach for APS. Furthermore, the Army warns there would likely be significant costs to bring what they refer to as "vendor locked" APSs (APSs fielded or nearly fielded) into full compliance with U.S. safety boards and testing organizations requirements. Some in industry contend their systems are not truly "closed" systems as DOD suggests and incorporate modular design features, and that they are not "vendor locked" and are more safety compliant than has been suggested. With some commercially developed APSs already in use (or close to being operational), policymakers will likely debate the merits of these systems in relation to the time and cost required to develop an open architecture APS that could be more adaptable, effective, and affordable over its extended lifecycle, as the Army claims. Aside from the procurement or developmental costs associated with closed and open APS, affordability issues will likely influence the Army's and Marines' APS programs. The services' initial plans for APS are to install it on M-1 Abrams tanks and, if this proves successful, to expand use to other armored fighting vehicles and possibly to other tactical vehicles. The Army, however, notes it is the vehicle's base armor requirements that drive the selection of an APS, and APS efforts associated with Abrams, Bradleys, and Strykers might not prove feasible. Should the Army opt to adopt a NDI APS, there could be several hundreds of vehicles in active and reserve forces receiving a NDI APS. Fielding a NDI APS capability could prove to be a highly expensive undertaking for the Army and Marines, particularly if the APS adopted for use has a high per-unit cost. Other associated costs that could affect the overall affordability of APS include associated training, installation, and maintenance costs—including the cost of repair parts and components, as well as who does the repairs and maintenance (contractors or servicemembers). The frequency of required APS software and hardware updates will also contribute to overall costs. According to the U.S. Army Tank-Automotive Research, Development, and Engineering Center (TARDEC), "Active Protection Systems have been in the design and development stages since the early 1950s, but none have successfully made the transition from development to integration on a [U.S.] platform." In the late 1990s, for example, the Defense Advanced Research Projects Agency (DARPA) led efforts to develop "a small, low-cost, fully self-contained active defense system for military vehicles and high value assets." The system, designated SLID for "Small, Low-cost, Interceptor Device," was intended to protect from missile and artillery threats. In 1998, the Army was involved in a program designated the Counter Active Protective Systems (CAPS), which was intended to develop a suite of capabilities—including electronic countermeasures; advanced, long stand-off warheads; decoys; and ballistic hardening countermeasures—that could be mounted on tanks. APS development figured prominently in the Army's Future Combat System (FCS) program, which began in 1999. According to the Government Accountability Office (GAO), in 2005 the lead systems integrator for the FCS program sought proposals from industry for a developer who could design and deliver an APS prototype that could be mounted on current combat vehicles by 2009 and tested on FCS vehicles in 2011. The FCS program was cancelled in 2009. It was decided, however, to continue work on both developing an APS for use on combat vehicles as well testing existing APS systems that could be mounted on combat vehicles to meet urgent operational needs until an APS could be developed and fielded. Although the United States has been exploring APS technologies since the 1950s, other nations have developed and successfully fielded APS to their forces. The first operational APS—the Drozd—was developed by the Soviet Union between 1977 and 1982. Designed to protect against RPGs and ATGMs, it used primitive millimeter-wave radar sensors mounted on each side of the tank's turret to detect incoming rounds. The Drozd covered only the forward 60 degrees of the turret, but the tank crew could rotate the turret to change the tank's protective profile. The Drozd was reported 80% successful against RPGs in Afghanistan. In the late 1990s, France mounted the Galix countermeasures system on its Leclerc main battle tanks. The turret-mounted Galix provided 360-degree coverage and could automatically fire 80 mm smoke rounds, anti-personnel rounds, or decoy rounds. Israel has employed APS operationally on selected vehicles since the late 1990s and, as previously discussed, has recently employed its Trophy APS extensively in combat in 2014, with plans underway to expand its use with Israeli forces. Currently, Russia's newest tank, the T-14 Armata, has separate hard kill and soft kill APSs. Although these systems reportedly have multiple sensors and launch tubes, the Armata's APS supposedly covers only against threats lateral to the turret, meaning that there is no protection against guided missiles that are air-launched or have a top-attack mode. In March 2006, a contract potentially worth $70 million was awarded to Raytheon to develop an APS for FCS-manned ground vehicles as well as the Army's fleet of combat vehicles. The APS program came under public criticism in September 2006 when a press report alleged that the Army rejected the Israeli-developed Trophy APS for use in the FCS program, despite the system being successfully tested on U.S. combat vehicles. The report further contended the Army was favoring the APS system in development by Raytheon over the Trophy system because of "money and politics" and that U.S. forces in the field were suffering casualties because of this decision. A GAO report, however, maintains there was no conflict of interest, concluding: No officials from the offering companies participated in the evaluation and all offers were evaluated based on the same criteria. Four proposals were evaluated and three were determined to be comparable in terms of cost and schedule. The winner—Raytheon—was chosen on technical merit, as being more likely to meet APS requirements although its design had less mature technology. Among the Army's concerns was that the Trophy system had a single-shot capability. The Army also believed the Raytheon system would result in less collateral damage than the Trophy system. The Army suggested that adopting the Trophy system could provide soldiers with a "false sense of security" and also suggested that the Raytheon-developed system was progressing favorably, noting it had intercepted live warheads during testing. Section 216 of the Fiscal Year 2008 National Defense Authorization Act ( P.L. 110-181 ) required the Secretary of Defense to conduct live fires tests of foreign and U.S. APSs suitable to protect wheeled tactical vehicles—especially light wheeled tactical vehicles—to determine their effectiveness and develop information that could be useful for defense acquisitions. The Army notes the major findings of these tests were as follows: none of the systems tested were mature enough for fielding; further development and testing and evaluation standards were needed; industry claims were not successfully demonstrated; systems were not fully deployable or tested under operationally realistic conditions; and there was no U.S. military concept of operations, or tactics, techniques, or procedures for APS use. In 2013, U.S., British, and Canadian evaluations of commercially available APS revealed that "APS was deemed too high risk" and "APS was not currently ready to field." Presently, Army officials suggest that the fielding challenges and risks associated with non-developmental APS systems have not changed since 2013 but instead battlefield threats and the operational environment have changed—thereby emphasizing the need for an APS-like capability. A survey of international industry suggests there are a number of systems either in use or under development that could qualify as "active protection" systems. The following systems have been featured in press articles and have been associated with DOD APS efforts. According to the Marines, it should be noted that these systems are hard kill systems and not illustrative of what industry has previously developed. According to defense officials, the systems listed here will require additional funding and investment to further test, validate vendor claims, and integrate into selected vehicles. Rafael, the developers of Trophy, considers it "the world's only fully operational combat-proven APS." In terms of system performance, Rafael contends that Trophy "Provides protection against all known chemical energy threats, including chemical energy tank rounds; Proven high kill probability; Offers 360 degree protection in azimuth, as well as extensive elevation coverage; Operates in challenging combat scenarios: short range, on the move, multiple/simultaneous shots from one or different directions; Proven built-in Hostile Fire Detection(HFD) capability; Safety certification process (Fuze Board) completed; Independent tests prove minimal risk to civilians, dismounted troops and nearby vehicles; Pre-defined safety zone for friendly troops on the ground can be defined; and Proven capability to fully operate with other radio frequency (RF) systems (radars, electronic warfare, radio, data, etc.) in a close proximity." Trophy was introduced operationally in 2009 and is an integral part of Israel's Merkava MK4 main battle tank . U.S. Army officials, however, have expressed reservations about some of Trophy's advertised capabilities, noting that Trophy is compliant only with Israeli Fuze and Safety boards and that RF operational and other performance capabilities claims are based solely on Israeli testing and experiences. From IMI's Iron Fist web page: Iron Fist provides a combined Soft-and Hard-Kill Active protection System, adaptable to various platforms from light vehicles to heavy AFVs. Iron Fist employs a sophisticated, multi-sensor early warning system, utilizing both infrared and radar sensors, providing the crew with enhanced situational awareness and early warning from potential threats. Upon a threat warning, the modular system employs the multi-layered defenses, comprising electro-optical jammers, Instantaneous smoke screens and, if necessary, an interceptor-based hard kill Active Protection System (APS). The Iron Fist effectively protects against the full spectrum of Anti-Tank (AT) threats including AT Rockets fired at short range, in open area or urban environment, AT Guided Missiles, High Explosive AT and Kinetic Energy rounds. The Iron Fist is currently in advanced development at IMI. The company has installed the system for demonstrations in light and heavy armored vehicles, where Iron Fist capability demonstrators underwent full end-to-end interception tests, against all threat types, operating on the move and in urban scenarios. In these installations, Iron Fist proved highly effective, with its wide angle protection, minimal weight penalty and modest integration requirements. Iron Fist APS was selected by the Israel Defense Forces (IDF) as the Active Protection System designed to protect the Namer heavy infantry fighting vehicle. IMI further notes that Iron Fist is an open architecture system and can be integrated with other sensors and countermeasures. U.S. Army officials point out IMI is currently under contract to develop MAPS-compliant technologies to satisfy U.S. safety requirements. Raytheon has spent a decade developing its Quick Kill APS since its 2006 contract award to develop APS for the Army's FCS program. After FCS was cancelled in 2009, the Army awarded Raytheon another APS contract for the Ground Combat Vehicle (GCV) in 2012, but GCV (and APS) was defunded by the Army in 2014. Quick Kill APS, as it has evolved over the years, employs a maneuverable countermeasure approach whereby when a threat is detected, rounds are ejected from the top of the vehicle, and then maneuver to defeat the threat. Raytheon contends this approach is both simpler and safer than other APS systems, places a lower power burden on the defended vehicle, and involves much less software than current APS models. Quick Kill is a "hard kill" system exclusively. Raytheon also notes that their Quick Kill 2.0 version will be compliant with the Army's Modular Active Protection System (MAPS) program, which is described in later sections. Virginia-based ARTIS produces the Iron Curtain APS. Iron Curtain is designed to protect against RPGs and other shoulder-launched threats and, theoretically, ATGMs by utilizing high-speed sensing and parallel processing to intercept and destroy threats inches from their intended targets. The Army notes that it could take from $5 million to $24 million to upgrade Iron Curtain so that it can address ATGM threats. ARTIS contends that its near-vehicle defeat feature significantly reduces collateral damage, as well as threats to dismounted military personnel and civilians. ARTIS claims that Iron Curtain is highly adaptable and can be mounted on a wide variety of ground vehicles, as well as rotary-winged aircraft, watercraft, and fixed sites such as buildings. Iron Curtain can be configured to protect fronts, sides, and the tops of vehicles and has the ability to classify targets and can address new and emerging threats, usually with just a software upgrade. ARTIS began its Iron Curtain work in 2004 as a Defense Advanced Research Projects Agency (DARPA) project, culminating with a successful live-fire test in August 2013 and again in 2014 as part of the Army's GCV program. Germany-based Rheinmetall Defence Systems (RDS) produces its Active Defence System (ADS), which employs both soft and hard kill defenses. It employs two independent sets of electro-optical sensors, which reportedly can detect, recognize, and neutralize threats in less than one millisecond and can defeat threats fired from less than 10 meters. Because of overlapping sensors and countermeasure redundancy, the ADS can respond to multiple incoming threats, and because threats are defeated in the immediate proximity of the protected vehicle, collateral damage is reduced. RDS claims that ADS can be modified to fit onto a range of vehicles, from tactical wheeled vehicles to tanks. U.S. Army officials note ADS is a fairly mature system and has undergone significant RPG and ATGM testing by U.S. NATO allies and has performed well. While ADS is considered a mature and capable system by the Army, it may require additional design work to address U.S. safety requirements. Both Army and Marine officials emphasized to CRS that their respective APS efforts are not in any sense either acquisition programs or Programs of Record by DOD definition. Although there is not a Joint Program Office (JPO) for APS, both services are working in concert on their respective APS programs, which they currently characterize as "vehicle capability assessments" and "technology demonstrations," respectively, as opposed to formal acquisition programs. The Army is currently involved in two separate parallel and distinct APS efforts—the Expedited, Non-Developmental Item (NDI) APS effort and the Modular Active Protection System (MAPS) effort. The Army's Expedited NDI APS Program is focused on fielding an existing "hard kill" APS capability in the near term for the Army's M-1 Abrams tanks, M-2/3 Bradley fighting vehicles, and the M-1126 Stryker combat vehicle. The requirement for the NDI APS is based on the previously discussed evolution of threats and the operational environment and the Army's anticipation of an operational need request from commanders in the field. The Army's current NDI APS plans call for installing and evaluating commercially available APS systems on the M-1 Abrams and on the M-2 Bradley and M-1126 Stryker in FY2017 and FY2018. Testing and evaluation during this period will be limited to basically how the APS performs on the selected platforms and will not involve integration in current vehicle battle management systems or extensive live-fire testing. The Army's desired outcome for these activities is the development of a baseline APS system installation kit for NDI APS hardware, as well as evaluation data that will be used to inform future Army decisions. In FY2018, the Army plans to decide how to proceed with the NDI APS effort, with options including beginning the process to acquire limited NDI APS for use or "shelving" it for future fielding should the situation warrant. A recent press report suggests the Army's NDI APS integration efforts plan to focus on integrating the Trophy system with the M-1 Abrams, the Iron Fist system with the M-2 Bradley, and the Iron Curtain system with the M-1126 Stryker. In parallel with the Expedited NDI APS effort, the Army is involved with the Modular Active Protection System (MAPS) effort. MAPS is—in and of itself—not an APS, but instead a modular framework and controller intended to enable the integration of commercial or government-provided APS subsystems (sensors and hard and soft kill countermeasures) for current and future combat vehicles. The Army describes MAPS as a sort of a "house hold electrical system" that can accommodate a variety of appliances and technologies—both current and future—without having to be rewired or upgraded every time a new component is installed. The Army contends MAPS should permit the rapid introduction of new technologies to respond to evolving threats while preventing "locking into" a single vendor and thereby promoting innovation in the commercial sector. The Army's current MAPS plans call for continued development of a MAPS safety-compliant controller through the end of FY2019, as well as developing MAPS-compliant soft kill and hard kill countermeasures. As part of this effort, the Army is also examining how current NDI APS can be integrated into MAPS, thereby taking advantage of subsystems already in existence as opposed to developing new APS "from scratch." If successful and funds are available, the Army envisions transitioning MAPS to a Program of Record at some point in the future. The Marines describe their APS efforts as a "technology demonstration" whereby the Marines would attempt to install an existing Trophy on the M-1A1 tank in coordination with the Army Expedited NDI effort. The Marines plan to conduct limited testing, leveraging whenever possible similar Army efforts, and do not plan to integrate the installed Trophy with any of the M-1A1's battle management and communications systems. The Marines would also examine the need to "harden" the current Trophy system so that it would meet survivability requirements. Marine officials emphasized that Marine-unique requirements, based on their amphibious assault mission, could have a significant impact on their decision to adopt the Trophy or some other APS. Based on the Marines' M-1A1 concept of employment and its anticipated operational environment, it is likely that the Trophy APS will need to be "hardened" to protect it from small arms and artillery fire. In addition, it is likely additional armor protection will be needed to protect exposed tank crewmen from the Trophy's blast effects. These hardening efforts will add additional weight, bulk, and cost to the Marines' M-1A1s. Adding an APS capability to any combat vehicle—Army or Marine—will add weight to that vehicle and could affect performance as well as maintainability. In the Marines' case, additional weight could affect the vehicle's ability to be accommodated aboard naval and commercial shipping. The Marines estimate adding Trophy to their M-1A1s could result in an overall vehicle weight increase of 2.5 to 3 tons, which could have a significant impact on its ability to be transported by ship. In addition to shipping, the added weight of an APS could also affect the M-1A1's ability to be transported to shore by ship-to-shore "connectors" such as the Marines' Landing Craft, Air Cushioned (LCAC). It is unknown what impact—if any—this would have on operations. Part of the Marine Corps APS effort is intended to examine these potential issues. Adding the Trophy or some other APS to M-1A1s could also affect the tank's ability to "fit" inside of commercial or naval vessels. The Marines have noted that embarked vehicles are often tightly packed onboard ships and the addition of APS components could affect the ship's overall load plan. One solution, should this prove to be the case, would be to dismount the APS before loading the M-1A1s aboard ship. This could have significant maintenance ramifications as well as operational considerations if the operating environment requires the APS to be reinstalled before the M-1A1 comes ashore. Because M-1A1s would be embarked on ships for potentially lengthy periods, it is also necessary that APS components are protected from the corrosive effects of salt water. Protection from corrosion, as well as related maintenance requirements, could also affect the Marines' decision on adopting APS for use. The House Armed Services Committee and the Senate Committee on the Armed Services, as well as the House and Senate Appropriations Committees, included the following APS-related provisions in their respective FY2017 authorization and appropriations acts. The committee is encouraged by the Army's current strategy for vehicle active protection system (APS) tests and integration. The committee believes this strategy will allow the Army to better address the threats posed by the growing proliferation of anti-tank guided missiles and rocket-propelled grenades. The committee is aware of the importance of vehicle APS capabilities for forward-deployed units, specifically those units in the U.S. European Command area of operations. The committee supports this effort and encourages the Army to expedite deployment and fielding of vehicle APS technology on ground combat vehicles that will form an essential element of the European Reassurance Initiative. The committee notes that the Army plans to conduct demonstration testing of mature vehicle APS capabilities on the Abrams main battle tank, the Bradley fighting vehicle, and Stryker combat vehicle. The committee encourages the Army to analyze options for incorporating vehicle APS solutions on additional vehicles, including the Joint Light Tactical Vehicle, and to identify the APS solutions that are best suited for deployment on lighter-weight combat and tactical vehicles. The committee directs the Secretary of the Army to provide a briefing to the Committee on Armed Services of the House of Representatives by March 1, 2017, on the status of plans to deploy and integrate mature vehicle APS technology on deployed ground combat vehicles. The budget request included $480.2 million in line item GA0700 of Procurement of Wheeled and Tracked Combat Vehicles, Army (W&TCV) for M1 Abrams Tank (Modification). The committee recommends an increase of $82.0 million in W&TCV for the procurement and integration of active protection systems (APS). Additional funding for APS was included in the Chief of Staff of the Army's unfunded priority list. The budget request included $316.8 million in PE 0203735A for combat vehicle improvement programs. The committee recommends an increase of $12.0 million in PE 0203735A for the integration of active protection systems (APS) on Army armored fighting vehicles. Additional funding for APS was included on the Chief of Staff of the Army's unfunded priority list. The committee encourages the Army, in cooperation with the United States Marine Corps, to rapidly acquire effective active protection systems (APS) to protect ground combat forces and weapon systems from projectiles including rocket propelled grenades and anti-tank, wire guided missiles. Key armored fighting vehicles such as M1 main battle tanks, Bradley fighting vehicles, Stryker vehicles, and armored assault vehicles should be given first priority for APS due to their mission profiles. The committee understands that APS technology is mature and fielded by some of our allies. The committee encourages the Army to acquire non-developmental, mature designs for integration and testing with our vehicles. The committee believes that such an effort will increase both force protection and combat power of our close combat maneuver forces. Active P rotection S ystems The committee encourages the Army, in cooperation with the United States Marine Corps, to rapidly acquire effective active protection systems (APS) to protect ground combat forces and weapon systems from projectiles including rocket propelled grenades and anti-tank, wire guided missiles. Key armored fighting vehicles such as M1 main battle tanks, Bradley fighting vehicles, Stryker vehicles, and armored assault vehicles should be given first priority for APS due to their mission profiles. The committee understands that APS technology is mature and fielded by some of our allies. The committee encourages the Army to acquire non-developmental, mature designs for integration and testing with our vehicles. The committee believes that such an effort will increase both force protection and combat power of our close combat maneuver forces. SEC. 876. NONTRADITIONAL AND SMALL DISRUPTIVE INNOVATION PROTOTYPING PROGRAM. (a) IN GENERAL.—The Secretary of Defense shall conduct a pilot program for nontraditional contractors and small business concerns to design, develop, and demonstrate innovative prototype military platforms of significant scope for the purpose of demonstrating new capabilities that could provide alternatives to existing acquisition programs and assets. The Secretary shall establish the pilot program within the Departments of the Army, Navy, and Air Force and within the United States Special Operations Command. (b) FUNDING.—There is authorized to be made available $250,000,000 out of the Rapid Prototype Fund established under section 804(d) of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–5 92; 10 U.S.C. 2302 note) to carry out the pilot program. (c) PLAN.— (1) IN GENERAL.—The Secretary of Defense shall submit to the congressional defense committees, concurrent with the budget for the Department of Defense for fiscal year 2018, as submitted to Congress pursuant to section 1105 of title 31, United States Code, a plan to fund and execute the pilot program in future years. (2) ELEMENTS.—The plan submitted under paragraph (1) shall consider maximizing use of— (A) Broad Agency Announcements or other merit-based selection procedures; (B) The Department of Defense Acquisition Challenge Program authorized under section 2359b of title 10, United States Code; (C) The Foreign Comparative Test Program; (D) Projects carried out under the Rapid Innovation Program and Phase III Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) projects; and (E) Flexible acquisition authorities under procedures developed under sections 804 and 805 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92). (d) PROGRAMS TO BE INCLUDED.—The Secretary of 8 Defense shall allocate up to $50,000,000 on a fixed price contractual basis for fiscal year 2017 or pursuant to the plan submitted under subsection (c) for the demonstration pursuant to the pilot program of the following capabilities: (1) Swarming of multiple unmanned air vehicles. (2) Unmanned, modular fixed-wing aircraft that can be rapidly adapted to multiple missions and serve as a fifth generation weapons augmentation platform. (3) Vertical take-off and landing tiltrotor aircraft. (4) Integration of a directed energy weapon on an air, sea, or ground platform. (5) Swarming of multiple unmanned underwater vehicles. (6) Commercial small synthetic aperture radar (SAR) satellites with on-board machine learning for automated, real-time feature extraction and predictive analytics. (7) Active protection system to defend against rocket-propelled grenades and anti-tank missiles. (8) Other systems as designated by the Secretary. (e) DEFINITIONS.—In this section: (1) NONTRADITIONAL CONTRACTOR.—The term ''nontraditional contractor'' has the meaning given the term in section 2302(9) of title 10, United States Code. (2) SMALL BUSINESS CONCERN.—The term ''small business concern'' has the meaning given the term in section 3 of the Small Business Act (15 U.S.C. 632). (f) SUNSET.—The authority under this section expires at the close of September 30, 2026. The Committee notes that the Army's combat vehicle modernization strategy has identified requirements for greater lethality for existing combat vehicles, in developing new platforms, and in maintaining technical superiority. The Army's modification of combat vehicles over the years has resulted in additional protection at the expense of mobility, and lagging increases in lethality. The Committee urges the Secretary of the Army to develop new armament systems for both current and future combat vehicles that will provide lethality overmatch as well as the ability to defeat multiple target sets, active protection systems, and lethal and non-lethal capability within the same weapon system. The Committee is concerned with the growing threat to the warfighter from inexpensive shoulder-launched munitions such as rocket-propelled grenades and commends the Secretary of the Army for initiating the acquisition and testing of active protection systems that provide a higher level of survivability against these threats for Army ground vehicles. The Committee recommendation includes an additional $10,000,000 in overseas contingency operations/global war on terrorism funding to advance the development and testing of active protection systems. In addition, the Committee notes that the Marine Corps is currently leveraging Army investments on the Abrams tanks, and directs the Secretary of the Navy to consider conducting similar demonstrations on other Marine Corps ground vehicles. The Senate report contained no specific language addressing Army or Marine Corps APS issues. On August 12, 2016, DOD released a response from the four congressional defense committees to a budget reprogramming request submitted in April 2016 that included the following Army APS reprograming approvals: "Added $16.8 million is to support an expedited Non-Developmental Item (NDI) Active Protection System (APS) effort on the Stryker vehicle to assess the 'Iron Curtain' APS system's reliability and the ability to mitigate the threat of Rocket Propelled Grenades (RPG's). The 'Iron Curtain' is a downward firing APS designed to defeat only RPGs. The funding supports procurement of two prototype hardware 'Iron Curtain' APS solutions for the installation and characterization that is required to assess its suitability and for integration onto the Stryker vehicle platform. Iron Curtain is a downward firing APS designed to defeat only RPGs. This is a new start. The estimated total cost of this effort is $31.2 million (FY2016, $16.8 million and FY2017, $14.4 million). The FY2017 funding is included in the FY2017 President's Budget request. This is a base budget requirement." "Added $11.0 million is to support an expedited Non-Developmental Item (NDI) Active Protection System (APS) effort on the Bradley vehicle to assess the 'Iron Fist' APS system's reliability to mitigate the threat from Anti-Tank Guided Missiles (ATGMs) and Rocket Propelled Grenades (RPGs). The Iron Fist countermeasure uses a gimbaled launcher with a hard kill interceptor. Funding supports the procurement of 4 prototypes APS along with A-kit installation hardware and B-kit system hardware. This effort is required to assess its suitability for potential future integration onto the Bradley platform. This is a new start. The estimated total cost of this effort is $26.3 million (FY2016, $11.0 million; FY2017, $15.3 million). The FY2017 funding is included in the FY2017 President's Budget request. This is a base budget requirement." As previously noted, Army officials in 2016 suggested the fielding challenges and risks associated with non-developmental APS systems have not changed since 2013 but, instead, battlefield threats and the operational environment have changed, thereby perhaps "driving" the need for an APS-like capability. In 2013, the Army noted APS was deemed too high-risk and not currently ready to field. This statement seemingly suggests not much has changed from 2013 to present in terms of NDI APS improvements and raises the possibility that less-than-effective or safe NDI APSs could be adopted for operational use based on the perceived urgency of battlefield threats. However, it is also possible the services are overemphasizing their NDI APS concerns in hopes a "less-risky/more effective" APS can be developed in the future. In 2010, then Secretary of Defense Robert Gates admonished the services for "gold plating" systems, suggesting that a "70 to 80 percent solution in five years is better than a perfect outcome that could take decades, or worse, never materialize." Given the Army's reservations about NDI APS and past DOD practices that some analysts have noted of seeking "perfect" technological solutions, Congress might examine the Army's and Marines' operational and safety requirements for NDI APS in relation to current APS offerings. Such an examination could help to determine if the Army and Marines are potentially "rushing" to the field a less-than-capable, risky APS based on pressure of a perceived threat or are, instead, waiting for a "perfect" solution in the future when the "70 to 80 percent" solution might be at hand. In this regard, it could be useful to characterize what a "70 to 80 percent" solution means in terms of vehicle and soldier survivability and what tradeoffs would be involved in adopting a NDI APS versus pursuing a longer-term effort. The Army's current APS efforts—NDI APS and MAPS—are being conducted in a resource-constrained environment where two somewhat parallel efforts might not be financially viable over the long term. Some have questioned if, under these budgetary constraints, the Army can afford both NDI APS and MAPS. Dr. Daniel Gouré of the Lexington Institute suggests: While the Army continues to work within the science and technology community on MAPS, ... if the Army likes a system that works through the interim effort [NDI APS] it might want to "just call it a day and buy a bunch and then use the extra research and development money to go figure out the answer to another big problem it's got." As previously noted, the Army contends MAPS will permit the rapid introduction of new technologies to respond to evolving threats while preventing "locking into" a single vendor and thereby promoting innovation in the commercial sector. The Army noted a similar MAPS-like approach has been adopted for modernizing its AH-64 attack helicopters and has been highly effective. While these assertions regarding MAPS appear to be reasonable, Congress might examine them in greater detail with Army officials to determine their analytical basis. Potential areas for further examination could include the following: Given the Army's current and total planned investment in MAPS, how much does the Army project in total savings over the option of simply integrating an APS directly into a combat vehicle's existing protective and battle management systems? What are the safety-associated costs associated with installing NDI APS components directly on a vehicle versus installing these components on an existing MAPS architecture? What are the short- and long-term impacts on vehicle survivability if NDI APS is seen as a "good enough" solution at the expense of MAPS development? How will MAPS permit the rapid introduction of new technologies to respond to evolving threats any more effectively than APS vendors upgrading their systems, which—in some cases—involves little more than software updates? Given current and projected budgetary limitations and the potential of NDI APS costs increasing if the Army decides to outfit an appreciable number of its combat vehicles with these systems in the near future, how might such a cost increase affect longer-term MAPS efforts? There are also MAPS-related technological and engineering considerations that Congress might further examine in terms of effectiveness and cost. There could be concerns from a basic systems engineering perspective that requiring NDI APS to operate through the MAPS interfaces, architecture, and controller could degrade the responsiveness and effectiveness of vendor-developed NDI APS sensors and countermeasures. In a similar manner, some in industry are worried about the possible technical "mismatch" between commercially developed APS and MAPS requirements set by DOD and the Army. As the Center for Strategic and International Studies (CSIS) notes: The growing commercial role in military-relevant technology and the speed at which that technology is advancing challenges DOD's capacity to keep up with the flood of technologies both for its own adoption, and to counter the technologies adopted by adversaries. This statement illustrates commercial sector concerns that DOD and the Army might not be technologically at the same level as industry and current APS systems might need to be modified in order to be integrated into MAPS, potentially resulting in a less-than-optimal APS capability. Finally, some industry representatives have expressed concerns that by adopting MAPS, per unit cost of their APS sensors and countermeasures might actually increase based on the addition of MAPS integration requirements. Both the Army and Marines emphasized that their respective APS efforts were in the very early phases of technology demonstration and, as such, there is not a great deal of specific detailed information available. While this is understandable at this phase, additional details will be required over time as these efforts mature in order to inform congressional oversight. Such details include but are not limited to the following: What types of Army and Marine vehicles—other than M-1 Abrams from both services and Army M-2 Bradleys and M-1126 Strykers—are being considered for NDI APS and/or MAPS installation? For example, what are the Marines doing to assess APS suitability for their assault amphibian mission profiles and the unique operational and environmental challenges of ship-to-objective transport and maneuver? How many vehicles by class (armored fighting vehicles, heavy, medium, and light tactical wheeled vehicles, for example) would receive APS or would only selected vehicles in a unit receive APS in order to provide collective coverage of non-APS capable vehicles? Will both Active and Reserve component vehicles receive NDI APS and/or MAPS? Will vehicles in the service's pre-positioned stocks—both afloat and ashore—be outfitted with NDI APS and/or MAPS and what is the priority given to these "war stocks"? What are the Army's and Marines' fielding priorities and how long will it take to field APS and/or MAPS to designated vehicles? What are the total projected program costs for outfitting potentially tens of thousands of vehicles with APS-related capabilities? As previously noted, "threats are not standing still." In addition to APS's advertised ability to defeat RPGs, ATGMs, and certain tank main gun rounds, there are other types of potential threats to U.S. combat vehicles that merit consideration. In this regard, Congress might wish to examine with the services and industry the adaptability of APS and MAPS in detecting and defeating threats such as precision artillery and mortar rounds; main tank gun penetrator, or "sabot," rounds; aerial ATGMs from attack helicopters and unmanned aerial systems (UAS); hypersonic missiles; and advanced electronic defeat technologies. A greater understanding of APS and MAPS capabilities, as well as their ability to adapt to a variety of threats—both current and emerging—could prove valuable as Congress evaluates the viability and efficacy of Army and Marine APS efforts.
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Active Protection Systems (APSs) are subsystems integrated into or installed on a combat vehicle to automatically acquire, track, and respond with hard or soft kill capabilities to a variety of threats, including rocket-propelled grenades (RPGs) and anti-tank guided missiles (ATGMs). APS technologies are not new, and a number of nations have already employed APS on the battlefield. The U.S. military is now beginning to include APS as part of its formal combat vehicle modernization plans and, if the initial deployment of APS proves successful, could expand the use of APS to potentially thousands of tactical military vehicles—a complex and potentially costly undertaking. The proliferation of advanced RPGs and ATGMs is of concern to some defense officials and policymakers, including Congress. These weapons—RPGs in particular—have been particularly popular with insurgents because they are readily available, relatively inexpensive, and require little training. Israel's experiences with RPGs and ATGMs in the 2006 Israel-Lebanon War and the 2014 Gaza Conflict and growing concerns with Russian military capabilities and activities in Eastern Europe have possibly served as catalysts for intensifying U.S. APS efforts. Technical and operational challenges to APS include being able to work under extremely demanding circumstances and compressed timelines, robustness against countermeasures, minimizing the threat to friendly forces and civilians, being compatible with the space and power allocated to it on the vehicle, and affordability. A number of nations have operationally deployed APS on combat vehicles—Russia and Israel most notably—and some experts characterize U.S. efforts as somewhat lagging. U.S. military officials contend there are still a number of developmental and safety challenges that must be overcome before current APS systems are suitable for battlefield deployment. According to the U.S. Army Tank-Automotive Research, Development, and Engineering Center (TARDEC), "Active Protection Systems have been in the design and development stages since the early 1950s, but none have successfully made the transition from development to integration on a platform." The Army's and Marines' current APS efforts are described as technology demonstrations and have not progressed to formal Programs of Record. The Army and Marines are coordinating their respective efforts, although no joint program currently exists. The Army is currently involved in two separate parallel and distinct APS efforts—the Expedited, Non-Developmental Item (NDI) APS effort and the Modular Active Protection System (MAPS) effort. The Marines describe their APS efforts as a "technology demonstration" whereby the Marines would attempt to install a Trophy APS on the M-1A1 tank in coordination with the Army's Expedited NDI effort. The Marines have a number of unique APS requirements—including the ability to be transported by ship and withstand salt water corrosion—which will also factor into their eventual APS plans. Potential issues for Congress include whether current NDI APSs are effective and safe enough for operational use, the benefits of MAPS relative to non-developmental efforts, MAPS' impacts on NDI APS performance and costs, the Army's and Marines' detailed plans for APS fielding, and APS adaptability to future threats.
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Congress relies on two formal means of resolving differences on House and Senate versions of legislation: conference committees and amendments between the houses. Conference committees can be created by the House and Senate after each chamber has disagreed to the position of the other. The House and Senate presiding officers then each appoint conferees, largely drawn from the committees with jurisdiction over the bill, to represent the chamber in conference committee negotiations. Conference committees develop and present compromise legislation, in the form of a conference report, for approval in each chamber. Historically, conference committees have been used to resolve differences on major bills, where policy issues are complex and differences between the chambers are likely to be greater. The process of exchanging amendments between the houses is more often used when differences between the chambers are comparatively small, although sometimes the chambers use it to resolve their differences on major legislation as well. In recent Congresses, the use of conference committees to resolve differences has decreased. Regardless of the formal parliamentary mechanism chosen, in the contemporary Congress the chambers generally arrive at a resolution of the substantive differences between House and Senate versions of a measure through informal, bicameral discussions that might resemble conference committee negotiations even though neither house has officially appointed conferees to consult over a bill. Once the interested legislators have negotiated an acceptable compromise through these discussions, the compromise can then be embodied in an amendment between the houses or, if conferees have been formally appointed, in a conference report. The difference between amendments between the houses and a conference committee is not necessarily in the way a policy compromise is reached but in the formal parliamentary steps taken after the principal negotiators have agreed to a compromise. The purpose of this report is to explain the procedural options for resolving differences through amendments between the houses, and to discuss the procedural effects of resolving differences through this process as an alternative to a conference committee. Throughout the report, the phrase "amendment exchange" is sometimes used as an alternative to the longer but formal name of "amendments between the houses." The report is arranged to identify legislative options at each stage of the amendment exchange process, first for the Senate and then for the House. For each chamber, key procedural differences between amendments between the houses and conference committee are also discussed and then listed in Table 1 (Senate) and Table 2 (House). The answers to frequently asked questions are highlighted throughout the report in separate, shaded text boxes. The final section of the report describes a particularly complicated case of amendment exchange from the 110 th Congress to illustrate a variety of actions the chambers might take. The House and Senate must agree to the same legislative language in the same legislative vehicle before the bill can be presented to the President. The same legislative vehicle means the same numbered bill or resolution; lawmaking measures that originate in the Senate carry the designation S. (bill) or S.J.Res. (joint resolution); measures that originate in the House are designated H.R. (bill) or H.J.Res. (joint resolution). Only one legislative vehicle, with either a Senate or House designation, is sent to the President. After one chamber passes a bill, it sends it to the other chamber. The receiving chamber then typically refers the measure to committee in the same way that measures introduced in that chamber are referred. There is no requirement that one chamber act on a measure approved by the other chamber, and in each Congress many measures are approved only by the originating chamber. In order for a measure to become law, however, the House and Senate must pass the same vehicle with the same text. If one chamber passes a bill and the other chamber agrees to it without amendment, then the legislative process is complete, and the bill is sent to the President. This is extremely common; more than three-quarters of all legislation that became law in recent Congresses passed the second-acting chamber without amendment. Many of these measures that pass this way are salient to relatively few Members of Congress, such as bills naming post offices or other federal buildings. When major legislation is passed without amendment by the second-acting chamber, it usually reflects extensive negotiations between the chambers prior to the passage of the bill in either chamber. In other words, interested Members from the relevant committees and their staff consult beforehand to ensure that the bill that passes the first-acting chamber will be acceptable, without change, to the second-acting chamber. Most major legislation is not passed by the second-acting chamber without amendment, however. In addition, on major policy topics, it is common for both the House and Senate to initiate legislation, such that there is often both a Senate bill (S.___) and a House bill (H.R.___) introduced on a topic. The requirement that the House and Senate act on the same bill with the identical text means that in this situation the House and Senate must (1) select a single measure—either the House or Senate bill—on which they will both act; and (2) agree on the same legislative language. The selection of the measure, or identifying which bill Congress will send to the President, does not restrict either chamber from acting on its preferred legislative language. More specifically, whether the chambers select an "H.R./H.J. Res." or an "S./S.J. Res." as the vehicle on which to resolve differences will not necessarily affect what policy proposals a chamber considers on the floor. Both the House and Senate can amend the legislation sent by the other chamber, and they can amend it in its entirety. The selection of a measure that both chambers will act on is usually straightforward. The bill that passes a chamber first and is sent to the other chamber is normally the bill that is selected as the vehicle and is eventually presented to the President. The Constitution requires, however, that all revenue provisions originate in the House. The House interprets this to include all appropriations measures as well, and the Senate generally defers to the House on this issue because it does not affect the Senate's ability to propose changes to the legislation. For this reason, measures raising revenues or providing for appropriations that are sent to the President will carry a House bill number (H.R. or H.J. Res.). As mentioned above, most of the time, neither chamber finds it advantageous to wait for the other to act before beginning its own work on a major policy initiative. Typically, the committees of jurisdiction from both chambers will consider legislation regardless of what action is taking place on similar topics in the other chamber. At some point, however, the chambers must select one bill to be the vehicle that is sent to the President. The selection of the vehicle is either done at the start of floor consideration or at the very end. It can only be done at the beginning if one of the chambers has already passed a bill on the subject, in which case the other chamber might choose to take up that bill on the floor instead of legislation crafted by its own committee. Usually, in this situation, a full-text substitute amendment, representing the work of the committee of jurisdiction, is presented at the outset of consideration and is effectively treated as the text for further amendment by the chamber. Alternatively, a chamber can take up a bill reported from its own committee. At the conclusion of floor consideration of its own bill, the chamber can take up the companion bill passed by the other chamber, strike all of the text after the enacting clause, and insert the text of the bill it originated. Either way, the chambers have fulfilled the first requirement: selecting the same bill on which to act. The second step, agreeing to the same legislative language, is generally more challenging. If one chamber considers a bill from the other chamber and amends it before passing it, the House and Senate have acted on the same measure, but they have not agreed to the same text. The chambers can resolve their differences over the text either (1) through an amendment exchange, when the chambers shuttle the bill and amendments back and forth between them proposing alternatives in hopes that both houses will eventually agree on the same language; or (2) through a conference committee, a panel of Members from each chamber that meets to resolve the differences between the bill and the amendment(s) proposed by the second-acting chamber. Occasionally, Congress uses both methods to resolve differences on a measure if it first attempts to resolve differences through amendment exchange and then resorts to conference. Although this report discusses some conference committee procedures for comparison purposes, its main subject is the formal parliamentary steps and options associated with an exchange of amendments between the chambers. In both chambers, the procedures applicable to consideration of amendments from the other body change when the chamber reaches what is known as "the stage of disagreement." A chamber enters the stage of disagreement by formally agreeing to a motion or a unanimous consent request that it disagrees to the position of the other chamber, or that it insists on its own position. When both chambers reach the stage of disagreement, they usually form a conference committee. This report almost exclusively addresses the procedures available prior to the stage of disagreement . When the House amends a bill that has already passed the Senate, it sends the bill and its amendment(s) back to the Senate accompanied by a written document that describes what is being transmitted. This document is a message to the Senate, and sometimes the Senate uses the term message to refer to the amendment(s) received from the House. The Senate will generally hold House amendments at the desk for action by the full Senate, rather than refer them to committee. Nothing in Senate rules requires that the Senate consider the House amendments it receives. However, if the Senate wishes to act further on that particular bill or resolution, it must take some action on the House amendments. By long-standing custom, the majority leader usually makes motions and requests affecting the agenda of the Senate, including those concerning House amendments. Under Senate Rule VII, paragraph 3, House amendments are "privileged for consideration" in the Senate, which means that a Senator can request that the Presiding Officer lay the amendments before the Senate. Most of the time, the majority leader requests that the Presiding Officer lay the amendment(s) before the Senate in the following way: Senator: Mr. President, I ask the Chair to lay before the Senate a message from the House on the bill S.____, with the amendment(s) of the House thereto. Presiding Officer: The Chair lays before the Senate the amendment(s) of the House of Representatives to S. ____. After the House message is laid before the Senate, typically the majority leader immediately makes a motion to dispose of the amendment(s). Sometimes, the House sends what is effectively a new legislative proposal to the Senate in the form of a House amendment, instead of as a House bill. House amendments, unlike House bills, can be called up in the Senate without debate. To be clear, it is only the question of whether to consider the House amendment that is not subject to debate; the question of how to dispose of the House amendment is debatable under the regular rules of the Senate. The ability to take up a matter without debate can potentially make a difference in the Senate, because the Senate then needs to end debate only on the main question (or questions). To bring debate on a question to a close, the Senate may need to invoke cloture, and the process for doing so can be time-consuming. Most cloture motions are not voted on until two days of session after being filed. If cloture is successfully invoked by a vote of three-fifths of the Senate duly chosen and sworn (60 Senators if there is no more than one vacancy), then consideration of the question can continue for up to an additional 30 hours. If there is opposition to calling up a bill, the Senate might need to go through this cloture process twice: once on the motion to proceed to the bill, and a second time on the bill itself. If the same legislative proposal is called up as a House amendment, then those in favor of moving forward on the matter can do so more quickly because cloture would need to be invoked, if at all, only on the question of disposing of the House amendment. Once the House amendment(s) are before the Senate, several motions are in order. The basic choices before the Senate are to reject the House amendment and return it to the House, propose a change to the House amendment(s), or agree to the House amendment(s). More formally, the four central motions to dispose of House amendments are as follows: 1. Motion to lay the House amendment(s) on the table 2. Motion to concur in the House amendment(s) with (an) amendment(s) 3. Motion to concur in the House amendment(s) 4. Motion to disagree to the House amendment(s) If the chambers have reached the stage of disagreement—meaning that the House or Senate has already disagreed to an amendment of the other chamber or insisted on its own amendment—then a fifth motion, to recede, might be considered. The motion to recede, however, is rarely offered in the modern Senate. It is used essentially to reverse the position a chamber took previously on an amendment, and to bring the chambers closer to agreement. The Senate could, for example: recede from its disagreement to a House amendment and concur with the House amendment (and, in this way, reverse its previous stance against the House amendment and instead agree to it); recede from its disagreement to a House amendment and concur with the House amendment with an amendment (and, in this way, continue the amendment exchange by proposing a new alternative); or recede from its own amendment. After receding from its own amendment to a House amendment, the Senate has the option of concurring in the House amendment with a different amendment(s) in order to continue the amendment exchange. After the stage of disagreement, the Senate might also choose to lay a message from the House on the table. A motion to insist on a Senate amendment is also available after the stage of disagreement. The procedures available for disposing of House amendments depend in certain respects on whether the House has proposed a single full substitute for the Senate proposal or a series of separate amendments to individual provisions. The House, like the Senate, often proposes an amendment to a bill from the other chamber that strikes all after the enacting clause (the first line of every bill that states "be it hereby enacted by the House and Senate") and inserts a new text. Any amendment that proposes a full-text alternative for a bill is formally called an "amendment in the nature of a substitute" or a "complete substitute." If the first amendment between the houses is a full-text substitute, further amendments between the chambers also tend to propose replacing the last-proposed text in its entirety, although this is not required. If the Senate receives one amendment from the House, then the Senate can agree to one motion to dispose of it. In some instances, the House amendment to a Senate bill is the result of extended negotiations between the chambers. In this situation, the majority leader is likely to propose that the Senate agree to the House amendment without changes, and he will do this by making a motion to concur . He is proposing that the Senate agree to the House text because that text is the negotiated compromise. If the House amendment is not the result of bicameral negotiations, and instead is best viewed as the House version of the legislation, then the majority leader might make a motion to disagree . In the contemporary Congress, when the Senate formally disagrees to a House complete substitute amendment it almost always immediately requests that a conference committee be created to negotiate the differences. If a conference is not desired, then the majority leader is more likely to propose simply that the House amendment be laid on the table . This motion is not debatable; once made, the Senate votes on it immediately. Unlike the other options, including arranging for a conference, it will not be necessary to secure the support of three-fifths of the Senate at any point to take this action. Tabling a House amendment has the effect of returning the papers to the House, just as agreeing to the motion to disagree would. In fact, when the Senate tables a House amendment, what is transmitted to the House is a message that the Senate has disagreed to the House amendment. The leader might choose to move to table the House amendment, instead of moving that the Senate disagree to the House amendment, because the motion to table would be voted on immediately, while the motion to disagree could require a cloture process. Finally, the majority leader might make a motion that the Senate concur in the House amendment with a further amendment . That further amendment might be the result of bicameral negotiations. In other words, sometimes when the Senate agrees to a substitute amendment to a House amendment, the Senate substitute amendment is the bicameral compromise. (The Senate could also agree to a motion to concur in the House amendment with several distinct Senate amendments to the text, instead of a full-text substitute amendment. The Senate has not chosen this option in recent Congresses.) All amendments in the Senate, including an amendment to a House amendment, are required under Senate rules to be read out loud by the clerk at the time they are offered. The reading is usually waived by unanimous consent and under certain circumstances may be waived by motion. The option of agreeing to a motion to concur with an amendment is not always available in the Senate, because there is a limit to the number of times the chambers can propose amendments as they shuttle the bill back and forth. Under House and Senate precedents, the amendment of the chamber that acts second on the bill is the text that is subject to amendment in two degrees. Thus, if the Senate passes a bill, and the House amends it, there can be one further Senate amendment and then one further House amendment to that. Another way to think of this is that there can be a total of four versions: (1) the original bill, (2) the first amendment of the other chamber, (3) the amendment of the chamber that originated the bill, and (4) the second amendment of the other chamber. This limitation on the number of rounds of amendment exchange can be waived in the Senate by unanimous consent, and it does not apply if the House has already extended the number of rounds past the four allowed under chamber precedents. Thus, if the Senate receives a House amendment in the second degree (for example, a House amendment to a Senate amendment to a House amendment to a Senate-passed bill), then a motion to concur in the House amendment with an amendment would be in order only by unanimous consent. But if the Senate receives a House amendment that is already in the third degree (for example, House amendment to a Senate amendment to a House amendment to a Senate amendment to a House-passed bill) or greater, then unanimous consent is not necessary in the Senate to propose an amendment to the latest House amendment. When a motion to concur with an amendment is made, it is in order for a Senator to offer an amendment to the motion to concur. The amendment is considered to be an amendment in the second degree to the amendment proposed in the original motion to concur. This second-degree amendment is not a "round" in the amendment exchange; it is a Senate floor amendment proposed to a Senate amendment to a House amendment. The Senate might agree to several floor amendments to the Senate amendment to the House amendment. When floor consideration is complete, however, the Senate will vote on the motion to concur with an amendment as it may have been amended. If the Senate agrees to the motion, it then sends to the House a single Senate amendment that incorporates all the changes to it that were agreed to by the Senate during floor consideration of the motion. From time to time, the House will send multiple amendments to the Senate. In this situation, the Senate must consider House amendments in the order that they affect the Senate text. The Senate must act on each House amendment, and for this purpose the same four motions identified above are in order. The Senate, however, does not necessarily need to agree to a separate motion to dispose of each amendment. Instead, the Senate can agree to one motion to dispose of several House amendments—as long as the Senate is agreeing to dispose of them all in the same way. For example, if the House were to send two amendments to the Senate, then the majority leader could make a single, debatable motion to concur in both of the House amendments. If he wished to propose that the Senate concur in one amendment and disagree to the other, however, then it would be necessary to make two separate, debatable motions. Under Senate Rule XXII, cloture can only be filed on a pending question. As a result, it might be necessary for the majority leader to file cloture multiple times (that is, separate efforts in relation to each of several House amendments). In a situation where the Senate is considering each House amendment separately, the Senate will not cast a final vote on the package of House amendments at the end of consideration. This is true even though, in some cases, Members, staff, and the public might conceive of the multiple House amendments as a single policy proposal. The Senate at this stage of the legislative process has already passed the bill. It does not vote again on the bill but only on any remaining matters in disagreement, which in this situation are the House amendments. The limitation on the number of rounds of amendment still applies in a situation in which the Senate must dispose of multiple House amendments. One additional restriction might arise when the Senate is considering a House amendment that is not a full-text substitute. The Senate cannot change text that both chambers have agreed to. For example, if the Senate passed a bill with three titles, and the House messaged to the Senate two amendments—one that replaced Title 1 and one that replaced Title 3—then the two chambers have technically both agreed to Title 2. The House, after all, concurred in the Senate bill with amendments. The Senate could, in this situation, consider a further amendment to the House amendment to Title 1 or to Title 3, but it could not entertain motions concerning Title 2. The prohibition against amending text both chambers have agreed to can complicate changing long titles of bills in the Senate; if the House and Senate both passed a bill and agreed to the same long title, it would take unanimous consent in the Senate to agree to a House amendment to the title. Very often, particularly in situations when the procedures have the potential to become complicated, the Senate considers House amendments under the terms of a unanimous consent agreement. Under these agreements, all Senators agree to set aside the regular rules in favor of an arrangement that can specify exactly what motions and amendments will be offered and by whom, as well as when votes are likely to occur. In the absence of such a unanimous consent agreement, it is possible for several motions to be pending at one time to dispose of a single House amendment. This situation becomes possible through the operation of precedence . A motion can be understood to have precedence over another if (1) it may be offered while the other is pending and (2) it is disposed of first. The available motions, in order of precedence, are to concur with an amendment, to concur, and to disagree. Thus, with a motion to disagree pending, a motion to concur and a motion to concur with an amendment could be offered and would be voted on first. In addition, any motion to concur with an amendment is itself subject to amendment. The precedence of motions can also prevent action. Once one motion is offered, the other motions of lower precedence may not be offered until the Senate votes on or otherwise deals with the pending motion. Therefore, if a motion to concur with an amendment were pending, neither a motion to concur nor a motion to disagree could be offered until the Senate disposed of the motion to concur with an amendment. In recent Congresses, the Senate majority leader has used his preferential recognition to offer all the available motions to dispose of a House amendment. This process has been referred to as "filling the tree." The procedural effect of filling the tree—or offering all of the amendatory motions available in a particular parliamentary situation—is that no Senator can propose an alternative method of acting on the House amendments until the Senate disposes of (or lays aside by unanimous consent) one of the pending motions. Filling the tree does not affect the right of Senators to debate the matter at length. It does not, therefore, bring the Senate any closer to final disposition of the House amendments. If, however, the majority leader can build a coalition of at least 60 Senators (assuming no more than one vacancy in the Senate) in order to invoke cloture, then he can fill the tree to block other Senators from proposing other ways of disposing of House amendments, including perhaps the opportunity to propose Senate amendments to the House amendments prior to Senate disposition of the House amendments. The number of motions that must be offered to "fill the tree" depends on what motion to dispose of a House amendment is offered first. Typically, the first motion that is offered by the majority leader is the one he wants the Senate to approve. If, for example, the majority leader wishes to propose that the Senate agree to a House amendment with changes that resulted from bicameral negotiations, the first motion he might offer is the motion to concur with an amendment . This motion has the highest precedence of the three motions to dispose of House amendments, but it is subject to amendment. To prevent other Senators from offering amendments, the majority leader could offer a perfecting amendment to the amendment proposed in the motion to concur. This second-degree perfecting amendment could be any amendment that proposed to insert text, strike text, or replace a portion of the text of the amendment. Often, the majority leader proposes an amendment with minimal impact, such as changing the enactment date of the legislation by one day. If the goal, however, is to propose that the Senate agree to the House amendment, perhaps because the language of the House amendment actually reflects a negotiated bicameral compromise, then the motion to concur must be offered first. In recent Congresses, the majority leader has typically offered three motions to fill this tree: (1) the motion to concur in the House amendment; (2) the motion to concur in the House amendment with an amendment (a motion that would be in order with the straight motion to concur pending); and (3) a perfecting amendment to the amendment proposed in the motion to concur. Similarly, if the majority leader proposes that the Senate disagree to a House amendment, then to fill the tree he must also offer a motion to concur with an amendment and a perfecting amendment to that. With any of the motions to dispose of House amendments pending, a Senator could offer a motion to refer the House amendments to a Senate committee. Motions to refer can contain instructions to the committee, but these instructions are not binding. For example, a Senator could propose that the House amendments be referred to a committee for further examination of a specific subject. If the motion to refer with instructions were agreed to, however, the committee would have the authority to decide what further action, if any, it would take. The motion to refer with instructions does provide a potential opportunity for Senators to bring a policy subject before the Senate. The majority leader could choose to offer all the available motions to dispose of the House amendments, as well as a motion to refer with instructions (and amendments to the instructions) in order to preclude such opportunities. Furthermore, if the majority leader offers all the available motions to dispose of a House amendment, files cloture, and then makes a motion to proceed to something else, another Senator could not, at that time, make a motion to refer because the Senate had moved on to another matter. A Senator can only make a motion to refer a matter that is before the Senate. Once cloture is invoked, any pending motion to refer would fall. When the majority leader fills the tree on a motion to dispose of a House amendment, to end consideration of the motions it is not necessary to file cloture on each pending motion separately. Instead, the Senate needs only to invoke cloture on the motion of lowest precedence (which generally is the motion the majority leader is proposing the Senate approve). If the Senate agrees to invoke cloture on a motion to disagree to the House amendments, then all other pending motions of a higher precedence fall. This is because the alternative—to consider and vote on the motions of higher precedence first—would contradict the language of the cloture rule, which states that the question on which cloture is invoked shall be the business of the Senate "to the exclusion of all other business until disposed of" (Senate Rule XXII). If cloture is invoked on a motion to concur, however, then the higher-precedence motion to concur with an amendment (and any pending amendment to that) remains pending. At the end of the maximum 30 hours of debate, if all three motions were still pending, the votes would occur first on the second-degree amendment to the motion to concur with an amendment, then on the motion to concur with an amendment, and then on the motion to concur. If the motion to concur with an amendment were agreed to, then the straight motion to concur would presumably then fall, since the Senate had already agreed to concur with an amendment. Because the motions offered to "fill the tree" typically propose simply to alter the enactment date, however, the Senate usually agrees that the two other amendatory motions be considered withdrawn. If the Senate has multiple House amendments to consider, and the majority leader makes separate motions to dispose of the House amendments, then to preclude other Senators from proposing alternative actions, he might fill the tree in relation to each motion and then must file cloture on each motion separately. The process of considering House amendments therefore has the potential to be time-consuming even if 60 Senators (assuming no more than one vacancy) are in favor of ending debate on every motion. Consideration of a conference report and consideration of amendments between the houses are similar in certain respects. Conference reports are called up without debate, and they cannot be amended. House amendments are called up without debate, and if the majority leader then "fills the tree," amendments are precluded (at least temporarily). Furthermore, both conference reports and House amendments are debatable under the regular rules of the Senate. This means that regardless of the form in which the bicameral compromise is brought before the Senate, it might be necessary to secure the support of 60 Senators (assuming no more than one vacancy) to end debate and bring the Senate to a vote. There are, however, important procedural distinctions between conference committee and amendment exchange procedures (see Table 1 ). Only conference committees require formal action to initiate their creation. These actions are generally taken by unanimous consent, but an expedited cloture process can be used if three-fifths of the Senate support the formation of a conference. Prior to the change in the rule, Senators sometimes objected, or threatened to object, to unanimous consent requests to take the actions necessary to send a bill to conference expeditiously. In some cases, Senate leadership responded to such objections by attempting to resolve the bicameral differences through amendments between the houses instead of conference committee. Amendments between the houses are also not subject to the same constraints as conference reports with regard to their content. In a situation where a negotiated bicameral compromise is being considered as an amendment between the houses, the compromise might not be subject to points of order that it would have been subject to if presented as a conference report. For example, implicit in the rules of both chambers is the requirement that conferees resolve the differences committed to them by reaching agreements within what is known as "the scope of the differences" between the House and Senate versions of the bill. Rulings and practices of the Senate allow matter in a conference report to be considered as within the scope of the differences as long as it is reasonably related to the matter sent to conference in either the House or Senate versions of the legislation. Senate Rule XXVIII restricting the content of a bicameral compromise does not apply to amendments between the houses. Furthermore, in the 110 th Congress, the Senate changed the manner of disposing of points of order raised under this long-standing rule, effectively providing an opportunity for Senators to vote on whether to waive the rule and permit the inclusion of provisions not sufficiently related to the matter committed to conference. The opportunity for a separate vote in relation to matter potentially outside of scope does not exist when considering a House amendment, because the scope requirement does not apply. Bicameral meetings and conversations among Senators, Representatives, and staff from the relevant committees of jurisdiction can be substantively similar regardless of whether the resulting compromise is embodied in an amendment between the houses or a conference report. Only in cases in which a conference committee is appointed, however, will there be any formal meeting of the conference. The House has interpreted its rules to require at least one public meeting. In practice, most bicameral negotiations take place informally, and the conference committee may hold no more than one formal public meeting where Senators and Representatives typically make statements and perhaps discuss any major items in disagreement. In contrast, discussions that can result in a compromise presented as an amendment between the houses are never required to be public; in fact, unlike conference committees, the negotiators are never formally identified. The documentation required at the conclusion of negotiations is another distinction between the two methods of resolving differences. Under Senate rules, every conference report must be accompanied by a joint explanatory statement, often called the managers' statement, which explains the position of each chamber and the recommendations of the conference committee on the issues in disagreement (Senate Rule XXVIII, paragraph 7). The requirement to produce this document does not apply in an amendment exchange, although sometimes committees prepare text similar to a managers' statement and submit it for printing in the Congressional Record . A majority of Senate conferees and a majority of House conferees must sign both the conference report and the joint explanatory statement. No such requirement applies to a compromise considered as an amendment between the houses. Senate rules further require that a conference report, but not a House amendment, be made available to Members and the general public on a congressional, Library of Congress, or Government Publishing Office website 48 hours before the vote on the report (Senate Rule XXVIII, paragraph 10). This availability requirement can be waived by three-fifths of Senators duly chosen and sworn (60 Senators if there is no more than one vacancy). It can also be waived by joint agreement of the majority and minority leader in the case of a significant disruption to Senate facilities or the availability of the Internet. Senate Rule XXVIII, paragraph 1, also requires that a conference report must be "available on each Senator's desk" before the Senate may consider it, a requirement that is usually met by the printing of the conference report in the Congressional Record and its distribution. If the report is not yet printed in the Congressional Record , then a copy of the report itself is placed on Senators' desks. Some requirements under the rules can apply to amendment exchange procedures but not to conference reports. Under a standing order of the Senate, conference reports are not required to be read if they are available in the Senate. The text of a House amendment is also not read under Senate precedents. If a Senator proposes the chamber concur in the House amendment with an amendment, however, then that further amendment is required to be read. The reading might be waived by unanimous consent. In addition, a new standing order of the Senate making in order a nondebatable motion to waive the reading of an amendment available in the Congressional Record that was submitted at least 72 hours before the motion was made presumably applies to amendments between the houses. The motion to waive the reading, created by a standing order approved in the 112 th Congress ( S.Res. 29 ), has not been offered with respect to a Senate amendment to a House bill or amendment. The final key procedural distinction is that amendment exchange is more likely to involve consideration of multiple questions. In the contemporary Congress, conference committee reports nearly always report in full agreement. The Senate therefore only takes a single action: approval or disapproval of the conference report. In contrast, if the House sends multiple amendments to the Senate, it will not necessarily be possible for the Senate to take a single action to resolve differences with the House. It bears emphasizing that these procedural differences are not the only factors that influence the decision on how to resolve differences between the chambers. Other differences between the two methods abound, and strategic decisions about how to resolve matters with the House take into account timing, the nature of policy disagreements, and the roles of likely negotiators, among many other factors. For more information on the larger decisionmaking context, see CRS Report RL34611, Whither the Role of Conference Committees: An Analysis , by [author name scrubbed]. When the House receives amendments from the Senate, the amendments are usually held at the Speaker's table for later consideration by the full House. The Speaker could refer Senate amendments to the committee or committees of jurisdiction, but he or she is likely to do so only if the Senate proposal is on a subject that has not already been considered by the House committee of jurisdiction. If the House wishes to continue the legislative process on a particular measure, when the House receives a Senate amendment(s) to the measure, it must agree to take some action on the amendment(s). Generally speaking, the options for action are the same as those that the Senate can take on House amendments: propose a change to the amendment(s), agree to the amendment(s), or disagree to the amendment(s). More formally, the House can agree to a motion to concur in the Senate amendment(s) with (an) amendment(s), to concur in the Senate amendment(s), or to disagree to the Senate amendment(s). If the chambers have already reached the stage of disagreement, meaning that one chamber has already disagreed to an amendment of the other or insisted on its own position, then the House can also agree to a motion to recede from a position previously taken. For example, the House can recede from its disagreement to a Senate amendment, or it can recede from its own amendment that the Senate has disagreed to. The limitation on the number of times the chambers can pass a bill back and forth described earlier applies to the House as well as the Senate. Essentially, after the second-acting chamber amends a bill initially passed by the other, that amendment can be amended in two degrees: once more by the originating chamber and then once more by the second-acting chamber. A majority of the House can override this practice, however, and extend the amendment exchange further. Under most circumstances, Senate amendments are not privileged for consideration in the House, which means Members cannot interrupt the regular order of business to make motions for their disposition. Furthermore, under the regular rules of the House, any House amendments offered to Senate amendments are required to be germane. Typically, the House disposes of Senate amendments through one of the expedited processes described below: a special rule reported by the Committee on Rules, a motion to suspend the rules, or by unanimous consent. A majority of the House can set the terms for consideration of a Senate amendment by agreeing to a privileged resolution reported by the Rules Committee. The Rules Committee might report a special rule that makes it in order at any time to take up a Senate amendment and dispose of it, usually by agreeing either to a motion to concur or to a motion to concur with an amendment. The rule would be required to lie over for one legislative day under House Rule XIII, clause 6(a), unless the House had previously adopted a waiver of this requirement (or the rule was adopted by a two-thirds majority). Special rules for considering motions to dispose of Senate amendments typically provide for a certain amount of time for debate of the motion, equally divided between a proponent and opponent. Most of the time, the rule does not provide an opportunity for Members to offer amendments to the Senate amendment on the floor. Any preferential or secondary motions, such as a motion to refer the Senate amendment, are also usually precluded. Typically, the House first considers the special rule and then, if the rule is adopted, considers the motion to dispose of the Senate amendment. As an alternative to a special rule providing for the consideration of a motion to dispose of Senate amendments, the Rules Committee might instead report a rule that provides that when the rule is agreed to, the motion to dispose of the Senate amendment also be considered agreed to. These "self-executing" or "hereby" rules are occasionally used to dispose of Senate amendments because they eliminate the need for separate consideration of a motion to dispose of the Senate amendment. Most often, self-executing rules concerning Senate amendments also provide for the formation of a conference committee. Special rules disposing of Senate amendments may provide for the equivalent of a joint explanatory statement, or statement of managers, which is required to accompany conference committee reports. In one instance, a rule concerning the disposition of Senate amendments provided the chair of the Appropriations Committee the authority to submit for printing in the Congressional Record any statement explaining the content of the House amendments to the Senate amendment. The inserted statement described the content of the House amendments in plain language and resembled a joint explanatory statement. If the special rule had not included the authority to insert the statement, the floor manager could have requested unanimous consent that it be printed in the Record . In contrast to the initial consideration of a bill or joint resolution under the terms of a special rule, consideration of Senate amendments is unlikely to include an opportunity for a Member of the minority party to offer a motion to recommit (or to commit, if the matter had not already been before the committee). When the House first considers a bill or joint resolution under a special rule, a Member of the minority party always has the opportunity to offer this motion. The Rules Committee is prevented by House Rule XIII, clause 6, from reporting a special rule that would not allow such a motion to recommit or commit. The protection afforded to the motion under Rule XIII, however, applies only to bills and joint resolutions on initial passage. It does not apply, therefore, to motions to dispose of Senate amendments. In other words, nothing in House rules prevents the Rules Committee from reporting a special rule for the disposition of the Senate amendment that has the effect of precluding a motion to recommit. If the House is considering a motion to concur in a Senate amendment with several amendments, separate votes might be held on each House amendment. There is no need for a single vote to approve the entire package of House amendments. The House has already, in a previous "round" of the amendment exchange, agreed to the bill as a whole; at this stage, accordingly, it need only agree to any changes. As a result, the amendment exchange procedure, in comparison to the consideration of either a new bill or a conference report, provides additional options for structuring votes in the House. In the case study described in the last section of this report, the House agreed to three separate amendments to a Senate complete substitute amendment to H.R. 3221 : one amendment concerned matters within the jurisdiction of the Financial Services Committee; one amendment concerned matters within the jurisdiction of the Ways and Means Committee; and the final amendment was a bipartisan proposal to preempt state housing foreclosure laws. In the case of H.R. 3221 , different committees had worked on different amendments to the Senate amendment. In the 114 th Congress, the House agreed to two separate amendments to a Senate amendment to H.R. 2029 , the Consolidated Appropriations Act of 2016. One amendment was the text of the consolidated appropriations act. A second amendment, "Protecting Americans from Tax Hikes Act of 2015," which was in the jurisdiction of the Ways and Means Committee, extended and modified a number of tax credits. In another example from the 110 th Congress, the House agreed to two separate amendments to a Senate amendment to H.R. 2206 , an emergency supplemental appropriations bill. The first amendment provided funding for various government agencies and programs. The second amendment included funding requested by the President for the Department of Defense, as well as State and Foreign Operations appropriations and funds for the Gulf Coast recovery. The second amendment was generally described as funding for the Iraq War, and it included provisions setting benchmarks for the Iraqi government that were different from the benchmarks that had been passed in an earlier version of the legislation that the President vetoed. The House agreed to the first amendment by a vote of 348-73, and to the second amendment by 280-142. Considering two amendments to the Senate-approved complete substitute allowed these issues to be voted on separately, allowing the leadership in the House to build separate majorities for the two amendments. In all three of the above identified cases, the special rule provided for a limited time for debate of the motion to concur with several amendments and precluded all other motions—but provided that the votes be taken separately on each House amendment. More specifically, each special rule provided for one motion to concur with amendments, and then the question of adopting that motion was divided among each of the amendments. In one instance, the special rule provided that if the House agreed to both amendments, then they would be engrossed as a single amendment for transmission to the Senate. Engrossment is the process, undertaken by the House clerks, of preparing a final certified version of a matter that has been approved by the chamber. The effect of this provision of the rule was that the Senate received, for its consideration, not two House amendments, but one. This allowed the Senate to take a single action, instead of considering separate motions to dispose of separate House amendments. In the 111 th Congress (2009-2010), pursuant to special rules, the House held separate votes on portions of a single amendment between the houses using a different procedure. The special rules provided that the question of agreeing to concur with an amendment (to a Senate bill or amendment) be divided. For example, the House could vote first on agreeing to concur with one portion of the text of a House amendment, and then could vote on agreeing to concur with a second portion of the text of a House amendment. Such rules allow separate votes on different issues but result in a single amendment being transmitted to the Senate. In the 111 th Congress, the special rules that provided for such division votes also provided that, if any division of the amendment was not agreed to, then the Senate amendment would not be disposed of. In other words, the bill would not be returned to the Senate unless the House agreed to all portions of the proposed House changes to the Senate text. In the 114 th Congress, pursuant to a special rule, the House took separate votes on different titles of a Senate amendment, and provided that if any portion of the divided question failed, then the House would be considered to have made no disposition of the Senate amendment. The House also has the option of agreeing to suspend the rules to dispose of Senate amendments. A motion to suspend the rules requires a two-thirds vote for adoption, so it is a procedural option generally used only when a large majority of the House favors the proposed action. Under this procedure, the House casts just one vote to suspend the rules and agree to one of the motions for disposing of the Senate amendment. For example, the House can consider one motion to suspend the rules and agree to a Senate amendment. Motions to suspend the rules are debated for no more than 40 minutes. No point of order can be made because the motion is proposing to suspend any rule that would interfere with its approval. Once the motion to suspend the rules is made, no further motion to dispose of the Senate amendment(s) is in order. A motion to commit or recommit is also not in order. The motion to suspend the rules is privileged under House rules only on Mondays, Tuesdays, and Wednesdays, although special rules occasionally provide for consideration of motions to suspend the rules on other days of the week. Usually when the House uses the suspension process to dispose of Senate amendments, it suspends the rules and concurs in an amendment of the Senate. The House could agree to suspend the rules and concur in a Senate amendment with an amendment. If that motion were made, the House amendment would be read in full by the clerk after the suspension motion was agreed to. For that reason, if the suspension process were used for this purpose, the House might be more likely to agree to a motion to suspend the rules and agree to a resolution that states that, upon adoption of the resolution, the Senate amendment be agreed to with the amendment printed in the text of the resolution. The House might also agree to Senate amendments by unanimous consent, particularly at the end of a session when time constraints make this a more desirable option than suspension of the rules. The chair of the committee of jurisdiction often asks unanimous consent to take from the Speaker's table the bill and Senate amendment(s), and, if there is no objection, the manager then makes a motion to concur in the amendment(s) which can be debated under the hour rule and voted upon. Alternatively, the floor manager might make one unanimous consent request to take the bill from the Speaker's table and concur in the Senate amendments. The request is not debatable, and a vote is not necessary. On occasion, the House enters into a unanimous consent agreement that sets a total time for debate of the motion to concur, and typically provides that the time be equally divided and controlled. Any unanimous consent request would be subject to the Speaker's guidelines for recognition laid out at the start of each Congress. The effective result of these guidelines is that a Representative will only be recognized to make a unanimous consent request to dispose of Senate amendments after clearing the consent request with the majority and minority floor leadership and the chair and ranking member of the committee(s) of jurisdiction. In practice, it is the chair of the committee of jurisdiction, or the chair's designee, who makes the unanimous consent request. Acting on Senate amendments to a House bill (or to a House amendment) is a stage of the legislative process distinct from the initial passage of the measure. As discussed at length above, if the House acts on a Senate amendment, instead of acting on a bill or joint resolution that has not yet passed the House, then (1) the motion to recommit is less likely to be in order, and (2) there will not necessarily be a single vote in relation to the Senate amendment, because the House proposal might be considered as separate amendments to the Senate amendment. Under the standing rules of the House, amendment exchange is different in many respects from conference committee procedures. In the contemporary Congress, however, conference committee reports are almost always considered under a special rule that waives all points of order that could be raised against the report or against its consideration. As a result, in practice, the consideration of a conference report and the consideration of amendments between the houses can be quite similar. For example, under the standing rules, bicameral compromises reported by a conference committee are required to remain within the scope of the differences between the House and Senate; amendments between the houses are not subject to these scope requirements. However, if agreed to by a majority of the House, the special rule for the consideration of a conference report would likely protect the conference report from a point of order. Furthermore, while conference reports (but not Senate amendments) are required to be available under House Rule XXII, clause 8, for three days prior to their consideration, in practice the special rule can waive this availability requirement. Special rules can also modify the manner in which amendments between the houses are considered. For example, under the standing rules conference reports cannot be amended, and Senate amendments can be amended; in practice, however, the special rule for the consideration of a Senate amendment would likely prevent amendments from being offered from the floor. Nevertheless, procedural distinctions do remain between conference committee procedures and amendments between the houses. Perhaps most significantly, the process for arranging a formal conference committee in the House includes an opportunity for a Member of the minority party to offer a motion to instruct conferees. Such motions typically direct the House conferees to take a position on a particular issue in disagreement between the chambers. The motion to instruct is not binding on the conferees; in other words, even if the conferees report contrary to the instructions, the report will not be subject to a point of order. Despite this limitation, motions to instruct are sometimes viewed as an opportunity for a Member of the minority party to present a view on a policy issue of his or her choosing. If the chambers resolve their differences through amendment exchange, instead of conference committee, then there is no opportunity to offer a motion to instruct conferees. Furthermore, under clause 12 of House Rule XXII, conference committee meetings are required to be open to the public, and the House has interpreted this rule to require that at least one public meeting of the conference committee be held after conferees are formally appointed. The same clause states that the chair of the House delegation "should endeavor to ensure" that all Members of the conference committee be given notice of all meetings and that all provisions in disagreement between the chambers will be open to discussion. The rule also guarantees managers access to a complete copy of the conference agreement at a unitary time and place for the collection of signatures. Although these requirements can be waived by special rule, generally conference committees do hold at least one public meeting and abide by these guidelines. No such requirements apply to negotiation meetings that result in a compromise embodied in an amendment between the houses. The appointment of a formal conference committee can facilitate a structured division of labor in negotiations. The Speaker can appoint conferees for a limited purpose—for example, only for consideration of a single title of the bill in conference. These appointments are more likely when the matters in conference fall under the jurisdiction of multiple standing committees, and the Speaker appoints Representatives from the various committees to negotiate over matters within their respective jurisdictions. A conference committee might choose to form structured subconferences to consider the matters under its jurisdiction, although generally negotiations among conferees are less structured. In any case, the House requires that, for every portion of the conference report that a distinct group of conferees is appointed to consider, a majority of the Representatives in that group (and a majority of Senators in that group) sign the report. Under this requirement, the House counts the signatures of limited-purpose conferees only for those matters within their respectively assigned authorities. In this way, the specific appointments and signature requirement can give some guidance to negotiators about the portion of the compromise under their responsibility. Because bicameral negotiations in an amendment exchange situation are by definition informal, and no signatures are collected, similar opportunities to enforce structure on the negotiations do not exist. The documentation required at the conclusion of negotiations is another distinction between the two methods of resolving differences. Under House rules, every conference report must be accompanied by a joint explanatory statement, often called the managers' statement, which explains the position of each chamber and the recommendations of the conference committee on the issues in disagreement (House Rule XXII, clause 7). The requirement to produce this document does not apply in an amendment exchange, although on some occasions committees have prepared text similar to a managers' statement and submitted it for printing in the Congressional Record . The special rule for the consideration of the Senate amendment can include language stating that the chair of the committee shall insert into the Congressional Record "such material as he may deem explanatory of the motion." Even taking into account the usual use of special rules to set the terms for consideration of the compromise, floor consideration of a conference report might differ procedurally from floor consideration of a Senate amendment. Clause 9 of House Rule XXI requires the public disclosure of any "congressional earmarks, limited tax benefits, and limited tariff benefits" included in a conference report. This rule, like other House rules, can be waived by a special rule; however, if a special rule waives House Rule XXI, clause 9, then a Representative can make a point of order against the special rule itself . The point of order is disposed of by a debatable question of consideration; this means that if any Member makes a point of order against a special rule on the grounds that it waives the earmark disclosure requirement, the presiding officer will submit to the House the question "Will the House now consider the conference report?" The question is then debated for up to 20 minutes, equally divided. In contrast, clause 9 of Rule XXI does not apply to amendments between the houses. An additional difference in the consideration of a conference report, as opposed to amendments between the houses, is that there may be an opportunity for a Member of the minority party to offer a motion to recommit a conference report. When the House is the first chamber to consider a conference report, a motion to recommit the conference report with or without instructions is in order. The motion to recommit is a prerogative of the minority party, and it is not debatable. A detailed discussion and diagram of one case in the 110 th Congress when the Senate considered multiple House amendments serves to illustrate some of the procedural options, and potential procedural complexities, in an amendment exchange. In April 2008, the Senate passed H.R. 3221 with a full-text substitute amendment and an amendment to the title. The Senate sent the newly titled "Foreclosure Prevention Act of 2008" to the House. In May, the House agreed to three separate amendments to the Senate full-text substitute and sent those to the Senate. Each of the House amendments addressed a group of titles in the Senate amendment that fell within the jurisdiction of a single House committee. As a result, some of the House amendments affected noncontiguous titles of the Senate amendment. House Amendment No. 1 struck Titles 1 through 5, 7, 9, and 11 of the Senate substitute and inserted five new titles, making up a "housing package," that were largely based on bills that had previously been considered by the House Financial Services Committee. House Amendment No. 2 struck Titles 6, 8, and 10 of the Senate substitute and inserted a new title consisting largely of the text of a housing assistance tax bill previously reported by the House Ways and Means Committee. House Amendment No. 3 proposed inserting a new section stating that the bill (and other federal laws) did not preempt state laws regulating foreclosure of residential real property or the treatment of foreclosed property. Senate precedents require that the chamber consider House amendments in the order that they affect the Senate text (in this case, the text of the substitute amendment the Senate had agreed to in April). To comply with this requirement, the Senate considered the three House amendments as though they were nine separate amendments. Under the Senate reorganization of the House amendments, House Amendment No. 1 struck Titles 1 through 5 of the Senate substitute and inserted the five titles comprising the "housing package." House Amendment No. 2 struck Title 6; House Amendment No. 3 struck Title 7; House Amendment 4 struck Title 8; House Amendment No. 5 struck Title 9; House Amendment No. 6 struck Title 10; House Amendment No. 7 struck Title 11; House Amendment No. 8 inserted the tax title; and House Amendment No. 9 inserted the proposed section affirming state laws (see Figure 1 ). With the House amendments reorganized, the majority leader could then propose actions on the amendments, provided he proceeded in the order they affected the Senate text. On June 19, 2008, the majority leader moved that the Senate concur in House Amendment No. 1 with an amendment. The bipartisan Senate amendment offered by the majority leader on behalf of the chair and ranking member of the Banking, Housing, and Urban Affairs Committee proposed to replace the "housing package" of the other chamber. The majority leader did not "fill the tree," and therefore the Senate amendment he proposed was open to further amendment. By unanimous consent, the Senate required that amendments offered that day be on the subject of housing. The agreement further provided that no other motions, except motions to table and reconsider, be in order during the day's consideration. On July 19, Senators offered six amendments to the Senate amendment offered by the majority leader to the first House amendment. Although under the rules, only a single second-degree amendment to an amendment offered with a motion to concur is in order at one time, Senators asked and received unanimous consent to set the other pending amendments aside so they could offer their own amendments. On several occasions that day and on subsequent days, however, unanimous consent was not granted to a Senator who attempted to set aside pending amendments in order to offer another amendment. The majority leader filed cloture on the motion to concur with an amendment on Friday, June 20, 2008, and two days of session later, on Tuesday, June 24, the Senate agreed to invoke cloture by a vote of 83-9. Of the six amendments that had been offered to the proposed amendment to the first House amendment, the Senate agreed to three of them. These three amendments were second-degree amendments to the Senate amendment to the House amendment. They were not "amendments between the houses" but instead can be understood as Senate floor amendments offered to an "amendment between the houses." As such, all three were incorporated into the Senate amendment to the first House amendment before the Senate, on June 25, agreed to the motion to concur in the first House amendment with an amendment. After the Senate disposed of the first House amendment, it was in order to consider the additional House amendments in the order that they affected the Senate text. On June 26, 2008, the majority leader moved that the Senate concur in the next six House amendments as reorganized by the Senate. Each of the House amendments proposed to strike a title of the Senate substitute for H.R. 3221 (see Figure 1 ). The majority leader then immediately filed cloture on the motion to concur. After the majority leader made the motion to concur, no other motions to dispose of the House amendments were in order. The motion to concur has precedence over the motion to disagree; therefore, with the motion to concur pending, a motion to disagree was not in order. The motion to concur does not have precedence over the motion to concur with an amendment. No motion to concur with an amendment could be offered in this situation, however, because the House amendments were all simple motions to strike. Under long-standing Senate precedents, motions to strike are not subject to amendment. Furthermore, the Senate had agreed by unanimous consent that no further motions to refer would be in order during consideration of the House message. Pursuant to the terms of a unanimous consent agreement, the Senate voted, 76-10, on July 7, 2008, to invoke cloture on the motion to concur in the House amendments to strike. The following day, the Senate agreed by unanimous consent to the motion to concur. With the other amendments disposed of, the only House amendments remaining for Senate consideration were the proposals to insert the House tax title and to insert the section concerning state foreclosure laws and regulations. On July 8, 2008, the majority leader made a motion that the Senate disagree to these two House amendments and filed cloture on the motion. The majority leader then used his preferential recognition to "fill the tree" by offering the following: A motion to concur in the House amendment adding a new title with a first-degree amendment (No. 5067), which proposed adding a sentence: "This title shall become effective in 3 days." A second-degree amendment (No. 5068) to amendment No. 5067, which proposed to strike "3" and insert "2." After the majority leader made those motions, no further motions proposing action on the House amendments were in order until one was disposed of or laid aside by unanimous consent. The majority leader could "fill the tree" on a motion proposing to dispose of multiple House amendments (one to insert a new title and a second to insert a new section) by offering a motion that only concerned the first House amendment. No motion to concur in the second House amendment, with or without an amendment, was in order. Two days of session later, on July 10, 2008, the Senate agreed to the motion to invoke cloture on the motion to disagree to the final two House amendments by a vote of 84-12. The motion to concur with an amendment (No. 5067) and the amendment to that (No. 5068) fell when cloture was invoked, pursuant to the Senate cloture rule requiring that the motion to disagree (on which cloture was invoked) remain the business before the Senate until disposed of. The following day the Senate agreed to the motion to disagree to the amendments, and the message of the Senate stating all of its actions on the House amendments was sent to the House. The Senate, after agreeing to the three motions described above, messaged to the House only one amendment: the substitute amendment for the "housing package" sent from the other chamber. It also communicated its agreement to the House proposal to strike Titles 6 through 11 of the first Senate substitute. Similarly, the Senate communicated its disagreement to the House proposal to insert a tax title and a section concerning state law. In short, the Senate, by its actions, effectively combined the matters in disagreement between the chambers into a single large amendment that was another version of the housing bill. More precisely, the Senate sent the following message to the House: The Senate concurs in the House amendment, striking Section 1 through Title V and inserting certain language, to the Senate amendment to the bill ( H.R. 3221 ) with an amendment. The Senate concurs in the House amendments, striking titles VI through XI, to the Senate amendment to the aforesaid bill. The Senate disagrees to the amendments of the House, adding a new title and inserting a new section to the amendment of the Senate to the aforesaid bill. The House, pursuant to the terms of a special rule reported by the Committee on Rules, agreed to the Senate amendment with an amendment on July 23, 2008. The House amendment was yet another version of the full bill, proposing to insert text in lieu of that proposed by the Senate. According to both Senators and Representatives, the amendment resembled earlier versions of the legislation and resulted from bicameral negotiations. The special rule also provided through a self-executing provision that the House recede from any other remaining amendments or disagreements. When the House further amended the Senate amendment, it had agreed to an amendment in the third degree. Although under the precedents of the House and Senate, an amendment between the chambers can be amended in only two degrees, the House was able to offer a further amendment because it considered the motion under the terms of a special rule. After the Senate received the House message on July 23, the majority leader called up the House amendment (to the Senate amendment to the House amendments to the Senate amendment to H.R. 3221 ). At this point, the majority leader wished to propose that the Senate agree with this final bicameral compromise so that the bill could be forwarded to the President. To prevent another Senator from making any other motion, he made two additional tree-filling motions. The majority leader offered the following: A motion to concur in the House amendment; A motion to concur in the House amendment with a first-degree amendment (No. 5103), which proposed adding a sentence: "The provisions of this act shall become effective 2 days after enactment"; and A second-degree amendment (No. 5104) to amendment No. 5103, which proposed to strike "2" and insert "1." After "filling the tree," the majority leader filed cloture on the motion to concur. The leader also asked unanimous consent that no motions to refer be in order when the House message was before the Senate. A Senator "reserved the right to object" in order to express his desire to offer a further amendment. The m ajority leader withdrew his unanimous consent request and instead made a motion to proceed to another matter. A motion to refer is not in order when a different question is before the Senate. Two days of session later, on July 25, the Senate voted to invoke cloture on the motion to concur by a vote of 80-13. The next day the Senate voted to concur in the House amendment, and under the terms of a unanimous consent agreement, the motion to concur with an amendment was withdrawn (and the second-degree amendment to that therefore fell). The Senate concurring in the House amendment was the final congressional action necessary to clear the measure to be sent to the President. Data on the manner of resolving differences were collected for recent Congresses from the House Final Calendars . The data are for measures that became public law. The total number of conference committees presented in Table A-1 therefore does not include conference committees on measures that do not become law, such as budget resolutions, nor does it include unsuccessful conferences or measures that went through conference committee and were eventually vetoed.
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The House and Senate must agree to the same measure with the same legislative language before a bill can be presented to the President. To resolve differences between House and Senate versions of legislation, Congress might appoint a conference committee to negotiate a compromise that is then reported to each chamber for consideration. Alternatively, Congress might use the process of amendment exchange. In this process, each chamber acts on the legislation in turn, shuttling the measure back and forth, sometimes proposing alternatives in the form of amendments, until both chambers have agreed to the same text. The difference between a conference committee and an amendment exchange is not necessarily in the way a policy compromise is reached but in the formal parliamentary steps taken after the principal negotiators have agreed to a compromise. After each chamber has passed its version of the legislation—or in some cases even before that stage—Senators, Representatives, and staff from the relevant committees of jurisdiction engage in policy discussions in an effort to craft compromise legislation that can pass both chambers. These informal meetings and conversations are sometimes referred to colloquially as "pre-conference," although they need not be followed by the convening of a formal conference committee. The phrase is applied generally to final-stage efforts to prepare legislation for passage in both the House and the Senate. The decision to use the amendment exchange route has procedural implications. Amendments between the houses are not subject to the same procedures as conference reports. For example, some of the limitations on the content of conference committee reports do not apply to amendment exchange. Furthermore, amendment exchange provides alternative opportunities to structure decisions, because the policy compromise can be voted on as separate amendments between the houses instead of as a single legislative package. In addition, in the Senate, House amendments are privileged, and therefore their consideration typically begins immediately after the majority leader asks the Presiding Officer to lay them before the Senate. In contrast, to begin consideration of a bill or resolution, the majority leader must either obtain unanimous consent or make a motion to proceed to the measure, which is debatable in most circumstances. Furthermore, in the House, consideration of Senate amendments is unlikely to include an opportunity for a Member of the minority party to offer a motion to recommit, an opportunity that is generally assured on initial consideration of a bill or joint resolution. In an amendment exchange, the formal actions the chambers generally take on amendments from the other chamber are (1) to concur, (2) to concur with an amendment, or (3) to disagree. There is a limit to the number of times each house can propose amendment(s) and send the measure back to the other house, but in both chambers the limitation can be waived. In the contemporary House, Senate amendments are typically disposed of through a special rule reported by the Committee on Rules, a motion to suspend the rules, or by unanimous consent. In the Senate, consideration of House amendments has the potential to become procedurally complex, particularly when the Senate must dispose of multiple House amendments. Because House amendments, unlike conference reports, are subject to amendment, the Senate majority leader might offer a motion to dispose of the House amendment and then "fill the tree" to temporarily prevent any Senator from proposing an alternative method of acting on the House amendment.
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Since the 1970s, private Saudi citizens, Saudi government ministries, Saudi government charitable committees, and international Islamic charity organizations based in Saudi Arabia have provided financial and relief assistance to Muslims around the world. This has included the provision of assistance to individuals and groups engaged in or victimized by various nationalist and religious conflicts. Similar public and private Saudi efforts have financed religious education and proselytization programs in dozens of Muslim-majority and Muslim-minority countries. In places such as Afghanistan, Pakistan, the Philippines, Chechnya, Bosnia, Indonesia, Nigeria, Kashmir, Kosovo, and the West Bank and Gaza, some of these activities appear to have provided financial or material support to individuals or groups actively involved in terrorism, armed violence, or the propagation of divisive religious ideologies. In 2007, the U.S. Department of State reported that, "Saudi donors and unregulated charities have been a major source of financing to extremist and terrorist groups over the past 25 years." Official U.S. government concerns about this trend were apparent prior to the September 11, 2001 terrorist attacks, which amplified public criticism within the United States of alleged Saudi involvement in terrorism or of Saudi laxity in acting against terrorist groups. Various critics have accused the Saudi government of directly supporting terrorism and of creating a permissive environment that has allowed funding to flow to terrorists and extremists. The final report released by the bipartisan National Commission on Terrorist Attacks Upon the United States (the 9/11 Commission) indicates that the Commission "found no evidence that the Saudi government as an institution or senior Saudi officials individually funded [Al Qaeda]." The report also states, however, that Saudi Arabia "was a place where Al Qaeda raised money directly from individuals and through charities" and indicates that "charities with significant Saudi government sponsorship" may have diverted funding to Al Qaeda. The Bush Administration's statements on Saudi Arabia's counterterrorism policies have praised new Saudi efforts to combat terrorist financing, while generally confirming accounts that suggest that the activities of some Saudi entities and individuals have contributed to the spread of terrorism and extremism over time. In April 2008, Undersecretary of the Treasury for Terrorism and Financial Intelligence Stuart Levey told the Senate Finance Committee that the Saudi government is "serious about fighting Al Qaeda in the kingdom, and they do," and argued that Saudi officials' "seriousness of purpose with respect to the money going out of the kingdom is not as high." He added, "Saudi Arabia today remains the location from which more money is going to... Sunni terror groups and the Taliban than from any other place in the world." This report: reviews allegations of involvement by Saudis in terrorist financing together with Saudi rebuttals; discusses the question of Saudi support for Palestinian organizations and religious charities and schools ( madrasas ) abroad; analyzes recent steps taken by Saudi Arabia to counter terrorist financing (many in conjunction with the United States); and suggests some implications of recent Saudi actions for U.S. counterterrorism policy. In the aftermath of the September 11 attacks, numerous allegations have been leveled against the Saudi Arabian government and prominent Saudi citizens regarding financial support for international terrorist groups. Although many of the allegations fault the Saudi government for failing to act decisively to close down channels of financial support, some critics go so far as to accuse Saudi government officials of responsibility for the September 11 attacks through design or negligence and for the continuing threat posed by the perpetrators or by like-minded terrorist groups. Since September 11, U.S. government officials have welcomed "undeniable progress" in the Saudi Arabian government's efforts to combat terrorist financing, while maintaining concern that "wealthy donors in Saudi Arabia are still funding violent extremists around the world, from Europe to North Africa, from Iraq to Southeast Asia." The following are summaries of the more publicized post-September 11 reports of alleged Saudi involvement in terrorist financing. The final report released by the bipartisan National Commission on Terrorist Attacks Upon the United States indicates that the Commission "found no evidence that the Saudi government as an institution or senior Saudi officials individually funded [Al Qaeda]." The report also states, however, that Saudi Arabia "was a place where Al Qaeda raised money directly from individuals and through charities," and indicates that "charities with significant Saudi government sponsorship," such as the Al Haramain Islamic Foundation, may have diverted funding to Al Qaeda. (For more on this subject see 'Action Against Questionable Charity ' below.) Specifically, the report describes bin Laden's use of "the Golden Chain," an informal financial network of prominent Saudi and Gulf individuals originally established to support the anti-Soviet Afghan resistance movement in the 1980s. U.S. officials state that this network collected funds and funneled them to Arab fighters in Afghanistan, and later to Al Qaeda, using charities and other non-governmental organizations. According to the Commission's report, Saudi individuals and other financiers associated with the Golden Chain enabled bin Laden and Al Qaeda to replace lost financial assets and establish a base in Afghanistan following their abrupt departure from Sudan in 1996. These activities were facilitated in part, the report argues, by the "extreme religious views" that exist within Saudi Arabia and the fact that "until recently" Saudi charities were "subject to very limited oversight." Although the report highlights a series of unsuccessful U.S. government efforts to gain access to a senior Al Qaeda financial operative who had been detained by Saudi Arabia in 1997, the report credits the Saudi government with assisting U.S. officials in interviewing members of the bin Laden family in 1999 and 2000. The report argues that these meetings were integral to U.S. efforts to understand the role of bin Laden's personal wealth in the financing of Al Qaeda. As a result of this assistance, U.S. officials learned that Saudi government actions in the early 1990s had in effect divested bin Laden of his share of the bin Laden family fortune, leading Al Qaeda to rely thereafter on a "a core group of financial facilitators" based in the Persian Gulf "and particularly in Saudi Arabia" for funding. The report also credits Saudi government actions following the May 2003 bombings in Riyadh which "apparently reduced the funds available to Al Qaeda—perhaps drastically." An independent task force sponsored by the Council on Foreign Relations has issued two reports that address terrorist financing and Saudi Arabia's alleged financial support for terrorism. The task force's October 2002 report strongly criticized what it asserted was Saudi financial support for international terrorist groups. For example, the report stated both in its summary and in the main body: "For years, individuals and charities based in Saudi Arabia have been the most important source of funds for Al Qaeda. And for years, Saudi officials have turned a blind eye to this problem." The authors argued that a connection between Saudi donors and Al Qaeda is logical for several reasons: Saudi Arabia possesses the greatest concentration of wealth in the region; Saudi nationals and charities were previously the most important sources of funds for the mujahideen [fighters against the Soviet occupation in Afghanistan]; Saudi nationals have always constituted a disproportionate percentage of Al Qaeda's own membership; and Al Qaeda's political message has long focused on issues of particular interest to Saudi nationals, especially those who are disenchanted with their own government [emphasis added]. The report grouped Saudi Arabia with Pakistan, Egypt, and other Gulf states and regional financial centers as "source and transit countries," implying that donations to terrorist causes not only originate in these countries but also that donations from other countries pass through them en route to terrorist organizations. The Saudi government responded by charging that the report's allegations were based on "false and inconclusive information." A Treasury Department spokesperson reportedly described the report as "seriously flawed" because in the Department's opinion it did not describe new initiatives to combat terrorist financing adequately. The task force's second report, released in June 2004, updates the first report and chronicles the steps the Saudi Arabian government had taken to strengthen its financial, legal, and regulatory systems and to combat terrorist financing since late 2002. The report acknowledged the Saudi government's announcement of "the enactment or promulgation of a profusion of new laws and regulations and the creation of new institutional arrangements... intended to tighten controls over the principal modalities of terrorist financing." The report welcomed the steps and concluded that "on a comparative basis" Saudi Arabia had taken "more decisive legal and regulatory action to combat terrorist financing than many other Muslim states." The second report also identified several areas in which its authors argued that Saudi authorities could have done more to combat terrorist financing. It argued that additional action was essential "because of the fundamental centrality that persons and organizations based in Saudi Arabia have had in financing militant Islamist groups on a global basis." The report cited a lack of publicly available enforcement information as the basis for its questions about the Saudi government's commitment to implement its new terrorist financing laws and regulations. For example, the report specifically criticized the Saudi government's "failure to punish, in a demonstrable manner, specific and identified leaders of charities found to be funneling money to militant Islamist organizations." Saudi authorities claimed at the time to have prosecuted five individuals "for terror financing" and frozen the assets "of number of other individuals." In response to the second report's release, Adel Al Jubeir, then-foreign policy advisor to Saudi Crown Prince Abdullah and chief Saudi spokesman, charged that the task force's conclusions were "politically motivated, ill-informed, and factually incorrect." A Treasury Department spokesperson reportedly agreed with the report's assertion that Saudi Arabia should take further steps to combat terrorist financing. In mid-August 2002, the families of more than 600 victims of the September 11 attacks filed a suit for approximately $1 trillion against three members of the Saudi royal family, a number of financial institutions and individuals, and the government of Sudan. The suit, which the Saudi media have described as an attempt to extort Saudi deposits in the United States, alleges that the defendants enabled the September 11 attacks to occur by making financial resources available to the perpetrators. On November 14, 2003, however, Judge James Robertson of the U.S. District Court of the District of Columbia ruled that two of the leading defendants, Defense Minister and now Crown Prince Sultan and former Director of Intelligence and Saudi ambassador to the United States Prince Turki Al Faisal, were entitled to foreign sovereign immunity for their official acts. [Burnett v. Al Baraka Inv. and Development Corp., 292 F.Supp.2d 9 (D.D.C. 2003)]. Families of victims killed or injured in terrorist attacks in Israel have filed two civil lawsuits against Arab Bank PLC of Jordan in the U.S. District Court of New York seeking approximately $2 billion in damages [Linde et al. v. Arab Bank, 04 CV 02799 (E.D.N.Y. filed July 2, 2004) and Almog et al. v. Arab Bank, 04 CV 05564 (E.D.N.Y. filed December 21, 2004)]. Although the Saudi government is not a party to the lawsuit, the complaints allege that the Saudi Committee for the Support of the Al Quds Intifada used accounts established at Arab Bank as conduits for funds to charities and individuals in the West Bank and Gaza Strip associated with the Islamic Resistance Movement (Hamas), Islamic Jihad, and other terrorist entities (for a full description of the Committee, see " Funding for Palestinian Organizations " below). The complaints also allege that the Saudi Committee used accounts in Arab Bank and Arab Bank branches in the Palestinian territories to provide "insurance benefits" to the families of suicide bombers and others killed or detained in confrontations with Israeli security forces. In court documents filed with the U.S. District Court in response to the lawsuits, Shukri Bishara, the chief banking officer for Arab Bank PLC, states that "beginning in December 2000, the Saudi Committee made approximately 200,000 payments into Palestine through Arab Bank branches totaling over US$90,000,000." According to the documents, these funds were primarily used to support "unemployed Palestinians, persons in hospitals, Palestinians that were wounded or injured in the violence, persons whose houses were destroyed as well as payments to Palestinian schools hospitals and infrastructure in general." Bishara contends that the lawsuits' allegations of Arab Bank's involvement in a conspiracy with Saudi officials to promote Palestinian suicide terrorism are "completely false and untrue." Press reports quote Bishara as stating that Arab Bank "did not have prior knowledge of payments to the families of suicide bombers." In 2003, the Central Bank of Jordan (CBJ) ordered all Jordanian banks "to freeze any dealing" with six Hamas figures and associated charities. In response to the lawsuits' allegations, a Saudi Committee official stated that the Committee "didn't know that some of the people we were sending money to were relatives of suicide bombers." In the past, however, Committee officials have indicated that the Committee supported "the families of Palestinian martyrs, without differentiating between whether the Palestinian was a bomber or was killed by Israeli troops." In a February 25, 2005 announcement, the U.S. Office of the Comptroller of the Currency (OCC) ordered the New York branch of Arab Bank PLC to halt its traditional banking activities, including the transfer of funds and the opening of accounts. The OCC order characterized "the inadequacy of the branch's controls over its funds transfer business" as "especially serious." On August 17, 2005, the OCC announced a $24 million civil fine against the New York branch of Arab Bank PLC because of "deficiencies in the Branch's internal controls, particularly in the area of Bank Secrecy Act and Anti-Money Laundering compliance." On September 2, 2005, U.S. District Judge Nina Gershon dismissed two of the eight counts in lawsuits filed against Arab Bank PLC but allowed the rest to proceed to trial. In January 2007, Judge Gershon ruled that Israelis and other foreign nationals could pursue similar claims in U.S. court under the terms of the Alien Tort Claims Act of 1789. Statements from Arab Bank in response to both rulings declared, "Arab Bank remains confident that it will prevail at trial. The bank abhors terrorism." In July 2007, Representative Anthony Weiner introduced the Arab Bank Accountability Act ( H.R. 2985 ), which would require the Secretary of the Treasury to release certain information related to Arab Bank, would block property belonging to Arab Bank under U.S. jurisdiction; and would revoke Arab Bank's banking charter. The declassification and release in mid-2003 of the report of the Joint Inquiry into Intelligence Community Activities before and after the Terrorist Attacks of September 11, 2001 also brought attention to the alleged role of Saudi Arabia in supporting terrorism. In the 900-page report, a crucial chapter on foreign support for the hijackers is virtually all blanked out—28 pages in all—because the Administration refused on national security grounds to release the chapter in a public forum. There has been speculation about the degree to which the deleted pages might reveal Saudi complicity in the September 11 attacks. According to the press, persons who claim to have read the still-classified section of the report say it covers Saudi links with individuals involved in the attacks. The Saudi foreign minister appealed to President Bush to publish the censored pages so as to enable Saudi Arabia to rebut these suspicions, but the President refused on the grounds that an ongoing investigation of the September 11 attacks might be compromised. A controversial private report issued by French investigator Jean-Charles Brisard in December 2002 made several detailed allegations about the involvement of prominent Saudi nationals in the financing of international terrorist organizations. The United Nations Security Council did not solicit or endorse Brisard's report, although it has been mischaracterized as a U.N. report in the public record. Although most public allegations of Saudi support for terrorist activities have not quantified the amounts of money involved, Brisard's report asserted that Al Qaeda received between $300 million and $500 million during the decade prior to 2002, by "abusing this pillar of Islam [charitable donations] and taking advantage of the Saudi regulatory vacuum." Brisard described Saudi donors as "wealthy businessmen and bankers." The report has been the subject of a lawsuit in the United Kingdom regarding defamation of character, and a British High Court ruled in July 2004 that allegations contained within the report were "untrue." [Mahfouz v. Brisard & Others, High Court of Justice, Queen's Bench Division, United Kingdom - [2004] EWHC 1735 (QB)] Since 2004, a number of statements from U.S. officials and other unnamed sources have alleged that private individuals and organizations in Saudi Arabia have financially supported insurgent operations in Iraq. News accounts have suggested that insurgent recruiters and facilitators prefer to deal with Saudi young men because Saudis provide for their own expenses and often personally finance insurgent operations. A senior U.S. Treasury Department official testified in July 2005 that Saudi individuals may be "a significant source" of financing for the Iraq insurgency. The Iraq Study Group report (p. 25) stated that "funding for the Sunni insurgency [in Iraq] comes from private individuals within Saudi Arabia and the Gulf States." Iraqi officials have called on Saudi Arabia and other neighboring countries to do more to restrict financial networks operating in their countries from supporting insurgents in Iraq. Saudi authorities initially denied the claims, but have since acknowledged that Saudi citizens have traveled to Iraq or otherwise offered material support to the insurgency. Saudi officials claim to have taken action against suspected insurgent financiers. The Saudi government administers official aid programs in Iraq under the supervision of the Saudi Committee for the Relief of the Iraqi People and the Saudi Red Crescent Society. Prince Nayef bin Abd Al Aziz, the Saudi Minister of Interior, directs the Committee's operations. In May 2003, the Saudi government established an official government bank account, Unified Account Number 111, to consolidate public and private donations in support of the Iraqi people. Saudi press reports describing the operations of the Committee and the Red Crescent Society indicate that numerous shipments of food aid and medical supplies have been delivered across Iraq since April 2003, including shipments to the former-insurgent stronghold of Fallujah during the summer of 2004. Other Saudi based charities, including the International Islamic Relief Organization (IIRO) have also delivered aid to Iraq, including to Fallujah and other areas of fluctuating insurgent activity. According to press reports, the IIRO maintained collection accounts in two Saudi banks where donations could be made as recently as December 2004. U.S. officials have expressed general concerns about the IIRO's operations and questioned its exclusion from Saudi charitable account regulations (see below). Support for Palestinian causes and the provision of humanitarian aid to Palestinians has long been an important component of Saudi foreign policy, and many Saudis identify strongly with the Palestinian people and view support for Palestinian causes as a religious, cultural, or, in some cases, political obligation. Repeated allegations made by Israeli and Western sources have contended that Saudi support for Palestinian institutions and individuals has directly or indirectly supported Palestinian terrorist groups, although public reporting has not conclusively linked official Saudi government support to Palestinian terrorist organizations. Some reports suggest that Hamas maintains a significant fund-raising infrastructure inside Saudi Arabia. Saudi Arabia, like other Arab states, recognizes the Palestine Liberation Organization (PLO) as the legitimate representative of the Palestinian people. A 2002 Saudi government report stated that overall government and private aid to Palestinian causes had reached $2.61 billion. Currently, Saudi officials say that government support to Palestinian causes, approximately $80 million to $100 million per year, goes solely to the Palestinian Authority, which was established pursuant to the Israeli-Palestinian agreement of September 13, 1993, known as the first Oslo Accord. Following the January 25, 2006, elections for the Palestinian Legislative Council in which Hamas won a majority of the votes, Saudi officials indicated that funding support for the Palestinian Authority would continue. According to press reports, Saudi officials promised $20 million to cover immediate needs on the part of the Palestinian Authority. On March 19, 2006, Prince Saud al Faisal stated the Saudi position, saying that "humanitarian assistance is not given to a government. It is given to a people ..." to help them deal with a difficult humanitarian situation. Saudi Arabia made significant efforts to support a Palestinian unity government prior to the intra-Palestinian violence of early 2007, and, in December 2007, Saudi Arabia pledged between $500 and $750 million to the Palestinian Authority over three years. Within Saudi Arabia, two official charitable committees solicited and delivered aid to Palestinian institutions, individuals, and causes after the onset of the second Palestinian intifada in October 2000: the Saudi Popular Committee for Assisting the Palestinian Mujahideen and the Saudi Committee for the Support of the Al Quds Intifada (now known as the Saudi Committee for the Relief of the Palestinian People). According to Saudi press reports, Prince Salman bin Abd Al Aziz, the governor of Riyadh Province, established the Popular Committee and directed its operations. The Popular Committee's periodic public reports indicate that it provided approximately $8.8 million to the PLO from October 2000 to April 2003. The Saudi Committee for the Support of the Al Quds Intifada served as the main conduit for Saudi financial and material aid to the Palestinian territories after its establishment under Royal Decree 8636 on October 16, 2000. A December 31, 2003 report issued by the Saudi Embassy in Washington stated that the costs of the Al Quds Intifada Committee's 31 relief programs amounted to 524,265,283 Saudi riyals (SR) [$139,804,075], in addition to the costs of then-current projects, which amounted to a further 203,699,433 SR [$54,302,249]. The report also stated that "the value of the services provided by the Committee to the Palestinian people" through December 2003 was equal to an additional 727,964,716 SR [$194,123,924]. The Al Quds Intifada Committee's periodic public reports describe millions of riyals in monetary aid that its programs provided to the Palestinian people in the form of financial transfers to the Palestinian Authority (PA), donations to charitable organizations in the West Bank and Gaza Strip, and by means of direct assistance to over 35,000 needy Palestinian individuals. In addition to financial assistance, the Al Quds Intifada Committee also provided food, blankets, medicine, ambulances, and other aid in kind through programs aimed at supporting health care, education, and the provision of basic social services in the Palestinian territories that were disrupted during the uprising. The Committee also constructed hundreds of homes for Palestinians who were left homeless due to violence and house demolitions. Palestinian officials reportedly praised the Committee's support for the Palestinian people. In June 2004, the Saudi government announced that the future activities of all Saudi charitable committees and organizations that send aid abroad (including "the Palestinian committees") will be monitored and directed by the Saudi Nongovernmental National Commission for Relief and Charity Work Abroad. As of June 2008, the National Commission was not operational. In October 2006, the Saudi Ministry of Interior submitted plans for its creation to Saudi Arabia's Shura Council for review and consultation. Saudi officials reportedly continue to work to resolve legal and financial hurdles to the integration of the international operations of Saudi Arabian charities. The Al Quds Intifada Committee continues to operate independently under the name—"the Saudi Committee for the Relief of the Palestinian People." The Committee now provides humanitarian relief and assistance via a number of partnerships with U.N. agencies. For example, in September 2006, the Committee announced plans to provide $6.3 million to finance the construction of 100 housing units in Hebron in cooperation with UN-HABITAT. Since 2000, both Committees have issued public solicitations encouraging Saudi citizens to make donations to support the welfare of the Palestinian people. In one often cited instance, the Al Quds Intifada Committee organized a telethon sponsored by King Fahd in April 2002 that raised over $110 million for families of Palestinians killed or injured in the uprising. Saudi officials told their U.S. counterparts that the proceeds of this telethon were funneled through non-governmental organizations to provide humanitarian support to needy Palestinian families. Saudi press reports indicate that the Al Quds Intifada Committee consolidated the proceeds of its fund-raising efforts along with public and private donations in support of Palestinian causes in national, government-sponsored unified accounts established in a number of Saudi banks. "Unified Account Number 98" and "Unified Account Number 90" were referred to in Saudi press reports describing the Al Quds Intifada Committee's activities, although it is unclear if both accounts existed simultaneously, if they are synonymous, or if one superseded the other. Saudi officials have repeatedly assured their U.S. counterparts that Account 98 no longer exists, most recently in a meeting with a U.S. Treasury delegation that visited Saudi Arabia in January 2006. However, Saudi press reports describe Saudi officials urging Saudi citizens to make donations to the account at their local banks, including a television advertisement that solicited donations to Account 98 in August 2005. Once collected, the proceeds of the Al Quds Intifada Committee's fundraising efforts were delivered to Palestinian beneficiaries in a variety of ways. Material aid collected by the Committee, such as food, clothing, blankets, and vehicles, was delivered in cooperation with third parties such as the Jordanian Red Crescent Society and the United Nations Relief and Works Agency (UNRWA). The Committee also developed a special process to transfer financial aid to Palestinian individuals in cooperation with Jordan's Arab Bank PLC. In an April 2002 interview Dr. Sa'id Al Urabi Al Harithi, the "chairman of the Executive Committee in Support of the Al Aqsa Intifada" and an advisor to Prince Nayef, provided details about the process used to identify beneficiaries and deliver financial aid to them: Using information provided by "welfare societies" and "official sources" in the Palestinian territories, the Al Quds Intifada Committee prepared lists of potential beneficiaries drawn from the ranks of "the wounded, the families of martyrs, the families of prisoners and disabled persons," and families that had been affected by the uprising. The word "martyr" is used to refer to those killed as a result of violence (usually Israeli actions). Then, a "central committee" conducted a "general study" of the lists and verified "the names of the beneficiaries, their telephone numbers, social conditions, addresses, and the date and type of injury." According to Al Harithi, the Committee would "coordinate with the Palestinian Authority and the [Palestinian] ambassador on the information in [the lists]" to confirm that it was "precise, correct, and clear." Once the information had been confirmed and approved, the Committee, in coordination with "the National Arab Bank," opened a bank account in the beneficiary's name, into which a standard amount of riyals or dollars were transferred based on the individual's circumstances and the criteria set by the Committee for each of its different programs. For example, "the committee allocated 20,000 riyals [$5,333] for the family of each martyr," and "the sum of 10,000 Saudi riyals [$2,666] for every prisoner." After the deposit had been made, a team in the Palestinian territories followed up "on the process of delivering aid directly to the beneficiaries" and filed "regular reports to the Saudi Committee in Support of the Al Quds Intifada." In May 2002, Israeli officials released a report that alleged that the Saudi Committee for the Support of the Al Quds Intifada had "transferred large sums of money to families of Palestinians who died in violent events, including notorious terrorists." The report argued that this alleged financial support encouraged Palestinian terrorism by easing the potential burden on the families of attackers. Saudi officials called the allegations "baseless and false," and stated "unequivocally that Saudi Arabia does not provide financial support to suicide bombers or their families." Saudi officials also questioned the claim that Palestinian suicide attacks were financially rather than politically motivated. Statements made by Committee figures in response to specific claims that the Al Quds Intifada Committee provided support to the families of suicide bombers or otherwise supported terrorism have been less consistent. Then-Saudi government spokesman Adel Al Jubeir discussed the possibility that money from the Committee may have gone to the families of suicide bombers but categorically ruled out the existence of any quid pro quo arrangement or reward system similar to that sponsored by former Iraqi President Saddam Hussein. The Al Quds Intifada Committee website, maintained in the name of "the Saudi Committee for Relief of the Palestinian People," once contained over 40,000 transaction records that featured the names individuals who received humanitarian aid and financial support from the Committee. The records portion of the Committee website was deactivated in March 2005. The website states that "many accounts were opened for the harmed persons at the Arab [B]ank branches in the Palestinian territory, and fixed aids [i.e. donations] were transferred to the harmed people in their respective accounts." One of the Committee's programs supported Palestinian families whose primary breadwinners were killed by Israeli forces or under other violent circumstances during the uprising. Online records for this program contained the names of deceased individuals, transaction numbers, the date of their deaths, their home towns, and the circumstances in which they were killed. The Committee's description of the program indicated that payments of 20,000 SR [$5,300] were transmitted to the family members of these individuals in their names following their death. Of the 1,300 names contained in the records for this specific Committee program, over 60 matched or closely resembled the names of known Palestinian militants who carried out attacks on Israeli military personnel and civilians from October 2000 to March 2002. These individuals included suicide bombers and gunmen who were killed during actual and attempted attacks inside Israel and the Palestinian territories. Most of the Committee records assigned to individuals whose names matched or closely resembled those of suicide attackers listed "assassination" as the cause of death—however other records credited "martyrdom." A handful of these records indicated that the individuals they referred to were killed during a "martyrdom operation." The Committee removed all records from its website in early 2005. Since the early 1990s, there have been unsubstantiated reports of Saudi public and private assistance to the fundamentalist Islamic Resistance Movement (Hamas), which the U.S. government has designated as a foreign terrorist organization. The Saudi government has not officially described Hamas as a terrorist organization. In its annual report on terrorism for the year 2001 ( Patterns of Global Terrorism, 2001 ), the State Department noted that Hamas received funding from "private benefactors in Saudi Arabia and other moderate Arab states." The 2002 and most 2003 editions of the report did not mention Saudi Arabia as a specific source of funding for Hamas. The State Department's 2005 Country Reports for Terrorism (released in March 2006) indicated that "private benefactors in Saudi Arabia and other Arab states" remained a primary source of funding for Hamas. The 2006 report did not cite Saudi Arabia specifically and the 2007 report stated that Hamas "fundraising takes place in the Gulf countries." Charitable giving ( zakat ) is a religious obligation for Muslims, constituting one of the five "pillars of Islam." Many wealthy Saudis contribute approximately 2.5 percent of their annual income or more to charitable causes and relief organizations that fund religious education programs, orphanages, hospitals, and other development projects both within Saudi Arabia and around the world. One expert estimates Saudi charitable donations, in general, to be about $3 billion to $4 billion annually, of which 10-20% is disseminated abroad. Saudi officials estimate that $100 million in charitable donations are directed abroad each year. As part of the government's effort to combat potential terrorist financing activities, Saudi charities reportedly are now prohibited from sending funds abroad, although international charities headquartered in the kingdom continue to raise funds for international activities via Saudi banks and private Saudi citizens may direct domestic and externally-held assets to overseas charitable endeavors. In response to criticism and allegations of involvement in terrorist financing directed at Saudi Arabian charitable organizations, the Saudi government has taken a series of steps to provide greater oversight to charitable giving in the Kingdom. In December 2002, the government announced the creation of the High Commission for Oversight of Charities to provide assistance to Saudi Arabian charities in reforming their operations and improving their transparency. At that time, Saudi officials also indicated that all Saudi charities had been audited; however, the results of those audits have not been made publicly available. In February 2004, King Fahd issued a royal decree establishing the Saudi Nongovernmental Commission on Relief and Charity Work Abroad. The Commission was publicly reintroduced in June 2004, and described as "the sole vehicle" through which all private Saudi donations marked for international distribution will flow in the future. In June 2005, the Saudi press reported that the Council of Ministers had decided that all future overseas charitable contributions must be channeled through the Commission. As of June 2008, the Commission was not operational, and Ministry of Interior officials reported that the Saudi royal court would need to make a decision regarding the establishment of the Commission. In May 2003, the Saudi government introduced new banking regulations that prohibited private charities and relief groups from transmitting funds overseas until further regulations could be instituted to ensure that the money would not be channeled to terrorist organizations. The new banking regulations do not place similar restrictions on the operations of "multilateral" charitable organizations based in Saudi Arabia, such as the Muslim World League (MWL), the International Islamic Relief Organization (IIRO), or the World Assembly of Muslim Youth (WAMY), which actively raise funds among the Saudi population. Saudi officials have stated that in spite of the regulatory exclusion, in practice these charities are being subjected to identical levels of scrutiny as all Saudi charities. Officials from the Defense Department and Treasury Department have stated that the IIRO, WAMY, and the MWL "continue to cause us concern" and that the charities "need to be included" in the oversight of new Saudi charity regulations and regulatory bodies. In late-2004, the Saudi government dissolved the Al Haramain Islamic Foundation, a large charity with links to the royal family, after years of sustained criticism and a series of joint U.S.-Saudi actions relating to its alleged involvement in terrorist financing. U.S. investigators have linked a former Al Haramain employee to the 1998 U.S. embassy bombing in Tanzania, and a June 2, 2004 Treasury Department statement called Al Haramain "one of the principal Islamic NGOs providing support for the Al Qaida [variant transcription of Arabic word] network and promoting militant Islamic doctrine worldwide." Since March 2002, the United States and Saudi Arabia have jointly designated 12 branches of Al Haramain as front organizations for terrorist activities, including its U.S. chapter. The two countries have asked the U.N. Al Qaeda and Taliban Sanctions Committee (which monitors sanctions pursuant to U.N. Security Council Resolution 1267) to add the branches to the Committee's consolidated list of terrorists tied to Al Qaeda and the Taliban. In the United States, prosecutors recently dropped charges against Al Haramain's U.S. branch, based in Oregon. Prosecutors are continuing to pursue charges against the branch's founders and corporate officers, including Suliman Al Buthe, a U.S. designated terrorist financier and Saudi national currently in Saudi Arabia. Al Buthe maintains his innocence. U.S. authorities also designated Al Haramain's founder and director, Aqeel Abdulaziz Al Aqil, as a supporter of terrorism in June 2004. In early January 2004, Al Aqil had stepped down from his position and remains in Saudi Arabia. Al Aqil's successor, Dabbas Al Dabbasi, resigned as director of the organization on July 14, 2004 because of "the freezing of the establishment's internal accounts and the inability to give charitable support." Saudi officials have indicated that Al Haramain's international operations were to be absorbed by the new Nongovernmental Commission for Relief and Charity Work Abroad, which is not yet operational. In August 2006, the Treasury Department designated the Philippine and Indonesian branches of IIRO, along with the Saudi executive director of the IIRO's branch in the kingdom's Eastern Province, Abd al Hamid Sulaiman al Mujil. According to the Treasury Department, Al Mujil "has been called the 'million dollar man' for supporting Islamic militant groups," and "provided donor funds directly to Al Qaeda" while raising funds for other groups. The United Nations designated Al Mujil on August 4, 2006. Saudi authorities have not prosecuted Al Mujil to date. Saudi officials maintain that they are working closely with the United States to combat terrorism, which they say is aimed as much at the Saudi regime as it is at the United States. A month after the September 11 attacks, the Saudi Government announced that it would implement U.N. Security Council Resolution1373, which called for freezing terrorist-related funds. The Saudi Arabian Monetary Agency has issued a number of "white papers" detailing actions taken by Saudi Arabia to combat terrorist financing. An update, issued in April 2004, addresses various steps including adopted legislation, implemented regulations and resolutions, and cooperation with the United States. In the past, U.S. officials, while acknowledging Saudi efforts, have expressed frustration with Saudi reluctance to share information gleaned from Saudi investigations of terrorist incidents and to move against organizations and individuals suspected of involvement in terrorism. Since mid-2003, however, the Saudi government seems to have become increasingly convinced of the seriousness of the terrorist threat and its attendant financing. Many commentators attribute this increased Saudi concern to the Al Qaeda terrorist campaign that swept the kingdom from 2003 through 2006. The State Department's 2003 Patterns of Global Terrorism report stated that the May and November 2003 attacks "galvanized Riyadh into launching a sustained crackdown against Al Qa'ida's presence in the Kingdom and spurred an unprecedented level of cooperation with the United States." Shortly after the May 2003 attacks in Riyadh, a joint U.S.-Saudi intelligence task force was set up to help identify the perpetrators. This set the stage for a more permanent bilateral group with a broader mission. During the first week in August 2003, a delegation of senior U.S. counter-terrorism officials from the National Security Council, the State Department, the Treasury Department, and the Federal Bureau of Investigation met with Saudi leaders reportedly to urge them to do more to cut off the funneling of money to terrorists through Saudi businesses and organizations. U.S. officials traveled to Riyadh later that month to set up a joint task force to investigate terrorist financing in Saudi Arabia. Subsequently, agents from U.S. organizations including the Federal Bureau of Investigation and the Internal Revenue Service joined Saudi officials to set up a center to focus on bank accounts, computer records, and other financial data. In addition, the FBI and the Internal Revenue Service Criminal Investigative Division have carried out a program of terrorism financing training for the Saudi government and have held sessions in Riyadh and Washington, D.C. According to press articles, the task force program marked the first time that U.S. law enforcement officials had been stationed in Saudi Arabia to pursue intelligence and financing issues. In March 2005, Saudi Ministry of Interior officials reported that U.S.-Saudi Joint Task Force on Terrorist Financing operations had led to the investigation of 1,098 Saudi bank accounts for suspicion of involvement in terrorism financing since September 11, 2001. Prior to 2003, Saudi Arabia lacked legislation specifically criminalizing money laundering and terrorist financing. Following Al Qaeda attacks within Saudi Arabia in May 2003, Saudi authorities moved forward with a number of draft laws and regulations, including a law adopted in August 2003 making money laundering and terrorist financing criminal offenses. That month, the Saudi Arabian government also introduced new banking regulations that prohibited private charities and relief groups from transmitting funds overseas until further regulations could be instituted to ensure that the money would not be channeled to terrorist organizations. New financial regulations also created a requirement for charitable organizations to have single disbursement bank accounts and an approved official with signatory authority to facilitate tighter controls over charity accounts and transactions. The Saudi Arabian Monetary Agency (SAMA) continues to serve as the chief regulatory body for Saudi Arabia's banks and financial institutions. A number of other oversight and regulatory mechanisms were also created, including a ban on cash collections at mosques and new rules governing the insurance sector and capital markets. All unlicensed money exchange houses were ordered closed, and authorities put in place close supervision mechanisms on traditional money transfer mechanisms used to send funds abroad, such as the hawala system. The kingdom's religious authorities also have engaged in closer vetting of religious clerics and supervision of money given to them by their congregations. The government suspended more than 1,000 clerics during 2003 and another 900 in February 2004 reportedly "on the grounds of negligence," which may include negligent financial accounting procedures. In September 2007, Interior Minister Prince Nayef bin Abd al Aziz urged citizens to comply with directives restricting the solicitation and collection of donations. In March 2008, Minister of Social Affairs Abd al Muhsin Bin Abd al Aziz al Akkas described his ministry's methods for supervising the finances of the over 300 domestic charities chartered by his ministry, including official financial audits and unscheduled inspection visits. According to the Financial Action Task Force (FATF), Saudi Arabia has established a Permanent Committee on Combating the Financing of Terrorism to coordinate its counter-terrorist financing policy efforts. A Financial Investigation Unit (SA-FIU) has been designated to serve as Saudi Arabia's financial intelligence unit (FIU). The SA-FIU began operations in September 2005. Treasury Department officials have welcomed the SA-FIU's establishment, and the U.S. Financial Crimes Enforcement Network (FinCEN) is a sponsor of the SA-FIU for membership in the Egmont Group. In September 2003, members of the Financial Action Task Force (FATF) and representatives of the Gulf Cooperation Council (GCC) visited Saudi Arabia to examine Saudi financial practices. The FATF 2004 annual report, released on July 2, 2004, states that Saudi Arabia's legal and regulatory system is "compliant or largely compliant with most of the FATF 40+8 Recommendations" on terrorist financing. The FATF review dealt only with the adequacy of legal and regulatory provisions and did not assess the degree to which the laws and regulations were being effectively implemented. The FATF report concludes that the Saudi government's legal definition of terrorist financing "does not conform to the international standards as expressed in the UN International Convention on the Suppression of Terrorist Financing." In November 2004, the Saudi Arabian government announced its participation in the newly established Middle East and North Africa Financial Action Task Force (MENAFATF). Membership in the regional body commits Saudi Arabia to implementing the internationally recognized anti-money laundering and counter-terrorist financing standards designed by FATF. According to the State Department's 2007 International Narcotics Control Strategy Report, "there is little money laundering in Saudi Arabia related to traditional predicate offenses" such as narcotics trafficking or smuggling. Since 2003, the Saudi government has undertaken a number of enforcement actions in response to international concerns about terrorist financing, including freezing some suspect accounts and jointly designating a number of individuals and organizations as Specially Designated Global Terrorists along with U.S. authorities. Saudi Interior Ministry officials reported in March 2005 that security forces had seized $4.5 million through raids on terrorist safe houses and operatives, along with $6.5 million in 11 separate bank accounts since early 2003. The U.S. Department of the Treasury also reports that Saudi security forces have killed a number of Al Qaeda financiers, including Yousif Salih Fahad Al Ayeeri (a.k.a. "Swift Sword") and Khaled Ali Al Hajj, who reportedly were key financial facilitators for terrorist operatives in the Persian Gulf region. The 2007 Country Report on Terrorism in Saudi Arabia notes that cooperation with the United States has helped Saudi authorities arrest "16 Saudi-based terrorism financiers." However, Administration officials have criticized the Saudi government for failing to prosecute prominent individuals accused of financing international terrorism (see below). Saudi Arabia has undertaken significant administrative reforms in its efforts to curtail terrorist financing. A FATF official involved in the 2003-2004 assessment of Saudi practices was quoted as saying that the new regulations to control Saudi-based charities "probably go further than any country in the world." As noted above, however, the effectiveness of many of these steps will depend on their implementation. Several uncertainties and unresolved questions remain. U.S. officials have complained in the past that Saudi officials have been slow to take action against organizations and entities implicated in terrorist financing. According to the 9/11 Commission Monograph on Terrorist Financing, "the Saudi government turned a blind eye to the financing of al Qaeda" before September 11, 2001, and "the Saudis did not begin to crack down hard on Al Qaeda financing in the Kingdom until after the May 2003 Al Qaeda attacks in Riyadh." The report recognized the "significantly higher levels of cooperation" that U.S. officials have received from their Saudi counterparts since May 2003. Securing timely cooperation remains an important component of U.S. efforts to curb the flow of funds to terrorist groups. U.S. officials have said that the Saudi government should give more emphasis to demanding personal responsibility for terrorist financiers and act against those who tolerate or promote financing of terrorist activity. The U.S. Treasury Department has observed that "while current regulations take account of the financial activities of charitable concerns, they do not apply to direct donations made by private donors." The 9/11 Commission terrorist financing monograph stated that as of 2004, Saudi authorities had "failed to impose criminal punishment on any high-profile donor." Some individuals have had their assets frozen by Saudi authorities and have been forbidden from traveling outside Saudi Arabia. However, several prominent Saudi individuals suspected by U.S. authorities of involvement in terrorist financing have not been charged or prosecuted in the United States, Saudi Arabia, or other jurisdictions. These individuals are believed to be in Saudi Arabia. The U.S. State Department has stated that "Saudi Arabia should demonstrate its willingness to hold elites accountable" for money laundering and terrorist financing related offenses. On September 11, 2007, Treasury Undersecretary Stuart Levey stated that, "when the evidence is clear that these individuals have funded terrorist organizations, and knowingly done so, then they should be prosecuted and treated as real terrorism because it is." Saudi authorities assert that the availability of sufficient evidence to support courtroom prosecutions of alleged terrorist financiers is limited by the classification of information in some cases. Although Saudi Arabia's financial customer information requirements are more stringent for international transfers under newly adopted regulations, some loopholes may remain. The FATF report called on Saudi officials to increase the amount of information required for foreign currency conversion transactions at money remittance centers in the Kingdom. Since 2006, Saudi customs authorities have introduced a new currency and precious items declaration system at all border crossings for amounts under $16,000. The use of cash couriers has been identified as "primary mechanism for the transfer of insurgency funds into Iraq" and U.S. Treasury Department officials have stated that Iraq's neighbors have a responsibility to act to prevent the transfer of large amounts of cash to insurgent organizations in Iraq. The extent to which couriers may be ferrying cash from Saudi Arabia into Iraq is unclear. However, press reports have described insurgent groups' preferences for Saudi recruits because of the large amounts of personal funding, usually in cash, that some Saudi nationals have brought with them to Iraq. It seems clear that challenges to internal security and terrorist incidents in Saudi Arabia have impelled the Saudi leadership to devote heightened attention to countering the financing of terrorism. This has been particularly true since mid-2003, when terrorists began mounting a series of attacks on residential and office compounds, apparently in an effort to target the Saudi government as well as the western presence in Saudi Arabia. Both U.S. officials and independent observers have welcomed the mechanisms that Saudi authorities have put in place with the aim of stemming the flow of funds destined for terrorist groups. They point out, however, that the effectiveness of these measures will be tested by the degree to which Saudi authorities succeed in implementing the various regulations that have been established in recent years. To date, U.S. officials have continued to express approval of changes in Saudi policy along with disappointment with Saudi enforcement measures, particularly with a lack of public prosecutions for individuals accused of financing terrorism outside of the kingdom. Several Committees and Members in the 108 th and 109 th Congresses expressed interest in these issues and held hearings and introduced legislation relating to U.S.-Saudi cooperation in the fight against terrorism and terrorist financing. Section 575 of the FY2005 Omnibus Appropriations Bill ( P.L. 108-447 ) prohibited Saudi Arabia from receiving aid or any direct assistance from the United States unless the President exercised waiver authority and certified that Saudi Arabia was "cooperating with efforts to combat international terrorism and that the proposed assistance will help facilitate that effort." The President exercised this waiver by Presidential Determination 2005-38 on September 26, 2005, and provided $200,000 in terrorism financing assistance (NADR-CTF) to Saudi authorities. The Intelligence Reform and Terrorism Prevention Act ( P.L. 108-458 ) required the President to submit to Congress within 180 days a strategy for collaboration with the people and government of Saudi Arabia, including a framework for cooperation on efforts to combat terrorist financing. In the 110 th Congress, Section 2043 of the Implementing Recommendations of the 9/11 Commission Act ( P.L. 110-53 , signed August 3, 2007) finds that "the Kingdom of Saudi Arabia has an uneven record in the fight against terrorism, especially with respect to terrorist financing," and requires the Administration to submit a report 180 days after enactment describing the long term strategy of the United States, "to work with the Government of Saudi Arabia to combat terrorism, including through effective measures to prevent and prohibit the financing of terrorists by Saudi institutions and citizens." The document submitted in January 2008 does not describe a strategy for future counter-terrorist financing cooperation with Saudi Arabia, but does review in general terms Saudi actions to date to improve their counter-terrorist financing measures. Members of Congress may seek to support executive branch efforts to encourage implementation of new Saudi laws and regulations. Hearings and inquiries seeking specific information about terrorist financing threats and monitoring U.S. and foreign government efforts to strengthen regulatory regimes, implementation capacity, and enforcement may improve public consideration of these issues. Intelligence considerations may limit the degree to which officials can publicly discuss terrorist financing threats and U.S. and foreign responses. Domestic political considerations and information security requirements may continue to limit the Saudi government's willingness to enforce existing regulations, particularly to prosecute prominent alleged financiers.
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According to the U.S. State Department 2007 International Narcotics Control Strategy Report, "Saudi donors and unregulated charities have been a major source of financing to extremist and terrorist groups over the past 25 years." The September 11, 2001 attacks fueled criticisms within the United States of alleged Saudi involvement in terrorism or of Saudi laxity in acting against terrorist groups. The final report released by the bipartisan National Commission on Terrorist Attacks Upon the United States (the 9/11 Commission) indicates that the Commission "found no evidence that the Saudi government as an institution or senior Saudi officials individually funded [Al Qaeda]." The report also states, however, that Saudi Arabia "was a place where Al Qaeda raised money directly from individuals and through charities" and indicates that "charities with significant Saudi government sponsorship" may have diverted funding to Al Qaeda. U.S. officials remain concerned that Saudis continue to fund Al Qaeda and other terrorist groups. In April 2008, Undersecretary of the Treasury for Terrorism and Financial Intelligence Stuart Levey told the Senate Finance Committee that the Saudi government is "serious about fighting Al Qaeda in the kingdom, and they do," and argued that Saudi officials' "seriousness of purpose with respect to the money going out of the kingdom is not as high." He added, "Saudi Arabia today remains the location from which more money is going to terror groups and the Taliban—Sunni terror groups and the Taliban—than from any other place in the world." Saudi officials insist that their counter-terrorist financing efforts are robust and are not limited to targeting domestic threats. In numerous official statements, Saudi leaders have said they are committed to cooperating with the United States in fighting terrorist financing, pointing out that Saudi Arabia has been a victim of terrorism and shares the U.S. interest in combating it. Saudi leaders acknowledge providing financial support for Islamic and Palestinian causes, but maintain that no official Saudi support goes to any terrorist organizations, such as Hamas. Al Qaeda affiliated terrorist attacks in Saudi Arabia from 2003 to 2006 appear to have given added impetus to the Saudi leadership in expanding counter-terrorist financing efforts. Since mid-2003, the Saudi government has: set up a joint task force with the United States to investigate terrorist financing in Saudi Arabia; shuttered some charitable organizations suspected of terrorist ties; passed anti-money laundering legislation; banned cash collections at mosques; centralized control over some charities; closed unlicensed money exchanges; and scrutinized clerics involved in charitable collections. A planned National Commission for Relief and Charity Work Abroad has not been established. As required by the Intelligence Reform and Terrorism Prevention Act (P.L. 108-458) and the Implementing Recommendations of the 9/11 Commission Act (P.L. 110-53), President Bush has submitted strategies for U.S.-Saudi collaboration, with special reference to combating terrorist financing. For more information about Saudi Arabia, see CRS Report RL33533, Saudi Arabia: Background and U.S. Relations, by [author name scrubbed]. This report will be updated to reflect major developments.
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Senate Passes H.R. 2360. On July 14,2005, the Senate passed its version of H.R. 2360 , which had been reported as anamendment in the nature of a substitute, 96-1. The Senate-passed version of H.R. 2360 recommendsa net appropriation of $31.9 billion for Department of Homeland Security (DHS) for FY2006. Thisamount includes $30.8 billion in discretionary budget authority. This amount represents an increaseof $1.3 billion or 4% compared to the FY2005 enacted level; and an increase of $1.2 billion or nearly4% compared to the FY2006 request. The Senate-passed version of H.R. 2360 includes $21.3 billionfor Border and Transportation Security (BTS) agencies as identified in this report. This amountrepresents an increase of $1 billion, nearly 5%, as compared to the FY2005 enacted level; anadditional $300 million as compared to the $21.0 billion provided in the House-passed H.R. 2360;and an additional $1.7 billion as compared to the FY2006 request. House Passes H.R. 2360. On May 17,2005, the House passed H.R. 2360 424-1. The bill provides a net appropriation of $31.9billion for DHS. This amount includes $30.8 billion in discretionary budget authority, whichrepresents an increase of $1.3 billion, or 4%, compared to the baseline FY2005 enacted level(without advance or emergency appropriations); and an increase of $1.2 billion, or nearly 4%,compared to the FY2006 request. House-passed H.R. 2360 contains $21 billion for BTS asidentified in this report, representing an increase of $700 million or 3.4% as compared to the FY2005enacted level of $20.3 billion. President's FY2005 Budget Submitted. OnFebruary 7, 2005, the President submitted the FY2006 budget request to Congress, proposing a netappropriation of $30.6 billion for DHS. This represents a 7.7% increase over net enacted FY2004funding of $30.3 billion. (1) Of the $30.6 billion requested by the Administration for DHS in FY2006, $19.6 billion or 64% isfor BTS agencies as identified in this report. The requested $19.6 billion for BTS agencies inFY2006 represents a 3.4% decrease compared to the enacted FY2005 amount of $20.3 billion(including supplemental and emergency appropriations). Table 1 summarizes the legislative status of DHS appropriations for FY2005. (2) Table 1. Legislative Status of Homeland SecurityAppropriations Note: vv = voice vote Increasing border and transportation security are essential strategies for improving andmaintaining homeland security. Border security entails regulating the flow of goods and peopleacross the nation's borders so that dangerous and unwanted goods or people are detected and deniedentry. Transportation security entails screening and protecting people and goods as they movebetween different locations within the country. Determining which goods and people are permitted and which are denied entry into theUnited States involves a system of sophisticated border management. This system must balance theneed for securing the nation's borders with facilitating the essential commerce and legitimate freeflow of citizens and authorized visitors. The system must be capable of a detailed examination ofthe goods and people seeking entry, but must still fit within budgetary constraints and beadministratively feasible. Improving transportation security has meant an expanded federal role in screening passengersand baggage traveling through airports and also increasing the presence of federal officers aboarddomestic and international flights. Plans exist to expand the presence of federal officers in othermodes of transportation. Finally, these management systems must accomplish their functions witha minimum of disruption of legitimate activities, and without unnecessary intrusion into the civilliberties of persons affected by them. The Homeland Security Act of 2002 ( P.L. 107-296 ) transferred the functions, relevantfunding, and most of the personnel of 22 separate agencies and offices to the newly createdDepartment of Homeland Security. DHS was organized into four major directorates: BTS;Emergency Preparedness and Response; Science and Technology; and Information Analysis andInfrastructure Protection. The BTS Directorate, along with the U.S. Coast Guard, is responsible for the first line ofdefense against terrorism and for securing and managing the nation's borders. Included in theseresponsibilities are the inspection, investigative and enforcement operations of the formerImmigration and Naturalization Service (INS), which had been responsible for managing andcoordinating the entry of people into the United States, and for enforcing immigration laws. DHSborder and transportation security objectives also include fulfilling the newly expandedresponsibilities of the TSA in protecting the nation's transportation systems, initially involving airlinepassengers, baggage, and freight. The Customs function, previously the responsibility of the Department of the Treasury's U.S.Customs Service, now also forms part of BTS. The Customs functions administered by DHS, inconjunction with the U.S. Coast Guard, are intended to effectively secure all commercial trafficentering the nation's ports. The Directorate also assumes responsibility for inspecting andmonitoring plants and animals entering the United States to minimize the risk that noxious pests anddiseases will be introduced into the country. The activities for which BTS has assumed responsibility are organized into three bureaus: the Bureau of Customs and Border Protection (CBP); the Bureau of Immigration and CustomsEnforcement (ICE); and the Transportation Security Agency (TSA). The inspection and borderpatrol functions of the legacy Customs, INS, and Animal and Plant Health Inspection Service(APHIS), were merged into CBP. The investigative and interior enforcement functions of the legacyCustoms and INS were merged within ICE. The Federal Protective Service (FPS), the Federal LawEnforcement Training Center (FLETC), and the Office of Domestic Preparedness (ODP) were alsoincluded under BTS by the Homeland Security Act. Subsequently, the Federal Air Marshals (FAMs)have been transferred from TSA to ICE; the US-VISIT program has been transferred from ICE tobe managed at the BTS directorate level; and ODP has been reconfigured and renamed the Officeof State and Local Government Coordination and Preparedness (OSLGCP) and is managed at theDHS level. The Coast Guard remains a direct report, or free standing agency, within DHS butoutside the BTS directorate. On July 13, 2005, the Secretary of DHS, Michael Chertoff, announced the results of themonths-long Second Stage Review (2SR) that he undertook upon being confirmed as DHSSecretary. (3) The proposedchanges affect many aspects of the Department. (4) The Secretary has designed a six-point agenda based upon theresults of the 2SR: increase overall preparedness, particularly for catastrophicevents; create better transportation security systems to move people and cargo moresecurely and efficiently; strengthen border security and interior enforcement and reform immigrationprocesses; enhance information sharing with our partners; improve DHS financial management, human resources development,procurement and information technology; and realign the DHS organization to maximize missionperformance. Specific new policy initiatives and proposed actions announced on July 13 by the Secretaryinclude several significant BTS changes, including the proposed elimination of the BTS Directorate. The Secretary announced the creation of a new Directorate of Policy (subject to legislative approval),which would, among other things, assume the policy coordination responsibilities of the BTSDirectorate. The operational agencies that comprise BTS (CBP, ICE, TSA) would report directlyto the Secretary and Deputy Secretary of DHS. Through this reorganization, DHS proposes tostreamline the policy creation process and ensure that the department's policies and regulations areconsistent across the department. In terms of immediate policy changes, the Secretary announced that the US-VISIT programwould be moving from the 2-print fingerprinting standard to a 10-print standard. (5) The Federal Air Marshals(FAMs) program will be moved out of ICE and back into TSA, to increase operational coordinationbetween all aviation security entities in the department. Regarding immigration, the Secretary statedthat the DHS would be looking at restructuring the immigration process, adding more personnel andtechnology to assist in gaining control of the border. Specific details on the nature of these changesare not currently available, however. In terms of cargo and supply chain security, the Secretaryannounced a new initiative called "Secure Freight." Though few details are currently available,presumably this initiative builds upon the concepts explored under the Advance Trade Data Initiative(ATDI). Through Secure Freight CBP would seek to obtain additional cargo and supply chain datato supplement the data they currently receive through the submission of advanced electronic cargomanifests. Secretary Chertoff also called for increasing the number of inspections carried out atforeign ports before cargo is loaded on U.S.-bound vessels, increasing the speed of cargo inspections,and for completing the deployment of radiation portal monitors to the nations ports. On July 22, 2005, the Administration also submitted a revised budget request for DHS toreflect the organizational and policy changes recommended by the 2SR. The only change ofrelevance to the BTS agencies identified in this report is the elimination of the Office of the UnderSecretary for BTS. The $10 million requested for this office in the original FY2006 budgetsubmission would be distributed among several accounts in the Departmental Management andOperations Bureau in DHS: $1.3 million for resources management would move to the Office of theChief Financial Officer; $1.3 million for administration, support and functional integration wouldmove to the Office of the Under Secretary for Management; $2.0 million would move to the newPreparedness Directorate for Preparedness Operations; and $3.2 million would move to the Officeof the Secretary and Executive Management for the Policy Office. March 1, 2003, was the effective date for shifting most of the responsibilities from formerdepartments and agencies to the new DHS. While the transfer of functional lines of authority andthe personnel to carry out those functions was relatively straightforward, problems arose with theinitial attempts to ascertain the exact amount of appropriated funds that were actually transferred tothe new department. Comparisons of responsibilities and analyses of requests for increased budgetauthority proved difficult to develop. This was due to the fact that the functions now performed byDHS were previously performed by predecessor agencies, and that some of these functions often hadnon-homeland security purposes prior to the creation of the department. As a result of this, thefunding lines between FY2003 and FY2004 were not identical to lines of functional responsibilitybefore and after the transfer. This reality, in turn, was exacerbated because the basic documentationof appropriations in the President's FY2004 Budget was prepared after the formation of DHS butbefore final enactment of appropriations for the remainder of FY2003. However, with thecompletion of appropriations for FY2004, a baseline has been established, making futureappropriations decisions more easily compared to the previous year's levels. It is too early to tell,however, what the just announced reorganization of the department will mean for next year'sappropriations cycle. The distinction between BTS functions and other functions funded through the same accountlines is somewhat arbitrary. Our analysis in this report attempts to identify a functional classificationfor "border and transportation security." This functional grouping includes the activities of the CoastGuard, a separate agency in DHS which is not part of the Directorate for BTS, but which has anessential role in providing "border and transportation security" as those words are commonlyunderstood. Additionally, some functions contained in other accounts within DHS that are relatedto border and transportation security, such as those aspects of the Science and Technology accountwhich are used to improve security, are excluded from this table because that is not the main functionof the account. We also exclude the grant programs available to localities through the Office forDomestic Preparedness and the Office of State and Local Government Coordination and Preparation,despite the fact that some of these grants may be used to secure transportation assets, because thatis not necessarily the primary function of the grant programs and because they are not an operationalcomponent of border and transportation security within DHS. The tables presented throughout this report show an approximation of costs for border andtransportation security, based on identifying the accounts for which such security functions are theprimary function involved. They do not necessarily reflect DHS breakdowns as to estimatedamounts specifically associated with the Directorate for BTS, nor the absolute total of the fundsbeing spent directly and indirectly on border and transportation security by the department. (6) The Administration's FY2006request groups the requests for the Undersecretary for Border and Transportation; US-VISIT; CBP;ICE; the TSA; the U.S. Coast Guard; and the U.S. Secret Service in Title II Security, Enforcement,and Investigations . In sum, for the purposes of this report, we exclude appropriations for the U.S. Secret Service,the Federal Protective Services, the Office of Science and Technology, ODP, and the Office of Stateand Local Government Coordination and Preparation. Included in this report are CBP, ICE, TSA,the U.S. Coast Guard, and the Undersecretary for BTS within Title II, as well as the appropriationfor FLETC, which is located in Title IV. FLETC has been included because it trains most of the lawenforcement officers that are responsible for BTS within DHS and a compelling argument can thusbe made that they are an operational component of BTS. The Administration requested $30.6 billion for DHS in FY2005; of this amount $19.6 billion,or 64%, is for BTS functions identified in this report. Figure 1 illustrates the relative size of therequest for each of the border and transportation security agencies. Of the $19.6 billion requestedin FY2006, the Coast Guard (USCG) accounts for 40.6%; CBP for 28.5%; ICE for 18.6%; TSA for8.4%; Office of Screening Operations (SCO) for 2.7% and FLETC for 1.1%. Figure 1. FY2006 Request for Border and Transportation Security Source: CRS Analysis of the FY2006 President's Budget, DHS Budget in Brief , and HouseAppropriation Committee tables of Mar. 15, 2005. Notes: Figure 2 illustrates net budget authority, and the amount requested for TSA includes asignificant fee increase proposal that lowers TSA direct appropriation, and thus decreases TSA shareof direct appropriations for DHS. Without including the fee increase (which has been denied in boththe House and Senate-passed versions of H.R. 2360 ) TSA's requested net budgetauthority would be $3,321 million, or 16% of DHS total requested budget authority for FY2006. Figure 2 illustrates the relative size of the appropriation for each of the border andtransportation security agencies in FY2005. Of the $20.3 billion appropriated for FY2005 (includingsupplemental appropriations), USCG accounts for 36.7%; CBP for 27.0%; ICE for 17.7%; TSA for15.8%; US VISIT for 1.6% and FLETC for 1.1%. Figure 2. FY2005 Appropriation for Border andTransportation Security Source: CRS Analysis of P.L. 108-334 . Table 2 provides a basic summary of BTS appropriations for FY2005-FY2006, includingthe FY2005 enacted appropriation, the FY2006 request and the appropriations recommended by theHouse and Senate. Table 2. Summary of Border and Transportation SecurityAppropriations, Functional Presentation (budget authority in millions of dollars) Source: CRS analysis of the FY2006 President's Budget, and DHS Budget in Brief , HouseAppropriation Committee tables of May 20, 2005, House-passed H.R. 2360 and H.Rept.109-79 ; and Senate-reported H.R. 2360 and S.Rept. 109-83 . Note: Totals may not add due to rounding. Amounts in parentheses are non-adds. a. This amount includes a $63 million rescission of funds previously appropriated by P.L. 108-11 . b. Includes $390 million for US-VISIT in the SCO. c. The House-passed H.R. 2360 did not fund the SCO, but did place the US-VISIT,FAST, and NEXUS/SENTRI programs in a new Automation Modernization Office, and leftthe TSA fees proposed for transfer to the SCO in TSA. d. The Senate-passed version of H.R. 2360 also did not approve the proposed SCO, butunlike the House, the Senate does not create a new Automation Modernization Office, andleaves all the programs proposed for transfer to the SCO in their current location: FAST andNEXUS/SENTRI remain in CBP, and several fee based programs remain in TSA. While most observers indicate the need for additional funding in the area of border andtransportation security, the issue for Congress is to determine the appropriate funding level in thecontext of the current budget situation and competing claims for resources. The following sectionsof the report provide detail concerning the operational components of border and transportationsecurity. These include selected appropriations data; issues of potential interest to the conferees; anda discussion of some of the challenges facing the different components of border and transportationsecurity. Securing the nation's borders and transportation systems includes the regulation of importsand exports; enforcement of laws pertaining to immigration and visitation; border-related inspectionof agriculture and livestock; oversight of the security of ports; federal inspection of airlinepassengers and baggage; achieving operational control over the international borders between portsof entry; and establishing comprehensive approaches to improving overall transportation security,including securing infrastructure such as roads and railways. Some observers might question theexclusion of the Bureau of Citizenship and Immigration Services (USCIS) from the discussion ofborder and transportation security. There is no question that homeland security is enhanced by thewell managed administration of routine immigration services. However, such services wouldcontinue to be provided even in absence of any threats to the homeland. Because these immigrationactivities would continue in any event, including the cost of these activities in this analysis woulddistort the true summary costs of border and transportation security. For this reason, we include theenforcement of immigration laws, but not the provision of immigration services, within the purviewof this report. Table 3 provides account level details for the various component border and transportationagencies as identified in this report. Table 3. BTS Appropriations: Select Detail,FY2005-FY2006 (budget authority in millions of dollars) Source: CRS analysis of the FY2006 President's Budget, and DHS Budget in Brief , HouseAppropriation Committee tables of May 20, 2005, House-passed H.R. 2360 and H.Rept.109-79 ; and Senate-reported H.R. 2360 and S.Rept. 109-83 . Note: Totals may not add due to rounding. Amounts in parentheses are non-adds. a. DHS is proposing to create this new office, which would combine the following programs andfees: US-VISIT; FAST and NEXUS/SENTRI from CBP; and Secure Flight, Crew Vetting,Credentialing Startup, TWIC, Registered Traveler, HAZMAT, and Alien Flight School fromTSA. The House Appropriation Committee denies the creation of the SCO. However, H.R. 2360 does move FAST and NEXUS/SENTRI from CBP to the BTSmanagement level, and combines these two programs with USVISIT in a new AutomationModernization office. Programs from TSA proposed for transfer to SCO would remain inTSA under H.R. 2360 . The Senate-reported version of H.R. 2360 would alsodeny the creation of the SCO, and would also leave funding for FAST and NEXUS/SENTRIin CBP, and funding for the TSA programs proposed for transfer to the SCO would remainin TSA. b. United States Visitor & Immigrant Status Indicator Project. c. Fees included TWIC, HAZMAT, Registered Traveler, and Alien Flight School Checks. Both the House-passed and Senate-reported versions of H.R. 2360 would leave theseprograms and their fees in TSA. d. Includes $124 million in funding provided by P.L.109-13 , the Emergency SupplementalAppropriations Act. e. Includes a $63 million rescission in P.L.108-11 and a $76 million rescission in P.L.109-13 from the CBP salaries and expenses account. f. Includes $52 million in supplemental funding provided by P.L.109-13 . g. Fees included COBRA, Land Border, Immigration Inspection, Immigration Enforcement, andPuerto Rico. h. Includes $454 million in supplemental funding provided by P.L.109-13 . i. Fees included Exam, Student Exchange and Visitor Fee, Breached Bond, Immigration User, LandBorder. j. Reflects the $85 million rescission from ICE in P.L.109-13 . k. Fees included TWIC, HAZMAT, Registered Traveler, and Alien Flight School Checks, whichwere included in the proposed SCO in the President's request, but would be retained in TSA as recommended by H.Rept. 109-79 . l. DHS is proposing to transfer the Research and Development account from TSA to the Directorateof S&T. m. Aviation Security Capital Fund, used for installation of Explosive Detection Systems at airports. n. In FY2006, DHS proposes a $3 increase in the passenger security fee for one-way and multi-legflights, generating $1.56 billion in new revenue. There is a discrepancy between theAdministration's budget documents and the committee tables concerning the aviation securityfee offset amount. The Administration's budget documents report the FY2005 enactedamount as $2,330 million, while the committee tables report the FY2005 enacted amount as$1,890 million. For FY2006, with the requested fee increase the Administration shows$3,889 million in offsetting aviation security fees, while the committee tables show $3,670million, as scored by CBO. The House Appropriations Committee did not approve theproposed fee increase, and recommends an offset of $1,990 million, and a net appropriationof $3,263 million for TSA. Table 3 reflects the amounts contained on the committee tables. o. Includes $112 million in supplemental funding provided by P.L.109-13 . p. Does not Include an additional $34 million transfer of funds from the Department of Defense tothe USCG pursuant to P.L. 108-287 . Includes $49 million in supplemental funding providedby P.L.109-13 . q. $16 million rescission pursuant to P.L. 108-334 . r. DHS is proposing to transfer the Research, Development, Tests and Evaluation account from theUSCG to the S&T Office. As a part of the FY2006 request, the Administration is proposing to create a new SCO whichwill coordinate DHS' efforts to screen people (and to some extent cargo) as they enter and movethroughout the country. Programs proposed to be moved to this office include the US Visitor andImmigrant Status Indicator Project (US-VISIT); Free and Secure Trade (FAST) andNEXUS/SENTRI, from CBP; Secure Flight, Transportation Worker Identification Credential(TWIC), Registered Traveler, Hazardous Materials (HAZMAT) background checks, and the AlienFlight School background checks program from TSA. FY2006 Request for SCO. The Administrationhas requested $846 million in gross budget authority for SCO for FY2006. The request includes$390 million for the US-VISIT program (7) (an increase of $50 million over the enacted FY2005 amount), $94million for Secure Flight (8) (an increase of $49 million over the enacted FY2005 amount), $7 million for the driver registrationcomponent of FAST, $14 million for NEXUS/SENTRI, and $20 million for the stand up of theCredentialing coordination office. In addition to appropriated activities, SCO will oversee severalfee funded activities including $245 million for TWIC and other TSA credentialing activities; $23million for the Registered Traveler program; $44 million for HAZMAT checks; and $10 million forAlien Flight School background checks. The net requested appropriation for SCO is $525 million. House-Passed H.R. 2360. Thecommittee notes that while the SCO office "may have merit," a broader justification is required forit than what was given by the Department. The committee therefore denies this consolidation andappropriates no funds for SCO. Instead, the committee establishes a new Office of TransportationVetting and Credentialing within TSA to oversee the Secure Flight, Crew Vetting, RegisteredTraveler, TWIC, HAZMAT, and Alien Flight School programs. US-VISIT, FAST, andNEXUS/SENTRI are funded within a new BTS Automation Modernization office. (9) Senate-Passed H.R. 2360. TheSenate-passed version of H.R. 2360 would also deny the creation of the SCO. Incontrast to the House-passed version of H.R. 2360, the Senate-reported version would leave fundingfor the FAST and NEXUS/SENTRI programs within CBP rather than placing them within a newBTS Automation Modernization office. The Senate-passed version of the bill would, like theHouse-passed version, leave funding for the TSA programs proposed for transfer to the SCO, withinTSA. Table 4. SCO Detail, FY2005-FY2006 (budget authority in millions ofdollars) Source: CRS analysis of the FY2006 President's Budget, DHS Budget in Brief , HouseAppropriations Committee tables of May 20, 2005, and S.Rept. 109-83 . Note: Totals may not add due to rounding. Amounts in parentheses are non-adds. a. Includes $390 million for US-VISIT in the SCO. b. The House-passed H.R. 2360 did not fund the SCO, but did place the US-VISIT,FAST, and NEXUS/SENTRI programs in a new Automation Modernization Office, and leftthe TSA fees proposed for transfer to the SCO in TSA. c. The Senate-passed version of H.R. 2360 also did not approve the proposed SCO, butunlike the House, the Senate does not create a new Automation Modernization Office, andleaves all the programs proposed for transfer to the SCO in their current location: FAST andNEXUS/SENTRI remain in CBP, and several fee based programs remain in TSA. Issues for Congress. The proposal for the creationof the SCO can be traced to Homeland Security Presidential Directive 11 (HSPD-11), which was oneof the Administration's responses to the 9/11 recommendations. HSPD-11 directed the improvedcoordination of "comprehensive terrorist-related screening procedures." (10) The goal of the SCO,according to the FY2006 DHS Congressional Budget Justifications, is to leverage the unique aspectsof each of the screening programs chosen to be incorporated into the SCO in order to enhance anoverall screening policy which would be directed by the new credentialing office within the SCO. Both House and Senate appropriators have denied this consolidation in their Appropriation Reports. There is not a significant amount of detail in the request about the operations of the SCO. One potential issue concerns the operational aspects of each of the programs proposed for transferto the SCO. How much of the program would actually be transferred to SCO? Is it simply thefunding, the policy planning, or would the whole function (and the people who carry out thatfunction) be transferred as well? Recent testimony by CBP Commissioner Bonner, and USCISDirector Aguirre indicated that there remains some uncertainty concerning which operationalfunctions should remain at the agency level and which functions could be performed by theSCO. (11) Coordination would be a key challenge for the SCO, particularly coordination between theSCO and the other agencies of the BTS Directorate. Other challenges recently identified by theGovernment Accountability Office (GAO) include defining interrelationships and commonalitiesamong the programs proposed for transfer to the SCO; clearly delineating roles and responsibilities;and identifying data needs. In addition, existing issues and concerns confronting some of theprograms proposed for transfer to SCO (such as Secure Flight, and TWIC) would still have to beaddressed. (12) CBP is responsible for security at and between ports-of-entry along the U.S. border. Since9/11, CBP's primary mission is to prevent the entry of terrorists and the instruments of terrorism. CBP's on-going responsibilities include inspecting people and goods to determine if they areauthorized to enter the United States; interdicting terrorists and instruments of terrorism; interceptingillegal narcotics, firearms, and other types of contraband; interdicting unauthorized travelers andimmigrants; and enforcing more than 400 laws and regulations at the border on behalf of more than60 government agencies. CBP is comprised of the inspection functions of the legacy CustomsService, INS, and the APHIS; the Office of Air and Marine Interdiction; and the Border Patrol. President's Request. The Administration hasrequested an appropriation of $6,717 million in gross budget authority for CBP in FY2006. Thisrepresents a 4% increase over the enacted FY2005 level (including supplemental appropriations) of$6,450 million. The Administration is requesting an appropriation of $5,575 million in net budgetauthority for CBP, representing a 4% increase over the FY2005 enacted level of $5,371 million. Therequest includes the following program increases (which are discussed later in this report): $125 million for weapons of mass destruction (WMD) detectiontechnology; $37 million for Border Patrol staff; $31.7 million for long range radar for Air and MarineOperations; $20 million for Border Patrol aircraft replacement; $19.8 million for the America Shield Initiative; $8.2 million for the Customs-Trade Partnership Against Terrorism(C-TPAT); $5.4 million for the Container Security Initiative (CSI); $5.4 million for enhancements to the Automated Targeting System(ATS); $3.2 million for the Homeland Security Data Network; $3 million for Border Patrol's Automated Biometric Identification System(IDENT) and the Federal Bureau of Investigation's Integrated Automated Fingerprint IdentificationSystem (IAFIS); $2 million for the Immigration Advisory Program (IAP);and $1 million for the Arizona Border Control Initiative(ABCI). House-Passed H.R. 2360. The Houseappropriators added $210 million to both the gross and net budget authorities for CBP in order tocover a range of programs. The House-passed H.R. 2360 provides a net appropriationfor CBP of $5,785 billion, an 8% increase over the FY2005 enacted level and a 4% increase overthe President's FY2006 request. (13) House-passed H.R. 2360 fully funds all of the above listedrequested increases, and provides an additional $150 million above the request for Border Patrolstaffing. However, the House makes unavailable the $1 million requested increase for the IAP untilCBP submits the report on the program that has been overdue since January 1. Senate-Passed H.R. 2360. TheSenate-passed version of H.R. 2360 provides a net appropriation of $ 5,998 million forCBP, representing an increase of $213 million or nearly 4% compared to the amount provided bythe House in H.R. 2360; an increase of $423 million or nearly 8% as compared to the FY2006request; and an increase of $627 million or nearly 12% as compared to the FY2005 enacted level. The Senate-passed version of H.R. 2360 funds the $125 million requested increase for radiationportal monitors (RPMs) under the S&T Directorate, rather than under CBP; and provides anadditional $241 million for Border Patrol staffing. Amounts provided for CBP in Senate-passedH.R. 2360 include $21 million in FAST and NEXUS/SENTRI funding that had been requested fortransfer to the Administration-proposed SCO (the House-passed version of H.R. 2360 placed thisfunding in a new BTS-level Automation Modernization Account). Table 5 presents account-level detail for CBP. CBP's appropriation is provided through fouraccounts: Salaries and Expenses; Air and Marine Operations; Automation Modernization; andConstruction. The bulk of CBP's appropriation is funded through the Salaries and Expenses account,which includes salaries and expenses for Air and Marine Operations. Table 5. CBP Account Detail,FY2005-FY2006 (budget authority in millions of dollars) Source: CRS analysis of the FY2006 President's Budget, and DHS Budget in Brief , HouseAppropriation Committee tables of May 20, 2005, House-passed H.R. 2360 and H.Rept.109-79 ; and Senate-reported H.R. 2360 and S.Rept. 109-83 . Note: Totals may not add due to rounding. Table 6 provides sub-account level detail for the CBP Salaries and Expenses Account. Table 6. CBP Selected Sub-Account LevelDetail (budget authority in millions of dollars) Source: CRS analysis of the FY2006 President's Budget, and DHS Budget in Brief , HouseAppropriation Committee tables of May 20, 2005, House-passed H.R. 2360 and H.Rept.109-79 ; and Senate-reported H.R. 2360 and S.Rept. 109-83 . Note: Totals may not add due to rounding. The House and Senate versions of H.R. 2360 are very similar in terms of theamounts provided for CBP. The main differences are illustrated by Table 6 . They include amountsprovided for C-TPAT and FAST, for Inspection and Technology Investments, for Border ControlBetween Ports of Entry (Border Patrol), and for Air and Marine Operations S&E. The Senateversion of H.R. 2360 provides $75 million for C-TPAT and FAST in this account. However, while the House and Senate versions of the bill would actually provide the same amountfor C-TPAT and FAST, the House version funds the FAST program under a BTS-level AutomationModernization account, while the Senate funds FAST within CBP's S&E account. For Inspectiontechnology, the differences between the House and Senate can be accounted for by the fact that theSenate funds the research and development of new RPMs and other non-intrusive inspection (NII)technology within the research and development accounts of the S&T Directorate, while the Houseversion of H.R. 2360 funds this within CBP. Between Ports of Entry, both the House and Senateadded funding to the President's request to accommodate the hiring, training, and deployment of1,000 additional Border Patrol Agents. The Senate, however, added $136 million more for thispurpose than the House because it also included funding for support positions, relocation costs, andinformation technology costs. CBP Issues for Congress. Potential CBP issuesfor Congress include cargo and container security; targeting and risk assessments; cargo inspectiontechnology; air and marine operations; the number of border patrol agents; IDENT/IAFISintegration; ABCI; and the America Shield Initiative. Cargo and Container Security. CBP's cargo securitystrategy includes two significant programs: the CSI, and C-TPAT. CSI is a CBP program thatstations CBP officers in foreign sea ports to target marine containers for inspection before they areloaded onto U.S.-bound vessels. The FY2006 request includes an additional $5.4 million for CSIto support the expansion of CSI activities in seven new ports in seven countries. House-passed H.R. 2360 fully funds the requested increase, recommending a total of nearly $139million for CSI in FY2006. However, the House Committee notes that it has not yet received areport detailing the spending and planning projections for CSI for FY2005-FY2009, and directs CBPto submit the report as soon as possible. The committee also includes a provision in H.R. 2360 withholding $70 million until this report is submitted as directed by H.Rept.108-541 . House-passed H.R. 2360 fully funds the request for CSI. The SenateCommittee fully funds the request for CSI, but notes its concern about CSI host-country cooperationand directs CBP to submit a report to the committee no later than February 18, 2006, detailingspecific steps the Department is taking to address any reluctance on the part of foreign countries tofully cooperate. C-TPAT is a public-private partnership aimed at securing the supply chain from point oforigin through entry into the United States. The FY2006 request includes an increase of $8.2 millionfor C-TPAT to be used for travel and the purchase of equipment and supplies for Supply ChainSpecialists to conduct an increased number of C-TPAT security profile validations. House-passed H.R. 2360 fully funds the request for C-TPAT. The Senate-passed version of H.R. 2360fully funds the request for C-TPAT. S.Rept. 109-83 directs CBP to submit a report by February 18,2006, providing detailed performance measures, human capital plans, and any plans or actions takenthat would address the recommendations made by GAO's recent report on the program. The SenateCommittee voiced its concern over standards for both the CSI and C-TPAT programs. Thecommittee directs CBP to submit a report by February 18, 2006 detailing: (1) the most rigorousperformance measures and indicators for both the CSI and C-TPAT programs; (2) a human capitalplan; and (3) plans currently in place describing the goals, objectives, and detailed implementationstrategies of the programs. Finally, the report should include results of the programs for FY2004 andFY2005, and should address the implementation of the recommendations made by GAO in its March2005 report. (14) Cargo Inspection Technology. The FY2006Administration request for CBP includes an increase of $125 million for technology to detect WMD. This request includes $77 million for the purchase of additional RPMs, and the purchase of nextgeneration RPMs. House-passed H.R. 2360 fully funds the $188 million request forcargo inspection technology. H.Rept. 109-79 directs CBP to submit two reports no later thanJanuary 16, 2006: (1) the current status and investment plan for RPMs through FY2010; and (2) theprojected spending, maintenance and replacement of large-scale non-intrusive inspection (NII)equipment (for example, truck x-ray machines, and vehicle and cargo inspection systems) forFY2006-FY2010. Senate-passed H.R. 2360 fully funds the requested increase of $125million for RPMs, but funds the request under the S&T Directorate rather than under CBP, as thecommittee believes that S&T is the appropriate organization to test, pilot, and direct procurementof RPMs. Air and Marine Operations (AMO). With the FY2005Appropriation, AMO was transferred to CBP, where it is now located. The FY2006 request includesan increase of $31.7 million for long range radar (LRR) coverage for AMO. This increase isrequested to finance a 50% share of the cost (the other 50% share to be covered by the Departmentof Defense) of a primary Federal Aviation Administration (FAA) LRR feed that FAA intends todiscontinue using. House-passed H.R. 2360 fully funds the request for AMO, andprovides an additional $60 million above the request for AMO: $14 million for the acquisition ofmanned covert surveillance aircraft, $15 million for the acquisition and deployment of palletizedsensor packages for the P-3 Slick aircraft, $16 million for the P-3 service-life extension program, and$5 million for additional staff and equipment. The Senate-passed version of H.R. 2360 would fullyfund the requested increase for AMO, and provide an additional $33 million in total for AMO: $5million for staff for the fourth Northern Border airwing base in Great Falls, Montana; $13 millionfor the operations of the fourth Northern Border airwing base; and $15 million for the P-3 Slickpalletized sensor packages. Increase in Border Patrol Agents. CBP is proposingto add 210 agents to the U.S. Border Patrol (USBP) workforce in FY2006 to backfill positionsvacated along the Southwest border. These vacancies were the result of agents being transferred outfrom the Southwest border in order to fulfill the requirement enacted in the USA PATRIOT Act( P.L. 107-56 , §402) to triple the number of agents assigned to the Northern border. This increaseis well below the 2,000 additional agents authorized by the Intelligence Reform and TerrorismPrevention Act of 2004 ( P.L. 108-458 , §5202). Given the disparity between the authorization andthe President's request, a possible issue for Congress may be what the appropriate level of staffingfor the Border Patrol is in order to achieve its mission of detecting and interdicting the entry ofterrorists, WMD, and unauthorized aliens between ports of entry. House appropriators haveaddressed this issue by adding $150 million to the President's request, which, combined with the$124 million available in the FY2005 supplemental appropriation ( P.L. 109-13 ), will allow theBorder Patrol to hire, train and deploy 1,500 agents to its workforce by the end of FY2006. (15) The Senate AppropriationsCommittee concurs with the House in adding 1,500 agents to the USBP in FY2006 and increasesthe President's request by $241 million. However, the Senate also included funding for 220 missionsupport positions, relocation costs, and information technology costs in its appropriation, resultingin a $136 million increase over the appropriation proposed by the House. Additionally, the Senateincluded $20 million for upgrading and modernizing the Border Patrol's fleet of aircraft, includingthe purchase of 12 single engine helicopters. (16) IDENT/IAFIS. According to CBP, the integration ofthe Border Patrol's Automated Biometric Identification System (IDENT) and the Federal Bureau ofInvestigation's Integrated Automated Fingerprint Identification System (IAFIS) is progressing andinteroperable IDENT/IAFIS workstations have been deployed to all USBP stations. This wouldseem to address some of the concerns about the slow pace of the integration project raised by Houseappropriators in FY2005. (17) The president's request includes an increase of $3 million for thesystem and notes that BTS has assumed ownership for the integration project. While the integrationof the two biometric databases has given USBP agents access to the FBI's criminal records, leadingto an 8.5% increase in the identification of criminal aliens, a possible issue for Congress may be theUSBP's apparent lack of access to the name-based Terrorist Watchlist at their stations. This may beof concern due to recent Congressional testimony by DHS then acting Secretary Admiral James Loythat Al-Qaeda is considering infiltrating the Southwest border due to a belief that "illegal entry ismore advantageous than legal entry for operational security reasons." (18) House appropriatorsexpressed frustration with CBP that the report they requested in the FY2005 appropriation bill onthe IDENT/IAFIS integration project has not been delivered yet. They directed DHS to submit thereport by July 1, 2005. The Senate Appropriations Committee funds the President's request anddirects DHS to submit the report on the project that was requested in FY2005 which continues tobe outstanding. The Senate also included $3 million in its amount to allow CBP to reimburse theUS-VISIT program for its use of the IDENT/IAFIS system. (19) Arizona Border Control Initiative (ABCI). Inresponse to a continuing high level of apprehensions in the Tucson sector, the ABCI was launchedon March 16, 2004. ABCI is a multi-disciplinary initiative that seeks to coordinate federal, state,and local authorities to control the Arizona border. ABCI is specifically aimed at stoppingcross-border smuggling operations by detecting, arresting, and deterring all groups seeking to bringpeople, drugs, weapons, and other merchandise into the country illegally. Two hundred additionalpermanent border patrol agents and 60 special operations agents trained for search and rescueoperations were assigned to the Tucson sector over the summer of 2004, bringing the total numberof agents there to approximately 2,000. According to DHS, in the first six months of the ABCI,apprehension of unauthorized aliens increased 56% from apprehensions during the same period ofthe previous year. From March 16, 2004 to September 7, 2004, 351,700 unauthorized aliens wereapprehended compared to 225,108 unauthorized aliens during the same period in 2003. CBPproposes an increase of $1 million to continue this multi-disciplinary program in FY2006, thoughmost funding for the program will come from ICE. House appropriators support this multi-agencyapproach to protecting the border and fund the President's request and direct CBP to work closelywith the Tohono O'odham Nation along the Arizona border to ensure that the Nation is fully awareof CBP's actions on their territory. (20) The Senate Appropriations Committee fully funds the President'srequest. America Shield Initiative. CBP proposes an increaseof $19.8 million for the America Shield Initiative (ASI), formerly known as the IntegratedSurveillance Intelligence System (ISIS). ASI integrates Remote Video Surveillance camera systems,sensors, and the Integrated Computer Assisted Detection (ICAD) database into a multi-facetednetwork capable of detecting illegal entries in a wide range of climate conditions. The requestedFY2006 funding will be used to deploy surveillance assets to high-priority areas such as Tucson,Yuma, and El Paso on the southwest border, and Blaine, Spokane, Buffalo, and Swanton (Vermont)on the northern border. House appropriators fully fund the President's request. However, the Housecites its concern with the contracting problems identified in the ISIS program by the GeneralServices Administration Inspector General and requests a report by January 16, 2006 on theseproblems and the specific measures taken by CBP to address them. Additionally, the House expectsDHS to consult with the Appropriations Committee as it searches for a contractor to oversee theintegration of new technologies into the existing ASI system. The House also notes that it expectsthe ASI will permit the Border Patrol to gather, analyze, and share information regarding thenumbers and types of intrusions by creating a database. To this end, the House requests a report onthe specific performance metrics used by the ASI program by January 16, 2006. (21) The Senate AppropriationsCommittee fully funds the President's request and encourages program managers to exploreoff-the-shelf solutions as they develop the program. Construction. The President requested $93 millionfor this account, which covers the construction of the tactical infrastructure that provides physicalimpediments to illegal entry. Construction under this account includes the erection of lights, fences,and vehicle barriers, as well as the creation of access roads for immigration enforcement staff. TheHouse Appropriations Committee fully funds the President's request. The Senate AppropriationsCommittee increases the President's request by $218 million, to $311 million. Included in thisincrease is $82 million for the construction of facilities to accommodate the 1,500 additional USBPagents that are included in the bill, as well as $55 million to complete the fence in the San DiegoSector and $55 million to expand the USBP tactical infrastructure in the Tucson Sector. The Senatealso directs DHS to submit detailed spending plans for these construction projects. (22) ICE focuses on enforcement of immigration and customs laws within the United States, aswell as investigations into such activities as fraud, forced labor, trade agreement noncompliance,smuggling and illegal transshipment of people and goods, as well as vehicle and cargo theft. Inaddition, this bureau oversees the building security activities of the Federal Protective Services(FPS), formerly of the General Services Administration; and the Federal Air Marshals Service(FAMS) transferred to ICE from TSA in August of 2003. The Office of Air and Marine Interdictionwas transferred from ICE to CBP. Therefore the totals for ICE do not include Air and MarineInterdiction funding now included under CBP. The bureau combined the investigations and intelligence functions of the U.S. CustomsService and the former Immigration and Naturalization Service, the air and marine interdictionfunctions of those agencies, and the immigration detention and removal programs, as well as theoperations of FPS. ICE conducts investigations to develop intelligence to reduce illegal entry intothe United States, and is responsible for locating and removing illegal aliens by inspecting places ofemployment for undocumented workers. ICE is responsible for identifying and finding persons whohave overstayed their visas, and the Bureau also develops intelligence to combat terrorist financingand money laundering, and to enforce export laws against smuggling and fraud. President's Request. The Administration hasrequested an appropriation of $4,364 million in gross budget authority for ICE in FY2006. Thisrepresents a 4% increase over the enacted FY2005 level (including supplemental appropriations) of$4,215 million. The Administration is requesting an appropriation of $3,648 million in net budgetauthority for ICE in FY2006, representing a 3% increase over the FY2005 enacted level of $3,537million. The request includes the following program increases : $105 million for the Office of Investigations; $90 million for custody management and detentionbedspace; $43.7 million for ICE's Organized Crime and Drug Enforcement Task Force(OCDETF) activities; $25 million for ABCI and Interior Repatriation; $24 million for detention and removal; $18 million for temporary worker worksite enforcement; $11.3 million for the Homeland Security Data Network; $9.9 million for the Federal Air Marshals (FAMs); $8.8 million for Fugitive Operations; $5.6 million for Institutional Removal Program (IRP); $5.4 million for Alternatives to Detention; $5 million for Visa Security; and $3.5 million for legal resources. House-Passed H.R. 2360. House-passed H.R. 2360 provides $3,830 million for ICE, an increase of $182 million,or 5% over the President's FY2006 request and $243 million, or 8% above FY2005 enacted. Of theappropriated amount, $5 million is to be used to implement §287(g) of the Immigration andNationality Act (INA), (23) which allows the Attorney General (24) to enter into agreementswith states and local governments to allow their employees to perform functions of immigrationofficers; and $11.2 million is designated to fund or reimburse other federal agencies for the cost ofcare, and repatriation of smuggled aliens. In addition, House-passed H.R. 2360 wouldwithhold $20 million of the money appropriated to DHS' Office of the Secretary and Executivemanagement until the Secretary of DHS submits a report to the Appropriations Committee outliningan immigration enforcement strategy to reduce the number of unauthorized aliens in the UnitedStates by 10% each year. Similarly, of the ICE salaries and expenses, House-passed H.R.2360 would withhold $50 million of the appropriated funds until the Assistance Secretaryof ICE submits to the Appropriations Committee a national detention management plan. Additionally, H.Rept. 109-79 recommends fully funding the President's requests andrecommends an additional : $90 million for 1,920 detention beds; $16 million for 60 fugitive operations team positions; (25) $18 million for 100 Institutional Removal Programagents; $10 million for 49 Alternatives to Detention positions; $19 million for 150 criminal investigators; $18 million for 200 Immigration Enforcement Agents;and $800,000 for the Cyber Crimes Center. Senate-Passed H.R. 2360. Senate-passed H.R. 2360 provides $3,808 million for ICE, an increase of $160 millionand 4% over the President's request. During floor debate, two amendments were agreed to thatimpact ICE funding directly. Amendment 1139 added $2 million to the Salaries and Expensesaccount and required that $1 million be spent on improving the information being entered into theNational Crime Information Center database. Amendment 1140 earmarks $5 million for thefacilitation of agreements between ICE and local law enforcement agencies under INA 287(g). Ofthe overall appropriated amount, $11.2 million is designated to fund or reimburse other federalagencies for the cost of care, and repatriation of smuggled aliens. Additionally, S.Rept. 109-83 recommends an increase of: $77.4 million for 32 positions (16 full-time equivalents (FTEs)) for CustodyManagement; $4.8 million for the Visa Security Program; $24.9 million for 60 fugitive operations team positions (30FTEs); $23.4 million for 136 Institutional Removal Program agents (69FTEs); $15.4 million for 62 Alternatives to Detention positions (31FTEs); $37 million for 300 investigator positions for immigration investigations (150FTEs); $18 million for 200 (100 FTEs) Immigration Enforcement Agents;and $25 million for the ABCI; $3.5 million for additional attorney personnel. Table 7. ICE Account Detail (budget authority in millions ofdollars) Source: CRS analysis of the FY2006 President's Budget, and DHS Budget in Brief , HouseAppropriation Committee tables of May 20, 2005, House-passed H.R. 2360 and H.Rept.109-79 ; and Senate-reported H.R. 2360 and S.Rept. 109-83 . Note: Totals may not add due to rounding. Table 8. ICE Selected Sub-Account LevelDetail (budget authority in millions of dollars) Source: CRS analysis of the FY2006 President's Budget, and DHS Budget in Brief , HouseAppropriation Committee tables of May 20, 2005, House-passed H.R. 2360 and H.Rept.109-79 ; and Senate-reported H.R. 2360 and S.Rept. 109-83 . Note: Totals may not add due to rounding. ICE Issues for Congress. There are several issueswithin the ICE appropriation that may be of interest to Congress, including but not limited to thesevere financial management problems at the agency over the past several years which have led tohiring and training freezes; the lack of detention bedspace which has resulted in some unauthorizedaliens being released; and whether the agency has enough investigators to adequately pursue its manyvaried missions. The following sections outline the main issues identified within the President'srequest and the House and Senate Appropriations Committee Reports. Financial Management at ICE. ICE inherited itsfinancial organization and systems from the former INS. An independent audit of ICE's financialstatements concluded that the agency's accounting records were inadequately maintained duringFY2004. The situation was characterized as especially grave regarding intra-departmental andintra-governmental agreements and transactions, costs, and budgetary transactions. This requiredextensive reconciliation and adjustment at the end of the fiscal year, which ICE was unable tocomplete. The report noted that ICE had served as the accounting services provider for several otherDHS agencies (26) whilesimultaneously experiencing significant turnover among its financial management staff. This ledthe agency to fall "seriously behind in basic accounting functions, such as account reconciliations,analysis of material abnormal balances, and proper budgetary accounting." Additionally, serving asthe accounting provider for other agencies led ICE to experience budget shortfalls due to tardyreimbursements for expenses it provided to cover other agencies' costs. This budget shortfall forcedthe agency into a freeze on hiring and non-mission critical expenditures, including training. Theauditors concluded that DHS should immediately address the "void in ICE's financial managementinfrastructure" in order to fix the lack of oversight and controls that led ICE to become anti-deficientor that prevented DHS management from knowing whether ICE was anti-deficient. (27) ICE recently requesteda $500 million reprogramming for FY2005 to cover funding shortfalls within the agency. (28) House appropriatorsexpressed concern and disappointment over the continuing financial troubles at ICE. The committeenotes that the agency has been forced to employ drastic cost-cutting measures that the committeebelieves adversely limited ICE's operations. The committee directs DHS to provide monthly reportson ICE's financial condition. (29) Office of Investigations/Immigration Functions. TheOffice of Investigations (OI) in ICE focuses on a broad array of criminal and civil violationsaffecting national security such as illegal arms exports, financial crimes, commercial fraud, humantrafficking, narcotics smuggling, child pornography/exploitation, worksite enforcement, andimmigration fraud. ICE special agents also conduct investigations aimed at protecting criticalinfrastructure industries that are vulnerable to sabotage, attack or exploitation. (30) The Homeland SecurityAct of 2002 ( P.L. 107-296 ) abolished the INS and the U.S. Customs Service, and transferred mostof their investigative functions to ICE effective March 1, 2003. There are investigative advantagesto combining the INS and Customs Services as those who violate immigration laws often areengaged in other criminal enterprises (e.g., alien smuggling rings often launder money). Nonetheless, concerns have been raised that not enough resources have been focused oninvestigating civil violations of immigration law, and that ICE resources have beendisproportionately focused on terrorism and the types of investigations performed by the formerCustoms Service. (31) The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 , §5203)authorized for FY2006, subject to appropriations, the addition of at least 800 new investigators toinvestigate violations of immigration law. The $1,496 million requested in the President's budgetfor the OI (32) includesincreases in the base funding for two groups responsible for immigration enforcement, the VisaSecurity Unit (VSU) (33) and Temporary Worker Worksite Enforcement, and includes a total of 148 new positions for theseunits. The President's budget requests an additional $18 million for temporary worker worksiteenforcement to add 143 positions responsible for investigating and prosecuting violations underexisting immigration law for hiring unauthorized aliens, and supporting and implementing theprovisions of possible temporary worker legislation. The President's request also includes anincrease of $5 million to add five new officers to the VSU, open a new overseas location, and expandtraining programs. H.Rept. 109-79 recommends $19 million to expand the Visa Security Program,and S.Rept. 109-83 recommends an additional $4.8 million for nine positions for an additional VSU. Furthermore, H.Rept. 109-79 recommends an additional $18 million over the President's request for200 new Immigration Enforcement Agents (IEAs). (34) H.Rept. 109-79 also recommends $19 million for an additional150 criminal investigators. (35) S.Rept. 109-83 recommends an additional $37 million for 300new immigration investigations positions, and $18 million for 200 IEAs, but does not provide afunding increase for temporary workers worksite enforcement. Detention and Removal Operations. Detention andRemoval Operations (DRO) in ICE provides custody management of aliens who are in removalproceedings or who have been ordered removed from the United States. (36) DRO is also responsiblefor ensuring that aliens ordered removed actually depart from the United States. Many contend thatDRO does not have enough detention space to house all those who should be detained. A study doneby DOJ's Inspector General found that almost 94% of those detained with final orders of removalwere deported while only 11% of those not detained who were issued final orders of removal left thecountry. (37) Concernshave been raised that decisions on which aliens to release and when to release them may be basedon the amount of detention space, not on the merits of individual cases, and that the amount of spacemay vary by area of the country leading to inequities and disparate policies in different geographicareas. The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 , §5204)authorized, subject to appropriations, an increase in DRO bed space of 8,000 beds for each year,FY2006-FY2010. The President's budget requests an increase for FY2006 of $90 million for 1,920new beds. H.Rept. 109-79 recommends $90 million for 1,920 new beds, (38) and House-passed H.R.2360 would withhold $50 million of the appropriated funds for ICE salaries and expenses until theAssistant Secretary of ICE submits to the Appropriations Committee a national detentionmanagement plan. S.Rept. 109-83 recommends $77.4 million for 32 positions for CustodyManagement, and 2,240 new beds. Alternatives to Detention. Due to the cost of detainingaliens, and the fact that many non-detained aliens with final orders of removal do not leave thecountry, there has been interest in developing alternatives to detention for certain types of aliens whodo not require a secure detention setting. In 2004, ICE began a pilot program, the IntensiveSupervision Appearance Program (ISAP), for low-risk, non-violent offenders. (39) The program, providesless restrictive alternatives to detention, using such tools as electronic monitoring devices (e.g., anklebracelets), home visits, work visits, and reporting by telephone, to monitor aliens who are out onbond while awaiting hearings during removal proceedings or the appeals process. (40) H.Rept. 109-79 recommends $10 million and 49 new positions for this program, and S.Rept. 109-83 recommends$15.4 million and 32 new positions. Interior Repatriation. ICE proposes a $25 millionincrease for the Interior Repatriation program. On June 9, 2004 the White House announced it hadreached agreement with the Mexican government to begin piloting the Interior Repatriation Program,which aims to reduce the number of aliens who immediately try to cross back into the United Statesby flying them into the interior of Mexico. Due to constitutional constraints in Mexico, theapprehended aliens' return to the interior must be strictly voluntary and the willingness of theirparticipation must be certified by Mexican consular officers. (41) In order to continue theprogram in FY2006, the Administration is requesting $39.3 million; $25 million for CustodyManagement and $14.3 for Transportation and Removal. This represents a $25 million increasefrom the $14 million spent on the pilot program in FY2005. H.Rept. 109-79 directs theCommissioner of CBP to report no later than January 16, 2006 on the performance of the InteriorRepatriation Program, including its cost, the number of agents required for its functioning, and therelevant statistics related to the number of aliens repatriated and any data on their recidivism. State and Local Law Enforcement. (42) Currently the INAprovides limited avenues for state enforcement of both its civil and criminal provisions. One of thebroadest grants of authority for state and local immigration enforcement activity stems from INA§287(g), which authorizes the Attorney General to enter into a written agreement with a state, or anypolitical subdivision to allow an officer or employee of the state or subdivision, to perform a functionof an immigration officer in relation to the investigation, apprehension, or detention of aliens in theUnited States. The enforcement of immigration by state and local officials has sparked debateamong many who question what the proper role of state and local law enforcement officials shouldbe in enforcing federal immigration laws. Many have expressed concern over proper training, finiteresources at the local level, possible civil rights violations, and the overall impact on communities. Some localities, for example, even provide "sanctuary" for illegal aliens and will generally promotepolicies that ensure such aliens will not be turned over to federal authorities. Nonetheless, someobservers contend that the federal government has scarce resources to enforce immigration law andthat state and local law enforcement entities should be utilized. Both Senate-passed H.R. 2360 and House-passed H.R. 2360 would appropriate $5 million toimplement INA §287(g). Student Exchange and Visitor Program (SEVP). TheStudent Exchange and Visitor Program (SEVP) in ICE is responsible for maintaining the web-basedforeign student monitoring system known as the Student and Exchange Visitor Information System(SEVIS). (43) Theoperating budget for SEVP comes from fees (44) collected from potential foreign students (i.e., those applying forstudent visas, or to change their nonimmigrant status to student), and from institutions seekingcertification to participate in SEVIS. (45) Schools have reported technical difficulties operating SEVIS,and the lack of consistent information and guidance from ICE. (46) The President is requestingan additional appropriation of $19.7 million for the SEVP in FY2006 to maintain staffing levels, andincrease spending on enhancements such as incorporating historical data, enhancing batch modeprocessing into SEVIS, and providing more training and outreach to the schools. This fee-basedincrease was included in H.R. 2360 as passed by the House or Senate. Office of Principal Legal Advisor. The Office ofPrincipal Legal Advisor (OPLA) is responsible for litigating alien custody and removal casesgenerated by ICE, CBP, and USCIS before DOJ's Executive Office of Immigration Review (EOIR). The OPLA also provides legal advice to operational components in ICE. The President's budgetrequests an increase of $3.5 million for OPLA to hire an additional 32 attorneys, and 16 legal supportstaff, arguing that the increase in the staff will increase OPLA's ability to complete matters in theimmigration courts, thereby reducing the number of backlogged cases. This increase was notincluded in H.R. 2360 as passed by the House or Senate. The TSA was created by the Aviation and Transportation Security Act (ATSA, P.L. 107-71 ),and was charged with protecting U.S. air, land, and rail transportation systems to ensure freedom ofmovement for people and commerce. In 2002, the TSA was transferred to DHS with the passageof the Homeland Security Act ( P.L. 107-296 ). TSA's responsibilities include protecting the airtransportation system against terrorist threats, sabotage and other acts of violence through thedeployment of: passenger and baggage screeners; detection systems for explosives, weapons, andother contraband; and other security technologies. TSA also has responsibilities for marine and landmodes of transportation including assessing the risk of terrorist attacks to all non-aviationtransportation modes, issuing regulations to improve the security of the modes, and enforcing theseregulations to ensure the protection of the transportation system. TSA is further charged withserving as the primary liaison for transportation security to the law enforcement and intelligencecommunities, and with conducting research and development activities to improve securitytechnologies. FY2006 Request for TSA. The President hasrequested an appropriation of $5,562 million in gross budget authority for TSA in FY2006, a netincrease of $156 million, or 3%, over the enacted FY2005 level of $5,406 million. (47) However, in comparingthe FY2006 budget request to prior year levels, it is important to note that the President is requestingto transfer a large portion of TSA's research and development functions -- totaling $109 million inFY2005 appropriated amounts -- to the S&T Directorate, and a transfer of a variety of functions --totaling $142 million in FY2005 -- to the proposed Office of Screening Coordination and Operations(SCO). Functions that would be transferred to the SCO under the proposal include Secure Flight($35 million); Crew Vetting ($10 million); Credentialing Startup Costs ($10 million); TransportationWorker Identification Card (TWIC, $50 million); Registered Traveler ($15 million); HAZMATDriver Security Threat Assessments ($17 million); and Alien Flight School Applicant SecurityThreat Assessments ($5 million). Adjusting for these transfers and other miscellaneous factors, therequested increase to the TSA budget on a comparable basis totals $415 million, roughly a 7.7%increase over FY2005 enacted levels (see P.L. 108-334 ). Almost 90% of the TSA's proposed budget is designated for aviation security functions. Keyaviation security initiatives proposed include the following: Developing and testing emerging checkpoint explosives technologies; Realigning the screener workforce and providing funds needed to maintain anauthorized level of 45,000 full-time equivalents (FTEs); Deploying high-speed Internet connections at airport screening checkpoints andbaggage screening areas; Providing mandated training for flight and cabin crews and conductingsemiannual requalification for armed pilots; and Conducting mandated security inspections of foreign airline repair stations andinspections at domestic repair stations. In an effort to approach full cost recovery from user fees for aviation security screening, thePresident has proposed an increase in passenger security fees. The proposal would raise the fee fromits current level of $2.50 per flight segment, with a maximum fee of $5.00 per one-way trip, to $5.50per segment, with a maximum of $8.00 per one-way trip. The Administration anticipates that thisproposed fee increase coupled with a return to pre-9/11 passenger volume will result in an increasein fee collections from an estimated $2.652 billion in FY2005 to $4.1 billion in FY2006. Thisincrease is projected to offset roughly 82% of the proposed $4.985 billion budget for aviationsecurity. In contrast, aviation security fees collected in FY2004 offset only 41% of expenditures foraviation security. (48) For surface transportation security, the President requests $32 million, which includes $8million for hiring and deploying 100 rail and transit inspectors. These inspectors will be deployedat significant rail and mass transit points across the United States to perform compliance reviews,audits, and enforcement actions pertaining to security measures. Table 9. TSA Account Detail (budget authority in millions ofdollars) Source: CRS analysis of the FY2006 President's Budget, and DHS Budget in Brief , HouseAppropriation Committee tables of May 20, 2005, House-passed H.R. 2360 and H.Rept.109-79 ; and Senate-reported H.R. 2360 and S.Rept. 109-83 . Note: Totals may not add due to rounding. a. These activities were proposed for transfer to the SCO under the President's FY2006 request,including TWIC, HAZMAT, Registered Traveler, and Alien Flight School Checks. Both theHouse-passed and Senate-reported versions of H.R. 2360 would leave theseprograms and their fees in TSA. Table 10. TSA Selected Sub-Account LevelDetail (budget authority in millions of dollars)
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A well-managed border is central to maintaining and improving the security of the UnitedStates against terrorist threats. Border security entails regulating the flow of goods and people acrossthe nation's borders so that dangerous and unwanted goods or people are denied entry. Transportation security entails screening and protecting people and goods as they move betweendifferent locations within the country. The overall appropriations over the past three years for Borderand Transportation Security, as defined in this report, are as follows: in FY2004, Congressappropriated $18,106 million; in FY2005, Congress appropriated $20,313 million; in FY2006, thePresident requested $19,586 million; House-passed H.R. 2360 provides $21,015million; and Senate-passed H.R. 2360 provides $21,283 million. Determining which goods and people are permitted and which are denied entry into theUnited States involves a system of sophisticated border management. This system must balance theneed for securing the nation's borders while facilitating the essential commerce and legitimate freeflow of citizens and authorized visitors. The system must be capable of a detailed examination ofthe goods and people seeking entry, but must still fit within budgetary constraints and beadministratively feasible. Improving transportation security has meant an expanded federal role inscreening passengers and baggage traveling through airports and also increasing the presence offederal officers aboard domestic and international flights. Plans exist to expand the presence offederal officers in other modes of transportation. Finally, these management systems mustaccomplish their functions with a minimum of disruption of legitimate activities, and withoutunnecessary intrusion into the civil liberties of persons affected by them. Within the federal government, the Department of Homeland Security (DHS) has been givenprimary responsibility for securing the nation's borders and for increasing the security oftransportation, among other responsibilities. The locus of border and transportation security activitywithin DHS is in the Directorate of Border and Transportation Security, which houses the Bureauof Customs and Border Protection (CBP), the Bureau of Immigration and Customs Enforcement(ICE), and the Transportation Security Administration (TSA). The U.S. Coast Guard is a stand-aloneagency within DHS but plays an important role in border and transportation security, as does theFederal Law Enforcement Training Center (FLETC). This report includes appropriations for thefunctions and agencies of BTS, the U.S. Coast Guard and FLETC. Major issues include the numberof available detention beds and investigators at ICE; the number of Border Patrol agents in CBP; theappropriate level of funding for the Deepwater program within the Coast Guard; and non-aviationsecurity spending within TSA. This report will be updated to reflect the Conference Agreement between the House and theSenate and final passage. Key Policy Staff: Border and Transportation Security
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The U.S. poultry industry is experiencing a severe outbreak of highly-pathogenic avian influenza (HPAI). As of June 17, 2015, the U.S. Department of Agriculture's (USDA's) Animal and Plant Health Inspection Service (APHIS) reported 223 cases of HPAI in domestic flocks in 15 states. (In this context, a "case" is an affected premise.) More than 48 million chickens, turkeys, and other poultry have been euthanized to stem the spread of the disease. Cases have been caused by several highly pathogenic H5 avian influenza (AI) strains that result in substantial mortality in domestic poultry. Turkey and egg-laying hen farms in Minnesota and Iowa have been hardest hit. Commercial broiler farms have not been affected to date. According to the Centers for Disease Control and Prevention (CDC), no infections in humans have been associated with the current HPAI outbreak, and CDC considers the public health risk to be low. Prior HPAI outbreaks in the United States occurred in 1924, 1983, and 2004. The 1924 and 2004 outbreaks were quickly contained. To control the 1983 outbreak, 17 million birds were euthanized in the U.S. northeast. Outbreaks of low pathogenic avian influenza (LPAI) are more frequent, but result in minor illness in poultry. Nonetheless, efforts are made to also eliminate LPAI outbreaks, because LPAI strains could potentially mutate to become more pathogenic. Established U.S. animal health policy is to eliminate the AI virus (both HPAI and LPAI strains), when it is found, through depopulation (i.e., euthanasia and disposal) of affected poultry. APHIS, state, and local animal health officials euthanize poultry, clean and disinfect premises and equipment, and then test for elimination of the virus to ensure that farms can be safely restocked. USDA indemnifies poultry owners and pays for cleaning, disinfecting, and testing. This process is time consuming, and poultry producers lose significant income as barns and laying houses are out of production for several months. The poultry export sector is also faced with numerous bans on shipments of U.S products. With loss of production, consumers see higher retail prices. The current HPAI outbreak was discovered in December 2014 in backyard flocks in the Pacific Northwest, and in two commercial turkey and chicken flocks in California. It is thought to have been introduced from Eurasia by wild birds migrating along the Pacific flyway and has continued to move eastward to and along the Central and Mississippi flyways (see Figure 1 ). It is primarily infecting flocks of egg-laying hens in Iowa and turkeys in Minnesota, with cases in several other states (see Figure 2 ). In addition to cases in domestic flocks, outbreak strains of HPAI have been found in free-ranging and captive wild birds in Washington, Oregon, Idaho, Montana, California, Nevada, Utah, New Mexico, Wyoming, Kansas, Missouri, Kentucky, Michigan, and Wisconsin. In June 2015, APHIS issued a report on the epidemiology of the outbreak. Although its studies showed that wild birds probably introduced the virus into U.S. poultry flocks, APHIS said that lapses in biosecurity practices—such as movement of vehicles, equipment, and persons from infected to uninfected farms—contributed to the continued spread of the virus. APHIS also raised concern about possible airborne spread of the AI virus. In general, colder temperatures favor transmission of influenza viruses, and cooler temperatures in the spring of 2015 could have extended the spread of HPAI. With the start of summer, the rate of new cases slowed. The last reported new case was in Iowa on June 17, 2015. Despite this, USDA said it is preparing for the possibility that HPAI could resurge in the fall as migratory birds fly south for the winter. With all flyways likely involved, HPAI could be introduced into large poultry production areas in the southeastern United States that have not been affected so far. In June 2015, APHIS updated interagency surveillance plans for migratory birds—a collaboration of APHIS, the U.S. Fish and Wildlife Service, the U.S. Geological Survey, state and local governments, and the private sector—with the goal of early detection and monitoring of HPAI before it again threatens domestic poultry flocks. From December 2014 through June 17, 2015, there were 223 cases of HPAI in domestic flocks in 15 states (see Table 1 ). Of the 48 million birds euthanized to control this outbreak, the vast majority were chickens, specifically egg-laying hens (38.4 million). In Iowa, more than 25 million egg-laying hens and 5 million pullets (young chickens that have not entered the egg-laying flock) were euthanized. Nearly 7.8 million turkeys were euthanized, with the majority (4.8 million) on Minnesota farms. Iowa turkey farms have had 1.5 million euthanized birds. In addition to the cases in commercial operations, 20 cases in 11 states involved backyard flocks, affecting about 10,000 birds. Most of these cases were classified as mixed poultry, which may include quail, guinea fowl, ducks, geese, and pheasants. Established U.S. animal health policy is to eliminate the AI virus through depopulation of poultry where the virus is found. In order to achieve this, the Animal Health Protection Act (AHPA; 7 U.S.C. §8301 et seq.) authorizes USDA to take extraordinary measures, such as seizing, restricting movement, or euthanizing animals to protect the health of animals. USDA has established a five-step process that federal and state responders use to address HPAI: 1. Quarantine—restrict movement of poultry and poultry-moving equipment into and out of the control area; 2. Eradicate—humanely euthanize affected flocks; 3. Monitor region—test wild and domestic birds in a broad area around the outbreak; 4. Disinfect—kill the virus in the affected flock locations and operations; and 5. Test—confirm the poultry farm is AI virus-free. APHIS, in cooperation with state and local animal health officials, euthanize poultry, disinfect and clean poultry premises and equipment, and then test for the virus to ensure poultry farms can be safely repopulated. Poultry owners are indemnified for euthanized poultry, and APHIS pays for cleaning and disinfecting, and testing. Once laboratory tests indicate a presumptive positive for HPAI, the poultry producer must develop a flock plan. The flock plan establishes the steps that will be taken to eliminate the virus, and to clean and disinfect the premises in order to be able to resume business. The flock plan must be signed by the producer, a state animal health official, and APHIS. After the flock plan is in place, APHIS prepares an appraisal document for indemnity. Under the authority of the AHPA (7 U.S.C. §8306(d)), USDA compensates producers for birds that must be euthanized. Payment is based on the "fair market" value as determined by USDA appraisers. Based on the inventory, age, and intended use of birds, APHIS prepares an appraisal calculated on available prices, costs, and bird productivity. The indemnity is usually for 100% of the appraised value. APHIS also pays for the disposition of birds and for destruction of infected materials. Producers are neither compensated for birds that die prior to the confirmation of HPAI, nor for lost income from barns and hen houses being idle. If the producers elect to perform some of the tasks involved in eliminating HPAI, they must sign a compliance agreement with APHIS that identifies who is responsible for what tasks, and what it is expected to cost. Some producers may choose this option in order to keep their workers employed through the outbreak crisis. Each state develops HPAI response plans that account for specific environmental and resource requirements in each state. APHIS works with the states and poultry producers to identify which of the options works best given the conditions at the premises—flock size, space, depopulation method—and meet state and local requirements. Usually euthanized birds may be disposed of through composting, landfills, burial, and incineration. It takes around 30 days for bird carcasses that are composted to be cleared as virus free. In general, repopulation of barns or hen houses may not begin for at least 21 days (the incubation period for the AI virus) after barns and hen houses are cleaned and disinfected, and environmental testing of the premises is completed. The actual number of days may vary for each case. Also, the area around the premises to be restocked must be assessed for risk of the premises becoming infected again. Producers must have written approval from APHIS and state officials to restock a facility. As a condition for restocking, producers are required to follow surveillance, movement, and biosecurity requirements. If a farm restocks without the approval of APHIS and state officials, APHIS will not indemnify the producer should the restocked flock become infected again. Restocking will vary by the type of operation affected by the outbreak. Egg-laying hen operations will phase restocking to reestablish variable hen ages in the flock. The age variability allows for even, year-round egg production. This phased restocking could take 18 months or more to accomplish before the producer will reestablish a normal income flow. A turkey operation, on the other hand, will restock the barn with birds of similar age that will be market-ready at about the same time. An HPAI outbreak results in a significant income disruption for the producers, which existing indemnities address only in part. As deadly as they are in poultry, most HPAI strains are not easily transmissible to humans. However, influenza viruses mutate and transfer genes with notable frequency, and public health officials track H5 avian influenza strains for signs of increased risk of human infection. According to the Centers for Disease Control and Prevention (CDC), no infections in humans have been associated with the ongoing HPAI outbreak, and CDC considers the public health risk to be low. However, human infections with other AI strains have occurred, most often in persons, such as poultry workers, who have had close contact with infected birds. With the possibility of bird-to-person infection, CDC's National Institute for Occupational Safety and Health (NIOSH) and the Department of Labor's Occupational Safety and Health Administration (OSHA) advise all farm workers and responders to the outbreak to wear proper protective clothing, practice good hand washing and showering practices, and participate in health monitoring programs for a period of time after exposure to infected poultry. In addition to guidance for poultry workers, CDC has developed guidance for health officials and providers for monitoring, diagnosis, and treatment of infections in humans. According to CDC testimony before the Senate Homeland Security and Governmental Affairs Committee, the agency has also issued guidance to state preparedness officials to allow the use of federally subsidized antiviral medications stockpiled at the state level, and instructions for requesting supplies from the Strategic National Stockpile if needed. In addition, CDC has developed an HPAI virus strain that could be used to produce a vaccine for use in humans, if needed. In the event of an animal health emergency, USDA has the authority to request additional funds from the Commodity Credit Corporation (CCC) as necessary, and the Office of Management and Budget (OMB) may make an apportionment to provide money to contain and eliminate an animal disease. APHIS noted in its FY2016 budget document that an AI outbreak similar to the 1980s outbreak could cost in excess of $1 billion for control and indirect costs to the poultry industry. The Senate and House Agriculture Committees, in a recent letter to OMB, expressed concern about the need for adequate funding and encouraged USDA to pursue whatever funding is necessary. USDA has received approval to use additional funds for HPAI from the CCC of nearly $700 million. As of July 7, 2015, APHIS has committed over $500 million to help producers control the spread of HPAI, including $190 million for indemnity payments. Separately, the ongoing annual appropriation to APHIS for avian health has been about $52 million in recent years. According to USDA, the avian health program includes AI prevention and control activities; avian health and management studies; disease threat planning and response for the livestock, poultry, and zoological industries; comprehensive poultry disease surveillance (including wildlife surveillance); and zoonotic disease prevention and response. The National Poultry Improvement Plan (NPIP), a cooperative federal-state-industry program focused on AI surveillance, is funded through the avian health appropriation. On July 8, 2015, the House Committee on Appropriations marked up the FY2016 agriculture appropriations bill ( H.R. 3049 ), which includes $55 million for avian health, $3 million more than appropriated for FY2015. The House bill also includes an additional $5 million, on top of a base of $7 million, for the APHIS portion of funding for the National Animal Health Laboratory Network (NAHLN). APHIS has been utilizing funds apportioned from CCC to reimburse the NAHLN for HPAI testing. On July 16, 2015, the Senate Committee on Appropriations marked up the FY2016 agriculture appropriations bill ( S. 1800 ), which would provide APHIS with $52 million for avian health, unchanged from FY2015. The House and Senate Appropriations Committee reports ( H.Rept. 114-205 and S.Rept. 114-82 ) accompanying the FY2016 agriculture appropriations bills also would direct USDA to use its existing authority to transfer funds from CCC as needed to address the HPAI outbreak. The cost of the HPAI outbreak to the poultry industry is high. The direct losses from euthanized turkeys and egg-laying hens are estimated at nearly $1.6 billion, $530 million for turkeys and $1.04 billion for laying hens. These estimates do not cover such activities as clean-up and restocking, or future lost production. Other sectors of the economy, such as feed and trucking, have suffered losses from lost business with the poultry industry, and egg shortages have caused higher prices for food processors and consumers in retail markets. The economy-wide impact to date is estimated at $3.3 billion. The nearly 7.8 million turkeys euthanized during the outbreak amounts to about 3% of the turkeys produced in the United States in 2014. In February 2015, before HPAI began infecting turkey flocks, USDA forecasted that turkey meat production would rise 6% in 2015. As a result of HPAI, USDA expects 2015 production to be more than 3% lower than in 2014. With decreased supplies, USDA raised its forecast for national wholesale turkey prices for 2015. Recovery from the HPAI outbreak is also expected to slow turkey production into 2016. USDA reports that fewer poults (young turkeys) are being placed on feed for growout through May. Turkey operations affected by HPAI in early March did not come back online until June because of the time needed to clean, disinfect, and test to ensure farms are free of the HPAI virus. The potential for Thanksgiving supply disruptions may be relatively small because the industry has had time to prepare. According to agricultural economists from the University of Illinois, stock building of whole turkeys held in cold storage typically starts in December and continues through the summer. USDA cold storage data shows that supplies of whole turkey at the end of May 2015 were 3% higher than a year ago. On June 22, 2015, USDA reported that there were 341 million egg-laying hens on U.S. farms during May, down 5% from a year earlier. Hardest hit has been Iowa, where the number of laying hens was down 26% from a year earlier. Hens euthanized because of HPAI account for 11% of the total U.S. egg-laying flock. USDA forecasts 2015 egg production to decline 4% in 2015, and its benchmark New York Grade A large egg price is forecast to be 19% higher than in 2014. Wholesale egg prices increased significantly in May, topping out at nearly $2.50 per dozen in early June. Prices retreated some by the end of June and leveled off during July (see Figure 3 ). Many of the egg farms infected with HPAI in Iowa supplied breaking eggs (used to produce eggs in liquid form) to food manufacturers, particularly the baking sector. When supplies of breaking eggs tightened, the price of table eggs sold in retail or the food service sectors increased. Food manufacturers began to bid up the price of eggs to pull supplies away from the table egg market and into the breaking market. Reportedly, H.E.B., a Texas grocery chain, limited the number of eggs that could be purchased in its stores in order to prevent commercial buyers from emptying retail supplies. Imports of eggs and egg products are limited. In order to address tight egg supplies, on June 1, 2015, the USDA's Food Safety and Inspection Service (FSIS) certified that five establishments in the Netherlands would be eligible to ship pasteurized egg products to the United States. Canada is also eligible to ship egg products to the United States. Because HPAI has not hit major commercial broiler-producing areas, the primary impact of HPAI on the broiler sector has been in the trade arena (see " Trade Implications " below). Broiler meat production is expected to increase 5% in 2015. With a slowdown in broiler meat exports, USDA's cold storage data at the end of May 2015 shows a 21% increase in broiler meat stocks compared with a year ago. Lower exports and higher stocks have pushed down broiler meat prices. For the week ending July 10, 2015, wholesale broiler prices were 12% lower than a year earlier. In 2014, the United States exported to global markets over 4 million metric tons of poultry meat, valued at $5.5 billion (see Table 2 ). The vast majority of exports was broiler meat ($4.1 billion), followed by turkey ($767 million) and other poultry meat ($671 million). In addition, the United States exported $637 million worth of eggs and egg products in 2014. In 2014, the United States exported 19% of its broiler meat production, 14% of turkey output, and 5% of eggs. For 2015, USDA forecasts broiler meat exports to be more than 6% lower than in 2014, turkey exports 26% lower, and egg exports nearly 8% lower. Data for 2015 U.S. poultry exports are available for the January-May period. Broiler meat exports are 9% lower compared with the same period a year ago. Turkey exports are 17% lower, but egg exports are up 11% because of strong shipments to Mexico. Since the HPAI findings in December 2014, 18 trading partners have imposed bans on all shipments for U.S. poultry and products, and 38 trading partners have imposed partial, or regional, bans on shipments from states or parts of states experiencing cases (see Figure 4 ). China, Russia, and South Korea, 3 of the top 10 destinations for U.S. poultry meat in 2014, have banned all imports of U.S. poultry. Based on World Organization for Animal Health (OIE) avian influenza guidelines, regional, or compartmental, bans are acceptable for handling concerns with disease and effects on trade. If USDA decides to implement a vaccine strategy to address an HPAI outbreak should it occur later this year, the U.S. poultry industry could experience increased disruptions in trade. Some trading partners have already told APHIS that if the United States adopts a vaccination strategy for HPAI, they will halt all trade until risk assessments of the U.S. strategy can be evaluated (see " Vaccine Use Policy "). On July 7, 2015, the Senate Committee on Agriculture, Nutrition and Forestry held a hearing on the HPAI outbreak and its impact on the poultry sector, and on July 8, 2015, the Senate Homeland Security and Governmental Affairs Committee held a hearing reviewing the threat of avian influenza to animal and public health. The hearings covered the experiences and lessons learned from containing and eliminating the current outbreak, and touched on issues to be addressed for the future. It is believed that an HPAI outbreak is likely to occur again in the fall when wild birds begin their migrations through the four flyways. This may likely result in more spread of AI, possibly in the poultry-producing eastern and southeastern regions untouched during the current outbreak. In response to questions from the Agriculture Committee, APHIS stated that it is preparing for the worst-case scenario this fall and defined this as 500 HPAI cases spread through 20 major poultry producing states, infecting turkey, laying hen, and broiler premises. The following sections discuss several issues that were raised during the hearings and are expected to be the focus of preparations for another potential outbreak in the fall/winter: vaccine use, biosecurity, timeliness, indemnification, and stakeholder communications. The World Organization for Animal Health (OIE) recommends that poultry flocks be depopulated to eliminate the AI virus. The OIE recognizes, however, that some countries may choose vaccination as part of their HPAI containment and elimination strategy. OIE states that: Culling may be complemented by a vaccination policy for poultry in a high-risk area. Vaccination aims to protect the susceptible population of birds from potential infection thereby reducing the incidence or the severity of disease. Vaccination strategies can effectively be used as an emergency effort in the face of an outbreak or as a routine measure in an endemic area. Careful consideration must be given prior to implementing a vaccination policy and requires that the recommendations from the World Organisation for Animal Health (OIE) on vaccination and vaccines are closely followed. Any decision to use vaccination must include an exit strategy. Vaccination is often considered a last resort in HPAI control. Among other concerns, it can mask continued transmission of the disease, making it more difficult for animal health officials to understand, and trade partners to trust, a country's status. Accordingly, OIE recommends that a country plan to adopt vaccination for HPAI control includes a plan to transition back to the preferred culling approach, without vaccination, once it has achieved control through vaccination. USDA has not approved a vaccine for HPAI. According to USDA, current AI vaccines are only effective about 60% of the time in chickens. Effectiveness in turkeys is still being evaluated. The Southeast Poultry Research Lab (SEPRL), part of USDA's Agricultural Research Service (ARS), develops and evaluates AI vaccines. According to testimony by Dr. David Swayne of SEPRL before the Senate Agriculture Committee, for the next several months the lab will be working on vaccines and vaccination protocols for use in the fall. The challenge for vaccine development is finding one that will be effective against circulating H5 strains, recognizing that the strains change over time. The experience of countries using vaccines for H5N1 strains (99% of H5N1 vaccines are used in China, Egypt, Vietnam, and Indonesia) shows that vaccines fail, effectiveness diminishes over time, and resistance develops. The decision to adopt a vaccine strategy is made by USDA and not state animal health officials. APHIS expects that an effective vaccine could be developed by fall to late fall. The use of vaccines negatively affects exports of poultry products. According to APHIS, some trading partners have stated that if the United States adopts a vaccination policy, they would immediately ban shipments of U.S. poultry products. The trading partners would conduct risk assessments of U.S. vaccination policy before allowing shipments to resume. APHIS is already engaging with other countries to mitigate impacts on trade if the USDA changes its policy. In order to address the trade issue, SEPRL is engaged in research to distinguish whether immunity in a bird is due to infection or vaccination. This concept has been demonstrated experimentally but is less successful in the field. The poultry industry is divided over whether or not vaccines should be used to fight HPAI outbreaks. The United Egg Producers (UEP) position is one of caution about vaccine use, in part due to trade issues, and also because the three-vaccine regime in a laying hen would mean increased contact with the birds in the houses. Handling hens during production could cause a decrease in egg output. Other witnesses from the turkey and egg sectors were ready to adopt vaccines as a tool to use against HPAI. USDA's June 2015 epidemiological report identified pathways for the transmission of HPAI. Besides wild birds shedding the AI virus, APHIS found that HPAI may have been spread through lax biosecurity measures. These include sharing of equipment and employees between infected and non-infected farms, the inadequate cleaning of vehicles moving between farms, and the presence of rodents or small wild birds inside poultry barns. APHIS also found that environmental factors could play a role as the HPAI virus was found in air samples that could be transmitted by wind to other farms. Scrupulous biosecurity practices may not fully protect against AI. The poultry industry increased biosecurity after the 1980s HPAI outbreak. Other regulations, such as the Food and Drug Administration's Egg Safety Rule , require egg producers to implement certain biosecurity measures. But as the UEP witness pointed out in testimony, his farm, one of the largest egg farms in Iowa, received a perfect score on a USDA biosecurity audit two months before being infected with HPAI. Biosecurity has often been thought of in terms of farm biosecurity. Biosecurity at the barn or hen house level for operations with multiple facilities may be more effective for an HPAI outbreak. For example, this could mean restricting movement between barns or hen houses on the same farm, requiring different clothing for each, and boosting disinfection measures for equipment shared between each barn. Producers may need to consider adding filtration systems in barns and hen houses because of potential airborne contamination. Poultry groups such as the National Turkey Federation and the U.S. Poultry and Egg Association recommend that producers reevaluate their biosecurity programs to prepare for future outbreaks. APHIS will be holding a meeting at the end of July in Iowa to discuss biosecurity issues with state veterinary officials and the poultry industry. Depopulating AI infected birds as quickly as possible is critical to halting the spread of the virus. Poultry producers have been concerned that it took too long between HPAI confirmation and the start and completion of depopulation. APHIS recognizes this concern and is seeking alternatives that could speed the process. APHIS has suggested that shutting off ventilation in barns and laying houses and turning up the heat would humanely euthanize the flocks. This could speed up the depopulation process and save time getting foaming or CO 2 equipment for depopulation in place. APHIS is working with the poultry industry and the American Veterinary Medical Association on the viability of such an approach. After depopulation, the disposal of dead birds is a considerable challenge for poultry producers. Many of the dead birds were composted, which, once tested to be free of virus, may be used on fields. In Iowa there was concern about moving euthanized poultry to landfills because of fear of virus contamination through feathers, dust, or on vehicles. States and the poultry industry are expected to reassess and implement disposal plans to manage a potential fall outbreak. Egg producers have expressed concern that APHIS, in calculating indemnity payments, is not capturing the true value of future egg production from lost layers. According to the regulations (9 C.F.R. §53.3(b)) that govern HPAI appraisals for indemnity payments, "The appraisal of animals shall be based on the fair market value and shall be determined by the meat, egg production, dairy or breeding value of such animals." Regulations for low pathogenic avian influenza (LPAI) outbreaks are in a different section (9 C.F.R. §56.4(a)) than the HPAI regulations and address future production. The LPAI regulations specifically state that, "For laying hens, the appraised value should include the hen's projected future egg production." Egg industry groups have been in contact with APHIS and have made proposals for changing the indemnity formulas. In addition, indemnity regulations require payment to owners of poultry, but many poultry producers are contract growers and not the owners of the birds. This raises concerns about whether some producers are being adequately indemnified. LPAI regulations (9 §C.F.R. 56.8(a)) specifically address the contract issue by setting a formula for splitting the indemnity payment between the contractor and the grower. The regulations for HPAI do not include such a provision. Besides indemnity payments, witnesses suggested that poultry producers need other options, such as insurance policies, to cover losses from an outbreak. The 2014 farm bill ( P.L. 113-79 ) directed USDA's Federal Crop Insurance Corporation to conduct a study to determine the feasibility of insuring poultry producers for a catastrophic event. The study was to be submitted to the Senate and House Agriculture Committees one year after the farm bill was enacted (February 2014), but it has not been submitted yet. Some poultry producers believe that communication between APHIS and producers was a problem, at least in the early stages of the outbreak. As APHIS rotates personnel assignments, farms worked with different APHIS employees at different stages, and some producers said this was frustrating and contributed to slowing the containment and elimination process. Also, some producers believed that some APHIS contractors (APHIS has employed 3,000) were not well trained and provided incorrect information. APHIS indicated that it plans to address communication issues in the future by assigning one APHIS employee to work with each producer dealing with an outbreak from the start to finish of the process. Also, APHIS plans to embed an APHIS employee with each contractor team.
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The U.S. poultry industry is experiencing a severe outbreak of highly-pathogenic avian influenza (HPAI). The U.S. Department of Agriculture's (USDA's) Animal and Plant Health Inspection Service (APHIS) has reported 223 cases of HPAI in domestic flocks in 15 states. With the start of summer, the finding of new cases slowed. The last reported new case was in Iowa on June 17, 2015. More than 48 million chickens, turkeys, and other poultry have been euthanized to stem the spread of the disease. Cases have been caused by several highly pathogenic H5 avian influenza (AI) strains that result in substantial mortality in domestic poultry. Turkey and egg-laying hen farms in Minnesota and Iowa have been hardest hit. Commercial broiler farms have not been affected to date. According to the Centers for Disease Control and Prevention (CDC), no infections in humans have been associated with the HPAI outbreak, and the public health risk is low. Under the Animal Health Protection Act (AHPA; 7 U.S.C. §8301 et seq.), APHIS, in cooperation with state and local animal health officials, has the authority to take extraordinary measures, such as seizing, restricting movement, or euthanizing animals to protect the health of animals. During the current outbreak, APHIS has paid to euthanize poultry, clean and disinfect poultry premises and equipment, and then test for the AI virus to ensure poultry farms can be safely repopulated. USDA has indemnified poultry owners for euthanized poultry. USDA has received approval to use nearly $700 million in additional funds from the Commodity Credit Corporation (CCC) to address HPAI. As of July 7, 2015, APHIS has committed over $500 million of the $700 million to help producers control the spread of HPAI, including $190 million for indemnity payments. The agency is committed to covering cleaning and disinfecting costs on affected farms. The cost of the HPAI outbreak to the poultry industry is high. The value of turkey and laying hen losses is estimated at nearly $1.6 billion. Economy-wide losses are estimated at $3.3 billion. Since the HPAI outbreak in December 2014, 18 U.S. trading partners have imposed bans on all shipments of U.S. poultry and products, and 38 trading partners have imposed partial, or regional, bans on shipments from states or parts of states with HPAI cases. China, Russia, and South Korea, 3 of the top 10 destinations for U.S. poultry meat in 2014, have banned all imports of U.S. poultry. It is believed that an HPAI outbreak is likely to occur again in the fall when wild birds begin their migrations through the four flyways. This may result in more spread of AI, possibly in the poultry-producing eastern and southeastern regions untouched by the current outbreak. APHIS and the poultry industry are taking lessons from the current outbreak to prepare for the fall. USDA is developing a vaccine to be available for manufacture if the agency decides to adopt a vaccination policy to manage any future outbreak. APHIS and the poultry industry are reassessing biosecurity, indemnity payment formulas, and other measures that aim to improve the containment and elimination process.
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O n February 16, 2016, House Speaker Paul Ryan announced the creation of six committee-led task forces to formulate proposals. The Tax Reform Task Force was led by Ways and Means Committee Chairman Kevin Brady. On June 24, 2016, Speaker Ryan released the Tax Reform Task Force Blueprint, or the Better Way tax reform. For the individual income tax, the plan would broaden the base, lower the rates, and alter some of the elements related to family size and structure. For business income, the current income tax would be replaced by a cash-flow tax rebated on exports and imposed on imports, with a top rate of 20% for corporations and 25% for individuals. The proposal would also repeal estate and gift taxes. The repeal of the Affordable Care Act taxes is not in the Better Way tax reform proposal, but these taxes along with subsidies are addressed in the House-passed American Health Care Act of 2017 ( H.R. 1628 ). The border adjustment (tax on imports and rebate on exports) has garnered a lot of attention and, along with international tax issues in general, was the subject of a hearing before the Ways and Means Committee. A recent announcement by congressional and administration leaders indicated that border tax adjustments would be dropped from future tax plans. The effect of eliminating the border tax adjustment will be discussed in the relevant sections. Note that the blueprint is a general outline rather than a detailed proposal, with many features not fully determined. This report reviews the plan as reported in that document. The inclusion of additional features could alter this analysis. This report describes current law and the proposed changes. It discusses economic efficiency, distributional and equity issues, administrative and compliance issues, revenue effects, and other tax-related issues. This section describes the changes in the individual income tax, the treatment of unincorporated business, the corporate tax, and the repeal of estate and gift taxes. The main structural elements of the individual income tax that apply to all taxpayers include the rate structure, the standard deduction or itemized deductions, personal exemptions, and the earned income tax credit. Lower- and moderate-income taxpayers with qualifying children are eligible for a partially refundable child credit. The earned income tax credit (fully refundable) is also available for lower- and some moderate-income taxpayers. Taxpayers at higher incomes are potentially subject to an alternative minimum tax. The blueprint revises all of these elements except the existing refundable child credit and the earned income credit. The values reported below for current law are for 2016, the year the plan was announced. (With low inflation rates, the dollar amounts are similar in 2017.) Most elements of current law are indexed for inflation, including rate brackets and deductions and exemptions. An exception is the child credit. Under current law, tax rates apply at rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% brackets. Rate brackets are wider for joint returns (i.e., married couples) than for head of household (i.e., households with a single head with children), which are in turn wider than returns for single taxpayers. The blueprint proposes three rates: 12%, 25%, and 33%. It would replace the 10% and 15% rate with a 12% rate; the 25% and 28% rates with a 25% rate; and the remaining rates with a 33% rate. The dollar size of the rate brackets would be unchanged. Less than 0.7% of taxpayers are subject to the 39.6% rate, and less than 0.1% to the 35% rate, which applies to a narrow bracket; taxpayers paying at these marginal rates, however, account for 15.6% and 1% respectively of adjusted gross income (AGI). The 33% bracket accounts for 1.3% of taxpayers and 7.1% of adjusted gross income. The most common top marginal tax rate for returns is the 15% bracket, which, in 2014, accounted for 28.9% of taxpayers (who accounted for 21.8% of adjusted gross income, AGI), followed by the 0% bracket, accounting for 24.2% of returns and 1.6% of AGI, then the 10% bracket accounting for 18.4% of returns and 6.5% of AGI. The 25% bracket accounted for 16.6% of returns and 26.6% of AGI. For a small share of taxpayers (6.3%) and AGI (9.6%), the top rate is the capital gains tax rate. High-income taxpayers are also subject to a provision termed a phase out of itemized deductions, but that effectively acts as an additional increase in tax rates of 3%, by increasing taxable income by 3% of AGI up to 80% of itemized deductions. For most taxpayers, the itemized deduction constraint is not binding. In 2016, the phase out began at $259,000 for singles and $311,000 for joint returns. High-income taxpayers are also subject to an additional tax of 3.8% of investment income (including capital gains, dividends, interest, and passive investments in unincorporated business), in excess of $200,000 for single returns and $250,000 for joint returns. There is also a 0.9% tax on wage income exceeding these amounts that goes into the Hospital Insurance Trust Fund. These provisions were enacted in the Affordable Care Act (ACA). The Better Way proposal does not address these taxes but indicates that all taxes imposed by the ACA will be repealed in different task force proposals. Tax brackets are currently indexed for inflation and that feature would be retained. Taxpayers may take a standard deduction or itemize deductions. About 30% of taxpayers itemize their deductions. Taxpayers may take personal exemptions for themselves and their dependents. Personal exemptions are phased out at higher-income levels, and a phase out of itemized deductions is also in place although it effectively operates as an additional tax. In 2016, the standard deduction was $6,300 for singles, $9,300 for head of household returns (single heads with children), and $12,600 for joint returns. The personal exemption was $4,050, and began phasing out at the same levels for itemized deductions. The revision eliminates personal exemptions, but offsets this elimination for the taxpayer with a larger standard deduction: $12,000 for singles; $18,000 for head of household returns, and $24,000 for joint returns. The plan adds a nonrefundable credit of $500 for dependents (child or non-child), again an offset for eliminating the personal exemption for dependents. The plan eliminates all itemized deductions except for mortgage interest and charitable deductions. The most important deduction eliminated is the state and local taxes (income, sales, and property) deduction. Although the standard deduction and current personal exemption are indexed for inflation, the blueprint would index the standard deduction, but apparently not the child and dependent credit. The credit will also apparently phase out at a lower-income level than the personal exemptions: $75,000 for single and $150,000 for joint returns. Current law imposes an alternative minimum tax that applies a lower tax rate of 26% (and 28% at higher-income levels) to a broader base with a large flat deduction, which is indexed for inflation. The primary provisions added back to the base are personal exemptions, the standard deduction, and itemized deductions for state and local taxes. This tax applies only to relatively high-income individuals, but does not affect the very highest income levels. The blueprint would repeal this tax. Current law provides for a fully refundable earned income tax credit, with a significantly higher rate for families with children. It also provides a $1,000 per child partially refundable credit. Both provisions are phased out as income rises. The blueprint leaves these provisions in place, except that it increases the child credit phase-out starting point for joint returns (from $110,000 to $150,000), making it twice the phase-out starting point for singles ($75,000). The phase-out levels for the earned income credit are indexed for inflation; the child credit level and phase-out levels are not: these features are retained. Under current law, interest income is taxed at ordinary rates. Dividends and capital gains are subject to lower rates: a zero rate for individuals with ordinary rates in the 15% bracket or below and 15% for those in higher brackets, except that high-income returns at the beginning of the top, 39.6%, bracket (for 2016, above $441,000 for single returns, $441,000 for head-of-household returns, and $466,950 for joint returns) are subject to a 20% rate. There are higher rates for capital gains arising from prior depreciation and for collectibles. The proposal would tax 50% of capital gains, dividends, and interest at ordinary rates. Thus the rates would be 6% for the new 12% bracket (rates were formerly zero for capital gains and dividends and 10% or 12% for interest), 12.5% for the 25% bracket (formerly 15% for capital gains and dividends and 25% or 28% for interest), and 16.5% for the 33% bracket (formerly 15% and 20% for capital gains and dividends and 33%, 35%, and 39.6% for interest). Business income earned from pass-through businesses taxed under the individual income tax (including sole proprietorships, partnerships, and Subchapter S firms with limited numbers of stockholders that are incorporated but can elect to be taxed as unincorporated businesses) is currently subject to ordinary rates. The blueprint applies a maximum rate of 25%. Earnings will be allocated to reflect the labor services of the owner-operator, which will be taxed at regular rates. Pass-through businesses are subject to the same current capital recovery and other tax rules as corporations and will be subject to the new cash-flow tax rules as well. Corporate tax treatment is discussed below. The blueprint indicates a variety of additional provisions will be studied and potentially changed. It indicates that incentives for retirement saving and benefits for higher education will be retained (although potentially revised). Provisions for health insurance, such as the exclusion of employer-provided insurance, are being studied by the Health Care Task Force. Under current law, corporations are subject to a 35% tax on taxable income. Some industries are allowed a 9% deduction for domestic production, lowering the tax rate on that income to 31.85%. In measuring taxable income, overhead, taxes, labor compensation, interest, and the cost of goods sold are deductible. Capital cost recovery provisions allow the cost of capital investment to be deducted over a period of years. Investments in plant and equipment are recovered through depreciation. A temporary provision, bonus depreciation, allows a fraction of investment in equipment to be deducted immediately. Intangible investments, such as research and development and advertising that create assets with future value, are deducted immediately as well. Small businesses are able to expense equipment investments in full. Research investments are also eligible for a research credit. In addition, corporations may be subject to a corporate alternative minimum tax. The U.S. tax system technically applies on a worldwide basis so that income from foreign operations is taxed, with a credit allowed against U.S. tax for foreign income taxes paid. Income earned by foreign subsidiaries incorporated abroad is not subject to tax (except for certain types of easily shifted income taxed under Subpart F) until repatriated, or paid to the U.S. parent as a dividend. As a result of this tax deferral and the foreign-tax credit, relatively little tax is paid on foreign source income. The blueprint would impose a 20% corporate income tax and allow investments to be expensed, but disallow the interest deduction. It would eliminate the domestic production activities deduction, but would retain the research credit. This treatment would convert the income tax to a cash-flow tax and impose a zero effective marginal tax rate on investment (and a negative tax rate on research investment). The same rules (except for the tax rate) would be applied to pass-through businesses. A cash-flow tax converts an income tax into a consumption tax. A consumption tax base is composed of two parts: cash flow and labor compensation. By converting the tax on capital income to a cash flow tax, it could be viewed as a part of a value-added tax, with the other part labor compensation. The resulting overall system would be a tax referred to as an X-tax, which imposes a value-added tax. The blueprint would have some slight modifications compared to a full cash-flow tax. It would not allow land acquisitions to be expensed, and it is unclear whether inventories are to be expensed, because it refers to retaining a certain type of inventory accounting (last in-first out), which is different from expensing. The blueprint also does not spell out any details of transition rules, such as allowing depreciation recovery on existing assets, interest income and deductions on existing debt, or for carryforwards for unused credits. Net operating losses (where firms' costs exceed their revenues) will be carried forward indefinitely, with interest. There are other tax code provisions whose treatment is not clarified. Value-added taxes only apply to physical and not financial assets. A cash-flow tax could also include financial transactions and the blueprint appears to do so as it refers to disallowing net interest deductions. How to treat financial firms such as banks under a standard value-added tax is challenging, and a variety of potential approaches exist. The blueprint notes that the plan will address the particular circumstances of financial institutions. The new cash-flow tax would also be imposed on a destination basis, that is, based on where output is consumed rather than the current system that largely imposes the income tax on where output is produced (with a small share of output produced abroad subject to tax). The destination-based tax would be implemented by taxing imports, allowing a deduction for export income, and excluding foreign-source income from tax. Value-added taxes are also imposed on a destination basis. House Ways and Means Committee Chairman Kevin Brady has recently suggested the possible inclusion of a five-year phase in of the border adjustment and the possible inclusion of special considerations for some industries, such as financial services, shipping, communication, digital services and insurance. The committee has also been considering an allowance of interest deductions for small businesses. Eliminating the border tax adjustment would make the tax a cash-flow tax imposed on production rather than consumption. The U.S. tax system would be territorial in the sense that no tax would be imposed on foreign-source income of U.S. firms by virtue of its being foreign source (i.e., producing abroad for the non-U.S. market). Under existing law, a substantial amount of earnings abroad have been deferred and never repatriated. The proposal would tax this accumulated income over an eight-year period at 8.75% for earnings held in cash or cash equivalents and otherwise at 3.5%. If the provision follows past practice, the U.S.-foreign tax credit would be allowed but scaled back proportionally, as was the case in the 2004 repatriation holiday that allowed amounts to be brought back at a lower rate on a voluntary basis. Anti-abuse rules under Subpart F would mostly be eliminated except for certain rules about passive income, such as interest income. Current law has a 40% estate tax with an exemption of $5.45 million in 2016 and $5.49 million in 2017. The blueprint will repeal the estate tax. Its companion, the generation-skipping tax that prevents donors from passing on assets to the generation after the next (e.g., to grandchildren) also will be repealed. The blueprint does not mention the gift tax, but it might also be repealed, as it could be avoided by foregoing large gifts and keeping assets in the estate. Retaining the gift tax would discourage inter vivos giving. Gains in economic efficiency are a traditional objective of tax reform. Efficiency gains have often been conflated with economic growth, but the concepts are different. Efficiency gains arise from an improved allocation of resources whereas economic growth arises from increases in labor and capital. The efficiency objective is to maximize well-being (referred to as utility in economics terms). The two are related to some of the measures but viewed differently. For example, if a marginal tax rate cut increases labor supply the growth effect is the value of additional output, but the efficiency gain is the increased income minus the loss in the value of leisure or unpaid work (such as child care). Increased work always adds to economic growth but does not necessarily add to efficiency or well-being. Labor supply is affected by income and substitution effects. When effective rates are cut, a rise in income allows individuals to consume both more goods and leisure, and thus reduces work effort. The substitution effect causes goods to be cheaper and encourages more work. Only the substitution effect and the marginal rate relate to efficiency gain (reducing the distortion between the consumption of goods, financed by working, and the consumption of leisure). Similarly, an increase in the rate of return has two conflicting effects on savings: a higher rate of return means that individuals can consume more both in the present and the future; consuming more in the present means a reduction in savings. A higher rate of return also encourages the substitution of future consumption for present consumption, increasing savings. The effect on savings also, however, depends on the timing of tax payments. To the extent, for example, that consumption taxes shift tax payments to the future (when assets may be drawn down in retirement and used to consume), a taxpayer should save more to finance those future tax payments. Whereas growth effects depend on income and substitution effects, and thus on both average and marginal rates, efficiency effects depend on marginal effective tax rates, for both labor and capital. As with labor, the efficiency gain from reducing marginal tax rates on capital income is not the amount of consumption it allows in the future, but the difference in the value of that consumption compared to foregone present consumption. The Tax Policy Center (TPC) estimated the effective marginal tax rates on wages, salaries, and self- employment income for current law and under the blueprint. TPC found that the average marginal income tax rate fell from 24.7% to 22.9%, or a 1.9 percentage point decrease. Its revenue analysis indicates that the tax's structural elements that drive these effects are roughly revenue neutral suggesting there would be no income effect. The percentage increase in net of tax wage (1 minus the tax rate) was 2.4% (based on the 0.771 to 0.753 ratio). Based on the Joint Committee on Taxation's labor substitution elasticity, 0.1 to 0.2, the effects would increase labor input by 0.24% to 0.48%. With labor accounting for about two-thirds of gross domestic product (GDP), the effect on output would be 0.16% to 0.32% in the short run. The effects would be closer to 0.24% and 0.48% in the long run. These effects are overstated, however, because they do not account for the base broadening effect on marginal effective tax rates. Disallowing state and local tax deductions is an increase in the share of taxes out of an additional dollar. Similarly, any item of expenditure (such as charitable contributions or mortgages interest) that is paid for out of labor income would affect the marginal effective rate for individuals who shift to the standard deduction. The major itemized deductions are mortgage interest, charitable contributions, and state and local taxes. To determine the importance of this issue in general, data from the Internal Revenue Service's Statistics of Income indicate that 23.2% of total wages accrued to itemizers who are likely to continue to itemize (income classes above $200,000) but would no longer be able to deduct state and local taxes, which accounted for 7.65% of AGI. Using the marginal tax rate for the top quintile, 28.4%, overall marginal tax rates would increase by 0.5 percentage points. The remainder of itemizers account for 36.3% of wage income, have itemized deductions equal to 24.1% of income, and using the tax rate for the fourth quintile of 19.3% have an increase of 1.7 percentage points. The total, 2.2 percentage points, more than offsets the direct marginal rate reductions. It is unclear whether mortgage interest and property tax deductions should be seen as labor income or capital income benefits. If they are considered capital income subsidies, then the offset would be reduced by 47% of the 1.7 percentage point effect, and a negligible amount of the 0.5 percentage points, for a total of 1.4 percentage points. With this view, the base broadening from itemizing deductions would offset three quarters of the rate reduction. Note also that the mortgage interest deduction may not have a marginal impact in the short run because it is largely affected by existing mortgages. It should have an effect in the longer term. Although this is a rough calculation, it suggests negligible effects on labor supply from reducing marginal individual income tax rates, in turn suggesting little effect on growth or efficiency. The base broadening changes as well as rates can also have an effect on the allocation of consumption. The direct disallowance of itemized deductions or the reduction in itemizers (largely as a result of disallowing state and local taxes as a deduction) and to a lesser extent the lower top rate would reduce the degree to which the tax system subsidizes these deductions. The deductions, in turn, favor certain types of consumption provided through labor and other incomes: state and local goods and services, owner-occupied housing (through mortgage interest and real estate tax deductions), and charitable contributions. Although a full treatment of these subsidies is beyond the scope of this report, there is some disagreement about the justification for subsidizing these items. Many economists criticize the deductions that favor home ownership as encouraging too much investment in housing, although some arguments (contributing to stable communities and providing an important retirement asset for much of the middle class) could be made in favor of those provisions. Those arguments, however, largely justify benefits for moderate income taxpayers and not wealthy ones. State and local tax deductions require all taxpayers to subsidize spending in particular states, although some spillover effects from this spending may occur (e.g., use of highways by nonresidents and spillovers from education because of mobility). Charitable contributions have been viewed more favorably because charitable giving is undersupplied in a market economy. At the same time, some would argue that tax subsidies favor the charities that benefit higher-income taxpayers (such as the arts and higher education) and that some response estimations to the tax subsidy suggest that a dollar of revenue loss results in less than a dollar of charitable contributions, indicating that the government could deliver more to charity per dollar through direct spending. Note that some itemized deductions also repealed by the blueprint—such as extraordinary medical expenses, casualty losses, investment expenses, and employee expenses—are seen to reflect an ability to pay or to be an appropriate measure of income, rather than an incentive. In addition, note that the incentive for charitable contributions will also be reduced through repeal of the estate and gift tax. In several respects the proposal will likely lead to efficiency gains in the allocation of capital, by type and by form (equity or debt). Its effect on growth via an increase in the capital stock depends on potential offsetting forces of increases in the rate of return and increases in public borrowing due to debt. The current income tax is characterized by significant variations in the effective tax rate due to variations in how rapidly costs are recovered. Table 1 shows estimates of effective tax rates on the returns to investment at the margin for different types of equity investments under two sets of assumptions regarding the taxability of shareholders (see table notes). The table excludes land, which is not reproducible, and inventories, whose short holding period makes investment in them relatively insensitive to tax rates. Effective tax rates measure the share of the return to investment at the margin that is collected in taxes. The primary differences between the two sets of assumptions are the shares of taxable shareholders; the CRS assumptions allocate based on ownership and include foreign owned shares and their U.S. taxes. The CBO assumptions consider the distribution among U.S. shareholders with adjustments for the shares of taxable and nontaxable excluding those below the ceilings of retirement accounts. The CBO estimated tax rates are also slightly higher. The first column of estimates shows the tax rates at the corporate level, which would be 35% without any type of subsidy. Investment in intangibles is already subject to cash-flow treatment, and investment in research has a negative effective tax because of the research credit. Tax rates are higher for equipment and public-utility structures and even higher for other structures. The corporate total rates add the shareholder level taxes on capital gains and dividends. These effects are small because of the low rates and limited shares of assets held by taxable shareholders. Tax rates are higher for the corporate sector, depending on the asset, but the differences are small in the aggregate because the corporate sector has a larger share of tax favored intangibles and equipment. The differences between sectors are larger for tangible assets. Effective tax rates for the blueprint are shown in Table 2 . Because the tax is a cash-flow tax, all firm-level taxes are at zero except for investment in research, which benefits from the credit. Total tax rates are close to zero. The blueprint has no differences across assets except for research intangibles within a sector and very small effects across sectors. Thus the blueprint tax plan reduces and largely eliminates the misallocation of capital across asset types. Moreover, there could be justifications for the favorable treatment for research, which has positive spillovers. The current tax treatment also has effects on dividend policy and capital gains realizations, which produce distortions, because capital gains taxes are not due until income is realized. The somewhat lower capital gains and dividend tax rates would reduce this effect, although this effect would be offset by higher after-tax rates of return. Under current law, very high-income taxpayers pay 23.8% (the income tax rate and the tax on investment income) and that rate would fall to 16.5%. Some taxpayers currently subject to a 15% rate would now pay 12.5%. These tax rate changes are relatively small, and, in addition, a significant portion of assets is held in nontaxable forms (i.e., retirement savings), so the effect would be relatively small. Some investment is financed by debt rather than equity, resulting in two effects. Debt is currently favored over equity and thus the tax creates a distortion between debt and equity finance. At the same time, because taxes on debt finance are lower (because interest is deductible), debt finance leads to overall lower taxes, narrowing the distortions between the corporate and noncorporate sectors (because the corporate sector's higher tax rate favors debt finance). Table 3 shows the aggregate tax rates on equity, debt, and combined debt and equity. As shown in the table, debt finance is subject to negative tax rates in the corporate sector because tax at which the interest is deducted is much higher than the rate imposed on the creditor (mainly because of the large share of tax-exempt creditors). The difference between debt and equity is more pronounced in the corporate sector because of the higher corporate tax rate (relative to the rates for noncorporate firms).The CBO estimates assume a larger share of taxable creditors with that share larger for the noncorporate sector and thus results in a small estimated positive rate for the noncorporate sector. Tax-favored debt-financed investment also reduces overall effective tax rates and reverses the relative tax burdens across the sectors with aggregate noncorporate burdens higher than corporate ones (although for the basic assumptions the difference is negligible.) CBO also assumes a lower leveraging ratio for the noncorporate sector, which increases the overall tax rate in that sector compared with the corporate tax rate. Nevertheless, in both cases, the differences in overall tax rates are not large. Table 4 shows the effective tax rates for the blueprint. Tax burdens on equity finance fall and those on debt rise, with an overall decline, small negative tax rates with the CRS assumptions reflected in CRS Report R44638, Corporate Tax Integration and Tax Reform , and small positive ones with the CBO assumptions. For purposes of considering overall savings and investment, it is important to consider the overall effective tax rates. The CBO assumptions may be more appropriate for measuring domestic savings effects, whereas the Congressional Research Service (CRS) assumptions may be better for a U.S.-investment effect (including investment from abroad). Combining the tax rates on the corporate and noncorporate sections in Table 3 and Table 4 indicates that, under current law, the combined business tax rate is 10.5% and 17.9% for the basic estimates and those using CBO assumptions about debt levels and taxability of shareholders and creditors. Under the blueprint, they would fall to 1.4% and 3.0%, respectively. Although the size of inventories is not likely to be sensitive to tax rates, inventories' taxes should be included in the total calculations for savings and overall investment. The returns are taxed at the statutory rate or higher, depending on the inventory method used. Total effective tax rates on business investment were 12.7% (22.7% under the CBO assumptions). Under the blueprint, these rates fall to 5.3% and 6.5%. Another asset to consider including in the savings effects calculations is owner-occupied housing. Based on CBO assumptions, owner-occupied housing comprises 41% of total investment. Estimated tax rates were -9% for the CRS estimates and -1.1% for the CBO estimates. Under the blueprint, owner-occupied housing rates rise to -1.1% and 3%. Overall effective tax rates combining business and housing investments are estimated at 4.8% under current law (14.4% for CBO assumptions). These effective rates are -2.9% and 5.1%, respectively, for the blueprint provisions. The Tax Policy Center (TCP) also reported estimated effective tax rates. The TCP estimates an overall effective business tax rate of 22% falling to a 6.3% rate, an estimate similar to the business investments' estimates, using the CBO assumptions. Three estimates have been made of the growth effects of the blueprint and project very different effects. Different estimates reflect, in part, different sources of growth. There are three sources: (1) short-run stimulative effects, which are transitory and depend on the Federal Reserve's response; (2) supply side effects, where labor and capital respond to tax rates and capital can flow from abroad or result from domestic savings (where effects depend on behavioral responses); and (3) crowding out due to deficits, which depend on the magnitude of the deficit and the extent to which it can be financed by borrowing from abroad. The Urban-Brookings Tax Policy Center's (TPC's) analysis used two different models. One model captures all three effects using a demand-side (Keynesian) model that transitions to a neoclassical growth model. In a neoclassical growth model output increases with individuals' increase in labor supply and savings, with the capital stock changing slowly. That model estimates a 1% increase in output in the first full fiscal year (FY2017). This effect would decline to 0.7% in the second year, and 0.2% in the third year. These effects are demand-side effects. The short-run effect disappears after the first four years and the effect turns negative by FY2021 (at a loss of 0.2%). Negative effects occur when crowding out reduces the capital stock more than induced saving increases it and the resultant reduction in output from the smaller capital stock more than offsets any increased labor supply. In the first 10 years, the plan reduces output by 0.5% overall; in the second 10 years, it reduces output by 1%. Note that these are not cumulative growth rates but rather the difference in each year in output with and without the tax change. The second model is a dynamic life cycle model (a model where many generations coexist and make savings and work decisions over a lifetime) that captures both supply-side effects and the crowding-out effects of increased deficits, but not the short-run demand-side effects. It begins with an increase in output of 0.9% in FY2017, declining to 0.1% by 2022, becoming negative (-0.1%) in 2023, and declining to a loss of 0.5% in 2026. In the first 10 years, output is reduced by 0.5% and in the second ten years by 2.6%. The Tax Foundation finds a significant positive effect. Its estimate projects output in the long run to increase by 9.1%, primarily due to changes in capital income taxes. The basic model type is a neoclassical growth model with an immediate transition to the long run. The results reflect only supply side effects and do not include short-run demand effects or crowding out. Auerbach, Kotlikoff, and Koehler hereinafter AKK) provide an estimate of wage growth of 8% using the Global Gaidar Model. They characterize this result as optimistic. While they don't report output growth, that growth rate should be similar. The basic model type is a life-cycle model with multiple worldwide regions. Their results appear to arise largely from an increase flow of capital from abroad in a mode where capital is perfectly substitutable across countries. This model also does not consider short-run demand effects or crowding out. The TPC has some sensitivity analysis in their life-cycle model, with an optimistic scenario where output increases quickly to a 1% increase which is fairly stable over time. A pessimistic scenario shows a decline in output by 2019 and, by 2040, a reduction of 9% of GDP. The growth effects appear to be positive in the optimistic case in part because it apparently assumes that deficits can be largely financed with borrowing from abroad, and negative in the pessimistic case in part because all deficits must be financed through the crowding out of investment. To assist in understanding how estimates for growth effects arising from supply side effects can vary widely, a simple growth model showing the steady state effects has been constructed (see Appendix ). This model relies on three elasticities: (1) savings elasticity (denoted as ER), (2) labor supply elasticity (denoted as ES-EI, which reflects a net of the substitution and income elasticities), and (3) factor substitution elasticity (denoted as S, which reflects the ease with which labor and capital can be substituted in the production function). An elasticity is a percentage change in quantity divided by a percentage change in price. For the savings response, it is the percentage change in the savings rate divided by the percentage change in after tax rate of return. The labor substitution elasticity is the percentage change in labor supply divided by the percentage change in after tax wage at the margin or last increment of work. The labor income elasticity, which is negative, is the percentage change in labor supply divided by the percentage change in after tax average wage. The factor substitution elasticity is the percentage change in the ratio of labor to capital divided by the percentage change in the ratio of the wage rate to the pretax return. The model is a closed model that is similar to the one used by the Tax Foundation (open economy issues will be discussed subsequently). It is important to understand how estimates for the effects of a tax change of this nature depend on so many fundamental values and estimates. To illustrate the uncertainties with supply side effects, first consider the two sets of estimated tax rate differentials; Table 5 and Table 6 estimate the long-run results using the two tax rate effects discussed in this analysis. Also, consistent with the discussion of marginal taxes on wages, the calculations assumes there is no direct effect on labor from tax reductions, although an expansion of the capital stock drives up wages and labor supply increases in response. These tables illustrate the importance of both the measurement of the tax change and the various elasticities. If the TPC's marginal tax rates on wages were also included in the estimate (not considering the offset of base broadening provisions), there would be an additional increase in output. These same changes applied to the Tax Foundation estimates, with a labor supply elasticity of 0.3, would produce an additional 0.7% increase in output. These effects would be smaller in the short run. The Tax Foundation model uses an infinite savings elasticity and, as noted above, a 0.3 labor supply elasticity. Their large output effect is difficult to explain with the model above: using the CRS estimates of tax rate with CBO assumptions about shareholders and debt, a projected 2.8% growth rate would be expected with an infinite elasticity of savings, and a 0.3 labor supply elasticity. Using the TPC's measure of marginal effective tax rate change on labor income, this elasticity would add 0.7%. Larger effects would be expected in a model that did not include economic depreciation in the cost of capital or had a smaller depreciation rate. In the model above, with the same elasticities, a model without depreciation would produce an effect of 4.4%, which added to the labor supply effect would be 5.1%. A likelihood may be that a full or an additional explanation is that the Tax Foundation's tax change is much larger. This larger effect could be partially explained by a different mix of capital stock, focusing more on the capital assets whose rates were reduced by the change and not including those (intangible assets and owner-occupied housing) that were increased by the change. The AKK model is likely to closely approach the results for an infinite elasticity because it has an open economy and its lifecycle elements are likely to lead to significant growth. AKK report the tax rates they use are estimated to fall from 34.6% to 16.1%. The effect of the tax rate changes on capital income, which is the main driver of effects, is 3.1 times the CRS tax rate changes with CRS assumptions and 2.4 times the effects of the CRS tax rate changes with the CBO assumptions. The tax rate differential alone would suggest an output effect of around 6% at an infinite savings elasticity and the other most generous assumptions (the higher labor supply and factor substitution elasticities). The effect is 36% higher than the rate reported by the TPC, and using the infinite elasticity that rate would imply a 5% output increase. The TPC and AKK rates exclude owner-occupied housing and that is a significant reason for the larger tax rate effects. This growth effects discussion illustrates that assumptions that go into models, including behavioral responses estimates, crowding out treatment, and a proper measurement of the tax rate changes, are important and reinforce each other in some cases, that is, high elasticities magnify differences in the measurement of tax rate changes on output. What might be a reasonable estimate of the savings and labor supply effects? Both the empirical evidence and the agencies' practices are reviewed in a report of dynamic scoring. Considering models like the one depicted here and the one used by the Tax Foundation, empirical evidence suggests a labor substitution elasticity from close to zero to 0.3, an income elasticity of 0 to -0.1, and a net labor supply elasticity ranging from -0.1 to 0.3. The JCT has used a substitution elasticity of 0.2 and an income elasticity of -.1 for a net labor supply elasticity of 0.1 in their model of this type, whereas CBO used a substitution elasticity of 0.24, an income elasticity of -0.05, and a net labor supply elasticity of 0.19. Empirical evidence on savings elasticities suggests an elasticity around zero, which ranges from negative to positive. In their model of this type, CBO used a 0.2 elasticity. JCT modifies this model by using a life cycle element, but indicates that it produces effects similar to a 0.29 elasticity. If the growth effects (without counting crowding out) were calculated with the JCT assumptions, using the tax rates under CRS assumptions and CBO assumptions, the effect would be an increase of 0.7% to 1.0%. If CBO assumptions on elasticities were used, the growth effects would be 0.6% to 0.8%. (These estimates assume a unitary factor substitution elasticity, which is a feature of most models, although some empirical evidence suggests the elasticity is lower.) These effects would likely lead to significant output decreases if crowding out were included. A number of important effects on international tax issues arise from the tax change. A true destination-based tax should not discourage imports or favor exports as is sometimes claimed. The import tax initially makes imports less attractive than domestic production, and the export subsidy, that initially permits firms to charge less for exports, makes exports more attractive to foreigners than their home production. These shifts in demand ultimately change demand for imports and exports, leading to changes in the demand and supply of dollars that causes the dollar to appreciate by 25% with a 20% tax rate. This dollar appreciation offsets the effects of the tax, so that U.S. consumers see no change in prices of imported goods, foreign exporters continue to receive the same price and foreigners buy and sell the same amounts for the same prices in their own currency. Some caveats or objections have been raised about this effect. Perhaps the most important of these is that the export subsidy is not refundable, so that exporters that have loss positions will not be able to use the subsidy. Although loss carryforwards are allowed with interest, these firms may be in a permanent loss position. A recent study that simulated the effect of the border adjustment on firms in loss positions found that, weighted by assets, going to a cash-flow tax without border adjustments caused the fraction of loss firms assets to change very little (remain at around 20%). Adding border adjustments increased the share to, typically, around 40%. Firms with losses will not be able to benefit from the export subsidy and to the extent that the subsidy does not have a value, it will cause the border tax adjustment to act partially as a tariff (and thus discourage imports). Potential ways for firms to address this inability to use the subsidy include merging with an importer, adding a business as an import broker, or shifting supplies of intermediate goods from domestic to foreign producers. All of these approaches, however, produce some distortions and market inefficiencies, and a better approach from an efficiency perspective might be to allow refundability or to allow the subsidy to be credited against other taxes, such as employer payroll taxes. In Table 5 and Table 6 , these international considerations include the possibility of attracting more capital from abroad and would suggest perhaps increasing the savings elasticity to account for more investment than that generated by domestic savings, although the upper limit that elasticity is nevertheless infinity. Evidence suggests that the portfolio substitution elasticity is considerably less than infinity and probably around 3. Moreover, because the United States is a large country, the portfolio elasticity will be larger than the supply elasticity, with the latter, approximately 1.8. If that elasticity were used to compute the effects, they would be 1.8% and 2.5% at the top of the range (labor supply elasticity of 0.5 and factor substitution elasticity of 1) and 0.8% and 1.1% at the bottom (labor supply elasticity of 0.1 and factor substitution elasticity of 0.5). Another reason the inflow of foreign investment might be less than suggested by the estimates, or even be negative, is the likelihood that debt is more mobile internationally than equity. The new system encourages more equity investment, but discourages debt-financed investment. Some studies have suggested that a cut in the corporate rate would decrease the U.S. capital stock because it would discourage debt inflow from abroad. The effects in the AKK study appear to arise largely, at least initially, from international capital flows and they appear to assign an infinite elasticity (perfect substitution) to equity capital (there does not appear to be debt-finance in their model although the tax rates incorporate it). If equity capital is imperfectly substitutable, and debt more substitutable, their results would be too large and possibly in the wrong direction. Their model also appears to treat all capital in the economy as corporate capital, whereas a large share is from pass-through businesses and owner-occupied housing. The destination basis of the tax (which is coupled with moving to a territorial tax that does not tax foreign source income) will eliminate some distortions that currently exist due to tax rules affecting international relationships. For example, the current tax discourages repatriation of income earned abroad by foreign subsidiaries because tax is not due when earned, only when returned to the parent firm as a dividend. This effect would no longer exist with a tax that is only imposed based on the place of consumption. The destination basis would also eliminate the incentive for firms to invert (shift their headquarters to another country), which may require a tax induced merger. In addition, it likely would reduce or largely eliminate artificial profit shifting, which is a paper transaction, but requires real resources and possibly some real effects (e.g., setting up a subsidiary operation in a tax haven). The blueprint will introduce inefficiencies with respect to its border adjustment if the export subsidy is not refundable. For firms in a permanent loss position, tax-motivated changes, such as merging with importers, establishing import brokerage businesses, or substituting foreign for domestic inputs, will introduce distortions motivated by a desire to use loss positions. To the extent these actions are not taken and firms do not receive the subsidy, the proposal will distort trade. Without the border tax adjustment, the territorial tax will still eliminate the tax on repatriations. The territorial tax, lower rate, and disallowance of interest deductions will reduce, and probably largely eliminate, the incentive for inversions. Profit shifting will be reduced because of the disallowance of interest deductions, but the shifting of profits into low tax countries through the pricing of intangibles, which is a more important method of profit shifting, would be increased with a territorial tax and no border adjustment. Several distributional consequences arise in considering the blueprint. This section discusses four issues: (1) distribution across income classes (vertical equity), (2) horizontal equity (or the treatment of taxpayers with the same abilities to pay), (3) intergenerational distribution (through the cash-flow tax and its effects on assets), and (4) international distribution (through the exchange rate effects of the border tax adjustment on assets). The measure commonly used for capturing the distributional effects on relative incomes is the percentage change in after-tax income. The TPC provides distributional analysis for 2017, that indicates the percentage increase in after-tax income is 2.5% overall. The effects across income classes depend on the assumption about the border tax adjustment and exchange rates. With no exchange rate adjustment, which might occur in the short run, the increase in income is 0.4% for the first two quintiles and 0.5% for the next two, and the increase is 4.6% for the top 20%. After-tax income is projected to rise by 13.4% for the top 1% and 16.9% for the top 0.1%. With an exchange rate adjustment, the increase for the first two quintiles and the fourth quintile is 1%, the increase for the third quintile is 1.1%, and the increase for the top quintile is 4%. The increase for the top 1% is 10.8% and the increase for the top 0.1% is 13.1%. With no border tax adjustment, the increase for the first two quintiles is 1.2%, the increase for the third and fourth quintiles is 1.4%, and for the top quintile is 5.5%. The increase for the top 1% is 14.1% and the increase for the top 0.1% is 17.4%. The Tax Foundation also presents distributional analyses, but with a smaller effect, 0.7% of income. It finds an increase of from 0.2% to 0.5% for the bottom 80% and 1% for the top 20%. The top 10% has an increase of 1.5% and the top 1% an increase of 5.3%. The overall increase in income is more than three times as large in the TPC analysis for 2017 and more than twice as large in 2025 compared with the Tax Foundation estimates. One difference between the two calculations is that the TPC analysis includes the repeal of the taxes in the Affordable Care Act, whereas the Tax Foundation does not. Because these taxes tend to grow more rapidly in the future, the revenue cost of repealing them accounts for a growing share of the total cost: 9% in 2017, 24% in 2021, 26% in the first 10 years, and 64% in the second 10 years. Both analyses, however, show a general pattern of favoring higher-income individuals, probably largely because of the reductions in business and corporate taxes. The Tax Foundation also provides a distributional analysis after the growth effects are incorporated with much larger and more even benefits. Aside from issues as to whether these increases could be as large as projected (particularly using an infinite savings elasticity, measuring a tax rate change that appears to be too large, and not allowing for crowding out), the sources of growth come at a cost. For example, the individual who increased savings reduced consumption to do so, and the benefit of the policy should capture what is lost and what is gained. Similarly, the worker who increases work effort is giving up unpaid work or leisure. That said, if the capital stock grows disproportionally, there will be some benefit accruing to lower-income workers because of capital deepening. The opposite would occur if capital declines, as suggested would eventually be the case, by the TPC's analysis. The AKK study provides a distributional analysis but, reflecting the life cycle nature of the model, provides distributional effects for lifetime spending and net wealth for the 40-49 age cohort. Its analysis indicates that the shares are essentially the same under the plan. The study also examines shares after the growth effects are incorporated and finds the distribution, again, essentially the same. Horizontal equity addresses the relative tax treatment of taxpayers with the same ability to pay who differ in other respects. The most important way that most taxpayers with the same ability to pay could experience different tax rates is family composition. Some families are headed by a married couple and some by a single individual. Taxpayers differ in the number, if any, of children. Differential tax rates can also apply to couples that live together with or without being married (the marriage penalty or bonus). Current law treatment of both these cases is addressed in a recent CRS report, and these rates are compared with the proposed treatment in the blueprint. Finally, individuals can differ in their ability to pay because of circumstances, such as large medical expenses. To examine the first horizontal equity issue, the effective tax rates arising from current and proposed structural elements of the tax system are compared across family types. These structural features include the rate structure, personal exemptions, child credits, standard deductions, itemized deductions and the alternative minimum tax. The comparison does not reflect the differential treatment of capital and labor income, although outside of high-income families, most taxpayers have relatively small shares of capital income. To make the comparisons, families that have an equal ability to pay are assigned an income required to match the reference income (that of a married couple without children) through an equivalency index. This index accounts for the ability of families to enjoy economies of scale (such as sharing kitchens and bathrooms) and for the size and nature (adults or children) of the family. The economy of scale issue means that although two people need more income than one person to achieve the same standard of living, they do not need twice as much income. Table 7 shows the effective average income tax rates for lower-and middle-income levels under current law and the blueprint. The table shows within one income level single, joint (headed by a married couple), and head of household (headed by a single parent with children) returns. The blueprint does not have an effect on the lowest income levels because these returns do not have positive tax liability and are not affected by the changes in nonrefundable provisions. At all of these income levels, there is some favoritism in current law for families with children, due to the earned income credit and the child credit, with the most generous treatment for families with two or three children. That favorable treatment becomes relatively small at the $25,000-income level and virtually disappears by the $50,000-income level. The blueprint generally maintains this pattern. Table 8 and Table 9 show the effective tax rates on higher incomes. (Tax rates that reflect payment of the alternative minimum tax are bolded.) Under current law, at middle and higher incomes, tax rates become more even across family size, although at higher-income levels families with children are taxed more heavily. This effect occurs because the allowances for children are either phased out or are not large enough relative to income to make the adjustments for large families. This pattern is largely continued under the blueprint because the basic structure of the current system is retained. A second horizontal equity issue concerns the treatment of couples who live together with and without marriage. Married couples file a joint tax return and couples that live together each file a single return if there are no children. If there are children, one taxpayer can file a head of household return and the other a single return. These choices can produce either a marriage penalty or a marriage bonus, depending on the income splits, income levels, and family circumstances. As shown in Table 10 and Table 11 for families without children, either penalties or bonuses can occur. Penalties can arise at low-income levels because of phase outs, particularly in the earned income credit. (Tax rates arising from the alternative minimum tax are bolded). No marriage penalties occur in the middle incomes because the rate brackets, standard deductions, and personal exemptions are twice those in a single return. Marriage bonuses arise when income is unevenly divided, although penalties can occur due to the earned income credit. Tax rates vary more widely when children are involved, and at low income levels an unmarried partner who is the primary earner but does not have custody can pay significantly higher taxes. As shown in Table 12 and Table 13 , these basic patterns are retained in the blueprint. As in the case of the basic horizontal equity issues, the structural elements are not that different from current law, with larger standard deductions offsetting the loss of itemized deductions, the new child and dependent credit largely replacing the personal exemption, and the limits on itemized deductions offsetting the flattening of the rate structure. Some features of the current tax law recognize that certain costs may have differential effects on ability to pay. One of these is allowing an itemized deduction for extraordinary medical expenses (i.e., expenses over 10% of income). Unlike most itemized deductions, these deductions are much more concentrated at lower and moderate income levels, in part because lower and moderate income individuals are less likely to have health insurance. Similarly, individuals deduct casualty losses as an itemized deduction and individuals with large losses in property have lost income (in the value of the return on their property), which would affect their ability to pay. The casualty loss is also allowed in excess of a percentage of income. Some itemized deductions are appropriate to the measurement of income and are included as itemized deductions as a simplification. These deductions include investment costs and employee expenses. In the case of professional gamblers, gambling losses are a cost of earnings income. Some of these issues may be addressed in the final proposal. Economists recognize that the incidence of a consumption tax, whether a retail sales tax, a value-added tax, or a flat tax (i.e., a flat rate tax imposed on wage earners and the same rate imposed as a cash-flow tax on businesses), falls on wages and asset values. By contrast, the income tax falls on wages and investment income. If a cash-flow tax is substituted for the corporate tax, as a separate move, the tax would fall on assets. These issues are outlined in numerous sources. That means there is an inter-generational distributional aspect to the cash-flow tax because it is a one-time tax that falls on the generation alive at the time (although some of the burden may be shared with future generations through inheritance). Returns to investment going forward are not subject to tax, except in the case of economic rents (i.e., returns in excess of the amount needed to attract investment). Which asset holders bear the burden for debt-financed investment depends on whether there is a general price rise (which requires an expansion of the money supply). For example, with a retail sales tax or a value-added tax, such a price rise might be desirable, so that the price of consumption goods rises while wages and asset values do not change. In this case, although these values do not change, their purchasing power falls, which is equivalent to a fall in asset value. If the tax is enacted in a way that does not require a price increase (such as a flat tax or a separate cash-flow tax) or a price rise is not accommodated, debt will retain its value, and the fall in the value of equity-owned assets is larger. For example, if a firm has a third of its assets debt financed, the stock market values would fall by 50% (one-third divided by two-thirds) more than their effective fall when prices change. That is, equity owners bear the full burden of the asset tax. Perhaps the best intuition behind the expectation that stock market prices would fall is that a new investment has a higher return than the old investments because it has a subsidy. Therefore, a new investment (such as a new issue of stock) is more attractive than existing investments. To make individuals, who could purchase a new investment with a higher return, willing to purchase existing shares, the price of existing stocks must fall so as to match the return on new issues. A fall in asset prices is not confined to the wealthy, although stock held by individuals is concentrated among high-income individuals. As noted earlier, about half of the stocks in U.S. firms is held by nontaxable shareholders, largely in retirement accounts (about 5% is held by charitable and other nonprofit organizations, such as university endowments). Note that the fall in the value of assets would not be recouped as in the case of normal market fluctuations: it would be permanent, although as time goes on more of the stock market would be owned by younger generations who would increasingly have purchased stock at a discount and therefore, increasingly do not bear the burden of the tax (although even after all individuals alive have died, some burden will remain because of inheritances). If the current income tax were fully an income tax, and the new tax proposal applied its cash-flow effects to all purchases, then the estimated fall in the stock market would be relatively straightforward. However, the current income tax contains significant aspects of a cash-flow tax through accelerated depreciation and expensing of intangibles. Thus it already has discounted prices. In addition, the new cash-flow tax system excludes land purchases from expensing and it is not clear whether inventories would be excluded. The formula for estimating the existing estimates of accelerated depreciation and expensing is shown in the Appendix . Based on the asset data and tax model used in previous CRS reports and data (particularly on land and inventories) in a recent CBO study, the estimated 12% discount, before adjusting for debt, in the current stock market is due to consumption tax elements of the current income tax. About half that effect is due to the expensing of intangible investments, including research and development, advertising, and human capital investment; the remainder is due to accelerated depreciation. The discount estimated for a 20% cash- flow tax that does not apply to land or inventories is estimated at 15.4% (with somewhat less than a quarter of assets in investments that do not qualify). The differences between the two numbers, adjusted to reflect debt and the existing stock market value, ranges from 5.9% to 6.2% (depending on the debt share). Some ambiguity exists regarding the treatment of inventories. If inventories were allowed to be expensed, the estimates would be 8.6% to 9.0%. If a true cash-flow tax were chosen, which would also apply to land, the estimated effects would be 16.9% to 17.3%. These estimates have many caveats. The proposed cash-flow tax is a destination-based tax rather than an origin-based one, and it is unclear how this rule would affect the estimates. Although all estimates are subject to uncertainty, estimating intangible assets, particularly for human capital investment, which accounts for about half of intangibles, is especially uncertain. The estimates of the existing discounts assume uniform debt shares and growth rates across assets. The proposal is unclear on transition rules that allow depreciation on existing assets, which would reduce the discount (although values would eventually fall to the permanent levels as deductions were taken). One important implication of this burden of a cash-flow tax is that proposals to increase the tax rate above 20% to address revenue shortfalls (because there would be little effect on real investment in plant and equipment) would increase the discount. With the exclusion of land and inventories reducing the discount to about three quarters, but debt increasing it by 1.125% for each percentage point. Thus increasing it to 25% would increase the discount by 5.6%, increasing it to 30% would increase the discount by 11.3% and leaving it at the current statutory rate would increase it by 16.9%. A final set of distributional effects could arise from the border tax adjustments. The first effect is from the dollar appreciation expected from the border adjustments. Because foreign currency would experience a decline in its power to purchase American goods or dollar denominated assets, U.S. holders of foreign assets would lose value, whereas foreign holders of U.S. assets would gain value. Those with debt denominated in U.S. dollars, including many third-world countries, find that their debt obligation has increased in terms of their own currency. One study estimated that U.S. holders of foreign assets could lose as much as $4.9 trillion, and foreign holders of U.S. assets could gain as much as $8.1 trillion. (These measures assumed the full export subsidy would be allowed and thus the full exchange rate adjustment would occur.) These distributional effects also suggest that to increase the tax rate from 20% to achieve revenue neutrality would exacerbate the exchange rate adjustment and the shifts in asset values. For example, raising the rate to 25% would lead to a dollar appreciation of 33%, over 30% larger that at a 20% rate. A 30% rate would lead to a 43% appreciation in the dollar and retaining the rate at the current 35% rate would lead to a 54% appreciation. The current trade deficit means that the border adjustment leads to a larger tax base, projected to raise more than a trillion dollars in the next 10 years. There appears to be no one bearing the burden of that additional tax, because U.S. consumers and producers have taxes offset by exchange rates and foreign producers and consumers buy and sell at the same level in their own currencies. These additional tax revenues are, in effect, loans from the rest of the world, because the country cannot perpetually have trade deficits. The trade balance must be zero in present value throughout a country's history and thus trade surpluses will occur in future years with tax revenues lost due to the border adjustment. The TPC, Tax Foundation, and AKK have estimated the blueprint's revenue effects, although the TPC included repeal of the Affordable Care Act taxes and the Tax Foundation and AKK did not. AKK also excluded the effects of the estate tax. These revenue losses are significant. All three studies also reported effects after macroeconomic feedback. None of the revenue estimates reflects the elimination of the border adjustment, which is estimated to add $1.2 trillion to the ten year cost. The TPC estimates a revenue loss of $3,100.9 billion for the first 10 years and $2,225.6 billion for the second 10 years. If the Affordable Care Act taxes are excluded, the cost is $2,297.6 billion in the first 10 years and $795.6 billion in the second 10 years. (The repeal of these taxes cost $803.1 billion in the first 10 years and $1,430.0 billion in the second 10 years.) Of these, the individual income tax costs are $1,219.0 billion in first 10 years and $303.9 billion in second 10 years, or less than half. Structural elements (rates, standard deduction, itemized deductions, personal exemptions, child and dependent credits, and alternative minimum tax) are close to revenue neutral, losing $95.9 billion in first 10 years but gaining $202.4 billion in the second 10 years. These results are consistent with the findings of limited changes from current law in the previous section on distribution and horizontal equity. Most of the losses on the individual side are from the treatment of business and investment income. The maximum tax rate on business income and expensing plus the disallowance of net interest deductions loses $1,050.3 billion in first 10 years and $221.9 billion in the second 10 years. The timing difference reflects the pattern of expensing whose revenue loss (assuming depreciation on existing assets is continued) loses significant revenue initially and then a smaller amount over time, plus the disallowance of net interest deductions, which gains more revenue over time as more loans are covered. The more generous treatment of capital gains, dividends, and interest results in losses of $497.8 billion in the first 10 years and $848.6 billion in the second 10 years. TPC also includes other tax expenditures assumed at a gain of $385.2 billion in the first 10 years and $515.7 billion in the second 10 years. Corporate revenue losses are $890.7 billion in the first 10 years and $192.5 billion in the in second 10 years. As with the case of business income, the significant decline in revenue loss over the two periods is due to the pattern of expensing and disallowance of net interest deductions. There is also a small offset from the deemed repatriation of foreign source income; without that one-time gain, the loss in the first 10 years would be $1,062.4 billion. The border adjustment accounts for a significant offset to loses, gaining $1,179.6 billion in the first 10 years and $1,689.3 billion in the second 10 years. The estate and gift tax repeal costs $187.4 billion in the first 10 years and $299.1 billion in the second 10 years. The Tax Foundation estimated a revenue loss of $2,418 billion in the first 10 years, with $981 billion from the individual income tax, $1,197 billion in corporate income taxes, and $240 billion in estate and gift taxes. The Tax Foundation also finds the structural change in the individual income tax change to be roughly revenue neutral, losing $104 billion in the first 10 years, thus also indicating that most of the revenue loss from the individual taxes arises from the treatment of business and investment incomes. AKK estimate a loss of $212 billion annually without identifying a time period. The estimate do not include the Affordable Care Act taxes or transition effects (such as the cost of depreciating old capital and the allowance of interest deductions on existing debt), although it appears that the model does not include debt. The estate tax repeal is also not included in the model. The AKK model does not appear to have other forms of capital, such as that of unincorporated businesses and owner-occupied housing. For a dynamic score, the TPC's Keynesian/neoclassical growth model shows a negligible change in revenue cost in the first 10 years from economic feedback effects and a 21% increase in the second 10 years, whereas the life cycle model shows a 2% offset in the first 10 years and a revenue loss that is 51.5% larger than the static loss in the second 10 years. The Tax Foundation finds a 92% offset. AKK find a revenue gain of $38 million annually and thus a revenue offset of 118%, although they once again stress that these estimates appear to represent an upper bound on wage growth. Note that the TPC's estimate, although it includes the effects of crowding out, does not include the much larger costs of interest payments on the debt. The Tax Foundation's estimate reflects neither. The revenue shortfalls, likely to be significant because the Tax Foundation's estimate reflects large supply side and tax rate effects and no crowding out, are a major challenge for the tax reform proposals, given the already unsustainable nature of the debt. The revenue losses would be more serious in the short run without the border tax adjustment, although, as noted above, this revenue could be thought of as a loan and not affect the longer-term burdens of the revenue shortfall. Many elements of the blueprint could produce simplification in tax administration and compliance. On the individual income tax side, the reduction in the share of taxpayers who itemize will be the major simplification, eliminating the need to keep records (particularly with charitable deductions), although there are potential simplifications if education and retirement benefits are consolidated. The repeal of the estate and gift taxes would end tax planning surrounding those taxes. The cash-flow treatment will simplify business accounting by eliminating the need to depreciate assets, although transition rules could extend the period that depreciation must be calculated. Firms would no longer need international tax planning to shift profits from U.S. jurisdictions into tax havens with low or no taxes because disallowance of net interest deductions would remove earnings stripping through leveraging and the destination-based treatment would remove profit shifting through transfer pricing. U.S. firms would no longer be interested in moving their headquarters for tax reasons, and thus no longer engage inefficient mergers to do so. Without the border adjustment, however, profit shifting would be reduced by the lower-tax rate and disallowance of interest deductions, but increased when using the more important source of profit shifting, transfers of intangibles, due to a territorial tax. With a territorial tax, profits shifted out of the United States under a production-based tax would have a larger benefit because they would never be taxed. Incentives to invert would be reduced substantially, but not entirely eliminated. Although the blueprint introduces some significant simplification, new administrative costs and complexities arise. A full exploration of these issues is beyond the scope of this report; however, the following are the main issues that have been under discussion. Many of them relate to the border adjustment and would no longer be of concern without that adjustment. Because the business income of taxpayers in the new 33% bracket is granted a lower rate (25%), the incentive (which already exists) to characterize labor income as capital income will be increased. The incentive currently exists because labor income is subject to the payroll tax, even for high-income individuals above the Social Security tax threshold in which the Medicare tax on labor income applies. All income of sole proprietorships and general partners is considered labor income subject to payroll tax. The lower rate will further encourage the recharacterization of income as capital rather than labor income. Moreover, to apply the lower capital income tax rate across the board, sole proprietors would have to allocate income between capital and labor, at least for purposes of the maximum income tax rate. An option that would also raise revenue would be to eliminate the 25% cap on tax rates. That elimination would exacerbate the distortion in entity choice (which already exists to a limited degree in the current law, where the top individual rate is 39.6% and the top corporate rate is 35%), leaving a 13 percentage-point spread (rather than a five-percentage point spread) between the rates. Exporters, whose deductions for export sales along with costs that lead them into a permanent loss position, would need to undertake potentially costly and complicated mechanisms to take advantage of these losses. The options include merger with importing firms, acquiring a separate business as an import broker, shifting supply sources from domestic production to imports, and engaging in leasing to delay the timing of deductions for investments or the loss of the value of expensing. It is possible to avoid the problem by refunding taxes that would be the case for a normal consumption tax. Alternatively, the burden could be reduced by refunding the tax against the employer payroll tax or, actually enacting a standard value-added tax and combining it with a set of income tax subsidies and surcharges to achieve an identical outcome. Although the import tax can be imposed by disallowing the import cost deduction, taxing direct business-to-customer sales is more complex. This issue is also a challenge for the value-added tax, particularly in the digital economy where the policing of digital goods is especially complex. Basically there are two approaches, neither entirely successful. One is to require customers to pay the tax, which has been the case with state sales taxes in which the seller did not have nexus (or a direct connection to the state through a permanent establishment). Compliance with such an approach is poor. The alternative is to require remote sellers to withhold the tax. This approach is also problematic as there is no way to compel a seller out of one's jurisdiction to collect taxes. This is, nevertheless, the approach recommend by the Organisation for Economic Co-operation and Development's (OECD's) project on base erosion and profit shifting. This option might work better because large-scale well-known firms have a reputational value in being tax compliant. To the extent that the tax is not complied with, there is a further incentive for U.S. producers to avoid the tax. For example, U.S. producers could sell to affiliates abroad (deducting the exports) who could then resell back into the United States. This issue is particularly a problem with sales of intangible goods, such as computer software, e-books, and music downloads. For sales to consumers, firms can substitute higher interest payments for sales prices. For a firm with net interest, additional interest income does not increase tax liability but additional sales does. To prevent abuse, interest rates for these sales would have to be regulated and enforced. Similarly, because net interest payments are no longer deductible, firms subject to tax may prefer to substitute deductible costs where possible for interest payments. These problems arise because the system would apply to intangibles, which are more difficult to police than tangible goods and because administration of the tax relies on accounting entries rather than actual tracking of tangible goods as is the case in a credit invoice value-added tax. An example of the potential type of tax planning that might occur centers around the exemption of the export of intangibles combined with a territorial tax system. A U.S. parent company invests in research (deducted as a cost) to develop technology for an electronic device; it sells the technology (as an exempt export) to its manufacturing subsidiary in a low-tax country. The subsidiary manufactures for the U.S. and foreign markets. With sales, the technology increases in value and the subsidiary distributes the rights back to the parent, which would be treated as a nontaxable dividend, and the parent now receives a royalty from the foreign subsidiary, which would be exempt as export income. This potential exclusion of income from intellectual property, including royalties embedded in the value of devices sold back into the United States, could occur given the lack of clear principles about how to treat intangibles under a destination principle tax. It also illustrates the unexplored waters of a new and untried type of tax system. Several other issues may be of concern to policymakers and are briefly highlighted below. The blueprint's border adjustments may be found to be illegal tariffs and export subsidies by the World Trade Organization (WTO). This determination is largely a legal matter which, according to some experts, is unlikely to be influenced by economic issues. Thus, although economic analysis indicates that as long as both the taxation of imports and exclusion of exports occur at the same rate, border adjustments do not influence trade, this point may not be taken into consideration. Even if it were, the lack of refundability of export subsidies could bring this issue into question. Most lawyers considering this issue appear to believe that the border adjustments will not be legal, especially the tax imposed on imports by disallowing deductions. Similarly, there are issues about the new tax coverage under the existing income tax treaties. If the tax is treated as an income tax and thus falls under these treaties' rules, it would violate income tax treaties. One of those violations would be imposing an import tax on sellers without a permanent establishment in the United States, which is not allowed under current treaties. Although the issues as to whether the tax complies with WTO and tax treaties are legal, the consequences would be economic. If the WTO rules are violated there would need to be major changes to the tax law (either abandoning destination basis or converting the tax into a true value-added tax) or being subject to penalties, such as countervailing duties. Changing to a different basis of taxation would present issues for state and local income tax systems and their enforcement. Most states use the federal income tax as the base for their own taxes. For businesses, the movement to expensing would require states to either adopt the same rules or make numerous adjustments to require depreciation and interest deductions, to allow deductions for imports, and deny exclusion of export revenues. Enforcement would become more difficult. Individual income taxes (outside of pass-through income) would be less radically changed, although the significant reduction in the number of itemizers could have revenue consequences for the states. If most of these non-itemizers now move to the state standard deduction, which may have been less generous than itemizing at the state level because most states add back state income taxes, revenues could be lost. States would also have to determine their own conformity with federal itemized deductions. To the extent that the states and localities retained a traditional income tax base, the simplification for businesses from cash-flow taxes would no longer be realized, because these measures would have to be calculated for state income tax purposes. Some arguments have been made that large publicly traded firms are more sensitive to the effects on profits in their financial accounts in making decisions to undertake investment. This concern raises issues for the destination-based cash-flow tax. The first is whether the tax will be treated as an income tax, with the expensing provisions treated as temporary timing provisions that do not change profits (because profits reflect deferred tax liabilities), or as a consumption tax, in which the tax is treated as a sales tax and profits rise. If treated as an income tax, arguments have been made that expensing will not provide the type of incentive discussed in the sections on investment and growth. Most economists have difficulties with this argument because it means that firms are not maximizing profits. A value-added tax is normally imposed on real income (sales of goods and services) and not financial income. The blueprint, modified from an income tax, includes financial income. For example, it appears that net interest income will be included in the base (and thus the only change for deductions is when net interest payments are present). If financial transactions are included in the tax base (including not only interest, but capital gains, royalties, and other items) then should the border adjustments also apply? These are questions that may remain to be answered. Growth Model Estimating the long-run growth effects begins with a production function: Q=A(aK1-1S)+1-aL(1-1S))1/(1-1S) where Q is output, A and a are constants, K is capital, L is labor, and S is the factor substitution elasticity. Maximizing profits subject to the payments for capital and labor yields the two first order conditions: QK= a-S A1-1S-S (R1-t+d)S and QL= a-S A1-1S-S WS where R is the after tax rate of return, t is the effective tax rate on capital income, d is the economic depreciation rate, and W is the wage rate. Labor supply is a function of after-tax wages: L=B(W(1-ta))-EI (W(1-tm)ES where B is a constant, ta is the average tax rate on wage income, tm is the marginal tax rate on wage income, EI is the absolute value of the income elasticity, and ES is the absolute value of the substitution elasticity. The equation for R is based on the steady state equilibrium that the savings equals investment and thus the savings rate times output equals the growth rate times the capital stock. The savings rate is in turn a constant elastic function of the rate of return, thus: C RERQ = gK where C is a constant, g is the (constant) growth rate, and ER is the savings rate elasticity with respect to the after tax return. To solve the model, substitute the value of K and L from equations (2) and (3) into equation (1) to derive the relationship between R and W. Also combine equations (2) and (3) to express the capital-labor ratio as a function of relative prices. There is a set of five equations and five unknowns, which are differentiated and combined to yield the percentage change in output (which is a function of the percentage change in inputs of capital and labor, which are in turn determined by tax rate changes). The analysis yields a percentage change in output dQ/Q, which is a function of the changes in the tax rate on capital income, the average tax rate on labor income and the marginal tax rate on labor income: dQQ=αS+ES-EI(1- α) Vdt1-t+EIdta(1-ta)-EStm(1-tm) where α is the share or capital income V=ER (R1-t)/(SR1-t+ER R1-t+d) Because this model applies to small changes, to get a better approximation of discrete changes, the initial tax rate is set at the midpoint of the old and new tax rates. Calculating Stock Market Effects This simplified formula does not include debt and interest payments, but these terms would disappear in any case. The calculations used a weighted average of debt and equity costs to determine the real after tax return, R, but there was virtually no difference if the higher equity return were used. The value of stock per dollar of the existing capital stock begins with the annual flow of profits net of reinvestment (or dividends): Π=C(1-u)-d+g+d+g uζ where Π is net profit, C is gross profit before depreciation, u is the statutory tax rate, d is the depreciation rate, g is the growth rate, and ζ is the value of depreciation discounted at the nominal growth rate (the value of depreciation deductions as a percent of investment). If profits grow with the inflation rate p and the real growth rate g, and are discounted at the nominal interest rate (R+p), where R is the real after tax discount rate, the value of an indefinite stream of profits net of investment is: (9) V=C1-u-d+g+d+guζ/[R-g) To determine C, use the standard user cost of capital, which relates gross profit to the after tax discount rate, economic, depreciation, tax depreciation, and the tax rate, for an investment that breaks even: (10) C= (R+d)(1-uz)(1-u) where z is the present value of tax depreciation deductions (which is discounted at the nominal interest rate, R+p). Substituting (10) into (9) results in: (11) V=R+d1-uz-d+g1-uζ/(R-g) or (12) V=1-[R+duz-d+guζ]/(R-g) Calculation of ζ is the same as the calculation of z, except that R is replaced by g. If depreciation is economic depreciation d/(R+d) for z and d/(d+g) for ζ, the value of V is 1, as the values in the numerator of the second term in (12) cancel out. Also if assets are expensed so that both z and ζequal 1, the value is (1-u). Calculations were done for each type of asset (equipment, public utility structures, nonresidential structures, residential structures, and intangibles). The value of p was set at 0.02, g at 0.03, u at slightly below 0.35 (0.334) for equipment, nonresidential structures, and intangibles to reflect the production activities deduction, and 0.35 otherwise, and R at .05538, reflecting a weighted average of debt and equity.
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On June 24, 2016, House Speaker Paul Ryan released the Better Way Tax Reform Task Force Blueprint, which provides a revision of federal income taxes. For the individual income tax, the plan would broaden the base, lower the rates (with a top rate of 33%), and alter some of the elements related to family size and structure by eliminating personal exemptions, allowing a larger standard deduction, and adding a dependent credit. For business income, the current income tax would be replaced by a cash-flow tax rebated on exports and imposed on imports, with a top rate of 20% for corporations and 25% for individuals. The cash-flow tax would be border-adjusted (imports taxed and exports excluded), making domestic consumption the tax base, although a recent announcement from congressional leaders has indicated that a border adjustment would be dropped in any future tax plan. The system would also move to a territorial tax in which foreign source income (except for easily abused income) would not be taxed. In addition, the proposal would repeal estate and gift taxes. Although the Affordable Care Act (ACA) taxes are not repealed in the Better Way tax reform proposal, ACA taxes are repealed in the Healthcare Task Force proposals. One objective of tax reform is to increase output and efficiency. However, the plan's estimated output effects appear to be limited in size and possibly negative. The direct effect of lower marginal tax rates on labor supply is limited because the reduction in marginal tax rates is small and largely offset by an increased base that increases effective marginal rates. Capital income effects are also somewhat limited even with the movement to a cash-flow tax (that generally imposes a zero rate) because the current effective tax rate is low, due to current accelerated depreciation and the negative tax rate on debt financed investment. Growth effects are also limited because most empirical evidence does not support large savings and labor supply responses. As currently proposed, the plan loses significant revenue which, according to some estimates, could more than offset the supply responses and eventually lead to a contraction in output. The plan would achieve efficiency gains, particularly in the allocation of capital by type and industry and in the even treatment of debt and equity finance. It would eliminate many distortions associated with multinational firms, including eliminating the tax treatment that discourages repatriation of foreign source income to the United States and the incentive for firms to invert (shift headquarters abroad) by merging. Although claims have been made that the border adjustment would penalize imports and favor exports, a true border-adjusted tax has no effect on imports and exports due to the dollar's appreciation. There may be transitory effects, and for the blueprint, the export exemption may not be received by all exporters, which could cause the plan to act in part as a tariff. There are, however, a number of methods that might be used to obtain the benefits of the export exemption. Studies of the distributional effects indicate that the plan increases the after-tax income of higher-income individuals compared with lower-income individuals. The plan's treatment of families of different compositions remains similar to current law, with families with children favored at low incomes and disfavored at high incomes. The plan would simplify the tax system's administration and compliance by reducing the number of itemizers, eliminating the estate tax, simplifying depreciation, and eliminating the need for most international tax planning to shift profits out of the United States. However, some new complications would be introduced, including separating favored capital income of pass-through businesses from labor income of their owner-operators and implementing border-tax adjustments. Other concerns about the tax reform are that the border adjustment will be found illegal by the World Trade Organization and violate bilateral tax treaties. Major changes in business taxes may also complicate the tax administration of state and local governments.
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The Troubled Asset Relief Program (TARP) was created by the Emergency Economic Stabilization Act (EESA; P.L. 110-343 ) enacted on October 3, 2008. EESA was passed by Congress and signed by President George W. Bush to address an ongoing financial crisis that reached near-panic proportions in September 2008. Financial turmoil began in August 2007 when asset-backed securities, particularly those backed by subprime mortgages, suddenly became illiquid and fell sharply in value as an unprecedented housing boom turned to a housing bust. The Federal Reserve (Fed) stepped in with emergency measures to restore liquidity, temporarily calming markets. Losses in mortgage markets, however, continued and spilled into other markets. Financial firms eventually wrote down many of these losses, depleting their capital. Uncertainty about future losses on illiquid and complex assets led to some firms having reduced access to private liquidity, with the loss in liquidity being catastrophic in some cases. September 2008 saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, and the near collapse of AIG, which was averted with an $85 billion loan from the Fed. There was widespread unwillingness to lend in the financial markets because participants were unsure which firms might be holding so-called toxic assets now worth much less than previously estimated, thus making these firms unreliable counterparties in financial transactions. EESA authorized the Secretary of the Treasury (hereinafter "the Secretary") to either purchase or insure up to $700 billion in troubled assets owned by financial firms. EESA granted this authority for a maximum of two years from the date of enactment, meaning it expired on October 3, 2010. The general concept was that by removing such assets from the financial system, confidence in counterparties could be restored and the system could resume functioning. This authority granted in EESA was very broad. In particular, the definitions of both "troubled assets" and "financial institutions" allowed the Secretary wide latitude in deciding what assets might be purchased or guaranteed and what might qualify as a financial institution. EESA also included a number of oversight mechanisms and reporting requirements. EESA was later amended to strengthen its executive compensation requirements and to reduce the authorized amount to $475 billion. This report provides a brief outline of the programs created under TARP, changes made by Congress, and a summary of the current status and estimated costs of the program. It also provides an Appendix that contains detailed discussions of the individual TARP programs. Treasury reacted quickly after the enactment of EESA, announcing the TARP Capital Purchase Program on October 14, 2008, and several other programs followed. These programs can be broadly broken down into Bank Support Programs, Credit Market Programs, Other Investment Programs, and Housing Programs, with several programs under each heading: Capital Purchase Program (CPP). The CPP did not purchase the mortgage-backed securities that were seen as toxic to the system. Instead, it purchased preferred shares in banks. The resulting addition of capital, it was hoped, would allow banks to overcome the effect of the toxic assets while those assets remained on bank balance sheets. The CPP is now closed with no additional disbursements possible under the current program. Of the approximately $205 billion disbursed, $1.1 billion remains outstanding, $4.9 billion has been written off or recognized as a loss, and $26.95 billion in income has been received. Targeted Investment Program (TIP). This program provided for exceptional preferred share purchases and was used only for Citigroup and Bank of America. TIP is closed, with all $40 billion in disbursed funds repaid and $4.4 billion in income received. Asset Guarantee Program (AGP). The AGP, required by Section 102 of EESA, provided guarantees that were also part of the exceptional assistance to Citigroup and Bank of America. This program is closed, with the $5 billion in extended guarantees canceled, no funds actually disbursed, and $3.4 billion in income received. Community Development Capital Initiative (CDCI ). The CDCI provided for lower dividend rates on preferred share purchases from banks that target their lending to low-income, underserved communities and small businesses. Many participants in the CDCI converted into the program from the CPP. The CDCI is closed with no additional disbursements possible under the current program. Of the $0.57 billion disbursed, $0.47 billion is still outstanding, $0.01 billion has been written off or recognized as a loss, and $0.04 in income has been received. Public-Private Investment Program (PPIP). This program provided funds and guarantees for purchases of mortgage-related securities from bank balance sheets. Purchases and management of the securities was done by private investors who have provided capital to invest along with TARP funds. The PPIP is closed with all of the $18.6 billion in disbursed funds having been repaid and $3.85 billion in income received. Term Asset-Backed Securities Loan Facility (TALF). The TALF program was operated by the Federal Reserve to support the asset-backed security market, with TARP funds committed to support the program and absorb initial losses. $0.1 billion in funds were disbursed to cover expenses, but no funds were disbursed to cover losses. While TALF loans extend to 2015, in January 2013 the earnings from the program were deemed sufficient to cover any possible future losses. Thus, the TARP commitment was canceled and the disbursement of $0.1 billion was repaid. Treasury received $0.59 billion in income due to TALF. Section 7(a) Securities Purchase Program . This program supported the Small Business Administration's (SBA's) Section 7(a) loan program through purchases of pooled SBA guaranteed securities to increase credit availability for small businesses. It is now closed with $0.36 billion repaid out of the $0.37 billion in disbursed funds and $0.01 billion in income received. AIG Assistance ( Systemically Signific ant Failing Institution Program) . TARP preferred share purchases supplemented and ultimately supplanted assistance to AIG previously provided by the Federal Reserve. The final AIG assistance restructuring occurred in January 2011 with the Treasury's peak disbursement equaling $67.84 billion and the government's ownership totaling 92% of AIG's common equity. Treasury sold its equity over time, with the final equity sold in December 2012. In total, Treasury recognized $13.5 billion in losses from the TARP portion of AIG assistance and received $0.96 billion in income. Automobile Industry Support. This program initially provided loans to support General Motors (GM) and Chrysler and later included preferred share purchases from the auto financing company GMAC (now renamed Ally Financial) and a loan for Chrysler Financial. The program ultimately resulted in majority government ownership of both GM (60.8%) and GMAC/Ally Financial (74%) and minority government ownership of Chrysler (9.9%). The U.S. government's ownership stake in GM was sold to GM itself and to the public between December 2010 and December 2013. The ownership stake in Chrysler was sold to Fiat in May 2011. Most of the stake in GMAC/Ally Financial has been sold over time and currently stands at 16%, with Treasury planning to sell additional shares. The current total outstanding support to the auto industry is $2.1 billion of the $79.7 billion in disbursed funds, with $15.9 billion in recognized losses and $7.0 billion in income received. No new disbursements are possible under the current program. These programs are unlike the other TARP programs in that they do not result in valuable assets or income in return for TARP funding. All housing programs remain open under the contracts previously agreed to, and substantial funds remain to be disbursed: Home Affordable Modification Program (HAMP) . HAMP pays mortgage servicers if they modify mortgages to reduce the financial burden on homeowners. A total of $29.8 billion in disbursements is possible under the program, with $8.8 billion disbursed. Hardest Hit Fund (HHF). HHF provides aid to state housing finance agency programs in states that have high unemployment rates or experienced the steepest declines in home prices. Eighteen states and the District of Columbia are participating in HHF. Of a possible $7.6 billion, $4.2 billion has been disbursed. Federal Housing Administration ( FHA ) Short Refinance . This program promotes refinancing of mortgages on "underwater" properties, those on which the mortgage balance is greater than the current value of the house, if lenders agree to forgive some of the principal balance owed on the mortgages. Of a possible $1.0 billion, $0.06 billion has been disbursed. As detailed above, until October 3, 2010, the Secretary had the authority to purchase or insure nearly any financial asset under the programs in place on June 25, 2010. While this authority has expired, the legal contracts entered into under the previous authority may still be in force. Thus, TARP funds may still flow from Treasury in the future. The only programs with a significant gap between legal commitments and actual amount disbursed, and the potential to grow in the future, are the housing support programs. Table 1 presents figures reported by Treasury for obligated and actually disbursed TARP funds. Although the total amount of assets held or insured under TARP was initially capped at $700 billion, and the program was widely reported as a "$700 billion bailout," the actual net cost of TARP was never likely to approach $700 billion. Unlike most government programs, where funds are simply expended, TARP funds were generally used in ways that resulted in either the holding of assets by the government or in some form of income accruing to the government. The incoming receipts from TARP outlays have taken several forms, including funds from the sale of previously purchased assets, repayment of principal from loans, premium payments for insured assets, dividend and interest payments from assets and loans, and proceeds from the sale of warrants issued by companies that sold assets to TARP. Table 2 summarizes these incoming revenues from TARP. According to EESA, revenues and proceeds from the sale of troubled assets, or from warrants and senior debt instruments, "shall be paid into the general fund of the Treasury for reduction of the public debt." This statutory language does not specifically address the dividends paid on the preferred stock held by Treasury. Legislation ( H.R. 678 ) to require that dividends fall under EESA requirements was introduced, but not enacted, in the 112 th Congress. Table 3 summarizes TARP funds that have been disbursed but not repaid. Most of these funds are classified by Treasury as "outstanding." This does not mean, however, that the recipient of these funds is obligated to repay them, as is typically the case with, for example, a loan that is outstanding from a bank to a borrower. Most of the outstanding TARP funds are embodied in assets, such as common stock, that recipients are not obligated to repay; instead, Treasury is expected to sell these assets at a future date and hopefully recoup the funds that were disbursed. TARP funds that are classified as a recognized loss, or as written off, are typically cases where either the asset sales were not sufficient to repay the initial TARP disbursement or a TARP recipient has failed and thus is unable repay the funds. In arriving at an overall cost to the government of TARP, or any similar program, it is important to account for the difference in time between initial outlay of funds and the receipt of any income. Some TARP contracts run for many years, and the difference in value between a dollar in 2008 and 2013, for example, could be significant. To compare dollar values over time, economists use present value calculations that reduce costs or income in the future relative to the present by a discount rate. Present value calculations can be very sensitive to the rate used if the amount of time involved is large. In preparing the budget cost estimates for TARP, the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) are directed by Section 123 of EESA to adjust their estimates by current market borrowing rates, as opposed to the borrowing rate paid by Treasury. Using market rates instead of government borrowing rates increases the net calculated cost of these investments and is meant to better represent the true economic costs of the programs. The cost estimates for TARP have fallen dramatically since the program was started. For example, in March 2009, CBO estimated a $356 billion budgetary cost for TARP. This number fell to $109 billion in March 2010, and the latest CBO estimate is for a total budgetary cost of $21 billion. The various programs under TARP have had very different estimated costs. In general, the bank support programs and credit market support programs have produced gains for the government. The losses in TARP are primarily accruing from the support for AIG, the automakers, and housing. Table 4 below summarizes recent detailed estimates of TARP's cost from CBO and OMB. The largest difference between the OMB and CBO estimates is in the amounts expected to be disbursed for the housing support programs. The CBO estimates are also made following the OMB estimates and thus use more current market data. The cost estimates of TARP are sensitive to financial markets and the state of the economy. The program's ultimate cost has depended largely on recouping value from the financial assets held in TARP. The assets resulting from bank support programs, including warrants and both preferred and common shares, have turned out to be relatively valuable. Thus, the estimates show an overall gain from these programs as the increases in asset values outweigh any losses from defaults. In the case of the automaker support, however, the estimates indicate that the assets held by the government through TARP ultimately will not return enough to recoup the TARP funds put into the companies, as was the case with the assistance for AIG. In addition to the numerous oversight mechanisms in the original statute, Congress has continued to directly oversee various aspects of TARP through committee hearings, with the House Committee on Oversight and Government Reform creating a subcommittee specifically focused on TARP and financial services during the 112 th Congress. In the 113 th Congress, the House Committee on Oversight and Government Reform's Subcommittee on Economic Growth, Job Creation, and Regulatory Affairs held a hearing on February 26, 2013, entitled "Bailout Rewards: The Treasury Department's Continued Approval of Excessive Pay for Executives at Taxpayer-Funded Companies." Government ownership of common equity in private companies was not a general goal of EESA although it was expected that the government would be compensated for the assistance given to companies under TARP. In some cases, this compensation has resulted in government holdings of common stock in amounts that typically would result in the government having a controlling interest in these companies. The government, however, has generally exercised little of the ownership control inherent in these large stakes. Common equity in companies has typically been accepted in return for TARP assistance in order to strengthen the companies' capital positions going forward. Such equity also provides a potential financial upside to the taxpayers if firms have a strong recovery, but it has a potential downside if firms do not recover strongly. Outstanding outlays, such as loans, that have been converted to common equity are no longer directly owed by the company to the government. In the case of Citigroup, which converted $25 billion of preferred shares into common shares, the outcome for the government was positive as the share price rose after the conversion, resulting in approximately $6.85 billion in capital gains for taxpayers. Ownership of Chrysler and GM equity, however, turned out less positively for the government, with a total of $2.93 billion in realized losses on Chrysler and a realized a loss of $11.16 billion on GM following the final sales of equity holdings. The ownership of AIG equity through TARP resulted in the government realizing a $13.48 billion loss, though this TARP equity loss was offset by a $17.55 billion gain from AIG equity holdings originating with the Federal Reserve. To date, Treasury has realized $1.82 billion in losses from equity holdings in GMAC/Ally Financial, with 16% of the company's equity yet to be sold. In all of these cases, however, the government also recouped funds through other means, such as dividends and interest payments, which offset the losses to varying degrees. Table 5 summarizes the current status of government ownership in large financial institutions. Unlike EESA, which was a temporary response to the immediate financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act; P.L. 111-203 ) was a broad bill that permanently changed many parts of the U.S. financial regulatory system. The act included a relatively short amendment to EESA in Title XIII, entitled the Pay It Back Act. Section 1302 of Dodd-Frank made three primary changes to EESA: reduced the overall authorization to purchase from nearly $700 billion to $475 billion; removed the implicit authority for the Secretary to reuse TARP funds when TARP assets are sold; and limited the authorities under the act to programs or initiatives initiated prior to June 25, 2010. As of June 30, 2010, Treasury reported that it planned to spend approximately $537 billion on the various programs, with $491 billion committed under signed contracts and $385 billion actually disbursed. The July 21, 2010, enactment of the $475 billion limit in the Dodd-Frank Act thus required Treasury to reduce the amounts planned for TARP by more than $60 billion and the legal commitments under TARP by more than $16 billion. CBO scored the TARP changes in the Dodd-Frank Act as resulting in a decrease in direct spending of $11 billion in 2010. The TARP changes reported by Treasury following the Dodd-Frank Act appear below in Table 6 . Under the broad authorities granted by EESA, Treasury could unilaterally change the planned program allocations. Following the Dodd-Frank Act, this authority was limited to the difference between the total of Treasury's plans and the total of the signed contracts, approximately $21 billion as of July 31, 2010. Bank Support Programs Capital Purchase Program and Capital Assistance Program Under the Capital Purchase Program (CPP), $125 billion in capital was immediately provided to the nine largest banks (which became eight after a merger), with up to another $125 billion reserved for smaller banks that might wish to apply for funds through their primary federal banking regulator. This capital was provided in the form of preferred share purchases by TARP under contracts between the Treasury and banks. The initial contracts with the largest banks prevented these banks from exiting the program for three years. The contracts included dividend payments to be made on the preferred shares outstanding and the granting of warrants to the government. By the end of 2008, the CPP had 214 participating banks with approximately $172.5 billion in share purchases outstanding. The Obama Administration and the 111 th Congress implemented changes to the CPP. EESA was amended, placing additional restrictions on participating banks in existing CPP contracts but also allowing for early repayment and withdrawal from the program without financial penalty. With the advent of more stringent executive compensation restrictions for TARP recipients, many banks began to repay, or attempt to repay, TARP funds. According to Treasury reports, by June 30, 2009, $70.1 billion of $203.2 billion CPP funds had been repaid; by December 31, 2009, $121.9 billion of $204.9 billion had been repaid; and by December 31, 2010, $167.93 billion of $204.9 billion had been repaid. The new Administration also announced a review of the banking system, in which the largest participants were subject to stress tests to assess the adequacy of their capital levels. Satisfactory performance in the stress test was one regulatory requirement for large firms that wished to repay TARP funds. Large firms that appeared too fragile in the stress test would be required to raise additional capital, and the firms would have the option of raising that capital privately or from the government through a new Capital Assistance Program. No funding was provided through the Capital Assistance Program, although GMAC, formerly General Motors' financing arm, received funding to meet stress test requirements through the Automotive Industry Financing Program (see discussion under "U.S. Automakers Assistance" section below). In addition, Citigroup, one of the initial eight large banks receiving TARP funds, agreed with the government to convert its TARP preferred shares into common equity to meet stress test requirements (see discussion of Citigroup below). CPP profits stem from dividend payments, warrants received from recipients, and capital gains in limited cases when shares are sold for more than face value (the standard CPP shares are resold at face value). Losses stem from failure to repay in part or full. The ultimate profitability of the program will be determined by the balance between the two. Another source of CPP profits is the proceeds from the warrants received from the companies. Treasury has not generally exercised warrants to take common stock in CPP recipients. Following the contracts initially agreed upon, Treasury has allowed institutions to purchase their warrants directly upon repayment of preferred shares, as long as both sides can reach an acceptable price. To reach an initial offering price, Treasury is using complex option pricing models to price the warrants that require assumptions to be made about future prices and interest rates. Since these pricing models are by their nature uncertain, some critics urge Treasury to auction the warrants on the open market (allowing the issuing firm to bid as well) to ensure that Treasury receives a fair price for them. Open auctions have been used, but only when an agreement between Treasury and the firms cannot be reached. CPP earns income from dividends with a rate of 5% for the first five years and 9% thereafter. (For S-Corp banks, the dividend rate is 7.7% for the first five years and 13.8% thereafter.) Realized losses to date on the CPP preferred shares have been relatively small. As of August 15, 2014, Treasury reported $4.9 billion in write-offs and realized losses from the CPP. The majority of this amount was due to the failure of CIT Group, which had $2.3 billion in TARP shares outstanding when it failed. Table A-1 below summarizes the CPP, including current and peak asset holdings, losses or gains, and conditions of the program. Community Development Capital Initiative The Community Development Capital Initiative (CDCI) operated somewhat like the CPP in that it purchased preferred shares from financial institutions; in some cases institutions were permitted to convert previous CPP preferred shares to CDCI preferred shares. The program was specifically focused on institutions that serve low-income, underserved communities and small businesses. Treasury purchased preferred shares from institutions that qualified for the CDCI up to an amount equal to 5% of the institutions' risk-weighted assets for banks and thrifts or 3.5% of total assets for credit unions. These preferred shares pay an initial dividend rate of 2%, which will increase to 9% after eight years. Unlike the CPP, no warrants in the financial institutions were included. Purchases under the program were completed in September of 2010 with approximately $210 million new shares purchased. In addition, approximately $360 million of shares were converted from CPP shares. Targeted Investment Program and Asset Guarantee Program The Targeted Investment Program (TIP) and the Asset Guarantee Program (AGP) were only used as part of a package to aid two large banks, Citigroup and Bank of America, which were also large recipients of CPP funds. The combined assistance for these banks is addressed below. Citigroup (CPP/TIP/AGP) On November, 23, 2008, the Treasury, Federal Reserve, and FDIC announced a joint intervention in Citigroup, which had previously been a recipient of $25 billion in TARP Capital Purchase Program funding, to "[support] financial stability." This exceptional intervention consisted of an additional $20 billion purchase of preferred shares through the TIP and a government guarantee for a pool of $306 billion in Citigroup assets (reduced to $301 billion when the guarantee was finalized on January 16, 2009) through the AGP, the FDIC, and the Federal Reserve. Citigroup paid the federal government a fee for the guarantee in the form of $4 billion in trust preferred securities paying an 8% dividend rate. Treasury also received warrants in both of these transactions. On February 27, 2009, Citigroup and Treasury officials agreed that the Treasury Department would convert $25 billion of its TARP CPP investment in Citigroup preferred stock into Citigroup common stock and cancel the warrants taken by Treasury under the CPP. After this conversion, the U.S. government owned approximately 33.6% (7.7 million shares) of Citigroup common stock. The conversion of preferred shares to common stock worsened the government's priority on Citigroup's assets in the event of liquidation but improved certain capital ratios for the company and relieved it of the obligation to pay dividends to the government, as it had previously with the preferred shares. The conversion exposed the government to more potential risk as well as to potential reward. The government's preferred shares could only be redeemed at par value, regardless of the performance of the company, while the government's holdings of common stock rose and fell in value based on the market valuation of the company. In December 2009, Citigroup and Treasury reached an agreement to repay the outstanding $20 billion in preferred securities and to cancel the asset guarantee. As part of this agreement, Treasury agreed to cancel $1.8 billion worth of the $4 billion in trust preferred securities originally paid as a fee for the guarantee. Citigroup repurchased the outstanding AGP trust preferred securities on September 30, 2009. While the asset guarantee was in place, no losses were claimed and no federal funds were paid out. In April 2010, Treasury began selling its common share holdings in Citigroup. The shares were sold in tranches through 2010, with a total of 4.1 million shares being sold by the end of September 2010. Treasury announced the completion of the sales early in December 2010. The average sales price for the Treasury shares was $4.14 per share compared with an initial conversion price of $3.25 per share. The gain from the common stock sales was approximately $6.9 billion, along with approximately $2.2 billion from the sales of the remaining trust preferred securities granted as a fee from the AGP, $2.9 billion in interest and dividends, and $54 million from the sale of warrants for a total nominal gain (i.e., not discounted for market risk) from the Citigroup intervention of $12.1 billion. Table A-3 summarizes the assistance for Citigroup through the CPP, TIP, and AGP, including current and peak asset holdings, losses or gains, and conditions of the program. Bank of America (CPP/TIP/AGP) On January 16, 2009, the Treasury, Federal Reserve, and FDIC announced a joint intervention in Bank of America, which had previously been a recipient of $25 billion in TARP Capital Purchase Program funds, "as part of its commitment to support financial market stability." This exceptional assistance included the purchase of an additional $20 billion of Bank of America preferred shares through the TARP Targeted Investment Program and a joint guarantee on a pool of up to $118 billion of Bank of America's assets (largely acquired through its merger with Merrill Lynch) through the TARP Asset Guarantee Program, the FDIC, and the Federal Reserve. Bank of America was to pay the federal government a fee for the guarantee in the form of $4 billion in preferred stock with an 8% dividend rate and warrants to purchase common stock worth $2.4 billion at the time of the agreement. Although the asset guarantee was announced in January 2009, a final agreement was never signed. On September 21, 2009, Bank of America announced that it had negotiated a $425 million termination fee that allowed it to withdraw from the AGP, canceling the warrants and preferred shares issued for the program. On December 9, 2009, Treasury announced that Bank of America had repurchased the $45 billion in preferred stock previously purchased under TARP. The warrants issued under the CPP and the TIP were sold at auction by the government in March 2010 for approximately $1.6 billion. No government assistance to Bank of America remains outstanding. Table A-4 summarizes the support for Bank of America through the CPP, TIP, and AGP, including current and peak asset holdings, losses or gains, and conditions of the support. Credit Market Programs Public Private Investment Program On March 23, 2009, Treasury announced the Public Private Investment Program (PPIP). PPIP as envisioned consisted of two asset purchase programs designed to leverage private funds with government funds to remove troubled assets from bank balance sheets. Perhaps closer to the original conception of TARP than other TARP programs, PPIP dedicated TARP resources as equity to (1) acquire troubled loans in a fund partially guaranteed by the FDIC and (2) acquire troubled securities in a fund designed to be used with loans from the Federal Reserve's TALF program or TARP. Both funds would match TARP money with private investment, and profits or losses would be shared between the government and the private investors. Unlike the original conception of TARP, private investors would choose the assets to purchase and manage the funds and the day-to-day disposition of assets. The legacy loan portion of PPIP never advanced past a single pilot sale reported by the FDIC on September 30, 2009. Treasury originally envisioned assets purchases through PPIP would be as high as $1 trillion (using as much as $200 billion in TARP funds), but a maximum of $22.4 billion was committed to the legacy securities portion of the program. The PPIP Legacy Securities Program was designed to deal with existing mortgage-related securities on bank balance sheets. Private investment fund managers applied to Treasury to pre-qualify to raise funds to participate in the program. Approved fund managers that raised private equity capital received matching Treasury capital and an additional loan to the fund that matched the private capital (thus, for example, a fund that raised $100 had a total of $300 available to invest). In addition to this basic transaction, Treasury had the discretion to allow another matching loan so that a fund raising $100 could have made a total of $400 available for investment. The funds were to be used to invest in non-agency MBS that were originally rated AAA. (Agency MBS refers to loans issued by GSEs, such as Fannie Mae and Freddie Mac, and non-agency MBS refers to mortgage-related securities issued by private financial institutions, such as investment banks.) Nine funds were prequalified by Treasury in June 2009. In early January 2010, however, one of the funds reached a liquidation agreement with Treasury and was wound down. By March 31, 2013, another five of the funds had been effectively wound down and all $18.6 billion of the disbursed funds had been returned. Term Asset-Backed Securities Loan Facility The Term Asset-Backed Securities Loan Facility (TALF) is a Fed program to assist the asset-backed security market, with TARP acting as a backstop in case of any losses. TALF was designed so that income accrues to the Fed with possible losses and some expenses accruing to Treasury. Initial obligation of TARP funds to support TALF was $4.0 billion, with $0.1 billion disbursed. The TARP commitment was reduced to $1.4 billion in June 2012 and canceled in January 2013 because the fees that had accrued from the program at that time were greater than the amount of TALF loans still outstanding. The initial $0.1 billion in disbursements from TARP have been repaid. Section 7(a) Securities Purchase Program This program supported the Small Business Administration's (SBA's) Section 7(a) loan program through purchasing pooled SBA guaranteed securities backed by private loans to small businesses. Beginning in March 2010, Treasury purchased a total of $368 million in securities guaranteed by the SBA. Purchases ended in October 2010 with the expiration of the TARP authority, and all securities have been sold or matured. U.S. Automaker Assistance In addition to financial firms, nonfinancial firms also sought support under TARP, most notably U.S. automobile manufacturers. While EESA specifically authorized the Secretary of the Treasury to purchase troubled assets from "financial firms," the legislative definition of this term did not mention manufacturing companies. After specific legislation for the automakers failed to clear Congress, the Bush Administration turned to TARP for funding. On December 19, 2008, the Bush Administration announced it was providing support through TARP to General Motors and Chrysler under the Automotive Industry Financing Program (AIFP). The initial package included up to $13.4 billion in a secured loan to GM and $4 billion in a secured loan to Chrysler. In addition, $884 million was lent to GM for its participation in a rights offering by GMAC as GM's former financing arm was becoming a bank holding company. On December 29, 2008, Treasury announced that GMAC also was to receive a $5 billion capital injection through preferred share purchases. After January 21, 2009, the Obama Administration continued assistance for the automakers, including support for the automaker warranties under the AIFP (so that consumers would not be discouraged from purchasing cars during the restructuring) and for third-party suppliers to the automakers (the Automotive Supplier Support Program). Additional loans for GM and Chrysler were made before and during the two companies' bankruptcies, and GMAC received additional capital through preferred share purchases as well. At the end of 2009, GM had received approximately $50.2 billion in direct loans and indirect support; Chrysler had received $10.9 billion in loans and indirect support; GMAC had received $17.2 billion in preferred equity purchases and loans; and Chrysler Financial had received $1.5 billion in loans. Some of this assistance is still owed by the companies, some has been repaid, and some has been converted into common equity in the company receiving assistance. As of August 15, 2014, TARP support for the auto industry totaled approximately $79.7 billion disbursed, with $61.7 billion repaid and $7.0 billion in income. Approximately $15.9 billion has been written off or taken as a realized loss and $2.1 billion of assistance is outstanding. The assistance outstanding takes the form of government ownership of 16% of the common equity in Ally Financial (formerly GMAC). All other assistance has either been repaid or recognized as lost. The most recent OMB cost estimates of assistance to the auto industry made with November 2013 data are for a lifetime cost of $14 billion; CBO also estimated the cost to be $14 billion as of March 2014. Table A-8 summarizes the support for the automakers, including current and peak asset holdings or loan amounts, losses or gains, and conditions of the assistance. American International Group In the fall of 2008, American International Group (AIG) was a federally chartered thrift holding company regulated by the Office of Thrift Supervision (OTS) at the holding company level, with a broad range of businesses, primarily insurance subsidiaries, which are state-chartered and state-regulated. Facing losses on various operations, AIG experienced a significant decline in its stock price and downgrades from the major credit rating agencies. These downgrades led to immediate demands for significant amounts of collateral (approximately $14 billion to $15 billion in collateral payments, according to contemporary press reports). As financial demands on the company mounted, bankruptcy appeared a possibility, as had occurred with Lehman Brothers on September 15, 2008. Many feared that AIG was "too big to fail" due to the potential for widespread disruption to financial markets resulting from such a failure. On September 16, 2008 (prior to the existence of TARP), the Fed announced that it was taking action to support AIG in the form of a secured two-year line of credit with a value of up to $85 billion and a high interest rate. In addition, the government received warrants to purchase up to 79.9% of the equity in AIG. On October 8, 2008, the Fed announced that it would lend AIG up to an additional $37.8 billion against securities held by its insurance subsidiaries. In October 2008, AIG also announced that it had applied to the Fed's general Commercial Paper Funding Facility (CPFF) and was approved to borrow up to $20.9 billion at the facility's standard terms. In early November 2008 (following the creation of TARP), financial support for AIG was restructured. The restructured financial support consisted of (1) reducing the size of the Fed loan to up to $60 billion, with the term lengthened to five years and the interest rate reduced by 5.5%; (2) purchasing of $40 billion in preferred shares through TARP; and (3) replacing the $37.8 billion loan with up to $52.5 billion total in asset purchases by the Fed through two Limited Liability Corporations (LLCs) known as Maiden Lane II and Maiden Lane III. The 79.9% equity position of the government in AIG remained essentially unchanged after the restructuring of the intervention. In March 2009, the assistance was restructured further through (1) a partial payback of the Fed loan through a swap of debt for equity in two AIG subsidiaries worth approximately $25 billion, reducing the maximum to $35 billion; and (2) commitments for additional future TARP purchases of up to $29.8 billion in preferred shares at AIG's discretion and the conversion of existing shares into shares with optional dividend payments. The Maiden Lane LLCs continued operating under the previous terms, with the actual loans extended to the LLCs totaling $43.9 billion of the possible $52.5 billion at their peak. AIG's access to the CPFF had been reduced to $15.9 billion in January 2009 due to a ratings agency downgrade. AIG continued to access this facility until it expired in February 2010. In September 2010, AIG and the government announced another restructuring of the government's assistance. This restructuring closed on January 14, 2011. The expressed goal was to simplify the government's interest in AIG and provide for a path for the divestment of the government's stake in the company. The plan called for (1) ending the Fed's involvement with AIG through loan repayment and transfer of the Fed's equity interests to the Treasury and (2) converting the government's $49.1 billion in existing preferred shares into common shares, which could then be sold to the public over time. The specific steps involved several interlocking transactions, including the initial public offering (IPO) of a large AIG subsidiary, the sale of several other AIG subsidiaries, and the use of up to approximately $20 billion in TARP funds to transfer equity interests from the Fed to Treasury. Once these transactions closed, Treasury held 92% of AIG's common equity (1.66 billion shares) and equity interests in AIG's subsidiaries worth approximately $20.3 billion. Treasury sold the AIG equity over time and completed the sales in December 2012. All of the Federal Reserve loans have been repaid, and the assets held in the Maiden Lane LLCs have been sold. The last government-held assets relating to the AIG intervention were TARP warrants that were sold in January 2013. Table A-9 summarizes the support received by AIG from both TARP and the Fed, including current and peak asset holdings, losses or gains, and conditions of the support. TARP Housing Assistance Programs One criticism leveled at TARP in the program's early stages related to its focus on assisting financial institutions, thus providing only indirect assistance to individual homeowners facing foreclosure. Sections 103, 109, and 110 of EESA specifically embody congressional intent that homeowners be aided under TARP. Treasury ultimately created several programs addressing this criticism. Unlike other TARP programs that have resulted in asset purchases that may eventually return some funds to the government, the housing assistance programs have no mechanism for returning funds. Some $50 billion of TARP funding was initially planned for housing assistance efforts. Expected outlays under these programs have been counted as 100% spending with no expected financial return to the government. The amount of spending on these programs, however, has been relatively low, and the programs have been further criticized as ineffective at helping homeowners. Home Affordable Modification Program In March 2009, the TARP Home Affordable Modification Program (HAMP) was announced. Through HAMP, the government provides financial incentives to participating mortgage servicers that provide loan modifications to eligible troubled borrowers to reduce the borrowers' monthly mortgage payments to no more than 31% of their monthly income. Servicers receive an upfront incentive payment for each successful permanent loan modification and a "pay-for-success" payment for up to three years if the borrower remains current after the modification. The borrower can also receive a "pay-for-success" incentive payment (in the form of principal reduction) for up to five years if he or she remains current after the modification is finalized. Investors receive a payment cost-share incentive (that is, the government will pay half the cost of reducing the monthly mortgage payment from 38% to 31% of monthly income), and can receive incentive payments for loans modified before a borrower becomes delinquent. Mortgage modifications can be made under HAMP until December 31, 2016. The Administration originally estimated that HAMP would cost $75 billion. Of this amount, $50 billion was to come from TARP funds and $25 billion was to come from Fannie Mae and Freddie Mac for the costs of modifying mortgages that those entities owned or guaranteed. Over time, Treasury has revised downward its estimate of the amount of TARP funds that will be used for HAMP, with some of these funds used for the other TARP housing assistance programs. As of August 15, 2014, a total of $29.8 billion is obligated for HAMP, with $8.8 billion disbursed. Hardest Hit Fund On February 19, 2010, the Obama Administration announced that it would make funding available to the housing finance agencies (HFAs) of five states that had experienced the greatest declines in home prices. The states could use these funds to create their own foreclosure prevention programs based on local conditions, as long as the programs they created met the TARP objectives and were approved by Treasury. This program is known as the Hardest Hit Fund (HHF), and several additional rounds of funding, with different criteria for choosing the states, have been announced since its inception, bringing the total number of states receiving funds to 18 plus the District of Columbia. State HFAs must expend the funds by December 31, 2017. The funding comes from the TARP funds that Treasury initially set aside for HAMP. After all of the rounds of funding, the total amount of funding allocated to HHF is $7.6 billion. Of this amount, $4.2 billion had been disbursed as of August 15, 2014. FHA Short Refinance Program On March 26, 2010, the Administration announced a new Federal Housing Administration Short Refinance Program for homeowners who owe more than their homes are worth. Detailed program guidance was released on August 6, 2010. Under the program, certain homeowners who are current on their mortgages but owe more than their homes are worth may be able to refinance into new, FHA-insured mortgages for an amount lower than the home's current value. The original lender will accept the proceeds of the new loan as payment in full on the original mortgage; the new lender will have FHA insurance on the new loan; and the homeowner will have a first mortgage balance that is below the current value of the home, thereby providing some equity in the home. Homeowners must be current on their mortgages to qualify for this program. Further, the balance on the first mortgage loan must be reduced by at least 10%. This program is voluntary for lenders and borrowers, and borrowers with mortgages already insured by FHA are not eligible. The FHA Short Refinance Program began on September 7, 2010, and is to be available until December 31, 2014. As of August 15, 2014, Treasury has obligated $1.03 billion of the TARP funds originally set aside for HAMP to help pay for the cost of this program, a reduction from the original amount of $8.1 billion. Of this $1.03 billion, $0.06 billion has been disbursed.
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The Troubled Asset Relief Program (TARP) was created by the Emergency Economic Stabilization Act (EESA; P.L. 110-343) in October 2008. EESA was enacted to address an ongoing financial crisis that reached near-panic proportions in September 2008. The act granted the Secretary of the Treasury authority to either purchase or insure up to $700 billion in troubled assets owned by financial institutions. This authority was granted for up to two years from the date of enactment and was very broad. In particular, the definitions of both "troubled asset" and "financial institution" allowed the Secretary wide leeway in deciding what assets might be purchased or guaranteed and what might qualify as a financial firm. The financial crisis grew out of an unprecedented housing boom that turned into a housing bust. Much of the lending for housing during the boom was based on asset-backed securities that used the repayment of housing loans as the basis of these securities. As housing prices fell and mortgage defaults increased, these securities became illiquid and fell sharply in value, causing capital losses for firms holding them. Uncertainty about future losses reduced many firms' access to private liquidity, with the loss in liquidity being catastrophic in some cases. September 2008 saw the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, and the near collapse of American International Group (AIG), which was saved only by an $85 billion loan from the Federal Reserve. There was widespread lack of trust in the financial markets as participants were unsure which firms might be holding so-called toxic assets that might now be worth much less than previously estimated, thus making these firms unreliable counterparties in financial transactions. This uncertainty prevented firms from accessing credit markets to meet their liquidity needs. As EESA moved through Congress, most attention was focused on the idea of the government purchasing mortgage-related toxic assets, thus alleviating the widespread uncertainty and suspicion by cleaning up bank balance sheets. The initial TARP Capital Purchase Program, however, directly added capital onto banks' balance sheets through preferred share purchases rather than removing assets that had become liabilities through purchasing mortgage-related assets. Several other TARP programs followed, including an asset guarantee program; programs designed to spur consumer and business lending; financial support for companies such as AIG, GM, and Chrysler; and programs to aid homeowners at risk of foreclosure. Eventually, the Public-Private Investment Program resulted in the purchase of some mortgage-related assets, but this remained a relatively small part of TARP. Most TARP programs are now closed. With the immediate crisis subsiding through 2009, congressional attention to financial services turned largely to consider broad regulatory changes. The resulting Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) amended TARP's authority, including (1) reduction of the overall amount to $475 billion; (2) removal of the ability to reuse TARP funds that had been repaid; and (3) removal of the authority to create new TARP programs or initiatives. The original TARP authority to purchase new assets or enter into new contracts expired on October 3, 2010. Outlays under the existing contracts, however, may continue through the life of these contracts. Overall budget-cost estimates for TARP have decreased significantly since the passage of EESA, with the most recent Congressional Budget Office estimates foreseeing $27 billion in costs and Office of Management and Budget estimates foreseeing $39 billion in costs. Most of these costs are from aid for homeowners, for the insurer AIG, and for U.S. automakers. The assistance to banks is generally showing a gain for the government. In the 113th Congress, oversight of TARP has continued, including a hearing held by a subcommittee of the House Committee on Oversight and Government Reform.
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C ongress has attempted to address the problem of suicide among veterans through legislation and oversight hearings, both on prevention of veteran suicide specifically and on veteran mental health more broadly. A task as challenging as preventing suicide requires collaboration among federal agencies, state and local governments, other organizations, communities, and individuals. This report, however, focuses on activities of the Veterans Health Administration (VHA) within the Department of Veterans Affairs (VA). The VHA's approach to suicide prevention is based in part on the National Strategy for Suicide Prevention, which involves multiple federal departments, including the VA, Defense (DOD), and Education (ED), as well as several agencies within Health and Human Services (HHS). While this CRS report focuses on suicide prevention efforts of the VHA, activities of other entities are discussed as they relate to VHA activities. This CRS report begins with a brief overview of the public health framework for suicide prevention, which forms the basis for both the National Strategy for Suicide Prevention and the VHA's approach to suicide prevention. The three subsequent parts of the report correspond to the three major components of the public health framework: (1) suicide surveillance, (2) suicide risk factors and protective factors, and (3) suicide prevention interventions. The final section addresses potential issues for Congress, and the Appendix summarizes provisions of public laws addressing suicide prevention among veterans. Prevention of suicide can be approached in two ways, which are not mutually exclusive. The public health approach intervenes with populations (e.g., distributing educational materials about mental illness and mental health services), whereas the clinical approach intervenes with individuals (e.g., prescribing antidepressant medication to a person diagnosed with depression). The individual focus of the clinical approach limits its reach to those who access the health care system; clinical interventions are necessary but not sufficient. The population-based public health approach is considered essential to address the broader problem of suicide among all veterans, including those who may not currently be in contact with the health care system. Both the National Strategy for Suicide Prevention and the VHA's approach to suicide prevention are based on a public health framework. As illustrated in Figure 1 , the framework has three major components: (1) surveillance, (2) risk and protective factors, and (3) prevention interventions. Suicide surveillance involves collecting data on completed (i.e., fatal) suicides in order to define the scope of the problem. Data collected in surveillance can be used to identify risk factors (i.e., characteristics associated with higher suicide risk) and protective factors (i.e., characteristics associated with lower suicide risk). Suicide prevention interventions aim to reduce risk factors and/or enhance protective factors that have been identified; interventions may target high-risk groups or individuals, identified based on known risk factors. No nationwide surveillance system exists for suicide among all veterans. Surveillance, or systematic collection of data on completed (i.e., fatal) suicides, is essential to define the scope of the problem (i.e., the suicide rate among veterans), to identify characteristics associated with higher or lower risk of suicide, and to track changes in the suicide rate and evaluate suicide prevention interventions. In order to evaluate interventions, suicide surveillance must measure the same thing, in the same way, repeatedly over time. In the case of veteran suicide, surveillance requires identifying both who is a veteran and who has died by suicide. The VHA collects detailed information about suicides (and suicide attempts) among veterans that are known to VHA facilities through the Behavioral Health Autopsy Program (BHAP), which will eventually collect information in four phases. The VHA has already implemented the two phases: standardized chart reviews and interviews with family members. The third and fourth phases involve interviewing the last clinician to see the veteran and locating public records that might indicate stressors (e.g., bankruptcy or divorce). A Government Accountability Office (GAO) evaluation found that some BHAP reports were not submitted, some included inaccurate information, and some were incomplete. VHA facilities had interpreted BHAP instructions differently, and no officials were reviewing BHAP reports for accuracy or completeness. Resolving the problems the GAO identified with BHAP would result in better information about suicides among veterans that are known to VHA facilities; however, information collected solely by the VHA would still exclude suicides among other veterans (i.e., those who are not known to the VHA). Of more than 21 million veterans estimated to live in the United States, fewer than 10 million are enrolled to receive health care from the VHA. The VA also has records of veterans who receive other benefits (e.g., home loans), regardless of whether they are enrolled in VHA health care, but does not have records of all veterans. The VA is working with the DOD to identify suicides among all veterans, including those who do not interact with the VA. Information about deaths—including whether a death resulted from intentional self-harm (i.e., suicide)—is collected in death certificates by state, territorial, and local governments. The resulting data may not be comparable across jurisdictions. The Centers for Disease Control and Prevention (CDC) aggregates death certificate data into the National Death Index (NDI), which can then be combined with data about who is a veteran. The lag between a suicide event and identification of the decedent as a veteran may be years; this delays the availability of crucial information. Timely reporting of death certificates was identified as a core issue in a 2010 progress report on the National Strategy for Suicide Prevention. The VHA conducts veteran-specific research that builds on research among the general population to identify characteristics associated with higher rates of suicide (i.e., risk factors) and lower rates of suicide (i.e., protective factors). Identifying risk and protective factors is essential in order to design effective interventions aimed at lowering overall risk of suicide by reducing risk factors and/or increasing protective factors. Knowing what the risk factors are also helps in identifying at-risk groups or individuals so that interventions can be delivered to the people who need them most. Table 1 provides examples of risk and protective factors among the general population. Within HHS, both the CDC and the National Institute of Mental Health (NIMH) disseminate research on suicide risk and protective factors within the general population. Also, the Substance Abuse and Mental Health Services Administration (SAMHSA) collects data on suicide attempts and related behavior. It should be noted that risk factors for attempted suicide may differ from risk factors for completed suicide; for example, women have a higher rate of attempted suicide, but men have a higher rate of completed suicide. Despite a large number of risk and protective factors identified by researchers, it is not yet possible to predict who will attempt or complete suicide. The inability to identify individuals most in need of interventions is one of the reasons a public health approach—with a focus on population-level interventions—is necessary for effective suicide prevention. Veteran-specific research on suicide risk and protective factors is necessary because the veteran population differs from the non-veteran population on a variety of characteristics (e.g., gender distribution), some of which may also be associated with suicide risk. Research has explored whether combat exposure is associated with risk of suicide (with mixed results). Veterans who are enrolled with the VHA may differ from non-enrolled veterans, as well. Within the VHA, research on suicide risk and protective factors is supported by three research components: the Office of Research and Development (ORD), a Center of Excellence (COE) in suicide prevention, and a Mental Illness Research, Education, and Clinical Center (MIRECC) on suicide prevention. Administratively, both the COE and the MIRECC (as well as other centers) fall under the Mental Health Strategic Healthcare Group, which is separate from ORD. In general, the ORD funds intramural research (including mental health research) by individual VHA investigators. The ORD's Health Services Research and Development Service supports research into suicide risk factors and protective factors. For example, the VHA conducted a study of suicide risk among veterans with depression (a known risk factor in the general population, as well as among veterans). Another study examined characteristics associated with suicide risk among patients seen in VHA primary care, to help identify factors that primary care providers may be able to use to detect suicide risk. These studies, and others like them, can help the VHA identify veterans at high risk of suicide, so that interventions can be targeted to them. The COE at Canandaigua, NY, conducts research on risk and protective factors, in addition to other suicide prevention activities. Established in August 2007 at the direction of Congress, the COE has the mission of developing and studying evidence-based public health approaches to prevention of veteran suicide, with the goal of reducing morbidity and mortality associated with suicide in the veteran population. In pursuit of its mission, the Epidemiology and Interventions Research Core within the COE collects and analyzes data on suicide risk and protective factors (as well as other topics) among both veterans who use VHA services and those who do not. The MIRECCs, also established at the direction of Congress, conduct research on a range of mental health-related topics, including suicide risk factors and protective factors. Specifically, the MIRECC of the VA Rocky Mountain Network pursues the goal of reducing suicidality in the veteran population, by conducting research on potential contributions of cognitive and neurobiological factors, among other activities. For example, one study assesses the relationship (if any) between suicidal ideation and thinking under stress. Other MIRECCs may also conduct research related to suicide, in the course of pursuing their other goals. Suicide prevention interventions aim to reduce risk factors and/or enhance protective factors, thereby lowering the risk of suicide. They may address entire populations (e.g., all veterans), at-risk subgroups (e.g., veterans diagnosed with a mental disorder), or high-risk individuals (e.g., veterans with recent suicide attempts). Interventions are refined in a three-stage cycle. The first stage is to develop and pilot test interventions on a small scale to ensure that they are safe, ethical, feasible, efficacious (i.e., they work under ideal conditions), and effective (i.e., they work under real-world conditions). If interventions are successful in the first stage, the second stage is to implement them on a larger scale. The third stage is to evaluate interventions that have been implemented on a larger scale, to verify their effectiveness and determine for whom they are most effective. The three stages can then be repeated to refine interventions, either to improve their effectiveness or to adjust them for use with a different population (e.g., applying an intervention developed for male veterans to a population of female veterans). Within the VHA, the same research components that study risk and protective factors research evaluate interventions: ORD, COE, and MIRECC. Both small-scale testing and large-scale evaluation are integral to suicide prevention interventions; however, rigorous research on effectiveness is difficult and lacking for most interventions, both within and outside the VHA. Easy access to care is a protective factor against suicide, and recent laws have included provisions aimed at increasing veterans' access to VHA-provided or VHA-funded care (not limited to mental health care). The Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 , as amended) aims to increase access to care by requiring the VHA to authorize reimbursement for non-VHA care under certain circumstances. More recently, the Clay Hunt Suicide Prevention for American Veterans Act ( P.L. 114-2 ) included a one-year extension of the existing five-year post-discharge period of enhanced enrollment in VHA health care for certain veterans. The Congressional Budget Office (CBO) estimates that this provision will result in the enrollment of about 4,600 veterans, including 1,400 who would not otherwise be able to enroll. VHA policy requires that emergency mental health care be available 24 hours per day through emergency rooms at VA facilities or local, non-VA hospitals; that new patients referred for mental health services receive an initial assessment within 24 hours and a full evaluation appointment within 14 days; and that follow-up appointments for established patients be scheduled within 30 days. The extent to which these policies are implemented in practice has been questioned in congressional testimony, news media, and survey responses from both providers and patients. Other efforts to increase access to mental health care focus on known barriers such as lack of understanding or awareness of mental health care, stigma associated with mental illness, concerns about VHA care, and challenges in scheduling appointments. The VHA provides information to help increase awareness of mental health care services, reduce the stigma associated with seeking care, and correct misconceptions about VHA care. Some mental health and substance use evaluation and treatment services have been integrated into other treatment settings, which both increases the convenience and reduces the stigma associated with seeking care. The VHA is required to conduct a three-year pilot program using outreach programs and peer support networks to assist recently discharged veterans in accessing VHA mental health services. Some types of screening are supported by evidence that they reduce the likelihood of suicide. The U.S. Preventive Services Task Force (USPSTF), which makes evidence-based recommendations about screenings and other clinical preventive services, recommends depression screening in primary care settings "when appropriate systems are in place to ensure adequate diagnosis, treatment, and follow-up." That is, the recommendation to use screenings is contingent upon the availability of further evaluation, treatment, and follow-up care. Without such systems in place, screening would serve little purpose. VHA policy requires screening for a variety of risk factors, including but not limited to depression, posttraumatic stress disorder (PTSD), and alcohol abuse. Those who screen positive are evaluated further and offered treatment if found to have a mental health problem. Positive screens for PTSD or depression, in particular, are followed by a suicide risk assessment. For individuals identified as having mental illness, clinical interventions may be indicated regardless of specific risk of suicide. Clinical interventions may include pharmacotherapy, psychotherapy, or both. The VA and the DOD have jointly developed clinical practice guidelines for treatment of some conditions, to help clinicians select treatments that research has shown to be effective (i.e., evidence-based treatments). A 2011 evaluation of VHA mental health care finds that treatment in the VHA is generally better than in other systems on a variety of measures, but still has room for improvement. In particular, the evaluation finds that evidence-based treatments, while widely available, are not usually provided. Researchers based this finding on a review of medical records, which showed that prescriptions for medication were often not filled for as long as recommended and that psychotherapy, as documented, was often not delivered according to evidence-based guidelines. Additionally, the evaluation found that assessment of veterans' symptoms is lacking, both at the beginning of treatment and during treatment (to track progress). Another third-party evaluation of the VHA's mental health care system is underway, to be completed by the end of FY2017. Third-party evaluations of VHA mental health care and suicide prevention programs are now required annually, with the first to be completed by the end of FY2018. Per department policy, every VA Medical Center has at least one suicide prevention coordinator, whose responsibilities include (among other things) tracking patients who have been identified as at high risk for suicide. The VHA's computerized patient record system enables clinicians to flag high-risk patients, and policy requires that safety plans be developed for them. A safety plan is a written document developed jointly by a patient and a clinician that identifies strategies for coping in a crisis (e.g., recognizing warning signs and contacting family members, friends, or mental health providers). Outside the VHA, the use of suicide prevention coordinators has not been widely adopted, although some components of the program (e.g., safety plans) are widely used. The suicide prevention coordinator program has been identified as a practice worth emulating by a DOD task force on suicide prevention. Suicide hotlines are telephone numbers individuals can call for help in crisis situations (e.g., at the moment they are considering suicide). Hotlines are generally toll-free and available around the clock. The Veterans Crisis Line is a joint effort of the VHA and SAMHSA. The main line (1-800-273-8255) is the National Suicide Prevention Lifeline, operated by SAMHSA. Veterans (or others calling with concerns about veterans) may select option 1 to be directed to the VHA's Veterans Crisis Line, answered by staff at the COE in Canandaigua, NY. Callers may remain anonymous or disclose their identities in order to allow the COE staff to access their VA medical records during the call. The Veterans Crisis Line is supplemented by an online chat service ( http://www.VeteransCrisisLine.net/chat ) and support via text messaging (text 838255). The Veterans Crisis Line has answered nearly 2 million calls since it began in 2007, has engaged in more than 250,000 chats since it added the chat service in 2009, and has responded to more than 44,000 texts since it added the text-messaging service in 2011. The evidence base for suicide hotlines is not sufficient to determine their effectiveness in reducing suicide rates, due to the difficulties inherent in conducting such evaluations. The confidentiality of suicide hotlines renders follow-up with each individual caller impossible (except in cases when a caller voluntarily discloses his or her identity). Moreover, national hotlines, such as those operated by SAMHSA and the VHA, serve a large geographic area. A range of other interventions may be in place in localities within the hotline's reach, such that any change in the suicide rate may not be attributable to the hotline. In February 2016, the VA Office of Inspector General released a report about an inspection conducted in response to complaints about the Veterans Crisis Line. Among the complaints substantiated by the VA Office of Inspector General, some calls that were routed to backup crisis centers were answered by voicemail. The routing of calls from SAMHSA's National Suicide Prevention Lifeline to VA's Veterans Crisis Line and from VA's Veterans Crisis Line to backup crisis centers is handled by a contractor, Link2Health Solutions, Inc. The Executive Director of VHA's Office of Mental Health Services and Operations concurred with all seven recommendations made by the VA Office of Inspector General. The VHA offers suicide prevention education and outreach to staff, patients, and surrounding communities. All VHA health care providers are required to complete web-based training on suicide risk and intervention and to pass a post-test. VHA Suicide Prevention Coordinators are required to conduct outreach activities in their local communities. The VHA has co-sponsored (with the Department of Defense) conferences on suicide prevention to educate clinicians and has sponsored Suicide Prevention Days to raise awareness. As of 2014, the three most common means of completing suicide among the general population are firearms (50%), suffocation (27%), and poisoning (16%). Evidence supports restricting access to lethal means (e.g., firearms, gas, drugs) as a way to reduce suicide rates. In some cases, means restriction may delay a suicide attempt long enough that the impulse passes, which may require only several minutes. In other cases, an individual may attempt suicide using a different method that is less lethal (e.g., drugs rather than firearms). The VHA has a gun safety program (as both a child safety initiative and a suicide prevention initiative), which includes distribution of free gun locks and dissemination of gun safety information. The VHA also conducts research on blister packaging medications as a potential way to reduce the incidence of medication overdoses. The VHA has received both praise and criticism for its suicide prevention efforts and mental health services more generally. A 2010 progress report on an earlier version (2001) of the National Strategy for Suicide Prevention praises VHA's suicide prevention practices and recommends disseminating them to the rest of the health care system, describing the VHA as "one of the most vibrant forces in the U.S. suicide prevention movement, implementing multiple levels of innovation and state of the art interventions, backed up by a robust evaluation and research capacity." In contrast, some congressional testimony has criticized VHA's suicide prevention efforts for inadequacies, such as barriers to accessing care and lack of evidence-based treatments for those who do access care. A 2011 evaluation of VHA mental health services captures both sides of the argument, finding that VHA mental health care is generally at least as good as that of other health care systems, but that it "often does not meet implicit VA expectations." Potential issues for Congress and related recommendations by outside organizations fall into three categories: improving the timeliness and accuracy of surveillance data, building the evidence base, and increasing access to evidence-based mental health care. Challenges in suicide surveillance include timeliness of data, consistent classification of deaths as suicides, and accuracy of information. Addressing these challenges requires the involvement of entities other than VHA. Recommendations related to the timeliness of suicide surveillance data include ensuring that the CDC's ability to compile national death data expeditiously is not limited by a lack of resources; coordinating the annual analysis of veteran suicide data among VA, DOD, and HHS; and establishing "reasonable time requirements for states to provide death data to the CDC." It should be noted that states, territories, and cities voluntarily share vital statistics with the CDC, so offering incentives for timely data might be more feasible than imposing requirements. It is widely believed that inconsistent reporting of suicides across jurisdictions, as well as underreporting of suicides in general, limits the effectiveness of surveillance efforts. Classification of a death as a suicide requires a determination that the death is both self-inflicted and intentional. Determining the decedent's intent is difficult, and coroners or medical examiners may feel pressure not to classify a death as suicide, due to the stigma associated with suicide. Suicides may be underreported when the manner of death is misclassified as "undetermined" or "accidental" (e.g., poisonings or single-vehicle crashes). Additionally, each jurisdiction (state, territory, or city) has its own requirements for investigating deaths, leading to variability across jurisdictions. The GAO recommends that the VA implement processes to improve the completeness, accuracy, and consistency of data reported through the VHA's Behavioral Health Autopsy Program (BHAP) system. Beyond that, the VA must rely on outside data sources (e.g., the DOD) to identify decedents as veterans if they are not enrolled with the agency. Developing an adequate evidence base is necessary both to identify risk and protective factors and to develop and disseminate effective interventions. Recommendations include increased information sharing, collaboration, and dialogue across areas of public health, among government agencies, and between congressional committees. Suicide prevention tends to operate in its own silo, even though suicide has some of the same risk and protective factors as other public health problems. Increased collaboration and dialogue between suicide prevention and other areas of public health "will help prevent the field from endlessly recreating wheels and spreading the limited funds too broadly to make a sustainable difference." If agencies (federal, state, or local) engage in ongoing collaboration and dialogue, sharing evaluations of existing interventions and research into new interventions, they may prevent unnecessary duplication of effort and help build the evidence base more quickly. (Note that replication of studies is an integral part of the research process, so a distinction may be made between appropriate and unnecessary duplication of effort.) Specific recommendations include sharing research findings among the VA, DOD, and HHS and fast-tracking all phases of the intervention cycle (designing and pilot testing interventions, implementing interventions, and evaluating interventions), as well as the dissemination of the knowledge gained in each phase. Some have also recommended that the House and Senate Committees on Veterans' Affairs initiate discussions with the House and Senate Armed Services Committees to develop provisions addressing veteran suicide in the National Defense Authorization Act. Providing timely access to high-quality mental health care has been a challenge for the VHA. The Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 , as amended) aims to increase access for veterans seeking VHA care (not limited to mental health care). Among other things, the act establishes the Veterans Choice Program, which requires the VHA to authorize reimbursement for non-VHA care under specified conditions. One such condition occurs when a qualified veteran is unable to schedule an appointment within the VHA's wait-time goals. In accordance with the act, the VHA has established a wait-time goal "to furnish care within 30 days of either the date that an appointment is deemed clinically appropriate by a VA health care provider, or if no such clinical determination has been made, the date a veteran prefers to be seen." Access to VHA mental health care is determined in part by the availability of providers. Pursuant to P.L. 113-146 , the VA Office of Inspector General (OIG) identified five occupations with the largest shortages: medical officer (i.e., physician), nurse, physician assistant, physical therapist, and psychologist. The OIG report does not specify physician specialties (e.g., psychiatrists). A shortage of psychologists might be mitigated by hiring other providers with similar scopes of practice (i.e., social workers, mental health counselors, and marriage and family therapists); however, the VHA may also have shortages among those occupations as the OIG report lists only the top five. The VHA has both long-standing and recently established mechanisms available to improve recruitment and retention of providers (e.g., educational debt repayment programs). The Clay Hunt Suicide Prevention for American Veterans Act ( P.L. 114-2 ) aims to expand access to care by extending the existing period of enhanced enrollment, requiring a pilot program to conduct community outreach, requiring a pilot program to repay the education loans of qualified psychiatrists, and authorizing collaboration with nonprofit mental health organizations. When veterans gain access to care—within or outside the VHA—they may not always receive high-quality care. While the VHA has made progress in disseminating knowledge about evidence-based treatment (e.g., through clinical practice guidelines developed jointly with DOD), that does not guarantee implementation of such treatments. A 2011 evaluation of VHA mental health care finds room for improvement in the use of evidence-based treatments. Another third-party evaluation of the VHA's mental health care system is underway (to be completed by the end of FY2017), and independent evaluations of VHA mental health care and suicide prevention programs are required annually (with the first to be completed by the end of FY2018). A 2014 report by the RAND Corporation indicates that only 13% of evaluated mental health providers (not limited to VHA providers) met study criteria for readiness to provide veteran-friendly, high-quality care. Providers working within the VHA or a military setting were more likely than others to meet the criteria, which may raise questions for some about increasing the use of non-VHA care. The report recommends conducting better assessments of civilian provider capacity, assessing the impact of trainings in cultural competency on provider capacity, expanding access to effective trainings in selected evidence-based approaches, and facilitating providers' use of evidence-based approaches. Since Operations Enduring Freedom and Iraqi Freedom began, five public laws have addressed VHA suicide prevention efforts. Relevant provisions of each are summarized below. Joshua Omvig Veterans Suicide Prevention Act The Joshua Omvig Veterans Suicide Prevention Act ( P.L. 110-110 ), enacted in 2007, required the VA Secretary to develop and implement a comprehensive suicide prevention program, and to report to Congress on the program. The Congressional Budget Office (CBO) estimated that implementing the Joshua Omvig Veterans Suicide Prevention Act would have "little, if any, cost," because the VA already had implemented or was planning to implement each of the specific requirements. The textbox below lists the required elements and additional authorized elements of the comprehensive suicide prevention program. National Defense Authorization Act for Fiscal Year 2008 Section 1611 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) directed the VA and DOD Secretaries to jointly develop a comprehensive care and transition policy for servicemembers recovering from serious injuries or illnesses related to their military service. The law specified that the policy must address (among other things) the training and skills of health care professionals, recovery coordinators, and case managers, to ensure that they are able to detect and report early warning signs of suicidal thoughts or behaviors, along with other behavioral health concerns. The law further specified that the policy must include tracking the notifications made by recovery care coordinators, medical care case managers, and non-medical care managers to health care professionals regarding suicidal thoughts or behaviors, along with other behavioral health concerns. A 2009 Government Accountability Office report indicates that DOD and VA have developed the relevant policies. Veterans' Benefits Improvement Act of 2008 Section 809 of the Veterans' Benefits Improvement Act of 2008 ( P.L. 110-389 ) grants the VA Secretary authority to advertise in the media for various purposes, including suicide prevention. Since enactment the VA has promoted the Veterans Crisis Line, for example, by placing advertisements on city buses and releasing public service announcements. Caregivers and Veterans Omnibus Health Services Act of 2010 Section 403 of the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ) requires the VA Secretary to conduct a study to determine the total number of veteran suicides (not limited to veterans using VA services) between January 1, 1999, and May 5, 2010 (i.e., the date of enactment). The in-progress study, dubbed the State Mortality Data Project, is described in a VA report published in February 2013. At the same time, the VA released a response to the report, which indicated (among other things) that a follow-up report was to be issued in May 2013. In January 2014, the VA released an update that includes some information about suicides among veterans who do not use VA health care services in 23 states. A full accounting of suicides among all veterans in all states has yet to be publicly released. Clay Hunt Suicide Prevention for American Veterans Act Enacted on February 12, 2015, the Clay Hunt Suicide Prevention for American Veterans Act ( P.L. 114-2 ) has eight sections, including the short title (Section 1). Section 2 requires the VA Secretary to have an independent entity conduct annual evaluations of VHA mental health care and suicide prevention programs, with the first evaluation to be completed by the end of FY2018. Section 3 requires the VA Secretary to maintain a website with up-to-date information about VHA mental health care services. Section 4 requires the VA Secretary to undertake a three-year pilot program to repay the education loans of at least 10 eligible psychiatrists (or psychiatric residents in their final year of training) in exchange for two or more years of obligated service. Section 5 requires the VA Secretary to undertake a three-year pilot program to conduct community outreach in at least 5 of the VHA's 21 Veterans Integrated Service Networks (geographic regions). Section 6 authorizes the VA Secretary to collaborate with nonprofit mental health organizations and requires the VA Secretary to appoint a Director of Suicide Prevention Coordination to manage such efforts. Section 7 extends by one year (beginning on the date of enactment) the existing five-year post-discharge period of enhanced enrollment in VHA health care for certain veterans. Section 8 prohibits new appropriations to carry out the act. The CBO estimated that implementing the act would cost $24 million over six years (2015–2020).
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This report focuses on suicide prevention activities of the Veterans Health Administration (VHA) within the Department of Veterans Affairs (VA). The VHA's approach to suicide prevention is based on a public health framework, which has three major components: (1) surveillance, (2) risk and protective factors, and (3) interventions. Surveillance, or systematic collection of data on completed (i.e., fatal) suicides, is essential to define the scope of the problem (i.e., the suicide rate among veterans), identify characteristics associated with higher or lower risk of suicide, and track changes in the suicide rate. No nationwide surveillance system exists for suicide among all veterans. Information about deaths (including suicides) is collected in death certificates by state, territorial, and local governments. Death certificate data are aggregated into the National Death Index, which can be combined with data about who is a veteran to identify veteran suicides. The VHA collects detailed information about suicides among veterans that are known to VHA facilities; however, the majority of veterans are not enrolled in VHA health care, so other sources of information (e.g., Department of Defense data) are necessary to identify veterans. Information collected in surveillance is used to identify suicide risk factors (i.e., characteristics associated with higher rates of suicide) and protective factors (i.e., characteristics associated with lower rates of suicide). This is essential in order to design interventions that reduce risk factors and/or increase protective factors, thus lowering overall risk of suicide. Risk factors are also helpful in identifying at-risk groups or individuals so that interventions can be delivered to the people who need them most. Within the VHA, this research is supported by the Office of Research and Development; a Center of Excellence in suicide prevention; and a Mental Illness Research, Education, and Clinical Center on suicide prevention. The intervention cycle includes three stages: (1) design and test interventions, (2) implement interventions, and (3) evaluate interventions. The research components mentioned above have roles in small-scale pilot testing and large-scale evaluations of interventions. VHA suicide prevention interventions include easy access to care, screening and treatment, suicide prevention coordinators, suicide hotline, education and outreach, and limited access to lethal means. The VHA has received both praise and criticism for its suicide prevention efforts and mental health services more generally. A 2010 progress report on the National Strategy for Suicide Prevention describes the VHA as "one of the most vibrant forces in the U.S. suicide prevention movement, implementing multiple levels of innovation and state of the art interventions, backed up by a robust evaluation and research capacity." In contrast, some have testified before Congress that VHA's suicide prevention efforts have inadequacies, such as barriers to accessing care and lack of evidence-based treatments for those who do access care. A 2011 evaluation of VHA mental health services captures both sides of the argument, finding that VHA mental health care is generally at least as good as that of other health care systems, but that it "often does not meet implicit VA expectations." An independent evaluation of VA mental health services is underway. Potential issues for Congress and related recommendations by outside organizations fall into three categories: improving the timeliness and accuracy of surveillance data, building the evidence base, and increasing access to evidence-based mental health care. Public laws addressing suicide prevention among veterans are described in the Appendix.
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T he renewable electricity production tax credit (PTC) expired on January 1, 2018, for nonwind facilities. Thus, under current law, the credit is not available for nonwind projects that begin construction after December 31, 2017. Under current law, wind facilities that begin construction before the end of 2019 may qualify for the PTC. However, the PTC for wind started phasing down in 2017. Whether the PTC should be extended, modified, or remain expired is an issue that may be considered in the 116 th Congress. Legislation enacted during the first session of the 114 th Congress, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), extended the PTC for wind for five years (with a phase down starting in 2017). Legislation enacted during the second session of the 115 th Congress, the Bipartisan Budget Agreement of 2018 (BBA18; P.L. 115-123 ), retroactively extended the PTC for nonwind technologies for tax year 2017. This report provides a brief overview of the renewable electricity PTC. The first section of the report describes the credit. The second section provides a legislative history. The third section presents data on PTC claims and discusses the revenue consequences of the credit. The fourth section briefly considers some of the economic and policy considerations related to the credit. The report concludes by briefly noting policy options related to the PTC. The renewable electricity PTC is a per-kilowatt-hour tax (kWh) credit for electricity generated using qualified energy resources. To qualify for the credit, the electricity must be sold by the taxpayer to an unrelated person. The credit can be claimed for a 10-year period once a qualifying facility is placed in service. The maximum credit amount for 2013, 2014, 2015, and 2016 was 2.3 cents per kWh. The maximum credit amount for 2017 and 2018 is 2.4 cents per kWh. The maximum credit rate, set at 1.5 cents per kWh in statute, is adjusted annually for inflation. Wind (before applying the 2017-2019 phaseout rates), closed-loop biomass, and geothermal energy technologies qualify for the maximum credit amount (see Table 1 ). Other technologies, including open-loop biomass, small irrigation power, municipal solid waste, qualified hydropower, and marine and hydrokinetic energy facilities, qualify for a reduced credit amount, where the amount of the credit is reduced by one-half (see Table 1 ). Under current law, nonwind facilities for which construction began before January 1, 2018, may qualify for the PTC. For wind facilities, the credit is available for facilities for which construction begins before January 1, 2020. However, for facilities that begin construction during 2017, the credit is reduced by 20%. The credit is reduced by 40% for facilities that begin construction in 2018, and reduced by 60% for facilities that begin construction in 2019. Before 2013, the PTC expiration date was a placed-in-service deadline, meaning that the electricity-producing property had to be ready and available for use before the credit's expiration date. The amount that may be claimed for the PTC is set to phase out once the market price of electricity exceeds threshold levels. Since being enacted, market prices of electricity have never exceeded the threshold level and the PTC has not been phased out, nor is the PTC likely to be phased out under current law. In the past, the ability to claim the PTC was also, in some cases, limited by the corporate alternative minimum tax (AMT). Before 2018, the PTC was available for taxpayers subject to the AMT for the first four years of the credit. While the PTC could not be claimed against the corporate AMT, unused credits could be carried forward to offset future regular tax liability. While few firms were subject to the corporate AMT, this limitation may have been significant for those affected. The corporate AMT was eliminated as part of the 2017 tax revision ( P.L. 115-97 ). From 2009 through 2017, PTC-eligible taxpayers had the option of claiming the 30% energy investment tax credit (ITC) in lieu of the PTC. Property that was placed in service during 2009, 2010, or 2011, or which was placed under construction in one of these years, also had the option of claiming an American Recovery and Reinvestment Act (ARRA) Section 1603 grant in lieu of tax benefits. There are also production tax credits for Indian coal and refined coal. Indian coal production facilities must have been placed in service before January 1, 2009, for coal produced before January 1, 2016, to receive credits. There is no placed-in-service limitation for coal produced and sold after December 31, 2015. Under current law, credits are not available for coal produced after 2017. The base rate for Indian coal is $2.00 per ton, but with the inflation adjustment the credit was $2.4 in 2017. For refined coal, the base credit amount is $4.375 per ton, and the 2018 credit with the inflation adjustment is $7.307 per ton. Refined coal facilities must have been placed in service before January 1, 2012, to qualify for credits. Refined coal facilities that were placed in service before this deadline may still be receiving credits, as the credit was allowed for production over a 10-year period. The PTC was first enacted in 1992 as part of the Energy Policy Act of 1992 (EPACT92; P.L. 102-486 ). Since 1999, the PTC has been extended 11 times (see Table 2 ). In many instances, the PTC lapsed before being reinstated. When first enacted as part of the EPACT92, the PTC was available for electricity generated using wind or closed-loop biomass systems. The credit was initially set to expire on June 30, 1999. In addition to extending the PTC through December 31, 2001, the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ) added poultry waste as a qualifying technology. The PTC was again extended, through December 31, 2003, as part of the Job Creation and Worker Assistance Act ( P.L. 107-147 ). The Working Families Tax Relief Act of 2004 ( P.L. 108-311 ) included provisions extending the PTC through December 31, 2005. Legislation enacted later in the 108 th Congress substantially modified the PTC. The American Jobs Creation Act of 2004 (AJCA; P.L. 108-357 ) added new qualifying resources, including open-loop biomass (including agricultural livestock waste), geothermal energy, solar energy, small irrigation power, and municipal solid waste (landfill gas and trash combustion facilities). Instead of being able to claim the PTC for the first 10 years of production, these new qualifying resources were limited to a five-year PTC period. Further, open-loop biomass, small irrigation power, and municipal solid waste facilities had their credit amount reduced by one-half. The AJCA also introduced a PTC for refined coal, with a rate of $4.375 per ton (indexed for inflation after 1992), available for qualifying facilities placed in service before January 1, 2009. The PTC was extended twice during the 109 th Congress. The Energy Policy Act of 2005 (EPACT05; P.L. 109-58 ) extended the PTC for all facilities except solar energy and refined coal for two years, through 2007. EPACT05 also added two new qualifying resources: hydropower and Indian coal. Hydropower was added as a half-credit qualifying resource. Indian coal could qualify for a credit over a seven-year period, with the credit amount set at $1.50 per ton for the first four years, and $2.00 per ton for the last three years, adjusted for inflation. EPACT05 also extended the credit period from 5 years to 10 years for all qualifying facilities (other than Indian coal) placed in service after August 8, 2005. The Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) extended the PTC for one year, through 2008, for all qualifying facilities other than solar, refined coal, and Indian coal. The PTC was again extended and modified as part of the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343 ). The PTC for wind and refined coal was extended for one year, through 2009, while the PTC for closed-loop biomass, open-loop biomass, geothermal energy, small irrigation power, municipal solid waste, and qualified hydropower was extended for two years, through 2010. Marine and hydrokinetic renewable energy were also added by EESA as qualifying resources. A new credit for steel industry fuel was also introduced. This credit was set at $2.00 per barrel-of-oil equivalent (adjusted for inflation with 1992 as the base year). For facilities that were producing steel industry fuel on or before October 1, 2008, the credit was available for fuel produced and sold between October 1, 2008, and January 1, 2010. For facilities placed in service after October 1, 2008, the credit was available for one year after the placed-in-service date or through December 31, 2009, whichever was later. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) provided a longer-term extension of the PTC, extending the PTC for wind through 2012 and the PTC for other renewable energy technologies through 2013. Provisions enacted in ARRA also allowed PTC-eligible taxpayers to elect to receive a 30% investment tax credit (ITC) in lieu of the PTC. ARRA also introduced the Section 1603 grant program, which allowed PTC- and ITC-eligible taxpayers to receive a one-time payment from the Treasury in lieu of tax credits. Under ARRA, the Section 1603 grant program was available for property placed in service or for which construction started in 2009 or 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) extended the Section 1603 grant program for one year, through 2011. The PTC for wind, which was scheduled to expire at the end of 2012, was extended for one year, through 2013, as part of the American Taxpayer Relief Act (ATRA; P.L. 112-240 ). In addition to extending the PTC for wind, provisions in ATRA changed the credit expiration date from a placed-in-service deadline to a construction start date for all qualifying electricity-producing technologies. The PTC, as well as the ITC in lieu of PTC option, was retroactively extended through 2014 as part of the Tax Increase Prevention Act of 2014 ( P.L. 113-295 ). The Protecting Americans from Tax Hikes (PATH) Act of 2015, enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), extended the PTC expiration date for nonwind facilities for two years, through the end of 2016. The ITC in lieu of PTC option was also extended through 2016. For Indian coal facilities, the production credit was extended for two years, through 2016. Additionally, for Indian coal facilities, the placed-in-service limitation was removed, allowing the credit for production at facilities placed in service after December 31, 2008, to qualify. As part of Division P of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), the PTC for wind was extended through 2019. The credit was extended at current rates through 2016. For wind facilities beginning construction in 2017, the credit is reduced by 20%. The credit is reduced by 40% for facilities beginning construction in 2018, and reduced by 60% for facilities beginning construction in 2019. The PTCs for nonwind technologies and the PTC for Indian coal expired at the end of 2016, but were retroactively extended for tax year 2017 in the Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123 ). Absent further legislative action, the PTC for nonwind technologies and the PTC for Indian coal will not be available for facilities the construction of which begins after December 31, 2017. Estimates of the cost, or foregone revenue, associated with tax expenditure provisions can be found in the Joint Committee on Taxation (JCT) annual tax expenditure tables. Because JCT's figures are estimates, they may differ from actual amounts of tax credit claims. Between 2018 and 2022, estimated revenue losses associated with the PTC are $25.8 billion (see Table 3 ). Most of these revenue losses, $24.0 billion, are due to the PTC for wind energy. An estimated $0.8 billion is for PTCs for electricity produced using geothermal, $0.5 billion for PTCs for electricity generated using open-loop biomass, $0.3 billion for PTCs for electricity generated using municipal solid waste, and $0.1 billion for PTCs for electricity generated using qualified hydropower. Over the same five-year period, the estimated revenue losses associated with the production credits for refined coal and Indian coal are $0.1 billion each. JCT's tax expenditure estimates are based on current law. A policy that further extends the PTC would increase these tax expenditure estimates. Information on PTC claims by corporations is available from the IRS through the 2013 filing year. For 2013, 230 corporate taxpayers claimed the PTC (see Table 4 ). Most of the credits claimed were for production of renewable electricity, with only a few claims being made for refined coal, Indian coal, or steel industry fuel. In total, for 2013, taxpayers claimed PTCs of $2.8 billion. Because the PTC is paid out for 10 years, most PTCs awarded in any given year are the result of previous-year investments. Some taxpayers may not be able to use all of their tax credits to offset taxable income in a given tax year. In this case, taxpayers may carry forward unused credits to offset tax liability in a future tax year. In 2010, nearly $1.2 billion in PTCs were carried forward from previous tax years. The IRS data on PTC claims highlight the effect that policy actions taken in response to the economic downturn had on renewable energy tax credit claims. While the number of taxpayers claiming the PTC increased between 2008 and 2009, this number decreased after 2009. With the Section 1603 grant option available, fewer taxpayers claimed the PTC. While Section 1603 grants were available in lieu of the PTC, $15.5 billion in grants was claimed for technologies that otherwise would have been PTC-eligible. This amount is not directly comparable to the costs of the PTC because Section 1603 grants were a one-time payment, while projects can claim the PTC for 10 years of production. The effect of the economic downturn can also be seen in data on tax credit carry forwards. The amount of PTCs being carried forward more than doubled between 2008 and 2009, then doubled again between 2009 and 2010. During the economic downturn, taxpayers had less net income to offset with tax credits. Further, weakness in tax equity markets made it harder for renewable energy project developers to establish partnerships to monetize tax credits. Other available estimates provide information on the cost of a long-term PTC extension. The Congressional Budget Office (CBO) estimates that a permanent PTC (or a PTC extended through the budget horizon) for nonwind technologies would reduce revenues by $1.4 billion between 2019 and 2028. Extending the Indian Coal Production Credit would reduce revenues by $0.4 billion between 2019 and 2028. Extending the wind construction start date through the end of the budget window, beyond 2019, would reduce federal revenues by an estimated $6.9 billion between 2018 and 2027. The PTC was enacted in 1992 to promote the "development and utilization of certain renewable energy sources." The 1999 sunset was included to provide an "opportunity to assess the effectiveness of the credit." When the PTC was extended as part of a "tax extenders" package in 1999, Congress noted that the PTC had been important to the development of environmentally friendly renewable power, and extended the credit to promote further development of wind (and other) resources. Recent extensions of the PTC reflect a belief that the tax incentives contribute to the development of renewable energy infrastructure, which advances environmental and energy policy goals. Research suggests that the PTC has driven investment and contributed to growth in the wind industry. While further extension of the PTC may lead to further investment and growth in wind infrastructure, this potential is limited in the case of short-term extensions. Further, retroactive extensions provide what are often characterized as windfall benefits, rewarding taxpayers that made investments absent tax incentives. While the PTC has contributed to increased use of renewable electricity resources, research on its contribution to reducing greenhouse gas emissions is mixed. In a 2013 report, the National Academy of Sciences estimated that removing tax credits for renewable electricity would result in a small (0.3%) increase in power-sector emissions. In an evaluation of the renewable energy tax credit extensions enacted in P.L. 114-113 , the National Renewable Energy Laboratory concluded that the recent extensions of tax credits for wind and solar contribute to reduced emissions, particularly if natural gas prices are low. A common rationale for government intervention in energy markets is the presence of "externalities," which result in "market failures." Pollution resulting from the production and consumption of energy creates a negative externality, as the costs of pollution are borne by society as a whole, not just energy producers and consumers. Because producers and consumers of polluting energy resources do not bear the full cost of their production (or consumption) choices, too much energy is produced (or consumed), resulting in a market outcome that is economically inefficient. Tax subsidies for clean energy resources are one policy option for addressing the inefficiencies and market failures in the energy sector. Here, the subsidies approach is not the most efficient way to achieve the policy objective. Subsidies reduce the average cost of energy, encouraging energy consumption, countering energy conservation initiatives, and offsetting emissions reductions. Additionally, tax subsidies do not necessarily provide a comparable incentive for all emissions reduction alternatives, and may favor more costly reductions over less costly ones. Finally, tax subsidies also reduce tax revenues. To the extent that these subsidies are financed by distortionary taxes on other economic activities, they reduce economic efficiency. A more direct and economically efficient approach to addressing pollution and environmental concerns in the energy sector would be a direct tax on pollution or emissions, such as a carbon tax. This option would generate revenues that could be used to offset other distortionary taxes, achieve distributional goals, or reduce the deficit. A carbon tax approach would also be "technology neutral," not requiring Congress to select which technologies to subsidize. Tax incentives are also not the most efficient mechanism for delivering federal financial support directly to renewable energy developers and investors. Stand-alone projects often have limited tax liability. Thus, project developers often seek outside investors to "monetize" tax benefits using "tax-equity" financing arrangements. The use of tax equity investors, often major financial institutions, reduces the amount of federal financial support for renewable energy that is delivered directly to the renewable energy sector. Tax incentives that reward production, as opposed to investment, are likely to lead to more renewable electricity per dollar of federal subsidy. Another consideration is the interaction of the PTC with other policies designed to support the development of renewable electricity resources. More than half of U.S. states currently have renewable portfolio standards (RPS) policies in place. Subsidies for renewable energy at the federal level, including the PTC, reduce the cost of complying with state-level RPS mandates. Without legislative action, the PTC is not available to nonwind projects that began construction after December 31, 2017, or wind projects that begin construction after December 31, 2019. One option is to allow the PTC to expire as scheduled. Under this option, projects that meet specified construction start dates would receive the PTC for the first 10 years of qualified production. Another option would be to provide a temporary extension of the PTC. With this option, the construction start date deadline could be extended by a set number of years. With the enactment of P.L. 114-113 , the expiration date for the PTC for wind is different than the expiration date for the PTC for other technologies. Thus, Congress may choose to extend the PTC for nonwind technologies. The extension could be made retroactive for 2018. If the PTC for nonwind technologies were extended, the phaseout that currently applies to wind could be applied to other technologies. Another alternative would be to extend the PTC for nonwind technologies, and remove the phaseout for wind, such that all PTC-eligible technologies qualified for the PTC at the same rate. In 2014, House Ways and Means Committee Chairman Dave Camp proposed a form of PTC phaseout as part his tax reform proposal introduced in the 113 th Congress, the Tax Reform Act of 2014 ( H.R. 1 ). Under this proposal, the PTC inflation adjustment factor would have been eliminated. This would reduce the value of the PTC for renewable electricity to 1.5 cents per kWh, for all PTC-eligible properties still within the 10-year eligibility window. Thus, facilities that had received a 2.3 cent per kWh PTC in 2014, and were still within their 10-year PTC window in 2015, would have seen the value of the PTC fall to 1.5 cents per kWh for 2015 and beyond. Under Chairman Camp's proposal, the PTC would have been fully repealed after 2024. Because the value of the PTC would be reduced for existing facilities, the JCT estimates that this proposal would have raised $9.6 billion in additional federal revenues between 2014 and 2023, relative to current law at the time. A similar proposal was introduced in the 114 th Congress as the PTC Elimination Act ( H.R. 1901 ). President Obama's FY2017 budget proposed a permanent extension of the PTC. Additionally, under President Obama's proposal, the PTC would be made refundable, solar facilities would be added as qualifying property, and the credit would be modified such that renewable electricity consumed by the producer could qualify for tax credits. Solar property that currently qualifies for the residential energy efficient property credit would also be eligible for the PTC. Additionally, the investment tax credit (ITC) for renewable energy would be made permanent. In analysis of President Obama's FY2017 budget, the JCT estimated that making permanent the PTC and ITC, along with these other changes, would cost $19.8 billion between 2016 and 2026.
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The renewable electricity production tax credit (PTC) is a per-kilowatt-hour (kWh) tax credit for electricity generated using qualified energy resources. For nonwind technologies, the credit expired at the end of 2017, so that only projects that began construction before the end of 2017 qualify for tax credits. After 2016, the PTC for wind remains available, at reduced rates, for wind facilities that begin construction before the end of 2019. Since the PTC is available for the first 10 years of production at a qualified facility, PTCs will continue to be claimed after the PTC's stated expiration date. Whether the PTC should be extended, modified, or allowed to expire as scheduled is an issue Congress may choose to consider. Most recently, the PTC for nonwind technologies was retroactively extended for tax year 2017 as part of the Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123). The PTC for wind was last extended in the Consolidated Appropriations Act, 2016 (P.L. 114-113). This legislation had extended the PTC for two years, through 2016, for all eligible technologies. Additionally, the PTC for wind was extended an additional three years, through 2019, but at reduced credit rates for wind facilities beginning construction in 2017, 2018, or 2019. The PTC for wind and closed-loop biomass was first enacted in 1992. When first enacted, the PTC was scheduled to expire on July 1, 1999. Since 1999, the PTC has been extended 11 times. On several occasions, the PTC was allowed to lapse before being retroactively extended. In addition to being extended, the PTC has also been expanded over time to include additional qualifying resources. In 2017, closed-loop biomass, and geothermal technologies qualified for the full credit amount of 2.4 cents per kWh. Other technologies (open-loop biomass, small irrigation power, municipal solid waste, qualified hydropower, marine, and hydrokinetic) qualified for a half-credit amount, or 1.2 cents per kWh in 2017. Wind facilities starting construction in 2017 qualified for 80% of the full credit amount. Credit amounts are adjusted annually for inflation. The Joint Committee on Taxation (JCT) estimates that in 2018, foregone revenues (or "tax expenditures") for the PTC were $4.8 billion. Between 2018 and 2022, under current law, tax expenditures for the renewable electricity PTC are estimated to be $25.8 billion. Extensions or modification of the PTC could increase or decrease the estimated tax expenditures associated with this provision. The PTC has been important to the growth and development of renewable electricity resources, particularly wind. Tax incentives for renewables, however, may not be the most economically efficient way to correct for distortions in energy markets or to deliver federal financial support to the renewable energy sector. Tax subsidies reduce the average cost of electricity, increasing demand for electricity overall, countering energy-efficiency and emissions-reduction objectives. Subsidies delivered as nonrefundable tax incentives often require those wishing to use the credit find "tax-equity" partners to provide equity investments in exchange for tax credits. The use of tax equity reduced the amount of the incentive that flows directly to the renewable energy sector. There are a number of policy options that might be considered related to the PTC. For example, the PTC could be allowed to expire as scheduled. Alternatively, the PTC could be temporarily extended. The extension could apply only to nonwind technologies. If the PTC is retroactively extended for nonwind technologies, the phaseout that currently applies to wind could be applied to nonwind PTC-eligible technologies. Another option would be to remove the phaseout that applies to wind starting in 2017. Other forms of PTC phaseout have been proposed in recent years, including elimination of the inflation adjustment factor. Another option would be to make the PTC a permanent feature of the tax code.
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Congress and the Executive Branch have historically identified the Asia Pacific Economic Cooperation forum (APEC) as potentially important in the promotion of liberalized international trade and investment in Asia, and possibly the rest of the world. APEC is unusual among various trade associations in its reliance on consensus-based, voluntary reductions in tariff and non-tariff trade barriers—as well as a variety of trade facilitation measures—to promote trade and investment liberalization not only between APEC members, but for all international trade and investment, an approach often referred to as "open regionalism" (see " APEC's Approach to Trade Liberalization " below). In addition to its primary trade mission, APEC provides a venue at which the United States can hold bilateral and multilateral discussions on non-economic matters of concern in the Asia-Pacific region, such as international security and human rights. Over the last few years, however, the United States' position as a leader in the region has been challenged by China. China's accession to the WTO, its recent efforts to negotiate bilateral trade agreements (BTAs) across Asia (including the ASEAN-China FTA), and its unilateral liberalization of its trade regime, has arguably placed China as a major competitor to the United States. Many argue that the United States should re-energize its involvement in Asian trade discussion and elevate the importance of APEC to reassert U.S. leadership. They advocate both increased financial assistance to APEC, through the annual contribution and specific assistance programs, and alteration in U.S. laws and policies on key issues. Others say that APEC should reformulate its mission by focusing more narrowly on trade facilitation and economic integration, abandoning many of the working groups that are not central to the core goals, and strengthening the Secretariat. The annual Leaders' Meeting continues to provide prestige and offer an opportunity for heads of state, particularly those of smaller countries, to interact with top U.S. officials. APEC offers the additional benefit of including Taiwan and Hong Kong as member economies, unlike most other regional groupings. Critics of APEC, however, point to its apparent slow progress as a demonstration of its ineffectiveness. For example, the Bogor Goals set the year 2010 for the achievement of trade and investment liberalization for APEC's "developed economies." Some experts maintain that it is doubtful that APEC will ever fulfill the Bogor Goals, in part because of its reliance on voluntary compliance. As a result, some would recommend a shift in U.S. trade policy in Asia to a focus on more formal trade associations, such as the TPP. One indicator of previous congressional interest in APEC is the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ). That legislation called for the President to develop a comprehensive strategy to address the "emergence of China economically, diplomatically, and militarily; promote mutually beneficial trade relations with China; and encourage China's adherence to international norms in the areas of trade, international security, and human rights." It continues by specifying that this comprehensive strategy should "identify and pursue initiatives to revitalize United States engagement in East Asia." The act then states, "The initiatives should have a regional focus and complement bilateral efforts. The Asia Pacific Economic Cooperation forum (APEC) offers a ready mechanism for pursuit of such initiatives ." [emphasis added] The notion that APEC may be an effective forum for advancing U.S. interests in Asia is shared by the Obama Administration. In his testimony before the House Foreign Affairs Subcommittee on Asia, the Pacific, and the Global Environment, U.S. Senior Official for Asia-Pacific Economic Cooperation Kurt Tong referred to APEC as a "valuable asset to the United States" and as "a primary venue for multilateral engagement with the Asia-Pacific on economic and other key interests." On another occasion, Tong referred to APEC as "the premier economic organization in the Asia-Pacific region." Tong's sentiments regarding APEC were echoed by U.S. Trade Representative (USTR) Ron Kirk during his December 15, 2009 presentation at a Washington International Trade Association (WITA) seminar when he referred to APEC as a "critical forum" for the United States. It is unclear, however, what role APEC will play in future U.S. trade policy in Asia. The Bush Administration saw APEC as a vehicle for regional economic integration in the Asia Pacific region under the concept of a Free Trade Area of the Asia-Pacific (FTAAP). This was widely seen as a counterforce to the efforts of some members of the Association of Southeast Asian Nations (ASEAN) to pursue an alternative "Asian only" model for regional economic integration that would exclude the United States. On December 14, 2009, USTR Kirk formally notified Congress that the United States would enter into negotiations with the members of the Trans-Pacific Strategic Economic Partnership (TPP) about U.S. participation in the regional trade agreement. The Obama Administration's interest in the TPP has raised questions about its commitment to APEC's vision of "open regionalism" and the FTAAP. The uncertainty about the future role of APEC in U.S. trade policy comes just before the target deadline for the first of APEC's Bogor Goals—open trade and investment among the industrialized APEC members by 2010—and a year before the United States is scheduled to host the association's meetings in 2011. According to some analysts, the next two years could be a critical time for APEC's development. The 111 th Congress could take action on APEC in several ways. First, Congress may choose to consider the level of direct and indirect financial support provided to APEC. Second, Congress may take into account U.S. commitments to APEC when considering legislation on various trade and non-trade issues. Third, Congress may increase oversight of APEC-related activities and programs of the U.S. Trade Representative, the Department of State and other federal departments and agencies. Although the U.S. government in the past has considered APEC as important, questions remain as to whether APEC has proven a reliable mechanism for advancing U.S. interests in Asia and if Congress and the White House shared a common view of what the U.S. interests in Asia are. In particular, the organizational and operational structure of APEC is unusual among multilateral associations, reflecting an atypical approach to trade liberalization. As a result, APEC's approach, organization, and operations may make it difficult for the United States to promote its positions on various issues through its activities in APEC. APEC began in 1989 as an Australian initiative—backed by Japan and New Zealand—in recognition of the growing interdependence among Asia-Pacific economies and in response to the free-trade areas that had developed in Europe and North America. From that initiative, APEC has grown into an association of 21 "member economies" bordering the Pacific Ocean that are working cooperatively to promote economic growth and prosperity in the Asia-Pacific region. It is the only international trade organization, besides the World Trade Organization, in which China, Hong Kong, and Taiwan are members. During the 1994 meetings in Bogor, Indonesia, APEC established the "Bogor Goals" of "free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and 2020 for developing economies." These goals have been reaffirmed at the Leaders' Meeting each subsequent year. In contrast to most other multilateral organizations, APEC is a cooperative forum in which members arrive at decisions via consensus. All commitments made by members are voluntary; APEC has no formal enforcement mechanisms to compel members to comply with any trade liberalization policies previously declared at APEC meetings—an approach often referred to as "open regionalism." Point 9 of the 1994 "APEC Economic Leaders' Declaration of Common Resolve" states, "APEC economies that are ready to initiate and implement a cooperative arrangement may proceed to do so while those that are not yet ready to participate may join at a later date." The underlying notion of the APEC approach to trade liberalization is that voluntary commitments are easier to achieve and more likely to be implemented than obligatory commitments derived from agreements negotiated by more traditional—and potentially, confrontational—methods. By establishing a common vision or goal for the organization, the belief is that future APEC discussions can make more rapid progress towards the organization's goals by seeking consensus views with which members are willing to comply. By contrast, trade agreements negotiated according to more traditional approaches tend to foster confrontation and expectations of reciprocal concessions. Lacking a shared goal or objectives, it may be difficult to resolve differences among the parties and complete a trade agreement. Later on, if any party to the agreement feels that it was inequitable, they may fail to comply with the terms of the agreement, or withdraw from the agreement in its entirety, even if there are formal sanction or grievance provisions within the agreement. Critics of the APEC approach warn that its voluntary nature can lead to inaction, with slow and marginal movement to the achievement of the Bogor Goals. In addition, because APEC lacks compliance requirements, members could reverse trade and investment liberalization commitments during economic downturns. APEC strives to meet the Bogor Goals in three "broad areas" of cooperation. First, members consult with each other to formulate individual and collective actions to liberalize merchandise and service trade, as well as international investment. Second, members discuss their domestic regulations and procedures to find ways of facilitating international business. Third, the members engage in "Economic and Technical Cooperation," or ECOTECH, to provide training and foster greater cooperation among APEC members. In 1995, APEC created a template to achieve the Bogor Goals in its "Osaka Action Agenda." The Osaka Action Agenda emphasizes APEC's "resolute opposition to an inward-looking trading bloc that would divert from the pursuit of global free trade" by accepting a set of fundamental principles for APEC's trade and investment liberalization and facilitation. These principles include comprehensiveness; WTO consistency; comparability; non-discrimination; transparency; flexibility; and cooperation. The November 2009 APEC meetings in Singapore were the first for President Obama, and came in the midst of an extended trip to Asia that included stops in China, Japan, and South Korea. The trip provided President Obama with an opportunity to present his vision for U.S. policy towards Asia in general and APEC in particular, as well as to announce his decision to enter into negotiations with the members of the TPP. Besides President Obama, the 2009 delegation included Secretary of State Hillary Clinton, Treasury Secretary Tim Geithner, and USTR Ron Kirk. Over the last few years, some APEC members had been critical of the Bush Administration's seeming disregard for the trade organization, and the lack of high-level representatives in the U.S. delegation. The strength of the U.S. delegation in 2009 was a symbolic act that was generally well received by other APEC members. As in previous years, the main focus of attention was on the Leaders' Meeting, which was held on November 14-15, 2009, and its associated statements. However, the event's more substantive outcomes came from the Ministerial Meeting, held on November 11-12, 2009. President Obama also held three bilateral meetings with leaders from other APEC members. Both the Leaders' Meeting and the Ministerial Meeting focused on the same themes—supporting balanced growth, resisting protectionism, fostering trade and investment liberalization, accelerating regional economic integration, and enhancing human security. The meetings were principally concerned about economic and trade issues, but there was limited discussion of non-trade issues, such as countering terrorism, preparing for natural disasters, and ensuring that people have sufficient access to safe food. In their post-meeting declaration, the APEC leaders endorsed the G-20 goals of strong, sustainable, and balanced growth. However, the APEC leaders added an additional criteria—economic growth must also be inclusive. In their efforts to achieve these goals, the leaders agreed to: "gradually unwind global imbalances;" adopt fiscal, monetary, trade, and structural policies consistent with the new growth paradigm; broaden access to economic opportunities; and "protect the environment and mitigate climate change." The leaders also agreed to resist protectionism, support the conclusion of the Doha Development Agenda (DDA) in 2010, continue to explore ways forward with a possible Free Trade Area of the Asia Pacific (FTAAP), strengthen economic and technical cooperation, enhance human security, combat corruption, and improve governance and transparency. In their joint declaration, the leaders mentioned the 2007 APEC Declaration on Climate Change, Energy Security, and Clean Development, that set out a APEC-wide target of reducing energy intensity by at least 25% by 2030. The joint statement issued following the Ministerial Meeting provided more detail to the general principles contained in the Leaders' Declaration. For example, in APEC's efforts to foster more inclusive growth, each member pledged to focus more resources on education, worker retraining, and greater assistance to small and medium sized enterprises (SMEs). In addition, APEC members said they would strengthen their social safety nets to enhance economic security. Similarly, to promote sustainable growth, APEC members pledged to reduce barriers to trade and investment for environmental goods and services (EGS), as well as to facilitate the diffusion of climate-friendly and other EGS technologies. As evidence of APEC's efforts to promote greater regional economic integration, the ministers cited various existing and new initiatives. As part of APEC's "At the Border" integration program, the members were developing more "business-friendly" rules of origin and adopting more consistent policies towards the trade in services. On the subject of "Behind the Border" integration, the ministers pointed to programs designed to lower the cost of starting a business, facilitating investment, strengthening intellectual property rights protection, and aligning national standards with international-recognized specifications. "Across the Border" connectivity was to involve increasing interconnectivity of transport, logistical, and digital systems; enhancing trade facilitation programs to reduce transaction costs; and improving the security of trade routes and the exchange of trade data. Much of the ministers' concerns about human security centered on food security and safety. During the last few years, there were periodic reports of food shortages in Asia that contributed to some nations prohibiting the export of staple grains (such as rice). While the food shortage reports were generally false, APEC members are concerned about the retreat from trade liberalization that occurred during this period. In addition, there have been repeated incidents of unsafe food products exported by APEC members. In their joint declaration, the APEC ministers agreed to enhance efforts to avoid unwarranted restrictions of food exports, while at the same time taking steps to ensure that food exports were safe. Other topics addressed in the ministers' joint statement included: continued regional cooperation to combat the H1N1 virus; improving governance; promoting gender equality and maximizing economic opportunities for women; greater development for the region's tourism industry; and strengthening the APEC Secretariat. A separate and concurrent finance ministers' meeting also issued a joint statement detailing the efforts APEC members would take to "support strong, sustainable, and balanced growth." There was consensus that the pace of implementing "exit strategies" should consider the pace of recovery in the different APEC economies, but that the members should confer with one another to avoid inconsistencies or undo harm. To that end, there was agreement to work with international financial institutions—such as the International Monetary Fund (IMF) and the World Bank to "evaluate the collective consistency" of members' economic policies. The finance ministers also committed to "strengthen financial supervision to prevent the re-emergence in the financial system of excess credit growth and excess leverage…" At the same time, they accepted the "need to further capital market development and integration…" An apparent effort by Secretary Geithner to accept the desirability of "market-oriented" exchange rates was toned down in the joint statement. The ministers agreed to "undertake monetary policies consistent with price stability in the context of market-oriented exchange rates that reflect underlying economic fundamentals." Besides the traditional Leaders' Meeting and the Ministerial Meeting, the 2009 APEC meeting featured the first official U.S.-ASEAN meeting, and three bilateral meetings between President Obama and other APEC leaders. The U.S.-ASEAN meeting was significant not only because it was unprecedented, but that it also reaffirmed the new U.S. policy towards Burma, in which the United States keeps its current sanctions in place, but is willing to engage in high-level talks with representatives of Burma's ruling military junta, the State Peace and Development Council (SPDC). Following the meeting, the leaders released a joint statement, which began with their agreement to hold a second meeting in 2010. Among other things, the joint statement indicated that the United States "welcomed ASEAN's plan to achieve an ASEAN Community by 2015," and "agreed on the need for a broader and deeper ASEAN-U.S. cooperation." During his time in Singapore, President Obama held three bilateral meetings with other leaders of APEC members. Bilateral meetings of this type have been a common feature of the APEC meetings because it is one of a few occasions each year when a significant number of Asian leaders are gathered together. In 2009, bilateral meetings were held with President Dmitry Medvedev of Russia, Prime Minister Lee Hsien Loong of Singapore, and President Susilo Bambang Yudhoyono of Indonesia. The main topics of discussion with President Medvedev were nuclear disarmament and Iran. By tradition, the U.S. President meets with the leader of the host member. In this year, President Obama met with Singapore's Prime Minister Lee. A number of issues were discussed, including the global economic recovery, regional economic integration, and the future role of APEC. The U.S.-Indonesia bilateral meeting was reportedly a more wide-ranging discussion. Among the topics discussed were the Copenhagen meeting on climate change, educational cooperation, trade and investment relations, and global economic recovery. Although the official theme for the 2009 APEC meetings—"Sustaining Growth, Connecting the Region"—was reflected in the official declarations and statements, the global economic recovery and the U.S. announcement of its intention to began formal negotiations about TPP membership drew more media attention. Little attention was paid to the impending milestone for the Bogor Goals in 2010—the year by which "industrialized economies" were to achieve free and open trade and investment in the Asia-Pacific. Japan, the host of the 2010 meetings, has indicated an interest in using the event to take stock of APEC's progress on achieving the Bogor Goals. By contrast, the United States, which will host the 2011 meetings, appears to favor a more "forward looking" orientation for APEC meetings over the next few years. Japan has decided that the next Leaders Meeting will be held in Yokohama on November 13-14, 2010. During his speech in Singapore, President Obama announced that the 2011 Leaders' Meeting is to be held in Honolulu. Russia has announced the 2012 Leaders' Meeting is to be held in Vladivostok. During the later part of 2009, the Obama Administration gradually began to reveal the outlines of its trade policy in Asia. While many aspects of the Obama trade policy demonstrate continuity with the policies of past administrations, there are some elements that distinguish it from the approach of the Bush Administration. The United States continues to support the goals of trade and investment liberalization, and the possible formation of a regional trade agreement—goals shared by administrations for many years past. However, the Obama Administration has taken actions that may indicate a shift in style and focus in U.S. trade policy in Asia. One initial difference that has drawn much attention and substantial praise in the region is a broader and more sustained interest in the region. The Bush Administration was frequently criticized for paying little attention to Asia outside of its relationship with China and its concerns about North Korea. Since assuming office, several senior administration officials have traveled to the region besides President Obama. The first official foreign visitor to the White House in 2009 was Prime Minister Taro Aso of Japan. President Obama also participated the first U.S.-ASEAN meeting and announced the decision to explore membership in the TPP. In both word and deed, the Obama Administration has indicated an interest in Asia that encompasses more than China and North Korea. However, it remains unclear how the various initiatives of the Obama Administration coalesce to form a consistent trade policy in the region that is compatible with the goals of trade and investment liberalization. In addition, it is uncertain how APEC fits into the overall U.S. vision for the future relations in the region. In particular, negotiations to join the TPP and greater interest in the U.S.-ASEAN relations may indicate a turn away from APEC as, in the words of Tong, "the primary venue for multilateral engagement with the Asia-Pacific." The TPP talks appear to be replacing APEC as the main vehicle for advancing trade and investment liberalization in the region. This shift was seemingly acknowledged by Deputy U.S. Trade Representative Demetrios Marantis in January 2010 when he stated, "It is our aim for the TPP to create a platform for economic integration across the Asia-Pacific region." However, in his speech, Marantis did acknowledge that APEC is "a flexible organization that provides an environment where economies are willing to take on pressing and new barriers." And, as host to the APEC events in 2011, the United States will have "an incredible opportunity to put forward a bolder vision for APEC and allow us to eliminate barriers to trade and investment impeding greater economic integration in the region." The formal notification of Congress of the intent to enter into discussions with the current members of the TPP and three other interested parties—Australia, Peru and Vietnam—about possible U.S. membership in the trade association creates tension with APEC's approach to trade liberalization and the previous goal of creating a Free Trade Area of the Asia-Pacific (FTAAP) under the auspices of APEC. The current TPP is a formal, obligatory trade agreement that extends trade benefits exclusively to parties to the agreement, and at the same time, protects selected domestic markets and industries in each member country from international competition. The APEC model for trade liberalization is based on the voluntary elimination of trade and investment barriers that are extended to all nations. Another source of ambiguity in the Obama Administration's trade policy in Asia is its developing relations with ASEAN. In 2009, the United States acceded to ASEAN's Treaty of Amity and Cooperation, a step that would allow the United States to formally join discussions led by ASEAN with other nations about the creation of a pan-Asian regional trade agreement. While no step has been taken in this direction to date, the option remains open. In October 2009, Senior Official for APEC Tong stated that the Obama Administration sees APEC as providing the "best and most established regional mechanism for practical cooperation and action" on economic issues. A few weeks later, Tong was asked specifically asked if the recent U.S. trade initiatives in Asia indicated that the United States had "given up the idea of forming an FTA [free trade agreement] in the Asia-Pacific region." In his answer, Tong stated that the United States still sees a Asia-Pacific free trade area as a "long-term objective," but the United States is trying to determine the best means of achieving that objective "tactically, organizationally." At a seminar held after the APEC meetings, USTR Kirk presented the U.S. interest in TPP as reflecting an interest in utilizing the organization as a model for future trade relations, as well as updating U.S. policy in response to the new global economic environment. Despite these reassurances as to the importance of APEC, many observers perceive a trade policy shift away from APEC and towards the TPP, at least in the short-run. APEC's unusual approach to trade liberalization is reflected in its organization and operation. APEC's organization consists of a small Secretariat in Singapore, which reports to the members of five separate groups: the preeminent Leaders' Meeting, the APEC Business Advisory Council, the Ministerial Meeting, the Sectoral Minister Meetings, and the Senior Officials Meetings. The Secretariat, in turn, supervises the work of six different groups: the Committee on Trade and Investment, the Economic Committee, the Steering Committee on ECOTECH, the Budget and Management Committee, Special Task Groups, and Working Groups. Each member of APEC seconds representatives to work on the Secretariat's staff to serve as program directors. Source: APEC website, http://www.apec.org/apec/about_apec/structure.html . The focal point of APEC activities is the annual Leaders' Meeting in which the APEC leaders set goals, publicize them, and seek to provide momentum for the process. This is usually held in October or November of each year, and is customarily attended by heads of state except for Taiwan which, because of China's objections, sends a special representative. The first Leaders' Meeting was held in 1993 on Blake Island, near Seattle, Washington. Major decisions are generally affirmed and/or announced at the Leaders' Meeting. Although APEC confines its agenda primarily to economic issues, the leaders often hold bilateral meetings during the Leaders' Meeting to discuss international security, human rights, and other issues. Most of the decisions announced at the Leaders' Meeting are first considered in a series of Ministerial Meetings held throughout the year. These include the respective ministers dealing with trade, finance, transportation, telecommunications, human resources development (education), energy, environment, science and technology, and small and medium-sized enterprises. The largest ministerial is the annual Joint Ministerial Meeting which immediately precedes the Leaders' Meeting. It usually is attended by foreign trade or commerce ministers from member states. The various Ministerial Meetings make recommendations to the Leaders' Meeting; they do not have the authority to act independently on behalf of APEC. Working under the direction of the various APEC ministers, the Senior Officials coordinate the activities of the various committees, working groups and task forces within APEC. Senior Officials Meetings are held three or four times a year. The current U.S. Senior Official for APEC is Kurt Tong. The APEC Business Advisory Council (ABAC) consists of up to three individuals appointed by each APEC member. It provides advice on implementing the APEC agenda and other specific business-related issues. ABAC also can make comments on the recommendations of the various Ministerial Meetings. Most of the specific tasks before APEC are addressed in committees, working groups, or expert groups that deal with economic issues of importance to the region. For implementing the Bogor goals, the Committee on Trade and Investment plays the key role. APEC has ten working groups that work on specific areas of cooperation and facilitation: (1) Trade and Investment Data, (2) Trade Promotion, (3) Industrial Science and Technology, (4) Human Resources Development, (5) Energy Cooperation, (6) Marine Resource Conservation, (7) Telecommunications, (8) Transportation, (9) Tourism, and (10) Fisheries. Each working group has one or more shepherds (members) who take responsibility for coordinating the work of the group. The APEC chair rotates annually and since 1989 has been held by (in order): Australia, Singapore, South Korea, Thailand, the United States, Indonesia, Japan, the Philippines, Canada, Malaysia, New Zealand, Brunei, People's Republic of China, Mexico, Thailand, Chile, South Korea, Vietnam, Australia, Peru, and Singapore. Japan is to be the chair in 2010, the United States is to be chair in 2011, and Russia is to be the chair in 2012. Decisions within APEC's various organizational bodies are based on the consensus approach of APEC. Most committees, working groups, and special task groups have representatives from all 21 members, and select their leadership from amongst themselves. Members may delay or refrain from any action recommended or approved by a meeting, committee, working group or special task force without facing sanctions or recriminations from other members. However, all decisions and agreements of the various meetings, committees, and working groups must be implemented by the organization in accordance with the Osaka Action Agenda. APEC actions take place at three levels: actions by individual members; actions with the confines of APEC; and collective APEC actions with respect to other multinational organizations. The primary form of individual member actions are the "Individual Action Plans," or IAPs. Each year, APEC members submit at the Ministerial Meeting an IAP that spells out what steps the member has taken and/or will take to advance their trade regime towards the achievement of the Bogor Goals. IAPs typically are organized along both sectoral (e.g., architectural services) and topical (e.g., customs procedures) lines. Although members cannot impose changes on each other's IAPs, the Osaka Action Agenda calls on each member to consult, submit, and review the IAPs to foster comparability, transparency, and cooperation amongst the IAPs. The internal actions of APEC generally involve research on topics related to trade liberalization, the exchange of best practices, and the standardization of policies and procedures related to international trade and investment. In some cases, APEC will create a working group on a particular topic, with the goals of generating a "collective action plan," or CAP. In some cases, the CAPs are little more than a topical summary of the member IAPs; in other cases, the working group plays a more active role in promoting trade liberalization and facilitation via the CAPs. Another example of an APEC's internal action is the "APEC Business Travel Card," an idea advanced by the ABAC. Business travelers possessing an APEC Business Travel Card (ABTC) are allowed fast-track entry and exit through special APEC lanes at major airports, and multiple, visa-free entry amongst members that recognize the card. In September 2007, the United States became a "transitional member" to the ABTC scheme, providing possessors expedited visa appointments at U.S. embassies and consulates, and expedited immigration processing through airline crew lanes upon arrival at any U.S. international airport port of entry. Collective actions of APEC usually involve joint or coordinated efforts to advance trade and investment liberalization in other multilateral organizations. APEC's collective actions have recently focused on helping complete the Doha Round of the WTO. For example, following the 2006 Leaders' Meeting in Hanoi, APEC released a statement on the "Doha Development Agenda of the WTO" that affirmed the members' "collective and individual commitments to concluding an ambitious and balanced WTO Doha agreement" by each member "moving beyond our current positions in key areas of the Round." The key areas mentioned were "trade-distorting farm support," "market access in agriculture," "real cuts in industrial tariffs," and "new openings in services trade." Possibly the premier issue facing future meetings of APEC is its relevance for the possible creation of some form of open trade and investment association in the region. At present, there are several overlapping and sometimes competing models. for trade and investment integration in the Asia-Pacific. ASEAN has its own FTA, known as the ASEAN Free Trade Area (AFTA). Over the last few years, ASEAN has concluded FTAs with several trading partners—including Australia, China, India, Japan, New Zealand, and South Korea—raising the possibility of a broader multilateral trade association centered around ASEAN. ASEAN, Australia and Japan have all put forward models for the possible creation of an Asian economic community, similar to the European Union. An expanding TPP, as envisioned by Deputy U.S. Trade Representative Marantis, also raises questions about APEC's relevance. Although it has been presented by both the Bush and the Obama Administration as an initiative designed to complement APEC, the TPP has the potential to supplant APEC as a vehicle for trade and investment liberalization in the region, though for the moment its membership is much more limited. In addition, the United States may find TPP's obligatory administrative process easier to understand than APEC's consensus-based "open regionalism." It may also be easier to transform the TPP than APEC into the U.S.-backed FTAAP. Even with its "open regionalism" approach to trade and investment liberalization, APEC has been seen since its inception as a possible vehicle for liberalizing both regional and global trade. In general, observers focus on two methods by which APEC may help foster greater trade and investment liberalization. The first method is by forming a coalition during WTO negotiations. The efforts of the APEC Geneva Caucus during the Doha discussions are often cited as an example of how APEC can help promote trade and investment liberalization. The second method is more controversial. Over the last decade, the number of Asia-Pacific bilateral trade agreements (BTAs) has grown dramatically. According to one observer, "The result is a competitive form of liberalization. As occurred within APEC itself, there are competing models of FTAs that cannot be integrated." A reporter described the phenomena as follows: The trade diplomacy of east Asia has become so blindingly complex that even the metaphors are getting muddled. The subtitle of one academic paper on free trade agreements (FTAs) suggests using "spaghetti bowls as building blocks." Another describes a "patchwork of bilateral hub-and-spoke FTAs in a noodle bowl." According to some experts, the growth of bilateral trade agreements (BTAs) amongst APEC members represents an unsystematic, but organic process that could lead to the formation of an APEC-wide regional trade agreement (RTA) much like the proposed FTAAP. According to this view, the actions of APEC—via the IAPs, CAPs, model measures, and the various committee reports—form a commonality of perspective on issues, thereby permitting some members to conclude limited BTAs. However, there is also a view that sees ASEAN's growing network of FTAs as a more likely base than APEC for the creation of a Asian RTA. In either case, the idea is that over time a network of BTAs will form the basis for the creation of an Asian RTA. However, other experts view the proliferation of BTAs as forming a barrier to trade and investment liberalization. As described by one scholar, "The resulting web of agreements and negotiations is fragmented, uncoordinated, and uneven in content and coverage." Because many BTAs are politically (not economically) motivated, the emerging BTAs in Asia generally suffer from several problems—WTO-incompatibility; narrow sector focus; discriminatory rules of origin (ROOs)—that make future amalgamation of the BTAs nearly impossible. As one expert describes it: The predictable results of foreign policy-driven FTA negotiations light on economic strategy are bitty, quick-fix sectoral deals. Politically sensitive sectors in goods and services are carved out.... Little progress is usually made in tackling domestic regulatory barriers.... Finally, the sway of power politics can result in highly asymmetrical deals, especially when one of the negotiating parties is a major player. Even if the merger of the various BTAs into an Asia-Pacific RTA were accomplished, there are concerns that the resulting agreement would institutionalize a number of tariff and non-tariff trade barriers in the region. A U.S. trade official was quoted as saying, "Bilateral FTAs being pursued by China, and Japan, and Korea to some extent, risk falling to the lowest common denominator. As one commentator once quipped, 'they are neither F, nor T, nor A.'" Some observers go on to argue that the rising number of BTAs in the region is generating dynamics that are preventing the formation of a FTAAP and progress in the Doha Round, despite the best efforts of APEC. One scholar writes: I note how the current discussions with the Asia-Pacific Economic Cooperation (APEC) forum to establish a Free Trade Area of the Asia-Pacific (FTAAP)," writes one scholar, "was also proposed at APEC's Santiago summit just two years ago. It failed then as it will probably fail now because of the immense political and technical challenge of harmonizing a large number of heterogeneous bilateral FTAs into a unified regional agreement." Another scholar is even more dismissive of APEC's potential, writing, "It cannot be expected to contribute anything serious to regional economic integration." Others see a slightly different effect of the BTAs on prospects for the creation of a FTAAP. In this view, the stalled Doha Round is fostering the further disintegration of the global trading system, generating a rising number of BTAs, and increasing the risk of the creation of an East Asia Free Trade Area (EAFTA) that might be discriminatory towards inter-regional trade. The fear is that the EAFTA would become another barrier to the completion of the Doha Round, and possibly generate protectionist reactions from the European Union and the United States. To counteract these trends, some experts say the United States should push for the creation of a more inclusive and comprehensive FTAAP. In this view, by advancing the idea of a FTAAP via APEC or the TPP, the United States might improve the prospects for the Doha Round, as non-APEC members may prefer to see progress at the WTO over the creation of a FTAAP. However, even if Doha talks remain stalled, discussion of the creation of a FTAAP could limit the growth of BTAs in Asia, and/or help insure that any new BTAs are less discriminatory and WTO-compatible. In summary, supporters of this view see APEC playing four roles in this new regional dynamic. Those roles are: 1. Organizing regular meetings of regional trade and finance ministers and political leaders to advance the process at the multilateral and bilateral levels; 2. Reinforcing the 'Bogor Goal' of free and open trade and investment by 2010/2020 and authenticating neoliberal trade policies; 3. Developing "model measures" for FTAs and RTAs to achieve "high quality" liberalization and consistency; and 4. Promoting WTO-plus FTAs that are consistent with the policy agenda of the international and regional financial institutions. Skeptics have frequently criticized APEC for being "all talk and no show." They maintain that APEC is unable to significantly reduce trade barriers because of its lack of an enforcement mechanism. However, according to studies conducted by APEC, its members have implemented substantive trade liberalization measures over the last 20 years, and those measures have contributed to significant trade growth in the region. APEC's trade liberalization measures include both sizable reductions in tariff rates and meaningful trade facilitation reforms. A 2005 study conducted by APEC found that the average tariff rate among APEC members had declined from 16.9% in 1989 to 5.5% in 2004 – a drop of nearly 66% in 15 years. The report also determined that nearly half of all APEC tariff lines were set at 5% or less. In addition, a range of non-tariff trade barriers (such as quotas, import and export levies, licensing, and export subsidies) had been eliminated by APEC members as part of their voluntary IAPs. While no subsequent study has been released, APEC members have continued to lower their tariff and non-tariff trade barriers over the last five years. In addition to the substantial reduction in tariff and non-tariff trade barriers, APEC has also contributed to the growth of regional trade by fostering the enactment of a variety of trade facilitation measures. For the international trading community, transaction costs associated with the compliance with various administrative measures—such as certification requirements, or country-specific rules of origin, product standards, and shipping documents—can hinder international trade. APEC programs designed to standardize trade documents, rules of origin, product labeling and safety requirements reduced the transaction cost of trade by 5% between 2002 and 2006. During the 2007 Leaders' Meeting, the members of APEC made a commitment to a further 5% reduction in transaction costs by 2010. The primary goal of APEC is to foster international trade by means of trade and investment liberalization and facilitation. Since its inception in 1989 and the adoption of the Bogor Goals in 1994, APEC members have lowered their trade restrictions to varying degrees. With nearly two decades of history, one question is whether or not there has been a corresponding rise in APEC members' foreign trade accompanying their liberalization and facilitation efforts. Figure 2 compares the growth of intra-APEC and total APEC exports to the growth of global exports from 1970 to 2006. Starting in 1981, total APEC exports begin growing faster than global exports, and intra-APEC exports are outstripping total APEC exports. However, the pace of export growth slows for all three categories in 1995, with noticeable downturns in APEC exports occurring in 1998 and 2001, corresponding to the Asia financial crisis and the attacks on the World Trade Center and the Pentagon. Since the downturn in 2001, the pace of world export growth has increased, and the pace of APEC export growth has increased even more. Import statistics reveal a similar pattern to exports (see Figure 3 ). From 1970 to 1980, there is little difference in the import growth rate for intra-APEC, total APEC, and the world. Starting in 1981, APEC's imports—both from amongst its members and from the world—begin to increase faster than world imports. The divergence between APEC import growth and world imports continues until 1997, when the Asian financial crisis precipitates a sharp decline in APEC's imports and global imports in 1998. For the next two years—1999 and 2000—global imports and APEC's imports recover, only to drop once again following the attacks on September 11, 2001. Import levels grew modestly in 2002 for both APEC and the world, and then accelerated starting in 2003, with APEC's import growth rate outstripping that of the world. While the trade data appear to support the notion that APEC has promoted trade growth for its members, the results are not conclusive. Although APEC's exports and imports have grown at a faster rate than world trade figures since the creation of APEC, it is uncertain if its trade growth is the result of trade liberalization and facilitation, or caused by other economic factors. During the time period in question, APEC's members included several of the fastest growing economies in the world—for example, China and Vietnam—so the average economic growth rate for APEC members was higher than the global average. APEC's greater economic growth rate could be sufficient to explain most of its better trade performance compared to global figures. The higher growth rate of trade among APEC members may also reflect changes in the global supply chain. The production of consumer goods is increasingly driven by major retailers and multinational corporations who source products from manufacturers and sourcing companies around the world. In turn, these companies subcontract out the production of subcomponents and parts to several other companies who may operate in several different countries. The subcomponents and parts are then shipped to possibly another country for final assembly. As a result, the initial order from the major retailer may initiate a chain of international trade flows that possibly exceeds the total value of the final goods produced. Such multinational supply chain networks are fairly common among the Asian members of APEC. Some may have been intentionally established among APEC members because of the association's relatively low trade barriers. For certain product categories—including clothing, textiles, consumer electronics, and toys—many of these supply chains depend on orders from U.S., European, or Japanese retailers or brand name distributors to initiate the multinational manufacturing of the consumer products. Also, a large percentage of these supply chains have their final assembly operations in China, but source the parts and components from several different Asian nations. However, the fact that intra-APEC exports and imports are growing at a faster rate than total APEC trade raises concerns about possible trade diversion. On the one hand, the greater growth of intra-APEC trade could be the result of lower intra-APEC trade barriers stemming from the members' actions via their IAPs and CAPs, and the spread of RTAs and FTAs amongst APEC members. On the other hand, the higher intra-APEC trade expansion could represent the diversion of trade from other nations as APEC members form preferential bilateral trade agreements that siphon off trade from non-APEC members. If APEC members have indeed benefited from more rapid trade and economic growth during the past few decades, they may also suffer more from the decline in trade and economic growth precipitated by the global financial crisis. As orders from Europe, Japan and the United States decline, the network of trade in intermediate goods associated with the Asian supply chains will decline even more quickly. Initially, APEC was viewed as a purely economic forum. APEC carefully kept its distance from political matters for fear that such issues would cause divisions within the group—particularly among China, Japan, Russia, Taiwan, and the United States. Such divisions could thwart cooperation in achieving economic goals. Consideration of non-economic issues was confined to bilateral meetings held before and after the Leaders' Meeting. In 1995, the issue was raised of whether APEC should be expanded to include consideration of regional security issues. The consensus in 1995 among APEC members seemed to be that regional security issues should be discussed in the ASEAN Regional Forum and other fora rather than in APEC. Starting in 2001, however, security was added to the official agenda of the Leaders' Meeting. At the October 2001 meetings in Shanghai, the attacks on the World Trade Center and the Pentagon overshadowed the economic agenda. The Leaders issued a joint statement condemning the attacks—APEC's first joint statement on non-economic issues. Since 2001, the agenda for the Leaders' Meeting has included issues related to "human security," with a focus on three topics: terrorism, disease, and disasters. In 2009, APEC's interest in human security focused primarily on the issue of "enhancing human security." Within that broad concept, APEC's discussions centered on two issues – improving food security within the region and responding to the H1N1 pandemic. On the topic of food security, the main concerns were ensuring that people had reliable access to an adequate supply of safe and affordable food. Regarding the H1N1 pandemic, APEC's goal was to build a regional capacity to respond to outbreaks in the region. Past Congresses and the Bush Administration identified APEC as the primary regional institution in the Asia-Pacific for promoting open trade and practical economic cooperation. APEC is also seen as a useful forum for advancing U.S. concerns on issues related to human security. Since APEC's inception in 1989, congressional interest and involvement with APEC has focused on two areas: (1) direct and indirect financial support for APEC; and (2) oversight of U.S. participation in APEC. Section 424 of the Foreign Relations Authorization Act, Fiscal Years 1994 and 1995, authorized the President to maintain United States membership in the Asia-Pacific Economic Cooperation and provided for U.S. contributions of APEC out of appropriations for "Contributions to International Organizations." The level of direct U.S. financial support for APEC for FY2010 was $900,000 per year. In addition, $4.497 million is included in the FY2010 budget under the State Department's Office of International Conferences of the Diplomatic & Consular Programs for preparation work for the 2011 APEC meetings. Section 2540 of the National Defense Authorization Act for Fiscal Year 1996 made "a non-communist country that was a member nation of the Asia Pacific Economic Cooperation (APEC) as of October 31, 1993" eligible to participate in a loan guarantee program "arising out of the financing of the sale or long-term lease of defense articles, defense services, or design and construction services." The Federal Agriculture Improvement and Reform Act of 1996 ( P.L. 104-127 ) included a finding by Congress that: ... during the period 1996 through 2002, there will be several opportunities for the United States to negotiate fairer trade in agricultural products, including further negotiations under the World Trade Organization, and steps toward possible free trade agreements of the Americas and Asian-Pacific Economic Cooperation (APEC); and the United States should aggressively use these opportunities to achieve more open and fair opportunities for trade in agricultural products. In the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), Congress finds: ... other economic and regional fora, such as the Asia-Pacific Economic Cooperation (APEC) Forum, and the Western Hemisphere Financial Ministers, have been used to marshal political will and actions in support of combating the financing of terrorism (CFT) standards. Finally, the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ) included as the sense of Congress: that the President should present to Congress quickly a comprehensive strategy to— (1) address the emergence of China economically, diplomatically, and militarily; (2) promote mutually beneficial trade relations with China; and (3) encourage China's adherence to international norms in the areas of trade, international security, and human rights. To be included in that strategy are "[a]ctions to encourage United States diplomatic efforts to identify and pursue initiatives to revitalize United States engagement in East Asia. The initiatives should have a regional focus and complement bilateral efforts. The Asia-Pacific Economic Cooperation forum (APEC) offers a ready mechanism for pursuit of such initiatives." Several bills have been introduced during the 111 th Congress that explicitly refer to APEC. Some are directly targeted at U.S. policy towards APEC. The Asia-Pacific Economic Cooperation Business Travel Cards Act of 2009 ( H.R. 3192 and S. 1633 ) would require that the Secretary of Homeland Security and the Secretary of State establish an "APEC Business Travel Program" that would issue APEC Business Travel Cards (ABTCs). As previously mentioned, the United States the became a "transitional member" to the ABTC program in September 2007, but progress has been slow. The Foreign Relations Authorization Act for Fiscal Years 2010 and 2011 ( H.R. 2410 ) includes a sense of Congress that "engagement is Asia must be a cornerstone of United States foreign policy in the 21 st Century" and that APEC is to pay an important role in that policy. To that end, the President should appoint "APEC Coordinators" in appropriate departments and agencies that "shall, in consultation with the United States Ambassador to APEC, set department- and agency-wide guidelines for each such department's or agency's participation at APEC." In addition, the legislation would require that the Secretary of State appoint a small business liaison to APEC, create a dedicated webpage to improve communication between the government and the small business community about APEC; and to submit a report to the appropriate congressional committee about the status of plans for hosting the APEC meetings in 2011. The Foreign Relations Authorization and Reform Act for Fiscal Years 2010 and 2011 ( H.R. 2475 ) has similar provisions. H.R. 2410 was passed by the House of Representatives on June 10, 2009 and referred to the Senate on June 22, 2009; H.R. 2475 awaits action in the House Committee on Foreign Affairs. The United States-China Diplomatic Expansion Act of 2009 ( H.R. 2311 ) is designed to increase funding for U.S. relations with China. However, it would also authorize the appropriation of $3 million in fiscal year 2010 for the financial support of APEC. Other proposed legislation attempts to use APEC to foster a consistent global approach to key issues. The Energy Security Through Transparency Act of 2009 ( S. 1700 ) would require the federal government to attempt to persuade the members of APEC to adopt regulations similar to those of the United States governing the operation of extractive industries. For the 111 th Congress, issues related to APEC could arise in a variety of direct and indirect ways. In addition to the issue of U.S. financial support for APEC, Congress may choose to express its sense on different policy issues. Also, there are oversight issues raised by U.S. participation in various APEC activities and, in particular, with respect to the 2011 APEC meetings to be held in the United States. The most direct issue would be the level of U.S. financial support for APEC. Although the President does have the authority under current federal law to determine the level of APEC's funding without action by Congress, Congress may choose to take up this issue (see above). For example, Congress could consider setting funding levels, directly or indirectly, for APEC's trade facilitation programs independently from the amounts previously appropriated. In addition, Congress may consider expressing its preferences regarding the agenda and content of the 2011 APEC meetings to be held in the United States, possibly via appropriation legislation that provides funding for those meetings. The 110 th Congress appropriated $2.3 million in FY2009 and $4.497 million in FY2010 for the 2011 meetings, but additional funding is likely to be needed. In his proposed FY2011 budget, President Obama has requested an additional $38.220 million for hosting APEC meetings in 2011. Past Congresses have recognized the potential of APEC as a vehicle for promoting free trade. In addition, to the issue of a possible Free Trade Area of the Asia-Pacific, negotiations over regional trade integration under APEC would likely raise issues related to labor rights and environment protection, and whether the United States would be able to respond to foreign country violations of labor or environmental standards with economic sanctions or monetary fines (as stipulated in the U.S.-Singapore/Chile FTAs). Successful completion of the Doha Development Round is a high priority for the Obama Administration. In the past, APEC has been viewed as a reliable ally to the United States during Doha negotiations. Congress could take steps to promote the use of APEC to help break the current stalemate. In addition to the various economic and trade issues, Congress may also consider issues pertaining to human security as a result of the U.S. involvement with APEC. For example, U.S. recognition of the APEC Business Travel Card could raise domestic security concerns to the expedited visa and entry privileges extended to card bearers. Similarly, concerns about a potential influenza pandemic may engender interest in providing more support to APEC's primary forum on health issues, the Health Working Group. From a geopolitical perspective, APEC is a leading forum through which the United States can broadly engage the Asia-Pacific region. The United States is not currently included in the other regional multilateral associations, such as ASEAN and the East Asian Summit (EAS), and no other forum includes such a wide range of Asian economies. From a strategic perspective, many experts believe APEC could play a useful role in advancing U.S. interests in the region. Others, however, think other for a—such as the TPP—may be more effective mechanisms at this time. The following table provides a brief summary of the past APEC Meetings. For more details about each meeting, see the official APEC web page, http://www.apec.org/ .
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Congress and the Executive Branch have historically identified the Asia Pacific Economic Cooperation forum (APEC) as potentially important in the promotion of liberalized international trade and investment in Asia, and possibly the rest of the world. APEC's commitment to the goal of trade and investment liberalization is embodied in its Bogor Goals, in which APEC members pledged to free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and 2020 for developing economies. The 2009 APEC Leaders' and Ministerial Meetings focused on balanced growth, resisting protectionism, fostering trade and investment liberalization, accelerating regional economic integration, and enhancing human security. In the Leaders' Declaration, APEC presented a new "growth paradigm" based on balanced, sustainable, and inclusive growth. In the Ministerial Meeting, one of the main topics was efforts to be taken at, behind, and across borders to promote regional economic integration. The next two years may be a critical period for APEC and its achievement of the Bogor Goals. The 2010 meetings are to be held in Yokohama, Japan—the target year for APEC's industrialized members to achieve the Bogor Goals. The United States will host the 2011 meetings. The Obama Administration has chosen Honolulu as the host city for the 2011 Leaders' Meeting, but has not given a clear indication of APEC's role in U.S. trade policy. Several alternative avenues for the promotion of trade integration in Asia have emerged, challenging the past U.S. focus on APEC. The Association of Southeast Asian Nations (ASEAN) is promoting the creation of various forms of an all-Asian free trade association that could exclude the United States. In November 2009, the Obama Administration announced it would to enter into negotiations with the Trans-Pacific Strategic Economic Partnership Agreement (TPP), a free trade agreement between Brunei Darussalam, Chile, New Zealand, and Singapore. Critics of APEC have referred to the association as a "talk shop," that has produced few results. However, studies conducted by APEC reveal a substantial drop in members' average tariff rates, the elimination of a number of non-tariff trade barriers, and a major reduction in the transaction costs associated with international trade—all of which is likely attributable at least in part to APEC initiatives. Historical trade data is consistent with the premise that APEC has been successful in promoting greater trade within its member economies and with the rest of the world. Both the exports and imports of APEC members have grown faster than global trade since the creation of APEC. However, APEC's greater trade growth may be attributable to other factors than the liberalization of trade and investment policies among its members. The 111th Congress may reexamine U.S. policy towards APEC. It has already increased APEC-related funding in FY2009, in part to provide for the preparations for the 2011 APEC meetings to be held in the United States. In addition, there are other actions Congress may choose to take with respect to APEC, depending on its determination of APEC's role in relation to trade promotion initiatives in Asia. Congressional attitudes and actions may also be influenced by the Obama Administration's trade policies in Asia—and the role APEC plays in those policies. This report will be updated as circumstances warrant.
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Federal law requires the President to submit an annual budget to Congress no later than the first Monday in February. The budget informs Congress of the President's overall federal fiscal policy based on proposed spending levels, revenues, and deficit (or surplus) levels. The budget request lays out the President's relative priorities for federal programs, such as how much should be spent on defense, education, health, and other federal programs. The President's budget may also include legislative proposals for spending and tax policy changes. While the President is not required to propose legislative changes for those parts of the budget that are governed by permanent law (i.e., mandatory spending), such changes are generally included in the budget. President Obama submitted his FY2014 budget to Congress on April 10, 2013. The Centers for Medicare & Medicaid Services (CMS) is the division of the Department of Health and Human Services (HHS) that is responsible for administering Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP). In January 2011, CMS became responsible for much of the implementation of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended) when the Center for Consumer Information and Insurance Oversight (CCIIO) was established within CMS. CMS is the largest purchaser of health care in the United States with Medicare and federal Medicaid expenditures accounting for 29.7% of the total national health expenditures in 2011. In 2010, CMS provided health insurance to 114 million individuals through Medicare, Medicaid and CHIP, which is roughly one in three Americans. This report summarizes the President's budget estimates for each section of the CMS budget. Then, for each legislative proposal included in the President's budget, this report provides a description of current law and the President's proposal. The explanations of the President's legislative proposals are grouped by the following program areas: Medicare, Medicaid, program integrity, private health insurance, and program management. At the end of each of these sections, there is a table summarizing the estimated costs or savings for each legislative proposal. The CMS budget includes a mixture of both mandatory and discretionary spending. However, a vast majority of the CMS budget is mandatory spending, such as Medicare benefits and grants to states for Medicaid. The President's budget estimates that under current law CMS mandatory and discretionary net outlays would amount to $845.5 billion in FY2014. This is an increase of $51.2 billion, or 6.4%, over the estimated net outlays for FY2013. The President's FY2014 budget increases the baseline for Medicare spending by assuming that Congress will block a proposed reduction in physician payments. The President's budget estimates this adjustment will increase CMS's net outlays by $15.4 billion in FY2014. With this adjustment, CMS's total net outlays are estimated to be $860.9 billion in FY2014. The President's FY2014 budget proposes to make a number of legislative changes to Medicare, Medicaid, program integrity, private health insurance, and program management. The President's budget estimates that if these legislative proposals were implemented, CMS's total net outlays would increase by $0.3 billion in FY2013 and decrease by $5.8 billion in FY2014. With the Medicare physician payment adjustment, the estimated impact of the legislative proposals, and the estimated savings net of the program integrity and Health Care Fraud and Abuse Control (HCFAC) investments ($0.4 billion), the President's budget estimates CMS's net outlays will be $854.3 billion in FY2014, which is an increase of $60.2 billion, or 7.6%, over the net outlays for FY2013. For budgetary purposes, CMS is divided into the following sections: Medicare, Medicaid, CHIP, program integrity, state grants and demonstrations, private health insurance, the Center for Medicare and Medicaid Innovation (CMMI), and program management. The President's budget estimates for each of these budget sections are summarized below. Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act as a federal entitlement program to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65. Medicare, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services. The President's FY2014 budget estimates that under current law Medicare outlays net of offsetting receipts will be $522.1 billion in FY2014 (see Table 1 ). The President's budget makes adjustments to the baseline assuming Congressional action preventing a reduction in Medicare physician payments, which increases the FY2014 baseline outlays net offsetting receipts by $15.4 billion. The budget includes a number of legislative proposals for Medicare. If implemented, these legislative proposals are estimated to decrease Medicare outlays by $6.0 billion during FY2014 and $371.0 billion over the next 10 years. With the baseline adjustments and the estimated impact of the legislative proposals, the President's budget estimates that Medicare's total net mandatory and discretionary outlays for FY2014 will be $531.5 billion, which is an increase of $20.0 billion, or 3.9%, over the estimated net outlays for FY2013. The " Medicare Legislative Proposals " section below includes a description of each legislative proposal pertaining to the Medicare program. This section includes an explanation of current law and each of the President's legislative proposals. At the end of the section, there is a table summarizing the costs or savings for each of the President's legislative proposals. CMS contracts with private organizations, now known as QIOs, to improve efficiency, effectiveness, economy, and quality of services delivered to Medicare beneficiaries. CMS contracts with one organization in each state, the District of Columbia, Puerto Rico, and other jurisdictions to serve as a QIO contractor to perform a range of activities. The QIO's most recent contract cycle or 10 th Statement of Work (SOW) began August 1, 2011 and will end July 31, 2014. The 10 th SOW provides $1.6 billion in funding over the three year timeframe, and this funding is used to fund clinical quality improvement priorities ($449.3 million), beneficiary center care ($181.0 million), value based purchasing support ($404.2 million), infrastructure and other special initiatives ($405.4 million), and other support contracts ($207.6 million). The 11 th SOW begins August 1, 2014, and this SOW will implement certain changes to the QIO program that were included as part of the Trade Adjustment Assistance Extension Act of 2011 (which was incorporated into the bill to extend the Generalized Systems of Preferences and for other purposes, P.L. 112-40 ). These changes include providing flexibility to determine the geographic scope of a QIO contract, permitting contracts with a broader range of entities, awarding certain QIO tasks to specialty contractors, terminating QIO contracts for poor performance among other changes, and extending the length of the existing three year contract to five years. Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care. Medicaid is jointly funded by the federal government and the states. Participation in Medicaid is voluntary for states, though all states, the District of Columbia, and the territories choose to participate. Each state designs and administers its own version of Medicaid under broad federal rules. While states that choose to participate in Medicaid must comply with all federal mandated requirements, state variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered. Historically, eligibility was generally limited to low-income children, pregnant women, parents of dependent children, the elderly, and people with disabilities; however, recent changes will soon add coverage for individuals under the age of 65 with income up to 133% of the federal poverty level (FPL). The federal government pays a share of each state's Medicaid costs; states must contribute the remaining portion in order to qualify for federal funds. The President's FY2014 budget estimates that under current law Medicaid total net outlays will amount to $303.8 billion, which is an increase of $37.2 billion, or 14.0%, over estimated net outlays for FY2013 (see Table 1 ). The President's budget includes a number of legislative proposals that would impact Medicaid. If these proposals are implemented, the President's budget estimates that total net outlays for Medicaid would decrease by $0.1 billion in FY2014 and $22.1 billion over the next 10 years. Including the estimated impact of the legislative proposals and savings from program integrity investments, the President's budget estimates FY2014 net outlays for Medicaid will amount to $303.7 billion, which is an increase of $37.1 billion, or 13.9%, over the estimated net outlays for FY2013. The " Medicaid Legislative Proposals " section below includes a brief discussion of current and proposed law for each of the legislative proposals for the Medicaid program. At the end of the section, there is a table summarizing the costs or savings for each of these proposals. The Balanced Budget Act of 1997 ( P.L. 105-33 ) established CHIP to provide health insurance coverage to low-income, uninsured children in families with incomes above applicable Medicaid income standards. Authorization and funding for CHIP has been extended a number of times, and most recently, the ACA extended federal funding for CHIP through FY2015. CHIP is jointly funded by the federal government and the states, and federal CHIP funding is capped on a state-by-state basis according to annual allotments. In general, CHIP allows states to cover targeted low-income children with no health insurance in families with income above Medicaid eligibility levels. States may also extend CHIP coverage to pregnant women when certain conditions are met. The President's FY2014 budget estimates that under current law CHIP's total outlays will amount to $10.1 billion, which is an increase of $0.1 billion, or 0.7%, over the estimated outlays for FY2013 (see Table 1 ). While there are no specific CHIP legislative proposals, two proposals in another part of the CMS budget will have an impact on CHIP. One proposal would prevent the use of federal funds to pay a state's share of Medicaid or CHIP expenditures, and the other proposal would strengthen penalties for illegal distribution of beneficiary identification numbers. These legislative proposals are discussed in the " Program Integrity Legislative Proposals " section of this report. Title II of the Health Insurance Portability and Accountability Act of 1996 ( P.L. 104-191 ) established the HCFAC program to detect, prevent, and combat health care fraud, waste, and abuse. HCFAC has traditionally focused on Medicare fraud, waste, and abuse through activities such as medical review, benefit integrity, and provider audits. In FY2009, discretionary funding was appropriated, which allowed HCFAC to expand its activities to Medicare Advantage and Medicare Part D among other things. In addition, HCFAC mandatory and discretionary funding is used to prevent fraud, waste, and abuse in the Medicaid program. The budget estimates for the program integrity activities are built into the budget summaries discussed above for Medicare and Medicaid. However, when the funding for program integrity activities are broken out, the President's FY2014 budget estimates total budget authority for program integrity activities will amount to $2.0 billion in FY2014. This is an increase of $52 million, or 2.7%, over FY2013. Funding for program integrity consists of both mandatory and discretionary funding. In FY2014, the mandatory funding for program integrity activities is estimated to be $1.7 billion, and the discretionary funding is estimated to be $0.3 billion. The " Program Integrity Legislative Proposals " section below includes a description of current and proposed law for each of the program integrity legislative proposals. At the end of the section, there is a table summarizing the costs or savings for each of the President's legislative proposals. The state grants and demonstrations portion of the budget funds a diverse set of grant programs and other activities. The grants and activities funded through this portion of the budget include the following: Money Follows the Person Demonstration, Medicaid Integrity Program, incentives for prevention of chronic diseases in Medicaid, CHIP Outreach and Enrollment Grants, Medicaid Emergency Psychiatric Demonstration, and emergency services for undocumented aliens. The President's budget estimates that under current law FY2014 total outlays for state grants and demonstrations will amount to $0.7 billion, which is a decrease of $40 million, or -4.9%, from FY2013 (see Table 1 ). The President's budget does not include any legislative proposals impacting the state grants and demonstrations portion of the CMS budget. The ACA includes reforms that focus on restructuring the private health insurance market by creating new programs (e.g., Health Insurance Exchanges) and by imposing requirements on private health insurance plans. Certain reforms require the participation of public agencies and officials in order to facilitate administrative or operational functions. The Center for Consumer Information and Insurance Oversight (CCIIO) within CMS is charged with helping implement the provisions of the ACA related to private health insurance. The President's FY2014 budget proposal includes estimates of the effects of ACA provisions that are currently in effect and the implementation of the health insurance exchanges, which are to be operational and offering coverage on January 1, 2014. The President's FY2014 budget estimates that under current law FY2014 total outlays for the health insurance programs will amount to $7.3 billion, which is an increase of $3.2 billion, or 76.4%, from FY2013 (see Table 1 ). The President's budget includes one legislative proposal that impacts the health insurance program, but the President's budget estimates this proposal will not have a budgetary impact. The " Private Health Insurance Legislative Proposals " section below includes a description of current and proposed law for the President's legislative proposal. CMMI was established by Section 3021 of the ACA and is tasked with testing innovative health care payment and delivery models with the potential to improve quality of care and reduce Medicare and Medicaid expenditures. The ACA appropriated $10 billion to support CMMI activities from FY2011 through FY2019. CMMI initiatives include Partnership for Patients, Health Care Innovation Awards, Pioneer Accountable Care Organizations (ACO), Advance Payment ACO Model, the Federally-Qualified Health Center Advanced Primary Care Practice demonstration, and state demonstrations to integrate care for dual eligible individuals. The President's budget estimates that under current law FY2014 total outlays for CMMI will amount to $1.4 billion, which is an increase of $0.1 billion, or 7.6%, from FY2013 (see Table 1 ). The President's budget does not include any legislative proposals impacting CMMI. The program management portion of the CMS budget includes funding for the administration of Medicare, Medicaid, CHIP, and other CMS activities. The budget estimates for the program management activities are built into the budget summaries discussed above. However, when the funding for program management activities are broken out, the President's budget estimates that under current law the FY2014 budget for program management activities will be $6.4 billion. The President's budget includes a few legislative proposals that would impact program management activities. If these proposals are implemented, the President's budget estimates that total program level funding for program management activities would increase by $0.4 billion in FY2014 and $0.5 billion over the next 10 years. Funding for program management consists of both discretionary and mandatory funding. The discretionary funding for program management activities is estimated to be $5.2 billion in FY2014, which is an increase of $1.4 billion, or 35.8%, over FY2013 funding. The discretionary funding for program management activities is broken into five different budget lines—program operations, federal administration, survey and certification, research, and state high risk pools. In FY2014, under current law, the mandatory funding for program management activities is estimated to be $0.3 billion, which is a $34 million decrease from the FY2013 funding. The President's budget estimate includes legislative proposals that impact program management activities. If these proposals are implemented, the President's budget estimates that mandatory program management funding would increase by $0.4 billion in FY2014. The legislative proposals impacting program management are discussed in the " Program Management Legislative Proposals " section of the CMS budget. Including the impact of the legislative proposals, the President's FY2013 budget estimates total program level funding for program management activities would amount to $6.9 billion in FY2014. This is an increase of $2.2 billion, or 47.8%, over FY2013. The President's FY2014 budget contains a number of proposals that would impact the CMS budget. Some are program expansions, and others are designed to reduce federal spending. For each proposal, this report provides a description of current law and the President's proposal. This report groups these legislative proposals by program areas: Medicare, Medicaid, program integrity, private health insurance, and program management. At the end of each of these sections, there is a table summarizing the costs or savings for each legislative proposal, and the tables classify each proposal as new, modified from the President's FY2013 budget, or repeated from the President's FY2013 budget. Medicare reimburses providers for beneficiaries' unpaid coinsurance and deductible amounts after reasonable collection efforts. Historically, Medicare has reimbursed 100% of these bad debts. BBA97 had scheduled bad debt in acute care hospitals to be reduced from 100% reimbursement to 75% reimbursement in FY1998, to 60% reimbursement in FY1999, and to 55% reimbursement in subsequent years; however, BIPA froze the reduction at 70% reimbursement in FY2001 and for subsequent years. DRA reduced the payment amount for Medicare-allowable skilled nursing facility (SNF) bad debt from 100% to 70%, except for the bad debt attributable to beneficiaries eligible for both Medicare and Medicaid (i.e., dual eligibles), effective for cost reporting periods beginning on or after October 1, 2005. For other Medicare providers, allowable beneficiary bad debt had been reimbursed at 100%. Other Medicare providers that receive bad debt reimbursement are: critical access hospitals, rural health clinics, federally qualified health clinics, community mental health clinics, dialysis facilities, health maintenance organizations reimbursed on a cost basis, competitive medical plans, and health care prepayment plans. The MCTRJCA reduced Medicare bad debt reimbursement to 65% for all providers. Providers who were reimbursed at 70% would receive 65% bad debt reimbursement beginning in FY2013. Other providers who were reimbursed at 100% of bad debt are reimbursed at 88% in FY2013 and will be reimbursed at 76% in FY2014 and 65% in FY2015 and subsequent years. The President's budget would reduce bad debt reimbursement to 25%. The scheduled reduction would be phased-in over three years beginning in FY2014 for all providers that receive bad debt payments. This proposal was included in the President's FY2013 budget proposal. Medicare pays hospitals with approved medical residency programs an additional amount to support the higher costs of patient care associated with training physicians. These indirect medical education (IME) payments are calculated as a percentage increase to Medicare's inpatient payment rates. The IME payments vary depending on the size of the hospital's teaching program (subject to Medicare's cap) as measured by the hospital's ratio of residents to hospital beds. Generally, teaching hospitals receive a 5.5% increase in IME payments for every 10% increase in their resident-to-bed ratio. The Medicare Payment Advisory Commission (MedPAC) has found that less than half of the IME payments can be empirically justified. In its June 2010 report, MedPAC recommended that Medicare's funding of graduate medical education be changed to support necessary workforce skills and that the Secretary of HHS, henceforth referred to a Secretary, set standards for receiving such funds. The President's budget would reduce IME funding by a total of 10%, starting in FY2014. The Secretary would be given the authority to set standards for teaching hospitals to encourage the training of primary care residents and develop necessary workforce skills. This proposal was included in the President's FY2013 budget proposal. As established by BBA97, critical access hospitals (CAHs) are limited-service rural facilities that meet certain distance criteria or have been designated as a necessary provider, offer 24-hour emergency care, have no more than 25 acute care inpatient beds, and have no more than a 96-hour average length of stay. Generally, CAHs receive enhanced cost-based Medicare payments, rather than the fixed-fee payments paid to acute care hospitals under the Medicare's prospective payment systems (PPS). Since FY2004, CAHs receive 101% of reasonable, cost-based reimbursement for inpatient care, outpatient care, ambulance services, and skilled nursing facility care provided in swing beds to Medicare beneficiaries. Prior to this date, CAHs received Medicare payment based on 100% of reasonable costs for these services. The President's budget would reduce Medicare's reimbursement to CAHs to 100% of reasonable costs, beginning in FY2014. This proposal was included in the President's FY2013 budget proposal. In order to be certified as a CAH, a rural entity must meet certain distance criteria or have been designated as a necessary provider by the state. Under federal distance standards, a CAH must meet one of the following criteria: (1) be located 35 miles from another hospital or (2) be located 15 miles from another hospital in areas with mountainous terrain or with only secondary roads. Until January 1, 2006, states could waive these federal mileage requirements for those entities determined to be necessary providers. Existing necessary providers maintained their status as CAHs. The President's budget would rescind state's ability to waive federal mileage requirements for entities less than 10 miles from another hospital or CAH, thus eliminating their Medicare enhanced payment beginning in FY2014. This proposal was included in the President's FY2013 budget proposal. MedPAC has found that Medicare payments generally exceed providers' costs for post-acute services. Each year, MedPAC makes recommendations for provider payment increases for the next fiscal or rate year. In its March 2013 report, MedPAC recommended that the Medicare payment updates for SNFs, inpatient rehabilitation facilities (IRFs), long term care hospitals (LTCHs), and home health agencies (HHAs) be eliminated for the upcoming year. MedPAC projected the 2013 aggregate Medicare margin (the amount that Medicare payments exceed costs) to be 12% and 14% for SNFs, 8.5% for IRFs, 5.9% for LTCHs, and 11.8% for HHAs. The ACA amended the annual update policy for these post-acute providers to include an adjustment to account for economy-wide productivity increases for cost savings. The productivity adjustment for SNFs, IRFs and LTCHs was implemented on October 1, 2011. The productivity adjustment for HHAs will be implemented on January 1, 2015. The annual updates for IRFs, HHAs, and LTCHs are subject to other reductions as well. The amount and the timing of such reductions vary by provider. Every post-acute provider may have an update less than 0.0 which would result in lower payment rate than in the preceding year. The President's budget would implement additional update reductions for these post-acute providers (i.e., IRFs, LTCHs, SNFs, and HHAs) of 1.1 percentage points from FY2014 through FY2023. Payment updates for these providers would not drop below 0.0 due to the 1.1 percentage point reduction. This proposal was included in the President's FY2013 budget proposal. IRFs are either freestanding hospitals or distinct units of other hospitals that are exempt from Medicare's inpatient prospective payment system (IPPS), which is used to pay acute care, general hospitals. Until recently, the Medicare statute gave the Secretary the discretion to establish the criteria that facilities must meet in order to be considered IRFs. Starting October 1, 1983, CMS has required that a facility must treat a certain proportion of patients with specified medical conditions in order to qualify as an IRF and receive higher Medicare payments. IRFs were required to meet the "75 percent rule," which determined whether a hospital or unit of a hospital qualified for the higher IRF payment rates or was paid as an acute care hospital. According to the rule, at least 75% of a facility's total inpatient population must be diagnosed with one of 13 pre-established medical conditions for that facility to be classified as an IRF. This minimum percentage is known as the compliance threshold. The rule was suspended temporarily and reissued in 2004 with a revised set of qualifying conditions and a transition period for the compliance threshold as follows: 50% from July 1, 2004 and before July 1, 2005; 60% from July 1, 2005 and before July 1, 2006; 65% from July 1, 2006 and before July 1, 2007 and at 75% from July 1, 2007 and thereafter. During the transition period, secondary conditions (comorbidities) were to be considered as qualifying conditions. The DRA extended the 60% threshold an additional year beginning on July 1, 2006. As established by MMSEA, starting July 1, 2007, the IRF compliance threshold is set at 60% and comorbidities are included as qualifying conditions. The President's budget would reinstitute the 75% threshold, starting in FY2014. This proposal was included in the President's FY2013 budget proposal. Patients receiving treatment for certain conditions such as hip and knee replacements can receive rehabilitative care in a variety of post-acute care settings, including SNFs and IRFs. Generally, care provided in an IRF is paid at a higher rate than care provided in a SNF. The President's budget would adjust reimbursement rates in the different post-acute care settings for certain overlapping conditions treated in multiple settings. Beginning in FY2014, the proposal would limit payment differentials for three conditions involving hips and knees, pulmonary conditions, as well as additional conditions the Secretary considers applicable. IRFs that provide intensive rehabilitation services to patients with relatively uncomplicated conditions would be paid as SNFs. This proposal was included in the President's FY2013 budget proposal. As established by the ACA, acute care hospitals with relatively high readmission rates are subject to penalties starting in FY2013. The penalties are capped at 1% of the Medicare payment in FY2013, at 2% in FY2014, and at 3% in FY2015 and beyond. SNFs with high readmission rates are not subject to such penalties. In its March 2012 report, MedPAC recommended that Congress reduce Medicare payments to SNFs with relatively high risk-adjusted rehospitalization rates to improve care coordination across different health care settings. The President's budget would reduce payments to SNFs with high rates of preventable hospital readmissions by up to 3% beginning in FY2017. This proposal was included in the President's FY2013 budget proposal. Post-acute care services primarily include nursing and rehabilitation services following a beneficiary's inpatient hospital stay. These services can be offered in institutional settings, such as LTCHs, IRFs, SNFs, as well as in community-settings by HHAs. Many post-acute care providers furnish similar services; however, Medicare payment rates are not the same across settings due to different provider cost structures and unique Medicare payment system differences. Use of post-acute care services is dramatically different across states. The Institute of Medicine (IOM) has noted that geographic variation in overall Medicare spending is heavily influenced by the use of post-acute care services, particularly SNFs and home health services. To encourage a more efficient use of post-acute care and improve care coordination, MedPAC's June 2008 report suggested a single predetermined payment for an episode of care that includes the beneficiary's inpatient hospital stay as well as physician services, post-acute care services, and any hospital readmissions. The details of MedPAC's bundled payment proposal are still under development; however, CMS recently launched a Bundled Payment for Care Improvements (BPCI) Initiative to test different bundling payment models. In Model 2 of the BPCI, participants in the initiative will manage a beneficiary's episode (either 30, 60, or 90 days) that includes the acute-care hospital services, physician services, and post-acute care services. Participants that achieve a reduction in episode spending when compared to a pre-determined spending benchmark will be allowed to share in the savings. The President's budget would implement a bundled payment for post-acute care providers (LTCHs, IRFs, SNFs, and HHAs) beginning in FY2018. The bundled payment would be based on patient characteristics and other factors and be set to reduce Medicare expenditures by 2.85% by FY2020. Payments would be bundled for at least half of the total payments for post-acute care providers, but little detail was provided about how this would work. This proposal was not included in the President's FY2013 budget proposal. Medicare DSH funds are paid to qualifying hospitals through an adjustment within the applicable PPS. Generally, DSH hospitals receive the additional payments based on a DSH patient percentage (DPP) which is the sum of two fractions. The Medicare fraction is calculated by dividing the number of hospital inpatient days provided to patients who are eligible for Supplemental Security Income (SSI) and entitled to Medicare Part A benefits divided by the total number of hospital days provided to patients who are entitled to Medicare Part A benefits. This is added to the Medicaid fraction which is calculated as the number of hospital days for patients who (for such days) are eligible for medical assistance under an approved state Medicaid plan and who are not entitled to Part A benefits divided by the total number of hospital days. A few urban acute care hospitals receive DSH payments under an alternative formula. The Medicare DSH payment adjustment has been the subject of substantial litigation. The President's budget would clarify that hospital days for beneficiaries' who have exhausted their inpatient Medicare Part A benefits and who are enrolled in Medicare Advantage plans under Part C of Medicare should be included in the Medicare fraction of the hospitals' DSH DPP calculation. This proposal was not included in the President's FY2013 budget proposal. Medicare covers certain drugs (i.e., drugs provided in physicians' offices and normally administered by physicians) under Medicare Part B, rather than under Medicare's Part D outpatient prescription drug benefit. Medicare reimburses physicians for most Part B drugs based on the formula of 106% of the manufacturer's Average Sales Price (ASP) for each drug, regardless of the price at which physicians are able to purchase the drug. Physicians negotiate with drug wholesalers, pharmaceutical manufacturers, and other entities to purchase Part B drugs. Large physician practices or hospital outpatient departments that can purchase Part B drugs in larger volumes often are able to get prices considerably lower than 106% of ASP, thereby earning profit each time they administer the drug. Smaller physician practices and other lower volume purchasers are unable to receive comparable discounts to the higher volume purchasers, so they make less profit and may sometimes lose money on Part B drug transactions. The President's budget would reduce Medicare Part B drug reimbursements to providers (i.e., physicians, hospital outpatient departments, clinics, and other entities) from 106% of the manufacturer ASP to 103% of ASP. The drug manufacturers would be required to pay a rebate for some drugs in certain instances as determined by the Secretary. This proposal was not included in the President's FY2013 budget proposal. Clinical lab services are paid on the basis of area-wide fee schedules. The fee schedule amounts are updated for each calendar year. There is a ceiling on each payment amount set at 74% of the median of all fee schedule amounts for that laboratory test. Generally, the Secretary is required to adjust payments annually by the percentage change in the consumer price index for all urban consumers (CPI-U) together with other adjustments as the Secretary deems appropriate. Updates were eliminated for 1998 through 2002, and MMA eliminated updates for 2004-2008. Under current law, the annual clinical laboratory test fee schedule update adjustment for 2009-2013 is the percentage change in the CPI-U minus 0.5 percentage points. The President's budget would lower the payment rates under the Clinical Laboratory Fee Schedule (CLFS) by −1.75 percent every year from 2016 through 2023. The proposal would also provide the Secretary with the authority to adjust payment rates under the CLFS in a budget-neutral manner, precluding administrative or judicial review of these adjustments. Additionally, the proposal would support policies to encourage electronic reporting of laboratory results. This proposal was not included in the President's FY2013 budget proposal. Limitations on physician self-referrals were enacted into law in 1989 under the Ethics in Patient Referrals Act, commonly referred to as the "Stark law." The Stark law, as amended, and its implementing regulations prohibit certain physician self-referrals for designated health services (DHS) that may be paid for by Medicare or Medicaid. In its basic application, the Stark law provides that if a physician (or an immediate family member of a physician) has a financial relationship with an entity, the physician may not make a referral to the entity for the furnishing of DHS for which payment may be made under Medicare or Medicaid. It also provides that the entity may not present (or cause to be presented) a claim to the federal health care program or bill to any individual or entity for DHS furnished pursuant to a prohibited referral. It has been noted that the general idea behind the self-referral prohibitions is to limit physicians from making referrals based on financial gain, thus preventing overutilization and increases in health care costs. The Stark law includes a general exception permitting physicians and group practices to order and provide certain DHS in their offices when they meet certain statutory requirements. Although it was intended to protect the convenience of patients and to allow patients to receive certain services during their doctor visits, concerns have been raised that this exception promotes the overuse of these services. Beginning in 2015, this proposal would exclude radiation therapy, therapy services, and advanced imaging from the in-office ancillary services exception to the Stark law, except when a practice meets certain accountability standards, as defined by the Secretary. This proposal was not included in the President's FY2013 budget proposal. In addition to paying monthly premiums for Medicare Part B, Medicare beneficiaries also pay certain out-of-pocket cost-sharing amounts for their Part B services including an annual deductible. Prior to 2003, the amount of the Part B deductible was set in statute. MMA set the 2005 deductible level at $110 and required that the deductible be increased each year by the annual percentage increase in the Part B expected per capita costs for enrollees aged 65 and over beginning with 2006 (rounded to the nearest $1). The 2013 Part B annual deductible is $147. The President's budget would increase the annual deductible by an additional $25 in 2017, 2019, and 2021 for new Medicare enrollees. Specifically, under this proposal, there would be two categories of beneficiaries; and, the members of one group would pay a different annual deductible amount than the members in the second. The first group, comprised of beneficiaries who enroll in Medicare prior to January 1, 2017, would not be affected by this proposal and their annual Part B deductible would continue to be adjusted each year according to the current methodology. The deductible for Medicare beneficiaries in the second group, those who enroll in Medicare beginning in January 1, 2017 and thereafter, would pay deductibles that would be subject to both the annual adjustments based on expected costs (current method) plus an additional increase of $25 starting in 2017, another $25 increase in 2019, and a third $25 increase in 2021. For example, in a scenario under which the deductible amount remained the same through 2021 (unlikely), in 2021, new beneficiaries would pay a $75 higher deductible than those who had been enrolled in Medicare prior to 2017. However, because deductibles are expected to grow each year due to expected growth in annual per capita costs, the application of the annual growth rate adjustments to the incrementally larger deductible amounts would mean that the difference in deductible amounts paid by individuals in the two groups would likely be higher than $75. This proposal was included in the President's FY2013 budget proposal. For beneficiaries who are eligible for Medicare-covered home health care, Medicare provides payment for a 60-day episode of home health care under a prospective payment system. The 60-day episode covers in-home skilled nursing, therapy, medical social services, and aide visits as well as medical supplies. Medicare, originally, required a 20% coinsurance for home health services covered under Part B in addition to having met the annual Part B deductible; however, legislative changes (P.L. 92-603 and P.L. 96-499 ) eliminated Medicare cost-sharing for home health services. There are currently no Medicare cost-sharing requirements for home health services; however, beneficiaries may be responsible for copayments associated with Medicare-covered durable medical equipment and osteoporosis drugs provided during a home health episode of care. In its March 2013 report, MedPAC recommended that Congress establish a per episode copayment for home health episodes that are not preceded by hospitalization or post-acute care use. Beginning in FY2017, the President's budget would institute a $100 copayment for new beneficiaries for each home health 60-day episode with five or more visits that is not preceded by a hospital or inpatient post-acute stay. This proposal was included in the President's FY2013 budget proposal. Medigap is private health insurance that supplements Medicare coverage. It typically covers some or all of Medicare's deductibles and coinsurance, and may also include additional items or services not covered by Medicare, such as foreign travel. Medigap is available to Medicare beneficiaries who have fee-for-service Medicare Part A and voluntarily enroll in Medicare Part B by paying the monthly premium. Individuals who purchase Medigap must pay a monthly premium which is set by the insurance company selling the policy. While the federal government does not contribute to Medigap premiums, former employers may make contributions. There are 10 standardized Medigap plans with varying levels of coverage. Two of the 10 standardized plans cover Parts A and B deductible and coinsurance in full (i.e., offer "first-dollar" coverage). In 2010, over 60% of all Medigap beneficiaries were covered by one of these two plans. Beginning in FY2017, the President's budget would impose a Part B premium surcharge for new Medicare beneficiaries who select a Medigap plan with low cost-sharing requirements (i.e., offer "near first-dollar" coverage). The surcharge would be equal to approximately 15% of the average Medigap premium (or about 30% of the Part B premium). This proposal was included in the President's FY2013 budget proposal. Most Medicare beneficiaries pay Part B premiums which are set at 25% of the program's estimated (projected) costs per aged enrollee (i.e., enrollees who are age 65 or older). Since January 2007, higher-income beneficiaries pay a larger share of premiums—35%, 50%, 65%, or 80%, depending on income. In 2010, the income thresholds for those premium shares are $85,000, $107,000, $160,000, and $214,000, respectively for single filers. (For married couples, the corresponding income thresholds are twice those values.) The ACA also imposed a similar income-related premium for Part D services. In addition, the ACA suspended inflation-indexing of income thresholds for Parts B and D through 2019 at 2010 levels. In 2011, about 4% of current Part B enrollees were estimated to pay these higher income-related premiums. Beginning in FY2017, the President's budget would increase the applicable percentage of the program's cost per aged enrollee for higher income beneficiaries to between 40% and 90%, replacing the current 35% to 80% range under current law. The proposal would also further suspend inflation-indexing of the income thresholds until 25% of beneficiaries under Parts B and D are subject to these premiums. This proposal was included in the President's FY2013 budget proposal. Medicare Advantage (MA or Medicare Part C) is an alternative to original fee-for-service Medicare wherein beneficiaries who choose to enroll can receive all Medicare covered benefits (except hospice) through a private health plan such as a health maintenance organization (HMO) or preferred provider organization (PPO). MA plans are paid a per person monthly amount to provide the Medicare covered benefits to enrolled beneficiaries regardless of how many services the beneficiaries actually use. In general, MA plan payments are risk-adjusted to account for the variation in the cost of providing care. Risk adjustment is designed to compensate plans for the increased cost of treating older and sicker beneficiaries, and thus discourage plans from preferential enrollment of healthier individuals. The DRA required the Secretary to adjust MA plan risk scores for patterns of diagnosis coding differences between MA plans and providers under Parts A and B of Medicare for plan payments in 2008, 2009, and 2010. The ACA required the Secretary to conduct further analyses on the differences in coding patterns and adjust for those differences after 2010. Starting in 2014, the ACA specifies minimum coding intensity adjustments, which were subsequently amended by ATRA. In 2014, the coding intensity adjustment is to be at least the value of the adjustment in 2010 plus 1.5 percentage points; for 2015 to 2018, the adjustment is to be not less than the adjustment for the previous year increased by 0.25 percentage points; and starting in 2019, the coding intensity adjustment is to be not less than 5.9%. The minimum required adjustments are be applied to risk scores until the Secretary implements risk adjustment using MA diagnostic, cost, and use data. The President's budget would increase the minimum coding intensity adjustment; starting in 2015, the yearly increase to the minimum coding intensity adjustment would be increased from the current law level of 0.25 percentage points to 0.67 percentage points until the minimum adjustment reached a 7.59 percent adjustment in 2018 and would be held at that level thereafter. This proposal was not incl uded in the President's FY2013 b udget proposal . Under the Medicare Advantage program, employers and unions may sponsor Medicare Advantage plans for their Medicare-eligible employees, retirees, and/or their Medicare-eligible spouses and dependents. The Secretary has statutory authority to waive or modify requirements that may hinder the design, offering, or enrollment in these plans, which are referred to as Employer Group Waiver Plans or (EGWPs). Like other MA plans, the EGWPs are paid a per person monthly amount to provide all Medicare covered benefits except hospice, and the method for determining the payment is the same for all plans. Payments to MA plans are based on a comparison of each plan's estimated cost of providing Medicare covered services (a bid) relative to the maximum amount the federal government will pay for providing those services in the plan's service area (a benchmark). If a plan's bid is less than the benchmark, its payment equals its bid plus a rebate. Starting in 2012, the size of the rebate is dependent on plan quality, ranging from 50% to 70% of the difference between the bid and the benchmark. The rebate must be returned to enrollees in the form of either additional benefits, reduced cost-sharing, reduced Part B or Part D premiums, or some combination of these options. If a plan's bid is equal to or above the benchmark, its payment is the benchmark amount and each enrollee in that plan pays an additional premium, equal to the amount by which the bid exceeds the benchmark. Beginning in payment year 2015, the President's budget would establish payment amounts for EGWPs based on average MA plan bids in each individual market. This proposal was not incl uded in the President's FY2013 b udget proposal . Medicare Part D provides coverage of outpatient prescription drugs to beneficiaries who choose to enroll in this optional benefit. About 60% of eligible Medicare beneficiaries are currently enrolled in Part D. Some beneficiaries with limited income and resources may qualify for the low-income subsidy (LIS), which provides assistance with their Part D premiums, cost-sharing, and other out-of-pocket expenses. In 2013 an estimated 11.4 million Medicare beneficiaries qualified for low-income subsidies. Medicare beneficiaries who qualify for Medicaid based on their income and assets (dual-eligibles), who are recipients of Medicare Savings Programs, or who receive Supplemental Security Income are automatically eligible for the full LIS. Others who do not qualify for one of the above, but who have limited assets and incomes below 150% of FPL may also be eligible for the LIS and receive assistance for some portion of their premium and cost sharing charges. About 40% of Part D enrollees receive the LIS. Prescription drug coverage is provided through private prescription drug plans (PDPs), which offer only prescription drug coverage, or through MA prescription drug plans which offer prescription drug coverage that is integrated with the health coverage provided under Part C. Part D plan sponsors determine payments for drugs and are expected to negotiate prices with drug manufacturers, which may involve an agreement from the manufacturer to provide a rebate. Under Medicaid, basic prescription drug rebates are determined by the larger of either a comparison of a drug's quarterly average manufacturers' price (AMP) to the best price for the same period, or a flat percentage (23.1%) of the drug's quarterly AMP. The basic rebate percentage for multi-source, non-innovator and all other drugs is 13% of AMP. Beginning in 2014, the President's budget would require drug manufacturers to pay the difference between rebates provided to Part D plans and the corresponding Medicaid rebate levels for brand name and generic drugs provided to LIS beneficiaries. This proposal was incl uded in the President's FY2013 b udget proposal . The Medicare Part D standard drug benefit includes a coverage gap or "doughnut hole"—a period when enrollees who have reached the plan's initial coverage limit, but haven't yet spent enough to qualify for more generous catastrophic coverage—face higher out-of-pocket costs. In 2013, an enrollee in a standard plan pays a $325 deductible, and 25% coinsurance or copayments on drug spending up to the initial coverage limit of $2,970. Between $2,970 and the catastrophic threshold of $6,733.75 – the current coverage gap—a beneficiary faces higher cost sharing. Prior to the ACA, Part D enrollees who did not receive a low-income subsidy generally paid the full cost of drugs in the coverage gap. The ACA gradually phases out the coverage gap through a combination of manufacturer discounts on brand-name drugs, and federal subsidies for brand-name and generic drugs. By 2020, enrollees in Part D standard plans will have a 25% cost-share for all prescriptions from the time they meet the deductible until they reach the catastrophic limit, after which cost-sharing is negligible. In accordance with the ACA, manufacturers in 2011 began providing a 50% discount for brand-name drugs purchased in the coverage gap. From 2011 to 2020, the federal government is providing gradually increasing subsidies for brand name and generic drugs. By 2020, the government will subsidize 25% of the cost of brand-name drugs (in addition to the manufacturer's 50% discount) and 75% of the cost of generic drugs in the coverage gap. The President's budget would increase the manufacturer discount for brand-name drugs to 75% from 50%, beginning in 2015. The change would effectively eliminate the coverage gap for brand-name drugs in 2015, though federal generic drug subsidies continue to be phased in through 2020. This proposal was not included in the President's FY2013 bu dget proposal . LIS beneficiaries enrolled in Medicare Part D may qualify for additional assistance with some, or all, of their prescription drug cost-sharing. LIS beneficiary cost sharing varies by income, and is adjusted annually. For 2013: Dual-eligible beneficiaries (who qualify for both Medicare and Medicaid) who are institutionalized or are receiving home and community-based services have no drug co-pays or coinsurance; Full-benefit, dual-eligible LIS beneficiaries with income less than 100% of FPL have a $1.15 co-pay for generic drugs and $3.50 for brand-name drugs, until they reach the catastrophic threshold, when their copayment is zero; Full-benefit, dual eligible LIS beneficiaries with income above 100% of FPL, and other LIS beneficiaries with incomes up to 135% of FPL and limited assets, pay $2.65 for a generic drug prescription and $6.60 for a brand-name drug until they reach the catastrophic threshold, when their co-payment is zero. Other beneficiaries with incomes up to150% of FPL and limited assets pay a flat 15% coinsurance rate for all drugs up to the catastrophic threshold, cost-sharing above that level of $2.65 for a generic drug or preferred, multiple-source drug prescription, and $6.60 for a brand-name drug. LIS beneficiaries are more likely to have multiple, chronic ailments than other Part D beneficiaries and also are more likely to have higher drug costs. At the same time, a smaller share of LIS beneficiary prescriptions is filled with lower-cost, generic drugs, as compared to non-LIS beneficiaries. In its March 2012 report, MedPAC found that, in 2009, non-LIS enrollees had a generic dispensing rate of 72% compared to 68% for LIS enrollees. Part D plan sponsors often use incentives, such as higher co-payments for expensive drugs, to persuade enrollees to switch to cheaper generics. Because LIS beneficiaries pay a set amount, regardless of the price of a drug, such incentives may be less successful with the LIS population. The President's budget proposes reducing co-payments for generic drugs by more than 15%, to 90 cents per prescription, for LIS beneficiaries with incomes below 100% of poverty, and to $1.80 for beneficiaries with incomes below 135% of FPL. At the same time, the proposal would double co-payments for brand- name drugs to twice the level under current law. The Secretary would have discretion to exclude certain therapeutic classes of drugs if generic substitution was not clinically appropriate or a generic substitute was not available. LIS beneficiaries could also submit an appeal to continue buying drugs at the current rates. The proposed cost-sharing change would not apply to LIS beneficiaries who are in an institution or receiving certain community-based services. Part D beneficiaries with incomes between 135% and 150% of FPL would face higher cost-sharing only if they reached their plan's catastrophic coverage limit . This proposal was not incl uded in the President's FY2013 b udget proposal . Generally, there is a two-step process for low-income persons to gain a LIS for their Part D coverage. First, a determination must be made that they qualify for the assistance; second, they must enroll, or be enrolled, in a specific Part D plan. Some LIS individuals who have not elected a Part D plan are automatically enrolled into one by CMS. CMS identifies plan sponsors offering basic prescription drug coverage with a premium at or below the Part D low-income premium subsidy amount, set annually through a formula. If more than one sponsor in a region meets the criteria, CMS auto-enrolls beneficiaries on a random basis among available plans. There is also a "facilitated enrollment" process for enrollees in Medicare Savings programs (MSPs), SSI enrollees, and persons who applied for and were approved for low-income subsidy assistance. The basic features applicable to auto-enrollment are the same for facilitated enrollment. The President's budget would allow CMS to contract with a single Part D plan to provide coverage for LIS beneficiaries while their eligibility is being processed, rather than assigning them to plans through the current, random process. This would mean that one plan would serve as the contact point for LIS beneficiaries, who must often seek reimbursement for retroactive drug claims. The single plan would be paid by CMS through an alternative method. This proposal was not included in the President's FY2013 b udget proposal . [This proposal impacts both the Medicare and Medicaid budgets.] The ACA established IPAB to develop and submit detailed proposals to Congress and the President to reduce Medicare spending. Proposals are to focus primarily on payments to MA and PDP plans and reimbursement rates for certain providers. The Board will be prohibited from developing proposals related to Medicare benefits, eligibility, or financing. Proposals, which will only be required in certain years when the CMS Chief Actuary determines that the projected Medicare per capita growth rate exceeds certain spending targets, will have to meet specific savings targets. Recommendations made by the Board automatically go into effect unless Congress enacts specific legislation to prevent their implementation. The first year the Board's proposals can take effect is 2015 (which ties to the 2013 determination year). For the first five years of implementation, the target growth rate will depend on changes in consumer price indices. However, beginning with the sixth year of implementation, the Medicare target per capita growth rate will be the projected five-year average percentage increase in nominal Gross Domestic Product (GDP) per capita plus 1.0 percentage point. In its February 2013 Medicare baseline, the Congressional Budget Office (CBO) estimated that the conditions for activating the IPAB trigger would not be met in any of the next 10 fiscal years. While the CMS Actuary makes the official determination that would trigger IPAB activity, estimates consistent with those from CBO would mean that the IPAB would have no effect on federal budget outlays in FY2013 through FY2023 under current law. The President's budget would lower the target rate applicable for 2020 and after from GDP per capita growth plus 1 percentage point to GDP per capita growth plus 0.5 percentage points. This proposal was included in the President's FY2013 b udget proposal . The Medicare and Medicaid appeal processes differ significantly. Even within Medicare, although the processes are conceptually similar, the appeals process varies depending on whether it is for Medicare Parts A, B, C, or D. These appeal variations can produce confusion, inefficiency, and increased administrative cost for beneficiaries, providers, and states. The difficulty navigating the different appeals processes is especially troublesome for dual eligibles, who are lower-income Medicare beneficiaries who also are eligible for Medicaid. For dual eligibles, Medicaid is the payer of last resort, meaning that if services are covered by Medicare, Medicare pays for dual eligibles first, and Medicaid is the secondary payer. If services are only covered by Medicaid, then Medicaid is the only and primary payer. Dual eligibles sometimes are in the situation where coverage of an item or service under one program is possible only after the other program has denied coverage. The Medicare and Medicaid appeal process variances are important for dual eligibles because duals might face delays in receiving medical services and may experience care interruptions due to the differences in the appeals processes. In addition, these coordination issues can be expensive for both programs, potentially adding administrative costs and duplicative treatments. The President's budget proposes to introduce legislation that would create an integrated Medicare and Medicaid appeals process for dual eligibles. This proposal was not incl uded in the President's FY2013 b udget proposal . [This proposal impacts both the Medicare and Medicaid budgets.] The ACA includes a provision that allows CMS to make standardized extracts of Medicare Parts A, B, or D claims data available to qualified entities for the purpose of publishing reports evaluating the performance of providers of services and suppliers. The ACA also required that qualified entities combine claims data from sources other than Medicare with the Medicare data when evaluating the performance of providers and suppliers. This President's budget would expand the scope of how qualified entities could use Medicare data beyond that of performance measurement. The Administration proposes that entities be allowed to use the data for fraud prevention activities and for value-added analysis for physicians. Also, qualified entities would be able to release raw claims data, instead of simply summary reports, to interested Medicare providers for care coordination and practice improvement. This proposal would make claims data available to qualified entities for a fee equal to Medicare's cost of providing the data. This proposal was not included in the President's FY2013 budget proposal . The Drug Price Competition and Patent Term Restoration Act of 1984 ( P.L. 98-417 , commonly known as the Hatch-Waxman Act), established the Abbreviated New Drug Application (ANDA), an expedited marketing approval pathway at the Food and Drug Administration (FDA). An ANDA allows a generic applicant to obtain marketing approval based upon safety and efficacy data provided to the FDA by the brand name firm. The filing of an ANDA with a paragraph IV certification (that the patent is invalid or not infringed) constitutes a "somewhat artificial" act of patent infringement under the act. A 180-day market exclusivity is provided by the FDA to the first paragraph IV filer(s). Brand name and generic firms engaged in litigation within the Hatch-Waxman statutory framework have sometimes concluded their litigation through settlement, rather than awaiting a formal decision from a court. In some settlements, the brand name company pays the generic firm in exchange for the generic firm's agreement not to market the patented pharmaceutical. These arrangements have been termed "reverse payment" agreements or "pay-for-delay" agreements. Beginning in FY2014, under the President's budget, the Federal Trade Commission would be authorized to prohibit "pay-for-delay" agreements between brand and generic pharmaceutical companies that delay entry of generic drugs and biologics into the market. This proposal was included in the President's FY2013 bud get proposal . [This proposal impacts both the Medicare and Medicaid budgets.] The Biologics Price Competition and Innovation Act of 2009 (incorporated into the ACA) establishes a licensure pathway for competing versions of previously marketed biologics. In particular, the legislation creates a regulatory regime for two types of follow-on biologics, termed "biosimilar" and "interchangeable" biologics. The FDA is afforded a prominent role in determining the particular standards for biosimilarity and interchangeability for individual products. In addition, the legislation created FDA-administered periods of data protection and marketing exclusivity for certain brand name drugs and follow-on products. Brand name biologic drugs receive four years of marketing exclusivity during which time other companies are prevented from filing an application for approval of a follow-on product. Brand biologics also receive 12 years of data exclusivity during which time the follow-on manufacturer cannot rely on the clinical data generated by the innovator firm in support of FDA approval of a competing version of the drug. Unlike market exclusivity, data protection does not block competitors that wish to develop their own clinical data in support of their application for marketing approval. In addition, applicants that are the first to establish their product is interchangeable with the brand name biologic are provided a term of marketing exclusivity. Effective in FY2014, the President's budget would award brand biologics seven years of exclusivity rather than the current 12 years, and there would be no additional exclusivity periods for "minor" changes in product formulations. This proposal was included in the President's FY2013 Budget. [This proposal impacts both the Medicare and Medicaid budgets.] The BBA97 required states to pay Medicare Part B premiums for a new group of low-income Medicare beneficiaries—Qualifying Individuals (QIs)—whose income was between 120% and 135% of FPL. BBA97 also amended the Social Security Act to provide for Medicaid payment for QIs through an annual transfer from the Medicare Part B Trust Fund to be allocated to states. States (and the District of Columbia) receive 100% federal funding to pay QI's Medicare premiums up to the federal allocation, but no additional matching beyond this annual allocation. There were approximately 523,000 QI individuals in CY2011. Since it was first funded in October 1, 1998, the QI program has been extended 13 times. The ATRA authorized the QI program through December 31, 2013, and appropriated $485 million for the second through the fourth quarters of FY 2013 and $300 million for the first quarter of FY2014. The President's budget would extend QI authorization through December 31, 2014. This proposal would authorize an additional 12 months of funding. This proposal was included in the President's FY2013 Budget. Under federal law, states are required to make Medicaid DSH payments to hospitals treating large numbers of low-income and Medicaid patients. States receive federal matching funds for making DSH payments up to a capped federal allotment that generally equals the previous year's allotment increased by the percentage change in CPI-U. In FY2012, federal Medicaid DSH allotments to states totaled $11.3 billion. The ACA requires the Secretary to make aggregate reductions in Medicaid DSH allotments for each year from FY2014 to FY2020. The MCTRJCA and ATRA applied the FY2020 Medicaid DSH reduction to FY2021 and FY2022. Under current law, in FY2023, states' DSH allotments will rebound to their pre-ACA reduced levels with annual inflation adjustments for FY2014 through FY2023. The President's budget proposes to "rebase" the Medicaid DSH allotments for FY2023 and subsequent years by calculating the Medicaid DSH allotments for these years based on the ACA reduced levels. The FY2023 Medicaid DSH allotments would be each state's FY2022 allotment increased by the percentage change in CPI-U, and the allotments for subsequent years would be the previous year's allotment increased by the percentage change in CPI-U. This proposal was included in the President's FY2013 Budget. As mentioned above, the ACA requires the Secretary to make aggregate reductions in Medicaid DSH allotments for each year from FY2014 to FY2020. Specifically, these reductions equal to $0.5 billion in FY2014, $0.6 billion in FY2015, $0.6 billion in FY2016, $1.8 billion in FY2017, $5.0 billion in FY2018, $5.6 billion in FY2019, and $4.0 billion in FY2020. The MCTRJCA and ATRA apply the $4.0 billion reduction from FY2020 to FY2021 and FY2022. The President's budget proposes to delay the Medicaid DSH reductions for one year (i.e., the Medicaid DSH reductions will begin in FY2015) and apply the reduction of $0.5 billion currently slated for FY2014 over the years FY2016 and FY2017. This proposal was not included in the President's FY2013 Budget. States are generally free to set payment rates for items and services provided under Medicaid as they see fit, subject to certain exceptions and a general requirement that payment policies are consistent with efficiency, economy, and quality of care and are sufficient to provide access equivalent to the general population's access. Providers for which federal upper payment limits (UPLs) apply under Medicaid include hospitals and nursing homes; federal regulations specify that states cannot pay more in the aggregate for inpatient hospital services or long-term care services than the amount that would be paid for the services under the Medicare principles of reimbursement. No UPL currently applies to DME under Medicaid. Historically, Medicare has paid for most DME on the basis of fee schedules. Unless otherwise specified by Congress, fee schedule amounts are updated each year by a measure of price inflation. MMA established a Medicare competitive acquisition program (i.e., competitive bidding) under which prices for selected DME sold in specified areas would be determined not by a fee schedule but by suppliers' bids. The first round of the competitive bidding program began in July 2008 in 10 areas, but was halted due to implementation concerns. A new first round of competition began in October 2009, and contracts and payments for the competitive bidding areas went into effect in January 2011. Implementation of the second round of competition started in 2011 in 91 additional areas, and CMS expects that payments and contracts under the second round will start in July 2013. The Secretary is required to extend the competitive acquisition program, or use information from the program to adjust fee schedule rates in remaining areas by 2016. The President's budget would limit federal reimbursement for a state's Medicaid spending on certain DME to what Medicare would have paid in the same state for the services. This proposal was included in the President's FY2013 Budget. For the purpose of determining prescription drug rebates, Medicaid distinguishes between two types of drugs: (1) single source drugs (generally, those still under patent) and innovator multiple source drugs (drugs originally marketed under a patent or original new drug application but for which generic equivalents now are available); and (2) all other, non-innovator, multiple source drugs. Rebates for the first category of drugs (i.e., drugs still under patent or those once covered by patents) have two components: a basic rebate and an additional rebate. Medicaid's basic rebate is determined by the larger of either a comparison of a drug's quarterly Average Manufacturer Price (AMP) to the best price for the same period, or a flat percentage (23.1%) of the drug's quarterly AMP. Drug manufacturers owe an additional rebate when their unit prices for individual products increase faster than inflation. For innovator multiple-source and all other non-innovator multiple source drugs, manufacturers' Medicaid rebates are 13% of AMP. Manufacturers sometimes market their patented products, or versions of their patented products, as over-the-counter (OTC) products, before their patents expire. When AMP for OTC sales are combined with AMP for patented product sales, it can reduce manufacturers' Medicaid rebate obligations for those products. The President's budget proposes to clarify that certain drugs still be considered brand drugs (i.e., innovator multiple source products) even though manufacturers have converted them to OTC products. The proposal also would remove the "original" from the definition of single source and innovator multiple source drugs. Moreover, this proposal would close other technical loopholes that might have enabled drug manufacturers to pay lower Medicaid drug rebates than otherwise would be required under Medicaid law. This proposal was not included in the President's FY2013 Budget. The ACA refined the definition of Medicaid multiple-source, generic, drugs. The ACA increased the number of drugs considered by the FDA as therapeutically and pharmacologically equivalent products from two to three which requires the Secretary to establish federal upper limits (FULs) for those products. Medicaid prescription drug FULs are used to limit reimbursement for certain multiple source drugs. Medicaid drug FULs are calculated based on the weighted average price of all drugs, brand, authorized generic, and generic drugs, in each product code. The President's budget would specify that the amounts paid for brand and authorized generics would be excluded from the Medicaid prescription drug FUL calculations. This proposal was not included in the President's FY2013 Budget. Outpatient prescription drugs are an optional Medicaid benefit, but all states cover prescription drugs for most beneficiary groups. Medicaid law requires prescription drug manufacturers who wish to sell their products to Medicaid agencies to enter into rebate agreements with the Secretary on behalf of states. Under these agreements, drug manufacturers pay a rebate to state Medicaid agencies for drugs purchased for Medicaid beneficiaries. Authorized generics are drugs that the original patent holder has licensed to a generic drug manufacturer to sell at a negotiated, reduced price. It is argued that authorized generics raise prices for consumers and reduce incentives for generic manufacturers to challenge single source drug patents. Including authorized generic sales with brand product sales has the effect of lowering a product's AMP, thereby decreasing manufacturers' Medicaid rebate obligations for those products (both the basic and the additional rebate might be decreased). The President's budget would change the calculation of Medicaid rebates for single source (i.e., brand name) products to exclude sales of authorized generic drugs. By removing authorized generic sales from the single source product's AMP calculation, the AMP would be higher thus increasing the rebate owed by manufacturers on brand name drugs. This proposal was not included in the President's FY2013 Budget. Under previous law, modifications to existing drugs—new dosages or formulations—generally were considered new products for purposes of reporting AMPs to CMS. As a result, when drug makers introduced new formulations of existing products they sometimes would have lower additional rebate obligations for these line-extension products. For example, manufacturers have developed extended-release formulations of existing products which, because they were considered new products under previous Medicaid drug rebate rules, were given new base period AMPs. The new base period AMPs for line-extension products would be higher than the original product's AMP. For line-extension products, manufacturers are less likely to owe additional rebates since the product's AMP would not have had time to have risen faster than the rate of inflation. ACA included a provision that required manufacturers to pay Medicaid rebates (both basic and additional rebates) on line-extension products as if they were the original product on which the line extension was based. The President's budget would make a technical correction to the ACA provision to amend the statute and correct rebate formula for line-extension drugs. This proposal was not included in the President's FY2013 Budget. As an alternative to traditional Medicaid benefits, states may enroll certain Medicaid beneficiaries into benchmark benefit plans that include four choices: (1) the standard Blue Cross/Blue Shield preferred provider plan under the Federal Employees Health Benefits Program, (2) a plan offered to state employees, (3) the largest commercial health maintenance organization in the state, and (4) other coverage appropriate to the targeted population, subject to approval of the Secretary. Additionally, states may opt for benchmark-equivalent coverage, which must have the same actuarial value as one of the benchmark plans and must also include certain services (e.g., inpatient care, physician services, prescribed drugs, among others). The ACA established a new Medicaid eligibility group for non-elderly, non-pregnant adults with income up to 133% of FPL beginning in 2014, or sooner at state option. Such individuals will be enrolled in benchmark plans rather than traditional Medicaid (with some exceptions for subgroups with special medical needs). The President's budget would allow benchmark-equivalent coverage for non-elderly, non-disabled adults with income that exceeds 133% of FPL. This proposal was included in the President's FY2013 Budget. States are required to continue Medicaid benefits for certain low-income families who would otherwise lose coverage because of changes in their income. This continuation of benefits is known as transitional medical assistance (TMA). Federal law permanently requires four months of TMA for families who lose Medicaid eligibility due to (1) increased child or spousal support collections, or (2) an increase in earned income or hours of employment. Congress expanded work-related TMA benefits in 1988, requiring states to provide at least six, and up to 12, months of TMA coverage to families losing Medicaid eligibility due to increased hours of work or income from employment, as well as to families who lose eligibility due to the loss of a time-limited earned income disregard (such disregards allow families to qualify for Medicaid at higher income levels for a set period of time). Congress created an additional work-related TMA option in ARRA. Under the ARRA option, states may choose to provide work-related TMA for a full 12-month period rather than two six-month periods. Congress has acted on numerous occasions to extend these expanded TMA requirements (which are outlined in Section 1925 of the Social Security Act) beyond their original sunset date of September 30, 1998. Most recently, the ATRA extended the authorization and funding of expanded TMA requirements through December 31, 2013. The President's budget would extend authorization and funding of expanded TMA requirements through December 31, 2014, and would adopt the Medicaid and CHIP Payment and Access Commission recommendation to permit states that adopt the ACA Medicaid expansion to opt out of TMA. This proposal is a modification of a legislative proposal from the President's FY2013 Budget. The HHS poverty guidelines (also referred to as the FPL) are a simplified version of the poverty thresholds that the Census Bureau uses to prepare its estimates of the number of individuals and families in poverty. The HHS poverty guidelines are published annually in the Federal Register (usually in January) and are used for administrative purposes such as determining financial eligibility for certain federal programs, including Medicaid. Federal law requires the Secretary to update the poverty guidelines at least annually by increasing the latest published Census Bureau poverty thresholds by the relevant percentage change in the CPI-U as calculated by the Bureau of Labor Statistics. After this inflation adjustment, the guidelines are rounded and adjusted to standardize the differences between family sizes. The 2013 poverty guidelines reflect actual price changes between calendar years 2011 and 2012. The President's budget would establish a permanent hold harmless provision to ensure that the HHS poverty guidelines are only adjusted when there is an increase in the CPI-U. The provision would impact social programs that rely on the poverty guidelines for administrative purposes (such as Medicaid, Supplemental Nutrition Assistance Program, Women, Infants and Children, etc.). This proposal was included in the President's FY2013 Budget. SSI, which provides means-tested cash benefits to aged, blind, and disabled persons, is generally only available to U.S. citizens and in some limited cases, certain legal permanent residents of the United States. However, certain classes of refugees; asylees; and other humanitarian immigrants, such as Cuban and Haitian entrants or Iraqi and Afghan special immigrants may receive SSI benefits for up to seven years after entering the United States or attaining refugee status. If, after the conclusion of this seven-year period, a refugee, asylee, or humanitarian immigrant has not attained citizenship or permanent resident status, then he or she is ineligible for any future SSI benefit payments. The President's budget proposes to extend the current seven-year period of SSI eligibility for refugees, asylees, and humanitarian immigrants to nine years through the end of FY2015. At the end of FY2015, the eligibility period for refugees, asylees, and humanitarian immigrants would return to seven years. This proposal was included in the President's FY2013 Budget. Currently, if a custodial parent has no private medical coverage at the time of her child's birth, the father can be held financially responsible for payment of the birth costs. Federal law (Section 1902(a)(25)(F) of the Social Security Act) permits states to use the Child Support Enforcement program to collect money from noncustodial fathers to reimburse the Medicaid agency for birth costs of children receiving Medicaid benefits. The President's budget proposes to prohibit the use of child support to repay Medicaid costs associated with giving birth—a practice retained by several states. This proposal was not included in the President's FY2013 Budget. Under current law, Medicare covers DME, including power wheelchairs and other power mobility devices (PMDs), when it is determined to be medically necessary. There is a history of fraud and abuse associated with DME and PMDs. PMDs are expensive items that are sometimes prescribed for beneficiaries when not medically necessary, or when a less expensive device, such as a cane or walker, would be more advisable. With an estimated 3-10% of Medicare spending lost to fraud, there has been increasing attention focused on stopping inappropriate or fraudulent Medicare claims. The ACA added a number of new program integrity tools, including a requirement that Medicare beneficiaries have a face-to-face examination with providers before DME may be prescribed (PMDs already required a face-to-face examination by the provider). In addition, CMS is focusing enhanced scrutiny on areas at high-risk for improper payments and fraud, which include areas of higher expenditure and utilization of services. Recently, CMS announced a demonstration that would require that PMDs in seven states receive prior authorization, before beneficiaries receive equipment. Medicare's FY2010 expenditures for PMDs in these states were 43% ($261 million) of the $606 million of Medicare's total PMD expenditures. The demonstration originally was to commence January 1, 2012 but was delayed until September 1, 2012. CMS revised the original scope, and the demonstration is slated to end August 31, 2015. The President's budget proposal would continue the Medicare PMD prior-authorization demonstration. This proposal was incl uded in the President's FY2013 b udget proposal . Participating Medicare providers and suppliers are required to submit updated enrollment information within specified time frames. CMS uses provider/supplier enrollment records to monitor provider status. Current provider records help to ensure that providers who could pose a higher risk of fraudulent activity receive greater scrutiny when applying and afterwards in submitting reimbursement claims. The President's budget would authorize the Secretary to impose civil penalties when providers and suppliers fail to update enrollment records on a timely basis. This proposal was incl uded in the President's FY2013 b udget proposal . Claims processing systems currently do not contain data that could be used to determine if a patient actually saw a practitioner or whether services billed on a claim were determined to be medically necessary. This information could be useful in determining whether a federal health care claim is valid prior to payment. In order to validate whether high-risk services were determined to be medically necessary and whether practitioners ordered those services, additional information would need to be required with the reimbursement claim. Many providers and health systems are implementing electronic health records (EHR) systems. Provisions in ARRA and the ACA provided financial incentives to providers to invest in EHR. Many EHR systems either are linked or have the capability to interact with clinical decision support systems and electronic claims processing. Electronic patient records may contain information on what services practitioners ordered, whereas claims processing systems only have information necessary to request reimbursement from payers, such as Medicare, Medicaid, or CHIP. As these EHR and claims processing systems become the standard of practice, it may be possible for program integrity systems to routinely validate that practitioners ordered specific treatments, tests, or other procedures at high risk for fraud. Current law does not specifically require the Secretary to develop or implement a system for validating practitioner orders for high-risk services. The President's budget would implement an electronic Medicare claims ordering system that could validate whether practitioners determined high-risk services were medically necessary and whether patients received those services. This proposal was incl uded in the President's FY2013 b udget proposal . There is no restriction or increased oversight when providers employ banking arrangements, such as sweep accounts and wire-transfers to off-shore accounts that might be at higher risk of fraudulent activities. In some cases, Medicare has been unable to recover improper payments because providers quickly transferred Medicare's payments to other jurisdictions. These providers were able to shield large Medicare payments from recovery actions because the improper payments were deposited into accounts where federal prosecutors had limited authority. The President's budget proposes to authorize the Secretary to require Medicare providers and suppliers to report the use of accounts that immediately transfer funds to sweep accounts in other jurisdictions where it might be difficult for Medicare to recover improper payments from these providers. This proposal was incl uded in the President's FY2013 b udget proposal . Over the last decade, the growth of imaging services provided under the Medicare program has exceeded those of most other Part B services. From 2000 through 2006, the Government Accountability Office (GAO) has found that "spending on advanced imaging, such as CT scans, MRIs, and nuclear medicine, rose substantially faster than other imaging services such as ultrasound, X-ray, and other standard imaging." More recently, another GAO study found that "[f]rom 2004 through 2010, the number of self-referred and non-self-referred advanced imaging services—magnetic resonance imaging (MRI) and computed tomography (CT) services—both increased, with the larger increase among self-referred services." These and other findings raise concerns about whether advanced imaging services are being used appropriately in the Medicare program. The President's Budget would adopt prior authorization for the most expensive imaging services. This proposal was incl uded in the President's FY2013 b udget proposal . MFCUs are separate state government entities certified to investigate and prosecute health care providers suspected of defrauding the state's Medicaid program. MFCUs also have authority to review nursing home residents' neglect or abuse complaints and patient abuse complaints in other health care facilities receiving Medicaid payments. MFCUs may review complaints alleging misappropriation of patient funds. MFCUs may not receive federal matching funds for patient abuse or neglect investigations that occur in non-institutional settings. MFCUs are responsible for investigating fraud in administration of the state Medicaid program itself and in collecting overpayments they identify in the course of their work. MFCUs have authority, with the Inspector General's approval, to investigate fraud in other federally-funded health care programs, such as Medicare or CHIP, that are primarily related to Medicaid. MFCUs are prohibited from investigating beneficiary fraud, unless it is part of a conspiracy with a provider. In 2011, the Office of the Inspector General (OIG) issued proposed regulations that would permit MFCUs to receive federal financial participation (FFP, i.e., federal Medicaid matching funds) for "data mining," which is computer screening of Medicaid claims to help identify potentially fraudulent activity. MFCUs are funded partially through a grant from the HHS OIG (75%) and partially with matching state funds (25%). The President's budget would expand the range of care settings where MFCUs would have authority to receive FFP for investigation of patient complaints. These settings might include home- and community-based services and providers. This proposal was not incl uded in the President's FY2013 b udget proposal . Under third-party liability (TPL) rules, Medicaid is the payer of last resort. If another insurer or program (e.g., private health insurance, Medicare, employer-sponsored health insurance, settlements from a liability insurer, workers' compensation, long-term care insurance, and other state and federal programs) has the responsibility to pay for medical costs incurred by Medicaid-eligible individuals, generally that entity is required to pay all or part of the bill before Medicaid makes any payment. Third parties are not responsible for reimbursing Medicaid for services not covered under Medicaid state plans. States are required to determine if third parties exist, and to ensure that providers bill the third-party first, before billing Medicaid. Whenever states pay Medicaid claims and then discover that a third party exists, they are required to recover overpayments from the third parties. The DRA strengthens states' TPL authority to identify and recover Medicaid payments for which third parties were liable by clarifying what entities are considered third parties and requiring states to pass laws that require insurers to comply with Medicaid TPL rules. The President's budget would expand Medicaid's TPL authority by allowing states to (1) delay payment of costs for prenatal and preventive pediatric costs/expenditures when third parties are responsible; (2) collect medical child support from non-custodial parents when these parents have health insurance; and (3) recover costs from beneficiary liability settlements. This proposal was incl uded in the President's FY2013 b udget proposal . Medicaid statute gives states broad authority to implement a variety of prescription drug monitoring activities; not all states have adopted such activities. A number of states have implemented voluntary or mandatory "lock-in" programs that require Medicaid beneficiaries who use prescription drugs at levels above certain medically necessary utilization guidelines, to obtain services from designated providers only (i.e., one pharmacy or a specific primary care provider). Other states have linked Medicaid data with statewide prescription drug monitoring programs. In addition to Medicaid authority to impose restrictions, some states have passed laws to increase penalties on individuals who participate in diverting Medicaid drugs from medically necessary uses to drug abuse or fraudulent activities. The President's proposal would require states to monitor high risk Medicaid drug billing to identify and remediate prescribing and utilization patterns that could indicate potential abuse or excessive prescription drug utilization. States would have discretion to tailor their programs, for example, by choosing one or more drug classes subject to overuse or abuse. States would be required to develop or review and update their high-utilization remediation plan to reduce excessive utilization and preventable abuse episodes and improve Medicaid integrity, but without reducing beneficiary quality of care. This proposal was incl uded in the President's FY2013 b udget proposal . Drug manufacturers that want to sell their products to Medicaid programs must agree to pay rebates for drugs provided to Medicaid beneficiaries. Under the terms of the Medicaid drug rebate program, manufacturers must make their entire product line available, and Medicaid must cover all of a manufacturer's products, except certain drugs or drug classes identified in law on an "excluded drug list." Rebates paid by manufacturers to Medicaid are calculated based on each manufacturer's AMP for a drug. AMP is defined in law. Studies and legal settlements between drug manufacturers and state Medicaid programs have shown some irregularities in how manufacturers interpreted CMS guidance on what sales transactions should be included in AMP. States are permitted to exclude coverage of drugs on the excluded drug list, but they also may cover these drugs. Manufacturers sometimes include sales transactions for excluded drugs in their calculation of AMP. By including these excluded drug sales in the calculation of AMP, rebates owed to states can be reduced. The President's budget proposal would require manufacturers that improperly reported drugs (that Medicaid does not cover) in their AMP calculations to fully compensate states for the drug rebates they would have received if the manufacturer had properly excluded drugs not covered by Medicaid. This proposal was incl uded in the President's FY2013 b udget proposal . CMS has authority to survey drug manufacturers, and HHS OIG has authority to audit drug manufacturers. CMS and OIG monitor Medicaid prescription drug prices submitted by manufacturers and the rebates these companies pay to the Medicaid program, which are shared between states and the federal government. CMS conducts automated data checks on the drug prices reported by manufacturers and notifies manufacturers when it identifies discrepancies or errors. There is substantial variation in the methodologies and assumptions drug manufacturers follow in reporting drug price data to CMS. Even though drug manufacturers' methodologies and assumptions for reporting drug prices can have a great impact on rebates, CMS does not generally verify that manufacturers' documentation supports their prices and does not routinely check that their price determinations are consistent with the Medicaid statute, regulations, or the rebate agreement. Studies have found and False Claims Act settlements have shown irregularities in manufacturers' drug price reporting. The ACA made a number of changes to Medicaid prescription drug pricing policies, including provisions to create more uniform manufacturer drug reporting standards. The President's budget would require, to the extent they are cost effective, that regular audits and surveys of drug manufacturers be conducted to evaluate manufacturers' compliance with drug rebate agreements, the Medicaid statute, and regulations. This proposal was incl uded in the President's FY2013 b udget proposal. Under federal law and regulation, outpatient prescription drugs may be covered by Medicaid if the drugs were approved for safety and effectiveness by the FDA under the Federal Food Drug and Cosmetics Act (P.L. 75-717). The FDA approves drugs when a manufacturer obtains a New Drug Approval, generally for sole source brand name drugs, or where a manufacturer obtains an ANDA, generally for multiple source, generic drugs. Federal regulations limit Medicaid reimbursement for outpatient drugs prescribed off label to those indications where a drug is listed in one or more of several named compendia, which are reference documents that list how most drugs could be used both on-label and off-label. Even though current law requires drug manufacturers to list their products with the FDA, not all drugs on the market are properly listed. CMS published a Notice of Proposed Rule Making that proposed a number of regulatory changes that were authorized by the ACA. The President's budget would require that drug manufacturers list their products electronically with the FDA in order to be covered and reimbursed by Medicaid. This proposal also would align Medicaid drug coverage requirements with Medicare's requirements. This proposal was incl uded in the President's FY2013 b udget proposal . Drug manufacturers that want to sell products to state Medicaid programs must agree to offer rebates to states, which are shared with the federal government. As part of the Medicaid rebate agreement, drug manufacturers are required to report accurate drug price information to CMS so it can compute or verify drug rebates. CMS guidance permits manufacturers to make "reasonable assumptions" consistent with the "intent" of the law, regulations, and rebate agreement. Thus, manufacturers determine which sales transactions to include when reporting prices to CMS. Provisions in the ACA amended the Medicaid drug rebate statute, and CMS published a proposal that would implement ACA's Medicaid drug rebate changes. Individuals (including an organization, agency, or other entity) who knowingly make or cause to be made false statements, omissions, or misrepresentations of material fact in applications, bids, or contracts could be subject to fines, program exclusions, and/or criminal penalties. However, the civil monetary and criminal provisions applicable to all federal health care programs are not specifically designed to address Medicaid drug rebate reporting violations. The President's budget proposed to increase penalties on drug manufacturers that knowingly report false information under Medicaid drug rebate pricing agreements that are used to calculate Medicaid rebates. This proposal was incl uded in the President's FY2013 b udget proposal . Medicaid and CHIP are jointly funded by the federal government and the states. Federal reimbursement for the cost of Medicaid services is provided on an open-ended basis to states that meet federal program requirements. The federal government's share of most Medicaid expenditures is called the federal medical assistance percentage (FMAP) rate. However, exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, services, and administration. Federal matching funds for CHIP are provided to states according to an enhanced FMAP (E-FMAP) rate, which is calculated by reducing the state share under the regular FMAP rate by 30%. The E-FMAP is provided for both services and administration under CHIP, but federal CHIP matching funds are capped on a state-by-state basis according to annual allotments. In general, federal regulations prohibit states from using other federal sources to fund the state share of Medicaid, unless authorized by law. The President's budget would codify the principle that states are prohibited from using federal funds to pay the state share of Medicaid or CHIP, unless specific exceptions were authorized in law. This proposal was incl uded in the President's FY2013 b udget proposal . The Improper Payments Information Act of 2002 (IPIA, P.L. 107-300 ) required federal agencies to annually review the programs they oversee that may be susceptible to erroneous payments, in order to estimate improper payments and report the estimates to Congress before March 31 of the following year. In addition, if estimated improper payments exceeded $10 million per year, IPIA required federal agencies to identify ways to reduce erroneous payments. In response to IPIA, CMS implemented the Medicaid Payment Error Rate Measurement (PERM), which estimates improper Medicaid and CHIP payments. In addition to PERM, federal Medicaid law requires states to assess Medicaid eligibility and quality control (MEQC). MEQC requires each state to calculate and report erroneous Medicaid payment and eligibility determination rates. States have discretion to develop and implement their own MEQC methodologies. Under CMS PERM regulations, states now have the option to use PERM to fulfill the MEQC requirement. The President's budget would authorize the Secretary to create a streamlined audit program that consolidated the MEQC and PERM programs. This proposal was incl uded in the President's FY2013 b udget proposal . RACs receive a percentage of any improper payments they recover. Congress initially authorized RACs as limited demonstrations for Medicare Parts A and B fee-for-service, but expanded the program nationally. Then, under the ACA, Congress authorized further RAC expansion to Medicare Parts C and D and Medicaid. Total RAC fee-for-service corrections for FY2010 through the first quarter of FY2013, including overpayment collections and underpayments returned, were $4.2 billion, of which $3.9 billion were for overpayment collections and $302.6 million were returned underpayments. Under current law, RAC recoupments, net of the percentage payments to contractors and other administrative expenses are returned to the Medicare Trust Fund. The President's budget would authorize CMS to retain a portion of RAC recoveries from Medicare and Medicaid to fund corrective actions, such as new processing edits and provider education and training, to prevent future improper payments. This proposal was incl uded in the President's FY2013 b udget proposal . HHS OIG has authority to exclude health care providers (individuals and entities) from participation in federal health care programs. HHS OIG exclusion authority is mandatory in some circumstances and optional in others. The ACA extended HHS OIG authority to include individuals or entities that make false statements or misrepresentations on federal health care program enrollment applications, including explicit applicability to MA plans, PDPs, and these organization's providers and suppliers. The President's budget would expand HHS OIG authority to exclude individuals and entities from federal health programs if they are affiliated with sanctioned entities. The proposal would eliminate a loophole that allows the officers, managing employees, or owners of sanctioned entities to evade exclusion from federal health programs by resigning their positions or divesting their ownership interests. This proposal's exclusion authority also would be extended to entities affiliated with sanctioned entities. This proposal was incl uded in the President's FY2013 b udget proposal . There are no specific penalties for selling, trading, bartering, or otherwise distributing beneficiary or identification numbers or billing privileges. Beneficiary identification numbers and provider/supplier billing privileges could be used to submit fraudulent claims to Medicare, Medicaid, or the CHIP programs. The President's budget proposal would strengthen penalties for knowingly distributing Medicare, Medicaid, or CHIP beneficiaries' identification or billing privileges. This proposal was incl uded in the President's FY2013 b udget proposal . Medicare and Medicaid limit or preclude federal coverage of health services for individuals who are in custody or incarcerated. In Medicare, payment for medical services delivered to beneficiaries who are in custody (for example, on parole, probation, bail, or incarcerated) can only be made if certain conditions are met. In Medicaid, in general, no federal financial participation (i.e., federal Medicaid matching dollars) are available for medical services delivered to inmates of public institutions. Inmates of non-federal correctional facilities are wards of the state. Thus, states are responsible for their care, not the federal government. Specifically, while serving time for a criminal offense or confined involuntarily in state or federal prisons, jails, detention facilities or other penal facilities, no federal matching funds are available to pay for Medicaid services delivered to that inmate. However, the federal statute provides for an exception to the prohibition on federal matching funds when an inmate becomes an inpatient in a medical facility (e.g., hospital) and the inmate is otherwise eligible for Medicaid. The President's budget includes a multi-agency proposal increasing federal and state access to the Prisoner Update Processing System, which is the Social Security Administration's database containing federal, state, and local prisoner data. This proposal also expands the type of information prisons are required to report to SSA, such as release dates, so that programs responsible for providing federal or state benefits can prevent improper payments to or on behalf of incarcerated individuals. This proposal was not incl uded in the President's FY2013 b udget proposal . Under section 1332 of the ACA, a state may apply to the Secretaries of HHS and Treasury for waivers of certain ACA requirements with respect to health insurance coverage in that state for plan years beginning on or after January 1, 2017. A state may apply for a "state innovation waiver" for all or any of the following ACA requirements: Title I, subtitle D, Part I (relating to the establishment of qualified health plans); Title I, subtitle D, Part II (relating to consumer choice and insurance competition through health benefit exchanges); Section 1402 (relating to reduced cost sharing for individuals enrolling in qualified health plans); Section 36B of the Internal Revenue Code (relating to refundable tax credits for coverage under a qualified health plan offered through an exchange); 4980H of the Internal Revenue Code (relating to shared responsibility for employers regarding health coverage); And 5000A of the Internal Revenue Code (relating to the requirement to maintain minimum essential coverage). The Secretaries have the authority to grant a request for one or more state innovation waivers if the Secretaries determine that the state has legislation in place that creates a system or plan that will provide health insurance coverage that is at least as comprehensive and affordable as coverage provided under the ACA; will provide that coverage to a comparable number of its residents as provisions of the ACA would provide; and will not increase the federal deficit. The President's budget would allow states to apply for state innovation waivers beginning in 2014, three years earlier than is currently permitted. This proposal was incl uded in the President's FY2013 b udget proposal . CMS's Program Management account funds the majority of Medicare's administrative and oversight functions, and Program Management activities include both discretionary and mandatory appropriations. Discretionary Program Management includes the following five account categories: program operations, federal administration, survey and certification, research, and state high-risk pools. The largest Program Management expenditure category is program operations, which funds a range of contractor and information technology activities necessary to administer Medicare, Medicaid, CHIP, implementation of new private health insurance protections created by the ACA, and additional activities required by legislation. Mandatory program management appropriations ($279 million) were established by the following four laws: ACA, ARRA, MIPPA, and ATRA. In addition, the President's FY2014 budget for Program Management includes reimbursable administration ($951 million) and provisions for new legislative initiatives ($410 million). The President's budget would increase mandatory funding for Program Management by $400 million to fund implementation of the mandatory health care proposals in the President's budget. The Administration estimated that the $400 million expenditure for this proposal over the next few years would decrease federal expenditures by approximately $393 billion over ten years. This proposal was not incl uded in the President's FY2013 b udget proposal . Federal and state governments share responsibility for ensuring that many Medicare providers and suppliers provide quality care and meet certain safety standards. The federal government sets quality and safety requirements that these entities must meet to participate in the Medicare and Medicaid programs. In general, CMS contracts with organizations (often state survey agencies) to conduct periodic inspections and investigate quality or safety complaints. Survey organizations follow federal regulations in conducting inspections or investigations; though some survey activities and policies are set by the surveyors, state agencies, or contractors, including hiring and retaining a surveyor workforce, training surveyors, reviewing deficiency citations, and managing regulatory interactions with the industry and public. The Medicare and/or Medicaid programs, through state survey agencies, contractors, or other entities, surveys and certifies at least the following providers and suppliers: Long-term care facilities, Home health agencies, Accredited and non-accredited hospitals, Organ transplant facilities, Dialysis facilities, Ambulatory surgical centers, Community mental health centers, Hospices, and Outpatient physical therapy, outpatient rehabilitation, rural health clinics, and portable X-Ray facilities. The number of participating facilities has continued to grow increasing by 4.3% from FY2012 to FY2014, from 55,800 to 58,200. CMS estimated that in FY2014 survey and certification entities will complete over 24,000 initial surveys and re-certifications and investigate over 55,000 complaints. All facility providers must undergo initial survey and certification inspections when they enroll as providers in Medicare or Medicaid, and on a regular basis thereafter. CMS intends to add inspection requirements for community mental health centers in FY2014. The President's budget includes two proposals for new user fees: a Survey and Certification Revisit Fee and a fee to share Medicare data with qualified entities. The Revisit Fee would provide CMS with additional resources to revisit poor performers, while also creating financial incentives for organizations to ensure continuing quality of care. The Revisit Fee would be phased in over a number of years. Fees for expanded data sharing would allow CMS to broaden qualified entities' use of Medicare data for activities such as fraud prevention, care coordination practice improvement, and other value-added analyses. This proposal was not incl uded in the President's FY2013 b udget proposal . Under current law, two provisions authorize specified quality and performance measurement duties for a contracted consensus-based entity. Section 183 of MIPPA requires the Secretary to have a contract with a consensus-based entity (e.g., National Quality Forum) to carry out specified duties related to performance improvement and measurement. These duties include, among others, priority setting; measure endorsement; measure maintenance; convening multi-stakeholder groups to provide input on the selection of quality measures and national priorities; and annual reporting to Congress. Section 3014 of the ACA requires the Secretary to establish a pre-rulemaking process, to include a series of six steps to select quality measures, including gathering multi-stakeholder input; making measures under consideration available to the public; transmission to, and consideration by, the Secretary of the input of multi-stakeholder groups; and the publication of the rationale for the use of any quality measure in the Federal Register; among others. The Secretary must establish a process for disseminating the selected quality measures and periodically review and determine whether to maintain the use of a measure or to phase it out. The President's budget would extend funding for both of the provisions authorizing specified quality and performance measurement duties for a contracted consensus-based entity. The President's budget would fund MIPPA Section 183 at $10 million per year for each of the fiscal years FY2014 through FY2017. It would also fund ACA Section 3014 at $20 million per year for each of the fiscal years FY2015 through FY2017. This proposal was not incl uded in the President's FY2013 b udget proposal . Usually, the President's budget request is the first step in the federal budget process. However, this year, both the House and the Senate agreed to budget resolutions prior to the President submitting his budget request. As shown in Figure 1 , the President's budget for Function 550 (which includes Medicaid, CHIP, and the health insurance exchanges among a number of other health care programs and activities) varies from both the House and Senate budget resolutions, but as shown in Figure 2 , the President's budget for Function 570 (which consists of the Medicare program) is similar to funding levels in the House and Senate budget resolutions. The following provides a brief description of the policies included in the House budget resolution and the Senate budget resolution, as compared with the President's FY2014 budget. On March 12, 2013, House Budget Committee Chairman Paul Ryan released the chairman's mark of the FY2014 House budget resolution together with his report entitled The Path to Prosperity: A Responsible Balanced Budget , which outlines his budgetary objectives. The House Budget Committee considered and amended the chairman's mark on March 13, 2013, and voted to report the budget resolution to the full House. H.Con.Res. 25 was introduced in the House on March 15, 2013 and was accompanied by the committee report ( H.Rept. 113-17 ). H.Con.Res. 25 was agreed to by the House on March 21, 2013 by a vote of 221 to 207. Chairman Ryan's budget proposal, as outlined in his report and in the committee report, suggests short-term and long-term changes to federal health care programs including Medicare, Medicaid, and the health insurance exchanges established by the ACA. Within the 10-year budget window (FY2014-FY2023), the House budget resolution assumes that certain ACA provisions would be repealed, including those that expand Medicaid coverage to the non-elderly with incomes up to 133% of FPL, and those provisions that establish health insurance exchanges. The budget proposal also suggests restructuring Medicaid from an individual entitlement program to a block grant program. Additionally, the House resolution assumes a fix to the Sustainable Growth Formula (SGR) used to establish Medicare physician rates, and a repeal of the IPAB. According to the House Budget Committee estimates, the House resolution would reduce health care spending by $2.7 trillion over the 10-year budget window in comparison to current policies. Beyond the 10-year budget window, beginning in FY2024, the budget proposal assumes an increase in the age of eligibility for Medicare and the conversion of Medicare to a fixed federal contribution program. On March 13, 2013, Senate Budget Committee Chairman Patty Murray released a report outlining the FY2014 Senate budget resolution entitled Foundation for Growth: Restoring the Promise of American Opportunity . The Senate Budget Committee considered and passed the budget resolution on March 14, 2013. S.Con.Res. 8 was introduced in the Senate on March 15, 2013 and was accompanied by the committee print (S. Prt. 113-12). The Senate passed S.Con.Res. 8 on March 23, 2013 with a vote of 50-49. In contrast to the House budget resolution, the Senate budget resolution maintains all the changes included in the ACA, including the ACA Medicaid expansion and the health insurance exchanges. According to Senate Budget Committee estimates, the Senate resolution includes $275 billion in health care savings, which are derived from encouraging health care delivery system reforms (i.e., bundled payments or value-based reimbursement programs) and reducing fraud and abuse. In addition, the Senate budget resolution assumes the costs of a permanent fix to the SGR physician payment system and eliminates the Medicare sequestration cuts. Figure 1 and Figure 2 compares the outlays provided for Function 550 and Function 570 in the President's budget, the House resolution, and the Senate resolution. Function 550 includes most direct health care services programs, most notably Medicaid. Other health programs in this function fund anti-bioterrorism activities, national biomedical research, activities to protect the health of the general population and workers in their places of employment, health services for under-served populations, and training for the health care workforce. Some of the HHS agencies in this function include the National Institutes of Health, Centers for Disease Control and Prevention, Health Resources and Services Administration, and the Food and Drug Administration. The major mandatory programs in this function are Medicaid, CHIP, federal and retirees' health benefits, and health care for Medicare-eligible military retirees. A vast majority of the spending in Function 550 is attributable to Medicaid. In FY2012, Medicaid accounted for 72.3% of the Function 550 expenditures. As shown in Figure 1 , over the next 10 years, the funding for Function 550 varies by budget plan with the House resolution providing significantly less funding for Function 550 when compared to the President's budget and the Senate resolution. This difference is largely attributable to the House resolution including reductions to Medicaid in the amount of $1.4 trillion over the 10-year budget window, which includes $636 billion in savings from repealing the ACA Medicaid expansion. The Senate resolution did not specify any Medicaid legislative proposals, while the President's budget includes a number of legislative proposals impacting the Medicaid program (see the " Medicaid Legislative Proposals " and " Program Integrity Legislative Proposals " sections of this report). Function 570 consists of the Medicare program, which pays for covered health care services for individuals age 65 or older and certain persons with disabilities. Nearly 99% of spending in this function is mandatory, and almost all of the mandatory spending consists of payments for Medicare benefits. Congress provides an annual appropriation for the costs of administering and monitoring the Medicare program . Figure 2 shows estimated outlays for Medicare, from FY2014 through FY2023, under the President's budget, the House resolution, and the Senate resolution. The figure shows relatively little difference between the budgets and the funding for Medicare, with the Senate resolution providing slightly more funding than the others, particularly in the later years. Both the President's budget and the Senate resolution assume that the SGR physician payment system would be fixed, and that the 2% reduction in Medicare benefit spending under sequestration would not take place; these assumptions were incorporated into their respective Medicare spending baselines. The President's budget also includes a number of specific legislative proposals (see the " Medicare Legislative Proposals " and " Medicaid Legislative Proposals " sections of this report) that the Administration estimates will save a net of $371 billion compared to the baseline over the next ten years. The Senate resolution did not include specific cost-reduction proposals, but the Senate resolution includes savings of $265 billion over the next ten years through delivery system changes, increased efforts to reduce fraud and abuse, and greater engagement across the health care system. The House budget resolution assumes a fix to the SGR physician payment system plus a repeal of the IPAB, however the resolution did not indicate how the cost increases associated with these two proposals were reflected in their Medicare spending baseline estimates. While the House resolution assumes a slight decrease in Medicare spending ($129 billion) over the next ten years compared to current CBO baseline projections (which is based on current law and assumes future reductions in physician payments and continuation of the 2% Medicare spending reductions under sequestration), the resolution did not provide specifics on how spending would be reduced to these lower levels, nor whether the 2% benefit reductions under sequestration would continue.
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Federal law requires the President to submit an annual budget to Congress no later than the first Monday in February. The budget informs Congress of the President's overall federal fiscal policy based on proposed spending levels, revenues, and deficit (or surplus) levels. The budget request lays out the President's relative priorities for federal programs, such as how much should be spent on defense, education, health, and other federal programs. The President's budget may also include legislative proposals for spending and tax policy changes. While the President is not required to propose legislative changes for those parts of the budget that are governed by permanent law (i.e., mandatory spending), such changes are generally included in the budget. President Obama submitted his FY2014 budget to Congress on April 10, 2013. The Centers for Medicare & Medicaid Services (CMS) is the division of the Department of Health and Human Services (HHS) that is responsible for administering Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP), among other activities. CMS is the largest purchaser of health care in the United States, with expenditures from CMS programs accounting for roughly one-third of the nation's health expenditures. In FY2014, it is estimated that one-in-three Americans will be provided coverage through Medicare, Medicaid, and CHIP. CMS is also responsible for implementing many of the private health insurance provisions in the Patient Protection and Affordable Care Act (ACA, P.L. 111-148). The CMS budget includes a mixture of both mandatory and discretionary spending. However, the vast majority of the CMS budget is mandatory spending, such as Medicare benefits and grants to states for Medicaid. For budgetary purposes, CMS is divided into the following sections: Medicare, Medicaid, CHIP, program integrity, state grants and demonstrations, private health insurance protections and programs, the Center for Medicare and Medicaid Innovation, and program management. The President's FY2014 budget contains a number of legislative proposals that would affect the CMS budget. Some are program expansions, and others are designed to reduce federal spending. The President's proposed budget for CMS would be $854.3 billion in net mandatory and discretionary outlays for FY2014. This would be an increase of $60.2 billion, or 7.6%, over the net outlays for FY2013. This estimate includes the cost of the Medicare physician payment adjustment ($15.4 billion), the estimated savings of the legislative proposals (-$5.8 billion), and the estimated savings from program integrity investments (-$0.1 billion). This report summarizes the President's budget estimates for each section of the CMS budget. Then, for each legislative proposal included in the President's budget, this report provides a description of current law and the President's proposal. The explanations of the President's legislative proposals are grouped by the following program areas: Medicare, Medicaid, program integrity, private health insurance, and program management. A table summarizing the estimated costs or savings for each legislative proposal is at the end of each of these sections.
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RS21234 -- The Bill Emerson Humanitarian Trust: Background and Current Issues Updated April 17, 2003 The Africa Seeds of Hope Act of 1998 amended Title III of the Agricultural Act of 1980 by replacing the Food Security Commodity Reserve (FSCR) and itspredecessor, the Food Security Wheat Reserve (FSWR), with the Bill Emerson Trust. (1) The purpose of the Trust is "solely to meet emergency humanitarianfood needs in developing countries..."(Section 302, 7 U.S.C. 1736f-1). The legislation authorizes the Trust to holdup to 4 million metric tons of wheat, corn,sorghum and rice. Taking into account previously unreplenished releases from the Trust and 4 recent releases ofcommodities for use in Africa and Iraq,approximately 1.1 million metric tons of wheat remain in the Trust. The Africa Seeds of Hope Act allows the Trustto hold funds as well as commodities, butno funds have ever been held. Uses. The statute authorizes two uses for the Trust. First, the Secretary of Agriculture has authority torelease up to 500,000 metric tons of eligible commodities for urgent humanitarian relief in the case of unanticipatedfood needs in developing countries and torelease an additional 500,000 metric tons of eligible commodities that could have been, but were not, released inprevious years. Second, the Secretary hasauthority to release commodities from the reserve when she determines that U.S. domestic supplies are so limitedthat commodities cannot be made availablefor regular programming in P.L. 480 foreign food aid programs. (2) Exchange of Commodities. A commodity in the Trust may be exchanged for another U.S. commodity ofequal value. In FY2002, wheat released from the Trust was sold and the proceeds used to purchase corn, vegetableoil, and dry beans for distribution insouthern Africa. Reimbursement. Commodities in the Emerson Trust are held as assets of the Commodity Credit Corporation(CCC). (3) When commodities are released from theTrust, the CCC incurs a loss (the value of the assets it no longer holds.) The Trust is subsequentlyreimbursed for the commodities released with a transfer of funds from P.L. 480. The 1998 Act provides that theCCC be reimbursed by P.L. 480 for thecommodity costs of a release for unanticipated needs based on the lesser of 1) the actual costs incurred or 2) theexport market price as determined by theSecretary at the time of the release. Reimbursement to the CCC for the cost of ocean freight and other non-commodity costs occurs through the regular USDAappropriations process in which USDA requests budget authority to cover these costs in annual budget submissions. Reimbursement for a release ofcommodities for unanticipated needs can be made from past, current, or subsequent unobligated P.L. 480 funds. Commodities released for use in P.L. 480programs when supplies are short are paid for from current fiscal year P.L. 480 funds. Replenishment. Current law does not require replenishment of commodities released from the Trust, butdoes provide for ways to do it. The Secretary of Agriculture may acquire commodities through purchases fromproducers or in the market, if the Secretarydetermines that such purchases will not unduly disrupt the market. Funds for such purchases must be authorizedin an appropriation act. The Secretary mayalso replenish the Trust by designation to the Trust of commodities already owned by the CCC. Origins of the Trust. During the 1970's, Congress debated the creation of either a permanentgovernment-held stock of grain or a fund to promote global food security. Advocates of a grain reserve argued thatit would provide a buffer to the vagaries ofagricultural production, ensuring grain availability, regardless of domestic supply conditions, in case of urgent need. They argued, in addition, that a reservewould serve as a surplus disposal mechanism in times of excess production, thereby strengthening farm prices. Supporters of a fund, on the other hand,contended that dollar resources would provide more flexibility in meeting urgent needs, and that factors other thanfood shortages, such as transportation or highcommodity costs, were more likely to impede the delivery of food to needy people in emergency situations. Areserve of funds also would not have thepotential price-depressing effect that a release of commodities could have. Events overtook this debate in 1979 when the Soviet Union invaded Afghanistan, prompting the CarterAdministration to embargo all U.S. grain shipments tothe USSR. To prevent loss of revenue to exporters and adverse impacts on domestic commodity prices which mighthave resulted from the embargo, the CCCoffered to purchase from U.S. suppliers grain previously committed to the Soviet Union. Through this process theCCC acquired 4 million metric tons ofwheat, with which to establish a grain reserve. The Food Security Wheat Reserve Act of 1980 (Title III of P.L.96-494 ) codified this move as a means of guaranteeing a supply of wheat in times of tight supplies or unanticipated need. The Act allowed wheat from thereserve to be used in the P.L. 480 program ifwheat were unavailable through normal channels. The 1980 Act also authorized the release of up to 300,000 metrictons to meet urgent humanitarian need inforeign countries without consideration of domestic supply conditions or additional congressional appropriations. The 1996 farm bill ( P.L. 104-127 ) transformed the wheat reserve into the FSCR which was still a reserve of upto 4 million metric tons, but included corn,sorghum, and rice in the reserve along with wheat. The criteria which would trigger release of stocks from theFSCR were the same as for the predecessorwheat reserve -- unanticipated urgent humanitarian need or short domestic supplies. The 1996 legislation increasedfrom 300,000 tons to 500,000 tons theamount of commodities that could be released through the P.L. 480 Title II donations program each fiscal year tomeet unanticipated needs without regard to thedomestic supply situation. Further, the 1996 Act allowed the release of up to an additional 500,000 tons of eligiblecommodities that could have been released,but were not, in previous years for use under Title II of P.L. 480 to provide urgent humanitarian relief.Reimbursement requirements remained the same as in theearlier statute. While the 1980 Act required that the reserve be replenished 18 months after stocks had beenreleased, the 1996 Act omitted a deadline by whichthe reserve must be replenished. The 2002 farm bill ( P.L. 107-171 ) contains the current legislative authority for the Emerson Trust as established in the 1998 Africa Seeds of Hope Act. P.L.107-171 extends the Trust through FY2007. Use of the Reserve: 1980-1996. Wheat from the reserve was used on six occasions from its establishment in1980 through fiscal year 1996 -- three times to meet P.L. 480 commitments when supplies were short and threetimes to meet unanticipated emergency needs.(See Table 1.) Although corn, sorghum, and rice are eligible commodities for the reserve (since 1996), only wheathas been held. In 1984, President Reagan ordered the release of 300,000 tons of wheat to meet emergency food needs in Ethiopia and other Sub-Saharan African countriesduring the famine of the mid-1980's. In October 1988, 1.5 million tons were authorized to meet P.L. 480programming requirements because the U.S. droughtof 1988 had reduced commercial wheat supplies. Supply conditions continued to worsen through that fiscal yearand, in September 1989, President Bushauthorized the release of an additional 2 million metric tons of wheat to satisfy P.L. 480 program commitments. In May 1991, 300,000 tons of wheat from thereserve were made available to meet disaster relief needs expected to be large as a result of the Iraqi Kurdish refugeecrisis and ongoing food emergencies inSub-Saharan Africa. However, a total of 59,000 metric tons was programmed for use. On July 19, 1994, PresidentClinton authorized the release of up to300,000 tons of wheat for emergency assistance to the Caucasus region of the former Soviet Union. On January22, 1996, the President delegated to theSecretary of Agriculture authority to release up to 1.5 million tons of wheat from the reserve for use in the P.L. 480program because of the limited availabilityof wheat in commercial markets. Of the amount authorized, a total of 1,280,779 tons was programmed for use inP.L.480. Table 1. Using the FSWR: A Brief History The "Short Supply" Determination. Section 401 of P.L. 480 provides that the Secretary of Agriculture makea determination of the agricultural commodities and quantities available for use in food aid programs. The sectionfurther provides that no commodity shall bemade available to P.L. 480 programs if so doing would reduce the domestic supply of the commodity below whatis needed to meet domestic requirements andto provide adequate carryover. As an example, USDA, in FY1996, estimated that 1.8 million metric tons of wheat and wheat products would be available for P.L. 480 from domestic supplies. However as the marketing year progressed, USDA revised its initial determination, based on its assessment that thesize of the wheat crop would be lower thanexpected and that commercial export demand would be strong. In January of 1996, wheat prices rose to $4.83 perbushel. Stocks for the 1996 wheat marketingyear were estimated at 452 million bushels, with a stocks-to-use ratio of just under 20% percent. The USDA'srevised supply and demand assessment concludedthat only 300,000 metric tons of wheat would be available from domestic supplies and led the Secretary to requestpresidential authority to release up to 1.5million metric tons of wheat from the FSWR during FY1996 for P.L. 480 programming. Use of the Trust: 2002 and 2003. The Secretary of Agriculture announced releases from the Trust of 275,000tons of wheat on June 10, 2002 and 300,000 tons of wheat on August 28, 2002. The wheat from the reserve wasexchanged for an equal value of corn, beansand vegetable oil for use in humanitarian relief in southern Africa. In FY2003, the Secretary has announcedreleases of 200,000 tons for emergency food needsin the Horn of Africa and 600,000 tons for emergency needs in Iraq. Of the 600,000 tons released for Iraq, 200,000will be made immediately available and400,000 tons will be made available as needed. A portion of the wheat released was to have been exchanged forrice. However, concerns about the potentialprice-depressing effect of selling wheat and a provision of the wartime supplemental appropriations act prohibitingexchanges in FY2003 precluded such sales.With these announced releases, an estimated 1.1 million metric tons remain in the Trust. Experience with Reimbursement and Replenishment. The first release from the Trust in FY1985 of 300,000metric tons of wheat to meet unanticipated need was reimbursed with $45 million of unobligated FY1987 P.L. 480Title I and Title II appropriations. Reimbursement was based on the export price of wheat at the time the commodities were released, that is inFY1985. In FY1991, the reserve was used again tomeet urgent humanitarian need and was reimbursed from Title I appropriations unobligated at the end of FY1991. The reserve was tapped again in FY1994 tomeet unanticipated need. The CCC was reimbursed $28 million, consisting of $15.4 million in prior yearunobligated balances in the Title I credit account, $2.3million in unobligated FY1995 funds in the Title I credit account, and $10.3 million in prior year unobligatedbalances in the Title I ocean freight differentialaccount. When commodities were released for reasons of short supply, current year P.L. 480 appropriations wereused to reimburse the CCC for the wheatreleased. Of the two ways to replenish the Trust after commodities have been released, i.e., purchase or designation of stocks already in CCC inventories, only the latterhas been used until now. Following the first release of wheat from the reserve in FY1985, an equivalent quantityof wheat owned by the CCC was designatedby the Secretary as replenishment for the wheat sent to Sub-Saharan Africa in the preceding year. Policy at this timewas essentially to replace any drawdown ofthe reserve immediately by available CCC inventory. This was possible because CCC held large stocks of wheat,and with such a large inventory, USDAofficials felt no need to identify wheat in the reserve separately from other CCC-owned stocks. In 1988, however, CCC changed its policy regarding a separate designation of wheat for the FSWR and entered into long-term contracts with commercialwarehousemen with the contracts specifically designating the wheat as part of the reserve. The long-term contractssaved annual storage costs because CCCwas able to negotiate lower storage terms. In 1990, USDA announced that the CCC would designate alluncommitted CCC-owned wheat to the Food SecurityWheat Reserve. At that time, 60 million bushels of wheat remained in the reserve because of releases for shortsupply in 1988 and 1989. CCC designatedenough wheat for the reserve to restore it to its full 147 million bushels or 4 million metric ton maximum by March1991. The reserve was not replenished forits drawdown in 1994. The 1996 release also was not replenished. With respect to releases from the Trust in FY2002 and FY2003, the Emergency Wartime Supplemental Appropriations Act of 2003 ( P.L. 108-11 , H.R. 1559 ) provides $69 million to acquire a quantity of commodities for use in administering the Trust. This appropriation will enable the firstreplenishment of the Trust since 1990 and the first time that Congress has appropriated funds for that purpose. Because of large needs for humanitarian foodaid in Africa and Iraq in FY2003, reimbursement of the Trust is likely to be postponed to subsequent fiscal years.
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The Bill Emerson Humanitarian Trust is becoming a critical component of the U.S.response to humanitarian foodemergencies in Africa, Iraq, and elsewhere. The Trust, as presently constituted, was enacted in the 1998 AfricaSeeds of Hope Act (P.L. 105-385). It replacedthe Food Security Commodity Reserve established in 1996 and its predecessor the Food Security Wheat Reserveof 1980. The Trust is a reserve of up to 4million metric tons of wheat, corn, sorghum and rice that can be used to help fulfill P.L. 480 food aid commitmentsto developing countries under twoconditions: (1) to meet unanticipated emergency needs in developing countries, or (2) when U.S. domestic suppliesare short. The Trust can also hold funds. Administration proposals to reduce food aid's reliance on surplus commodities and anticipated demand foremergency food aid have focused renewed attentionon the Emerson Trust, which has been used four times in FY2002 and FY2003 to meet unanticipated food needsin Africa and Iraq. About 1.1 million metrictons of wheat remain in the Trust. As the Trust is drawn down, reimbursement and replenishment of the Trust forcommodities released become importantissues. This report will be updated as developments occur.
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This report provides background information and issues for Congress on the Navy's desire to homeport a nuclear-powered aircraft carrier (CVN) at Mayport, FL. Prior to the submission of the FY2013 budget, Navy plans called for having Mayport ready to homeport a CVN in 2019. The Navy's proposed FY2014 budget, like the Navy's proposed FY2013 budget, requested no funding for Military Construction (MilCon) projects required to homeport a CVN at Mayport. The Navy's FY2013 budget deferred the Navy's plan to homeport a CVN at Mayport, and the Navy's FY2013-FY2017 Future Years Defense Plan (FYDP) contained no funding for MilCon projects required to homeport a CVN at Mayport. The Navy stated in its FY2013 budget submission: "Although the FY 2013 budget does not contain a construction project supporting the homeporting of a CVN in Mayport, FL, the Department [of the Navy] is committed to the requirement and policy to strategically disperse CVNs on each coast. This is a deferral at this time due to fiscal constraints." The Navy's desire to homeport a CVN at Mayport is an issue of strong interest to certain Members of Congress from Florida and Virginia. Transferring a CVN from Norfolk, VA, to Mayport would shift from Norfolk to Mayport the local economic activity associated with homeporting a CVN, which some sources estimate as being worth hundreds of millions of dollars per year. All of the Navy's aircraft carriers are nuclear powered. The Navy normally has 11 operational CVNs, but currently is in a temporary situation of having 10. The temporary decrease from 11 operational CVNs to 10 began with the deactivation of the aircraft carrier Enterprise (CVN-65) in December 2012, and is scheduled to last until late 2015, when the CVN force is to return to 11 operational ships through entry into service of the new CVN Gerald R. Ford (CVN-78). As of December 31, 2012, the Navy's six Pacific Fleet CVNs were homeported at Everett, WA, and Bremerton, WA, which are both located on Puget Sound (two ships each); San Diego, CA (one ship); and Yokosuka, Japan (one ship). The Navy's four Atlantic fleet CVNs are all homeported at Norfolk, VA. (Prior to its deactivation, CVN-65 was also homeported at Norfolk, making for a total of five CVNs homeported there.) The Navy since the 1960s has been replacing its older conventionally powered carriers (CVs) as they have retired with new CVNs. The Navy achieved an all-CVN carrier force on January 31, 2009, with the retirement of its last operational CV, the Kitty Hawk (CV-63). Prior to being decommissioned, the Kitty Hawk operated in the Pacific Fleet and was homeported in Yokosuka. The last operational CV in the Atlantic Fleet was the John F. Kennedy (CV-67), which was decommissioned on August 1, 2007. Prior to being decommissioned, the Kennedy was homeported at Mayport. In terms of numbers of ships homeported, Norfolk (known formally as Naval Station [NAVSTA] Norfolk) is the Navy's largest Atlantic Fleet home port. As of December 31, 2012, about 65 ships of various types—CVNs, attack submarines (SSNs), cruisers (CGs), destroyers, (DDGs), frigates (FFGs), large-deck amphibious assault ships (LHDs), and other amphibious ships (LPDs)—were homeported at Norfolk. The home port at Little Creek, VA, is roughly 7 nautical miles to the east of Norfolk (depending on the exact points used to measure the distance), on the same side of the Hampton Roads waterway, and is sometimes referred to as Norfolk (Little Creek). As of December 31, 2012, six amphibious ships (LSDs) were homeported there. Mayport is located in northeast Florida, on the Atlantic Coast, near Jacksonville. It is roughly 469 nautical miles south-southwest of Norfolk. In terms of numbers of ships homeported, Mayport (known formally as NAVSTA Mayport) is the Navy's second-largest Atlantic Fleet home port. As of December 31, 2012, about 16 CGs, DDGs, and FFGs were homeported at Mayport. The Navy reported to Congress in February 2010 that the service envisages Mayport as the primary Atlantic Fleet homeporting location for the Navy's new Littoral Combat Ships (LCSs). (The report identifies Little Creek, VA, as the Navy's envisaged secondary Atlantic Fleet LCS homeporting location, and Norfolk as the Navy's envisaged tertiary Atlantic Fleet LCS homeporting location.) In addition to homeporting CGs, DDGs, and FFGs, Mayport has also served as a CV home port at various times since the 1950s, and most recently was the home port for the Kennedy , until that ship was decommissioned in 2007. Navy records dating back to 1979 indicate that Mayport served as a home port for two CVs (the Forrestal [CV-59] and the Saratoga [CV-60]) in 1979-1980, 1985-1987, and 1989-1991. (During the period 1980-1985, first CV-60 and then CV-59 underwent Service Life Extension Program (SLEP) overhauls at the Philadelphia Naval Shipyard.) Homeporting of Navy ships at Mayport reached recent peak of more than 30 ships, including two CVs, in 1987, when the Navy as a whole reached a recent peak of 568 ships, including 15 CVs and CVNs. Although Mayport has previously serviced as a CV homeport, it has not previously served as a CVN home port, and would require certain facility upgrades to be capable of homeporting a CVN, including dredging and the construction of CVN nuclear propulsion plant maintenance facilities. The Navy announced that it wants to establish a second Atlantic Fleet CVN home port by homeporting a CVN at Mayport in a Record of Decision (ROD) document dated January 14, 2009. Later that month, following the change in administrations, Obama Administration officials testified that they would review the proposal. On April 10, 2009, the Department of Defense (DOD) announced that it had decided to delay a final decision on whether to propose transferring a CVN to Mayport until it reviewed the issue as part of its 2010 Quadrennial Defense Review (QDR). DOD's final report on the 2010 Quadrennial Defense Review (QDR), released on February 1, 2010, endorsed the Navy's desire to establish a second Atlantic Fleet CVN home port by homeporting a CVN at Mayport, FL. The report states: "To mitigate the risk of a terrorist attack, accident, or natural disaster, the U.S. Navy will homeport an East Coast carrier in Mayport, Florida." In October 21, 2011, letters to three Members of Congress from Florida, and in letters of the same date to six Members of Congress from Virginia, Admiral Jonathan Greenert, the Chief of Naval Operations, commented on the issue of homeporting a CVN at Mayport in the context of the ongoing Department of Defense strategic and budget reviews. In the letters to the three Members of Congress from Florida, Greenert stated the following, with the portions shown here in bold indicating the text that differs from that of the letters to the six Members of Congress from Virginia: Thank you for your letter of October 5 , 2011 regarding the decision to homeport a Nuclear-Powered Aircraft Carrier (CVN) in Mayport. I appreciate your thoughtful and constructive inputs on the strategic dispersal of our CVN Fleet . From a strategic standpoint, the rationale supporting the decision to disperse our East Coast Carrier Fleet remains sound, as validated in the Secretary of Defense-led 2010 Quadrennial Defense Review. Within the context of the ongoing Department of Defense strategic and budget reviews, the size of the fiscal adjustments compels us to take a comprehensive strategic review, examining every program element, including the timing and impacts of the decision to homeport a CVN in Mayport. You can be assured our strategic review will look to balance the merits of strategic dispersal with the challenges associated with current fiscal realities . In the letters to the six Members of Congress from Virginia, Greenert stated the following, with the portions shown here in bold indicating the text that differs from that of the letters to the three Members of Congress from Florida: Thank you for your letter of September 23 , 2011 regarding the decision to homeport a Nuclear-Powered Aircraft Carrier (CVN) in Mayport. I appreciate your thoughtful and constructive inputs on the current fiscal challenges in relation to the strategic dispersal of our CVN Fleet . From a strategic standpoint, the rationale supporting the decision to disperse our East Coast Carrier Fleet remains sound, as validated in the Secretary of Defense-led 2010 Quadrennial Defense Review. Within the context of the ongoing Department of Defense strategic and budget reviews, the size of the fiscal adjustments compels us to take a comprehensive strategic review, examining every program element, including the funding required to homeport a CVN in Mayport. You can be assured I will include your concerns in the Navy's strategic calculus . Prior to the submission of the FY2013 budget, Navy plans called for having Mayport ready to homeport a CVN in 2019. The Navy originally planned on transferring a CVN to Mayport as early as 2014, but meeting that schedule would have required funding all necessary MilCon projects at Mayport in FY2010. Then-Chief of Naval Operations (CNO) Admiral Gary Roughead summarized the Navy's rationale for its desire to homeport a CVN at Mayport in early 2010 testimony to Congress on the Navy's proposed FY2011 budget: Hampton Roads [Virginia] is the only nuclear carrier capable port on the East Coast. A catastrophic event in the Hampton Roads Area affecting port facilities, shipping channels, supporting maintenance or training infrastructure, or the surrounding community has the potential to severely limit East Coast Carrier operations, even if the ships themselves are not affected. Consistent with today's dispersal of West Coast aircraft carriers between California and Washington State, the QDR direction to make Naval Station Mayport a nuclear carrier-capable homeport addresses the Navy's requirement for a capable facility to maintain aircraft carriers in the event that a natural or manmade disaster makes the Hampton Roads area inaccessible. While there is an upfront cost to upgrade Naval Station Mayport to support our nuclear aircraft carriers, Mayport has been a carrier homeport since 1952 and is the most cost-effective means to achieve strategic dispersal on the East Coast. The national security benefits of this additional homeport far outweigh those costs. The January 2009 ROD document states: The DON decision to utilize the capacity at NAVSTA Mayport to homeport a CVN is the culmination of a two and a half year process involving environmental analysis under the National Environmental Policy Act (NEPA), identification of the recurring and nonrecurring costs associated with homeporting surface ships at NAVSTA Mayport, and an assessment of strategic concerns.... The decision reached by the DON, as further explained later in this Record of Decision, is based upon the DON's environmental, operational, and strategic expertise and represents the best military judgment of the DON's leadership. The need to develop a hedge against the potentially crippling results of a catastrophic event was ultimately the determining factor in this decision-making process. The consolidation of CVN capabilities in the Hampton Roads area on the East Coast presents a unique set of risks. CVNs assigned to the West Coast are spread among three homeports. Maintenance and repair infrastructure exists at three locations as well. As a result, there are strategic options available to Pacific Fleet CVNs should a catastrophic event occur. By contrast, NAVSTA Norfolk is homeport to all five of the CVNs assigned to the Atlantic Fleet and the Hampton Roads area is the only East Coast location where CVN maintenance and repair infrastructure exists. It is the only location in the U.S. capable of CVN construction and refueling. The Hampton Roads area also houses all Atlantic Fleet CVN trained crews and associated community support infrastructure. There are no strategic options available outside the Hampton Roads area for Atlantic Fleet CVNs should a catastrophic event occur. Additional excerpts from the ROD are presented in Appendix C . The Navy states that its desire to transfer a CVN to Mayport is informed by three analyses: a "strategic laydown analysis" that projected the future size and composition of the Navy, and then apportioned that Navy between the Pacific Fleet and the Atlantic Fleet, a Final Environmental Impact Statement (FEIS) on alternatives for homeporting additional surface ships at Mayport, and an analysis of the nonrecurring and recurring costs of homeporting ships at Mayport. Each of these is discussed below. For additional background information on the Navy's desire to transfer a CVN to Mayport, see Appendix B , which reprints an appendix from a May 2010 Government Accountability Office (GAO) report on the Navy's basing decision process. The strategic laydown analysis projected a future Navy fleet of 313 ships, including 11 CVNs. (Navy plans since early 2006 have called for achieving and maintaining a fleet of 313 or more ships, including 11 CVNs.) Based on an examination of projected future mission demands and other factors, the Navy assigned 181 of these 313 ships (including 6 CVNs) to the Pacific Fleet, and 132 ships (including 5 CVNs) to the Atlantic Fleet. This apportionment was then used to analyze the amount of homeporting capacity that would be needed in coming years for Atlantic Fleet ships. Homeporting capacity was measured in terms of linear feet of pier space, and expressed in terms of cruiser equivalents (CGEs), with one CVN equaling four CGEs. The analysis concluded that, given the 132 ships to be homeported on the Atlantic Coast and the amount of homeporting capacity available at Norfolk and Little Creek, the Navy in coming years would need 13 CGEs of surface ship homeporting capacity at an Atlantic Fleet location other than Norfolk and Little Creek. The calculation assumed no double-breasting (i.e., side-by-side mooring of two ships at a single pier) at Norfolk and Little Creek, and no construction of additional pier space at Norfolk and Little Creek. A Final Environmental Impact Statement (FEIS) on Mayport homeporting alternatives was released in November 2008. The FEIS examined 12 alternatives for homeporting additional surface ships at Mayport. Four of the 12 alternatives involved homeporting a CVN; another four involved making Mayport capable of homeporting a CVN, but not immediately homeporting a CVN there; and the remaining four did not involve making Mayport capable of homeporting a CVN. Ten of the 12 alternatives also involved transferring additional ships other than a CVN—various combinations of cruisers, destroyers, frigates, large-deck amphibious assault ships (LHDs), and other amphibious ships (LPDs and LSDs)—to Mayport. The FEIS also assessed a 13 th alternative of homeporting no additional ships at Mayport. Homeporting a single additional ship—a CVN—was Alternative 4. The FEIS identified Alternative 4 as the Navy's preferred alternative. The FEIS, like the January 2009 ROD, stated that a key reason for the Navy's desire to transfer a CVN to Mayport is to hedge against the risk of a catastrophic event that could damage the Navy's CVN homeporting facilities in the Hampton Roads area of Virginia. The FEIS stated: Based on a thorough review of the alternatives, the Department of the Navy has determined Alternative 4 to be its Preferred Alternative. Alternative 4 involves homeporting one CVN, dredging, infrastructure and wharf improvements, and construction of CVN nuclear propulsion plant maintenance facilities. Factors that influenced selection of Alternative 4 as the Preferred Alternative included impact analysis in the EIS, estimated costs of implementation, including military construction and other operation and sustainment costs, and strategic dispersal considerations. Homeporting a CVN at NAVSTA Mayport would enhance distribution of CVN homeport locations to reduce risks to fleet resources in the event of natural disaster, manmade calamity, or attack by foreign nations or terrorists. This includes risks to aircraft carriers, industrial support facilities, and the people that operate and maintain those crucial assets. The aircraft carriers of the United States Navy are vital strategic assets that serve our national interests in both peace and war. The President calls upon them for their unique ability to provide both deterrence and combat support in times of crisis. Of the 11 aircraft carriers currently in service, five are assigned to the Atlantic Fleet. Utilizing the capacity at NAVSTA Mayport to homeport a CVN disperses critical Atlantic Fleet assets to reduce risks, thereby enhancing operational readiness. Operational readiness is fundamental to the Navy's mission and obligation to the Commander in Chief. The Navy estimated the nonrecurring and recurring costs of each of the 12 options examined in the FEIS for homeporting additional surface ships at Mayport. The Navy in 2008 estimated the nonrecurring (i.e., initial) cost of transferring a CVN to Mayport at $565 million. The Navy has since updated this estimate, and as of February 2010 estimates the cost at $589.7 million. Table 1 shows the breakdown of this estimate. The Navy states that the figures shown in the table are rough order of magnitude (ROM) estimates that are subject to change. The Navy estimated in late 2008 that, compared to the cost of homeporting a CVN at Norfolk, homeporting a CVN at Mayport would result in an additional recurring (i.e., annual) cost of $25.5 million in constant calendar year 2010 (CY10) dollars. This estimate is a revision of an earlier estimate of $20.4 million in recurring costs that was briefed to congressional offices following the release of the FEIS. The Navy stated that the estimate of $25.5 million in additional recurring costs is based on an approximate yearly recurring cost of Base Operating Support (BOS) and Sustainment, Restoration, and Modernization (SRM) at $8.3M, Operations at $0.8M, travel/per-diem for transitory maintenance labor which occur two of every three 32-month operating cycles but annualized at $12.9M, permanent on-site labor at $5M and bi-annual maintenance dredging to maintain the depth necessary for unrestricted carrier access averaged out to $0.1M per year. It is anticipated that Basic Allowance for Housing (BAH) would show an annual savings of $1.6M. Table 2 reproduces a November 2008 Navy table that summarizes the Navy's comparison of Mayport and Norfolk in terms of certain operational characteristics and risk factors. On June 15, 2012, the Navy announced that it intended to transfer an amphibious ready group (or ARG—a group of three amphibious ships capable of embarking a Marine Expeditionary Unit) from Norfolk to Mayport in 2013 and 2014. The Navy had originally announced on February 28, 2012, that the ARG, which includes the "large-deck" amphibious assault ship Iwo Jima (LHD-7), would arrive no later than 2015. The Navy's announcement stated in part: The accelerated timeline ensures continued viability of the Mayport ship repair industrial base and maintains the capabilities of the Jacksonville fleet concentration area, thereby preserving surge capability and reducing risk to fleet resources in the event of natural or man-made contingencies. "I am very pleased that the Navy is able condense the time horizon for the arrival of the Mayport ARG," stated [Secretary of the Navy Ray] Mabus. "The move underscores just how important Jacksonville and Naval Station Mayport are to our national defense, and how committed we are to strategic dispersal on the east coast." At a June 27, 2012, press briefing at the Pentagon with Admiral Jonathan Greenert, the Chief of Naval Operations, the following exchange occurred: QUESTION: Admiral, I know you moved some ships down to Mayport recently. And I'm wondering, have you considered or are you considering a future moves of such ships? And would that require any modifications that might pave the way for an eventual carrier move? DM. GREENERT: Well, the—we haven't moved any—we've announced the movement recently of an amphibious ready group, which was part of our strategic (inaudible) that we've kind of been talking about since we rolled the budget out. So that—that's kind of an evolution to now get to the ship level. We have dredged the harbor. Actually, it's still underway down in Mayport, but we're about complete there. So that will, if you will, pave the way for these ships' arrival. And that does make the harbor, if you will, carrier capable. We're upgrading the pier in Mayport. It will be able to take a carrier visit and be able to do some maintenance there—enable it. And that will obviously pave the way for the amphibious ready group as well. But as we state in our budget, right now we just don't have the fiscal resources to conduct a carrier move right now. Strategic dispersal remains a key and critical element. Movement of the amphibious ready group satisfies that need for—in amphibious ships to have that, in the case of an amphibious ready group, that strategic dispersal to a couple of ports on the eastern seaboard. Serving as the home port for a CVN can generate substantial economic activity in the home port area. This activity includes, among other things, the ship's crew of more than 3,000 sailors spending its pay at local businesses, the Navy purchasing supplies for the ship from local businesses, and Navy expenditures for performing maintenance on the ship while it is in the home port. Various estimates have been reported of the value of homeporting a CVN to the economy of the home port area. The FEIS estimates that transferring a CVN at Mayport would result in 2,900 more jobs, $220 million more in direct payroll, $208 million more in disposable income, and $10 million more in local tax contributions for the Mayport area. An August 2007 press report stated that "some reports put the [earlier] loss of the [aircraft carrier] George Washington at $450 million in payroll and 8,200 military and civilian jobs in Norfolk." A November 2008 press report from a Norfolk newspaper stated that "The regional chamber of commerce estimates a carrier creates 11,000 jobs and $650 million in annual economic activity." Another November 2008 press report states that "Jacksonville mayor John Peyton said the new carrier would bring about 3,190 military jobs and pump about $500 million a year into the north Florida economy in salaries and spending." Another November 2008 press report states that "Virginians calculate that the economic activity related to one carrier can reach $1 billion a year." The Navy estimated that the initial $426 million in military construction work at Mayport would generate a total of $671 million in initial economic activity. The FY2010 budget provided $46.3 million in MilCon funding for channel dredging at Mayport to support the ability of a CVN to enter Mayport on a temporary basis. The conference report ( H.Rept. 111-288 of October 7, 2009) on the FY2010 National Defense Authorization Act ( H.R. 2647 / P.L. 111-84 of October 28, 2009) stated: The conference agreement includes authorization for $46.3 million for channel and turning basin dredging at Naval Station (NS) Mayport, Florida. The Navy requested this project in order to allow a nuclear aircraft carrier to enter Naval Station Mayport on a temporary basis with an embarked air wing, full stores, and under any tidal conditions. The conferees authorize funding for this project based on the Secretary of the Navy and Chief of Naval Operations' assurances that the dredging is needed for current operational considerations to permit the use of Mayport as a transient dock and is "required irrespective of the final decision on aircraft carrier homeporting at Mayport." The conferees emphasize that the inclusion of an authorization for dredging at NS Mayport is not an indication of conferee support for the establishment of an additional homeport for nuclear aircraft carriers on the east coast, or intended to influence the ongoing Quadrennial Defense Review, which may include a recommendation on the establishment of a second east coast homeport for nuclear aircraft carriers. Furthermore, the conferees note that this funding is provided solely to permit use of Mayport as a transient port, and that any potential designation of Mayport as a nuclear carrier homeport will require future authorizations from the Committees on Armed Services of the Senate and the House of Representatives. (Page 870) Of the $120.05 million in funding requested by the Navy for FY2011 for MilCon planning and design activities, about $2 million was requested for the project to establish a CVN home port at Mayport. The total amount appropriated for the Navy for FY2011 for MilCon planning and design activities was $119.81 million. The Navy's proposed FY2012 budget requested $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements project, a roadway construction project that is part of the Navy's plan for establishing a CVN home port at Mayport. In addition, the Navy stated that of the $84.36 million in funding requested by the Navy for FY2012 for MilCon planning and design activities, about $2 million was requested for the project to establish a CVN home port at Mayport. The conference report ( H.Rept. 112-331 of December 15, 2011) on H.R. 2055 / P.L. 112-74 , the FY2012 Military Construction and Veterans Affairs and Related Agencies Appropriations Act ( H.R. 2055 / P.L. 112-74 of December 23, 2011), approved the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project (page 1271) and the Navy's FY2012 request for $84.36 million in MilCon funding for planning and design activities (page 1283). The conference report ( H.Rept. 112-329 of December 12, 2011) on the FY2012 National Defense Authorization Act ( H.R. 1540 / P.L. 112-81 of December 31, 2011) recommended approving the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project (page 952) and stated: The conferees determined that the Massey Avenue Corridor Improvements Project had merit to support requirements at the Naval Station Mayport, Florida, whether or not a nuclear powered aircraft carrier was home ported there. (Page 757) The Navy's proposed FY2013 budget deferred the Navy's plan to homeport a CVN at Mayport. The Navy's proposed FY2013 budget and the FY2013-FY2017 Future Years Defense Plan (FYDP) contained no funding for MilCon projects required to homeport a CVN at Mayport. The Navy stated in its FY2013 budget submission: "Although the FY 2013 budget does not contain a construction project supporting the homeporting of a CVN in Mayport, FL, the Department [of the Navy] is committed to the requirement and policy to strategically disperse CVNs on each coast. This is a deferral at this time due to fiscal constraints." The Navy's proposed FY2014 budget requested no funding for MilCon projects required to homeport a CVN at Mayport. The Navy's desire to homeport a CVN at Mayport has become an issue of strong interest to certain Members of Congress from Florida and Virginia. Certain Members of Congress from Florida have expressed support for the Navy's desire to homeport a CVN at Mayport, arguing (as have DOD and the Navy) that the benefits in terms of mitigating risks to the Navy's Atlantic Fleet CVNs are worth the costs associated with moving a CVN to Mayport. Certain Members of Congress from Virginia have expressed skepticism regarding, or opposition to, the Navy's desire to homeport a CVN at Mayport, arguing that the benefits in terms of mitigating risks to the Navy's Atlantic Fleet CVNs are questionable or uncertain, and that the funding needed to implement the proposal could achieve greater benefits if it were spent on other Navy priorities. For examples of Member views on the issue, see Appendix E . Since a key reason the Navy wants to transfer a CVN to Mayport is to hedge against the risk of a catastrophic event that could damage the Navy's CVN homeporting facilities in the Hampton Roads area of Virginia, potential questions for Congress to consider include the following: What is the risk of a catastrophic event damaging Atlantic Coast CVN homeporting facilities, and how might that risk be altered by homeporting a CVN at Mayport? If a catastrophic event were to damage Atlantic Coast CVN homeporting facilities, what would be the operational impact on the Navy, and how quickly could the Navy repair the damage and return to normal operations? Are the costs associated with homeporting a CVN at Mayport worth the benefits in terms of hedging against the risk of a catastrophic event damaging Atlantic Coast CVN homeporting facilities? In assessing these and other questions relating to the Navy's desire to transfer a CVN to Mayport, Congress may consider several specific issues, including the following: the Navy's basing decision process; the Navy's strategic laydown analysis; the Navy's estimated recurring and nonrecurring costs for homeporting a CVN at Mayport; transit times from Norfolk and Mayport to key destinations; the vulnerability of Norfolk and Mayport to natural and man-made catastrophes; other factors that might differentiate Norfolk and Mayport; the Final Environmental Impact Statement (FEIS) on Mayport homeporting options; potential options for Mayport homeporting other than those studied in the FEIS; and potential alternative uses of the funding that would be required for homeporting a CVN at Mayport. Each of these specific issues is discussed below. One issue that Congress may consider is the Navy's basing decision process. A May 2010 GAO report on the Navy's basing decision process done in response to direction in the House Armed Services Committee's report ( H.Rept. 111-166 of June 18, 2009, pages 537-538) on the FY2010 defense authorization bill ( H.R. 2647 ) states: The Army, Marine Corps, and Air Force basing decision processes fully incorporate the key elements, associated factors, and management control standards that GAO identified as necessary in a comprehensive process; however, the Navy needs additional guidance for its process to be complete. GAO found that while the Army, Marine Corps, and Air Force each have issued comprehensive guidance for their basing possesses that describes the organizational roles and responsibilities within the service, establishes links among all of the service's strategic and environmental guidance documents, and identifies the service's basing criteria, some of the Navy's guidance documents lacked detailed information about specific actions taken during the process and defined responsibility for completing certain types of analyses. For example, the Navy's Strategic Dispersal Flow Chart—one of the five guidance documents used to implement the Navy's process—shows that some types of analyses are conducted to review a range of considerations, such as access to training areas, sailor and family quality of life, and ship size, for a particular basing decision. But the document does not describe in any detail how and by whom these analyses will be conducted. Additionally, Navy guidance does not provide a clear explanation of how its five guidance documents are linked together in implementing the Navy's overall basing process. Without comprehensive and clear guidance on all aspects of the Navy's overall basing decision process, the Navy may lack the completeness and management control to ensure that Navy basing decisions can facilitate external stakeholders' examination and scrutiny or ensure effective implementation of the Navy's basing process. The Secretary of Defense has not set a policy or assigned an office a clear role for providing management control of the services' basing decision processes within the United States, and as a consequence may lack reasonable assurance that certain departmentwide initiatives will be fully supported in the services' basing decisions. The Office of the Secretary of Defense (OSD) officials said that OSD is promoting joint sharing of DOD facilities and seeking to ensure that domestic basing decisions support global operations. However, OSD has not fully promoted service consideration of the joint sharing, global operations, and potentially other initiatives because the Secretary of Defense has neither provided a comprehensive policy for, nor clearly assigned an office within OSD to oversee domestic service basing processes. Without OSD guidance and an office to provide effective oversight of military service basing decision processes, the Secretary of Defense lacks reasonable assurance that departmentwide initiatives are adequately considered by the services in their domestic basing decision making. A second issue that Congress may consider is the Navy's strategic laydown analysis. As mentioned earlier, this analysis projected a future fleet of 313 ships (including 11 CVNs), of which 181 ships (including 6 CVNs) would be assigned to the Pacific Fleet and 132 ships (including 5 CVNs) would be assigned to the Atlantic Fleet. On September 1, 2011, it was reported that the Navy, in response to anticipated reductions in planned levels of defense spending, is discussing options for maintaining a fleet with considerably fewer than 300 ships, such as a 250-ship fleet that includes 10 aircraft carriers or a 240-ship fleet that includes 8 aircraft carriers; a fleet with 9 carriers is another reported option. Supporters of keeping all Atlantic Fleet CVNs homeported at Norfolk could argue that if the Navy in coming years includes fewer than 313 ships or fewer than 11 CVNs, there will be less need to shift a CVN from Norfolk to Mayport for reasons relating to homeporting capacity. Supporters of homeporting a CVN at Mayport could argue that if the Navy in coming years includes fewer than 313 ships or fewer than 11 CVNs, each ship or each CVN would represent a larger percentage of the Navy's overall capability, making the need to hedge against a catastrophic event in the Hampton Roads area more important. Additional factors that Congress may consider in connection with the strategic laydown analysis include the Navy's projected apportionment of the fleet between the Pacific and Atlantic Coasts (which reflects, among other things, a Navy judgment about likely potential missions for the Navy), the potential for "breasting" (i.e., side-by-side mooring of two or more ships at a single pier), and the cost of increasing homeporting capacity at Norfolk through construction of additional pier space and other facilities. A third issue that Congress may consider is whether the Navy has accurately estimated the nonrecurring and recurring costs of homeporting a CVN at Mayport. Other things held equal, if the Navy has underestimated or overestimated these costs, it might weaken or strengthen, respectively, the argument for homeporting a CVN at Mayport. A March 2011 GAO report on the Navy's estimate of nonrecurring and recurring costs of homeporting a CVN at Mayport stated: GAO's independent cost estimate suggests that the total one-time cost of homeporting a nuclear-powered aircraft carrier at Naval Station Mayport is expected to be between $258.7 million and $356.0 million, in base year 2010 dollars. The Navy's estimate of the one-time cost is $537.6 million—also in base year 2010 dollars—which is outside the upper range of GAO's estimate. Unlike GAO's estimate, the Navy did not conduct a risk and uncertainty analysis on its one-time costs; as a result, its estimate does not include a range. The largest difference between GAO's estimate of one-time costs and the Navy's estimate is the cost of constructing new facilities at Mayport. Based on the historical costs of constructing similar facilities, GAO estimates at the 65 percent confidence level that the cost for constructing the controlled industrial facility will be $70.5 million, and the cost for constructing the ship maintenance support facilities will be $45.6 million. The Navy estimates the construction costs to be much higher at $139.1 million and $157.2 million, respectively. Navy officials told GAO the difference is due to the increased cost involved in protecting the buildings from a potential storm surge associated with a Category 4 hurricane. GAO included a hurricane factor in its estimate to account for this increase, but GAO and the Navy used different estimating methods in developing the estimates for the construction costs. GAO used adjusted actual costs from similar construction projects, while the Navy used a detailed engineering estimate. For recurring costs, GAO's independent cost estimate suggests that the total is expected to be between $9.0 million and $17.6 million per year. The Navy's estimate of $15.3 million per year is within GAO's estimated range. The Navy's estimate did not fully meet any of the four characteristics—comprehensive, accurate, well documented, and credible—for producing a high-quality cost estimate. Specifically, although the estimate included almost all of the life-cycle costs related to homeporting a nuclear aircraft carrier at Mayport, it partially met the criteria for being comprehensive because it does not fully describe the cost-influencing ground rules and assumptions. The estimate was only minimally accurate and well documented in that although many elements of the estimate are based on actual experiences from other comparable programs, it is difficult to say if the cost estimates are the most likely costs since the Navy did not conduct a risk and uncertainty analysis. Further, the estimate contains very little step-by-step description of how the estimate was developed so that a cost analyst unfamiliar with the program could independently replicate it. The Navy had to recreate several portions of the estimate in order to provide GAO with supporting documentation. Further, the Navy's estimate does not meet the GAO best practice for a credible estimate because it does not include a sensitivity analysis and was not compared by the Navy to an independent cost estimate conducted by a group outside the Navy. Without fully meeting the characteristics of a high-quality estimate, the Navy's ability to present a convincing argument of the estimate's affordability and credibly answer decision makers' and oversight groups' questions about the estimate is hampered. Regarding nonrecurring costs, the report stated on pages 10-11: Table 2 [of this GAO report] shows a comparison between our estimated range and the Navy's estimate for one-time costs. Specifically, the table shows our estimated range at an 80 percent confidence interval and whether the Navy's estimate falls into that range. The low value of the estimate range ($258.7 million) represents a 10 percent chance that the cost will be that amount or less, and the high value of the estimated range ($356.0 million) represents a 90 percent chance that the cost will be that amount or less. The last column in the table identifies whether the Navy's estimate is within our estimated range. The report also stated on page 12: Table 3 [of this GAO report] shows our 65 percent confidence level estimate in comparison to the Navy's point estimate. To facilitate comparisons against the Navy's estimate, the one-time costs are expressed in base year 2010 dollars, which represent amounts based on 2010 prices, with the impact of inflation removed. While useful for comparisons against the Navy's estimate, base year 2010 dollars should not be used as the basis for budgetary decisions. In order to support a budgetary amount, base year 2010 dollars would need to be converted into then-year dollars. Regarding recurring costs, the report stated on page 14: Table 4 [of this GAO report] shows a comparison between our estimated range and the Navy's estimate for recurring costs. Specifically, the table shows our estimate range at an 80 percent confidence interval and whether the Navy's estimate falls into that range. The low value of the estimated range ($9.0 million) represents a 10 percent chance that the cost will be that amount or less, and the high value of the estimated range ($17.6 million) represents a 90 percent chance that the cost will be that amount or less. The last column in the table identifies whether the Navy's estimate is within our estimated range. As we did with one time costs, we also compared our 65 percent confidence level estimates with the Navy's point estimates for a direct element-by-element comparison between our estimate and the Navy's, as shown in table 5. The report made the following conclusions and recommendations: Conclusions The Navy's ability to produce a comprehensive, accurate, well documented, and credible cost estimate for homeporting a nuclear-powered aircraft carrier at Naval Station Mayport will continue to be hampered until it makes certain fundamental changes to the process it uses to develop, document, and update its overall estimate of Mayport homeporting costs. Specifically, without full documentation of the data sources, assumptions, and calculation methods it uses, the Navy cannot assure that its estimate can be validated or defended or any differences between estimated and actual costs can be explained—an important step in improving and updating the estimate. Additionally, without detailed documentation that describes how the estimate was derived, the Navy can neither present a convincing argument of the estimate's affordability, nor credibly answer decision makers' and oversight groups' questions about specific details in the estimate. Further, without conducting sensitivity and risk and uncertainty analyses on its cost estimate, the Navy is unable to identify and focus on major cost drivers, analyze the potential for cost growth, and quantify the risk and uncertainty associated with the cost estimate. Moreover, without a comprehensive, accurate, well documented, and credible cost estimate, Congress cannot have reasonable confidence that it has a complete understanding and an accurate and realistic determination of the projected costs to evaluate and make decisions on the Navy's planned homeporting of a nuclear-powered aircraft carrier at Mayport. Recommendations for Executive Action To improve the Navy's life-cycle cost estimate for the planned homeporting of a nuclear-powered aircraft carrier at Naval Station Mayport, Florida, we recommend that the Secretary of Defense direct the Secretary of the Navy to take the following three actions to incorporate to a greater extent the best practices identified by GAO for developing a high-quality cost estimate in future revisions of its Mayport nuclear carrier homeporting cost estimate as part of the annual budgetary process or in response to future congressional requests: 1. To improve the comprehensiveness of its cost estimate, the Navy should • include all potential recurring costs, and • clearly describe the ground rules and assumptions underlying the estimation of each cost element; 2. To improve the quality and transparency of the Navy's estimate, the Navy should thoroughly document the life-cycle costs associated with homeporting a nuclear-powered aircraft carrier at Naval Station Mayport. Specifically, documentation should • identify the source data used, their reliability, and how the data were normalized, • describe the steps used in developing the overall estimate so that it can be clearly understood and easily replicated, and • describe in sufficient detail the estimating methodology and calculations performed to derive each element's cost; and 3. To improve the accuracy and credibility of its cost estimate, the Navy should assign a single office with the responsibility for assembling the overall estimate into a comprehensive and well documented package and for performing a sensitivity and risk and uncertainty analyses on the overall estimate to identify the • major cost drivers, • extent to which estimates could vary due to changes in key cost assumptions, and • level of confidence in the estimate. The GAO report stated that "in written comments on a draft of this report, DOD partially concurred with two and nonconcurred with one of our three recommended actions…. DOD's written comments are reprinted in appendix IV [of this GAO report]." A fourth issue that Congress may consider is whether the Navy has accurately assessed the relative merits of Norfolk and Mayport in terms of transit times to key overseas operating areas and training ranges, as shown in the first two columns of Table 2 . Transit times are a function of transit distance and transit speed. With regard to transit times to key overseas operating areas, one key destination is the Strait of Gibraltar, which is used to support operations in the Mediterranean and (via the Suez canal) the Indian Ocean and Persian Gulf. Other key destinations include the Cape of Good Hope (a longer route to the Indian Ocean and Persian Gulf, but one that avoids the need to transit the Suez canal), and Puerto Rico (which might be considered a representative destination for supporting operations in the Caribbean). Table 3 shows transit times from Norfolk and Mayport to these three destinations at 14 knots (a typical transit speed for routine forward deployments) and 20 knots (an elevated transit speed that might be more likely for responding to a contingency). A fifth issue that Congress may consider is whether the Navy has accurately assessed vulnerability-related factors at Norfolk and Mayport, including the risk of a natural or man-made catastrophic event damaging CVN homeporting facilities, and the Navy's ability to defend against such an event at either site. The Navy's summary of its assessments of these factors is shown in the third, fourth, and fifth columns of the Navy slide reproduced in Table 2 . In assessing the question of port vulnerability, one factor that might be considered is the current degree of concentration or dispersion of Navy ships other than Atlantic Fleet CVNs. For example, supporters of transferring a CVN to Mayport might observe that the Navy's Pacific Fleet CVN homeporting facilities are currently located in three widely separated areas (San Diego, the Puget Sound area of Washington State, and Yokosuka, Japan), while supporters of keeping all Atlantic Fleet CVNs homeported at Norfolk might observe that the Navy's Pacific Fleet and Atlantic Fleet ballistic missile submarines (SSBNs)—which, like CVNs, are low-quantity, high-value assets—are homeported at a single site on each coast (Bangor, WA, and Kings Bay, GA, respectively). As shown in Table 2 , hurricanes were the principal type of natural disaster that the Navy analyzed in comparing the relative risk of a natural disaster at Hampton Roads and Mayport. The Navy assesses that, historically, the hurricane risk to Norfolk is similar to the risk to Jacksonville, which is close to Mayport. Information provided by the Navy regarding the risk of hurricanes at Norfolk and Mayport is presented in Appendix D of this report. Potential man-made disasters include but are not limited to shipping accidents, conventional or nuclear military attacks by foreign countries, and terrorist attacks. During the Cold War, the Navy was concerned about the potential for a conventional military attack on U.S. home ports by Soviet military forces. One possibility was a covert mining of U.S. Navy home ports by Soviet submarines and Warsaw Pact merchant ships prior to the start of a NATO-Warsaw Pact conflict. Another possibility was a cruise missile strike by Soviet submarines against Navy port facilities or ships in port. Concern over the potential for a conventional military attack on U.S. home ports by Soviet military forces was the central reason for the Navy's strategic homeporting program of the 1980s, which dispersed some of the Navy's ships away from the Navy's major home ports. The end of the Cold War reduced the apparent risk of a conventional military attack on U.S. Navy home ports by a foreign country, and led to a reconsideration of the strategic homeporting program. China is modernizing its naval and other military forces, but any potential ability China might have in coming years for conducting a conventional attack on U.S. home ports might be more of an issue for Pacific Fleet home ports than for Atlantic Fleet home ports. The terrorist attack of October 12, 2000, on the destroyer Cole (DDG-67) in the port of Aden, Yemen, and the terrorist attacks of September 11, 2001, have led to increased focus on the potential for terrorist attacks on U.S. port areas. The Navy states that DOD and other U.S. government entities conducted several vulnerability assessments for Norfolk and Mayport between 2006 and 2008. The contents of these assessments are generally classified. The Navy states that it used statistics on shipping volumes at the ports of Norfolk and Jacksonville (near Mayport) as one measure of the relative risk of a man-made disaster at Norfolk and Mayport, the idea being that certain elements of the risk of man-made disaster are somewhat proportional to the volume of shipping. The Navy states that in 2006, 2.05 million cargo containers and 16.6 million tons of cargo passed through the port of Norfolk, while 768,200 cargo containers and 8.31 million tons of cargo passed through the port of Jacksonville. The Navy further states that the center of the shipping channel in the port of Norfolk is about 500 yards from the carrier piers, and that the channel is separated from the piers by a line of buoys but no fixed obstruction, while the center of the shipping channel in the port of Jacksonville is also about 500 yards from the carrier pier, but is separated from the carrier pier by a 200-yard-wide spit of land. A July 2012 GAO report on the Navy's use of risk management at Mayport and Norfolk states: The Navy follows the five basic guiding principles for managing risk at the strategic, environmental, and operational levels before making decisions about the placement and operation of its force structure—including the placement of nuclear-powered aircraft carriers on the East Coast of the United States. The Navy does not conduct any unique risk assessment for its nuclear-powered aircraft carriers at naval installations; rather, nuclear-powered aircraft carriers are high-value assets that are included in the Navy's overall risk management process. At the strategic level, Office of the Secretary of the Navy and Office of the Chief of Naval Operations headquarters staff have identified and analyzed risks, such as emerging threats from hostile nation-states, which could make demands on homeland defense capabilities. Since 2004, according to Navy officials, the Navy has been using its strategic laydown and dispersal methodology in dividing its force structure and assets between the Atlantic and Pacific Fleets. In addition, officials stated that there may be adjustments to the Navy's current split of assets between the Atlantic and Pacific Fleets based on direction from the President that is reflected in DOD's January 2012 defense strategic guidance, which emphasizes rebalancing defense assets in the Pacific region. Furthermore, naval guidance indicates that the Navy seeks to operate around the world in an environmentally responsible manner, both ashore (installations) and afloat (ships), and work with stakeholders to ensure that it follows environmental laws, regulations, and policies. Since the terrorist attacks of 2000 and 2001, the Navy's risk management at the operational level has included conducting threat assessments for areas surrounding naval installations, as well as the installations themselves, and providing increased protection for high-value assets, such as nuclear-powered aircraft carriers. In addition, since the terrorist attacks, the Coast Guard has at times been providing escorts to the Navy's high-value assets. The Coast Guard officials also noted that the communication of threat information among stakeholders in the Hampton Roads Regional Threat Working Group in Virginia has been much improved during this period. The Navy has taken some actions to mitigate risk associated with homeporting nuclear-powered aircraft carriers at two East Coast naval installations. A naval installation and its high-value assets—such as nuclear-powered aircraft carriers—may be susceptible to the threat of a terrorist attack. The risk of becoming the target of such an attack is affected by vulnerabilities at the installation. As part of its ongoing risk management process to identify and assess vulnerabilities at installations, DOD requires that many of its installations undergo an annual antiterrorism vulnerability assessment. According to security experts who conduct the annual vulnerability assessments, they determine whether the installation is in compliance with DOD's 32 antiterrorism standards, such as establishing and implementing an antiterrorism program. During our site visits, we found that vulnerability assessments were performed at Naval Stations Mayport, Florida, and Norfolk, Virginia, on an annual basis. In addition, we found that the two naval stations had developed mitigation action plans and identified different possible courses of action to eliminate or mitigate the vulnerabilities and reduce the risk to the installations. The installation commander is responsible for protecting the installation and its assets—including nuclear-powered aircraft carriers—and selects the course of action that most effectively mitigates the vulnerability. Finally, as part of their ongoing risk management process, Naval Stations Mayport and Norfolk conduct four integrated training events each year, as directed by Commander, Naval Installations Command guidance. These training exercises focus on enhancing skills in emergency management, fire protection, and force protection conditions. A sixth issue that Congress may consider is whether the Navy has overlooked or not given adequate weight to other factors in evaluating the merits of Mayport and Norfolk as Navy home ports. Possibilities might include things such as the ability of private ship repair firms in Northeast Florida to support the maintenance requirements of a CVN, the readiness and cost impacts of the aircraft carrier homeporting and maintenance at Mayport on the Navy's traveling workforce, the interaction of the base facilities at Mayport or Norfolk with other regional military facilities (such as naval air stations), or the possible effect of CVN homeporting on Navy recruiting in the area surrounding the home port. Regarding the first factor above, a December 2010 Navy report stated that Mayport has a large and diverse vendor base that provides services such as maintenance, upkeep, and servicing to fleet units and installations…. [Five] northeast Florida-based ship-repair activities have been evaluated by the Department of the Navy (DON), as having the capabilities required to perform non-nuclear maintenance and modernization on U.S. Navy ships…. Mayport private-sector shipyards have a wide range of capabilities to perform maintenance and modernization on the majority of non-nuclear hull, mechanical, and electrical systems of various ship classes…. Private-sector ship-repair activities in Mayport will perform the same type of work on a nuclear-powered aircraft carrier that they currently perform on non-nuclear surface ships. Therefore, no additional specialized capabilities are required from the private-sector in northeast Florida to support nuclear-powered aircraft carrier maintenance. Because the Navy does not require additional capabilities from the private-sector in Mayport, no additional costs to the Navy are expected for the private-sector to develop additional capabilities to support a nuclear-powered aircraft carrier…. The Mayport private-sector has experience supporting large aircraft carrier availabilities of the magnitude of a PIA [i.e., an aircraft carrier Planned Incremental (Maintenance) Availability]. A March 29, 2011, GAO report that assessed the Navy's December 2010 report stated that Private ship repair firms in northeast Florida will likely be able to support the maintenance requirements of a nuclear aircraft carrier if one is homeported at Naval Station Mayport in 2019 as the Navy plans…. The northeast Florida area is home to three master ship repair firms certified by the Navy to have the capabilities and capacities to support the maintenance requirements of U.S. Navy surface ships, including aircraft carriers. Each of these firms has significant production and administrative facilities either on or near Naval Station Mayport, and officials from these firms told us they will maintain their presence in northeast Florida…. The tasks required of the private ship repair firms to support a nuclear carrier are the same as those performed on conventional carriers in the past and the other types of ships currently homeported at Mayport. Private ship repair firms in northeast Florida have previously demonstrated the ability to support carrier maintenance. In fact, the largest aircraft carrier availability ever performed outside of a public shipyard was completed on the USS John F. Kennedy in Mayport in 2003. Regarding the second of the factor above, a March 3, 2011, GAO report stated that In 2010, the Navy revised its original (2008) estimate of annualized workforce-related costs from about $18 million to $8.2 million. The Navy revised its estimate as a result of discussing its estimate with us and identifying more correct and complete assumptions than had been used to develop the original estimate. For example, the original estimate used the more expensive travel rates for San Diego instead of [the less expensive travel rates for] Mayport. To assess the validity of the revised estimate, we also developed an independent cost estimate. Our independent, risk-adjusted, annualized estimate for the workforce-related recurring costs is about $10.6 million at the 65 percent confidence interval, which means that there is a 65 percent probability the actual cost will be $10.6 million or less. We also estimated that these risk-adjusted costs could range from $5.5 million to $14.1 million. The difference is attributable in part to our estimate being based on a risk analysis while the Navy's was not. Our assessment of the Navy's cost-estimating procedures found that the Navy's procedures met best practices to various degrees. For example, the Navy's procedures met the requirements to comprehensively include both types of workforce-related costs (traveling and permanently stationed employees' costs) involved in the move. However, the Navy's procedures minimally met the credible criteria because they did not, among other things, include risk and sensitivity analyses or an independent cost estimate. The Navy has not begun to identify or document potential effects on readiness that might occur as a result of the proposed move nor has it identified workforce-related mitigation strategies because the move is years away. However, Navy officials indicated that the U.S. Navy Depot Maintenance Strategic Plan outlines strategies that will be used to address potential risks to readiness. Also, they indicated that they will begin to implement these strategies 4 to 5 years before moving the aircraft carrier to Mayport. We found that the Navy has processes to manage the workforce that include depot workers traveling to other locations to perform aircraft carrier maintenance. While the move to Mayport will result in increased travel for the workforce, Navy officials told us that they currently meet workforce travel requirements while staffed almost entirely by workers who voluntarily elect to travel. Navy officials do not anticipate any challenges in identifying a sufficient number of workers with the appropriate skills to perform maintenance work at Mayport. Further, Navy officials have indicated that the performance of the traveling workforce conducting remote aircraft carrier depot maintenance slightly exceeds that of workers requiring no travel. A seventh issue that Congress may consider is the adequacy of the FEIS that the Navy prepared to assess the potential environmental impacts of locating a nuclear carrier at Mayport. The National Environmental Policy Act (NEPA) requires all federal agencies to prepare environmental impact statements for major actions that would significantly affect the environment. The scope of these statements are broader than the environment per se, as agencies are required to examine not only the potential impacts on the natural environment but also the socioeconomic impacts of a proposed action. Some observers have questioned whether the Navy thoroughly assessed these sets of impacts when it selected Mayport for the location of a CVN. An eighth issue that Congress may consider are potential options for homeporting additional ships at Mayport that differ from the 12 alternatives studied in the FEIS. One such possibility, which the FEIS mentioned but did not examine in detail, would be to homeport some number of Littoral Combat Ships (LCSs) at Mayport. LCSs, which are just beginning to enter service with the Navy, are somewhat smaller than the Navy's frigates, and are to have much smaller crews. As mentioned earlier, the Navy reported to Congress in February 2010 that the service envisages Mayport is as the primary Atlantic Fleet homeporting location for the Navy's new LCSs. (The report identifies Little Creek, VA, as the Navy's envisaged secondary Atlantic Fleet LCS homeporting location, and Norfolk as the Navy's envisaged tertiary Atlantic Fleet LCS homeporting location.) Another possibility would be to homeport two CVNs rather than one CVN at Mayport. As mentioned earlier, Mayport served as a home port for two CVs for several years during the 1980s. A ninth issue that Congress may consider are potential alternative uses by the Navy or some other part of DOD of the funding that would be needed for homeporting a CVN at Mayport, and how the benefits of those potential alternative uses would compare to the benefits of homeporting a CVN at Mayport. The Navy's proposed FY2014 budget, like the Navy's proposed FY2013 budget, requested no funding for MilCon projects required specifically to homeport a CVN at Mayport. The Navy's FY2013 budget deferred the Navy's plan to homeport a CVN at Mayport, and the Navy's FY2013-FY2017 Future Years Defense Plan (FYDP) contained no funding for MilCon projects required to homeport a CVN at Mayport. The Navy stated in its FY2013 budget submission: "Although the FY 2013 budget does not contain a construction project supporting the homeporting of a CVN in Mayport, FL, the Department [of the Navy] is committed to the requirement and policy to strategically disperse CVNs on each coast. This is a deferral at this time due to fiscal constraints." The House Armed Services Committee, in its report ( H.Rept. 113-102 of June 7, 2013) on the FY2014 National Defense Authorization Act ( H.R. 1960 ), recommended no funding for MilCon projects required specifically to homeport a CVN at Mayport (see the list of Navy MilCon projects in Florida on pages 490-491, which shows funding only for projects that are for other purposes). The Senate Armed Services Committee, in its report ( S.Rept. 113-44 of June 20, 2013) on the FY2014 National Defense Authorization Act ( S. 1197 ), recommended no funding for MilCon projects required specifically to homeport a CVN at Mayport (see the list of Navy MilCon projects in Florida on page 399, which shows funding only for projects that are for other purposes). The final version of the FY2014 National Defense Authorization Act ( H.R. 3304 / P.L. 113-66 of December 26, 2013) recommended no funding for MilCon projects required specifically to homeport a CVN at Mayport (see the list of Navy MilCon projects in Florida on pdf page 506 of 532 of the explanatory statement accompanying H.R. 3304 , which shows funding only for projects that are for other purposes). The House Appropriations Committee, in its report ( H.Rept. 113-90 of May 28, 2013) on the FY2014 Military Construction and Veterans Affairs, and Related Agencies Appropriations Act ( H.R. 2216 ), recommended no funding for MilCon projects required specifically to homeport a CVN at Mayport (see the list of Navy MilCon projects in Florida on page 79, which shows funding only for projects that are for other purposes). The Senate Appropriations Committee, in its report ( S.Rept. 113-48 of June 27, 2013) on the FY2014 Military Construction and Veterans Affairs, and Related Agencies Appropriations Act ( H.R. 2216 ), recommended no funding for MilCon projects required specifically to homeport a CVN at Mayport (see the list of Navy MilCon projects in Florida on pages 76-77, which shows funding only for projects that are for other purposes). The final version of the FY2014 Military Construction and Veterans Affairs, and Related Agencies Appropriations Act (Division J of H.R. 3547 / P.L. 113-76 of January 17, 2014) provided no funding for MilCon projects required specifically to homeport a CVN at Mayport (see the list of Navy MilCon projects in Florida on pdf page 15 of 228 of the explanatory statement for Divisions J, K, and L of H.R. 3547 , which shows funding only for projects that are for other purposes). Appendix A. FY2007-FY2012 Legislative Activity FY2012 FY2012 Funding Request The Navy's proposed FY2012 budget requests $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements project, a roadway construction project that is part of the Navy's plan for establishing a CVN home port at Mayport. In addition, the Navy states that of the $84.36 million in funding requested by the Navy for FY2012 for MilCon planning and design activities, about $2 million is requested for the project to establish a CVN home port at Mayport. FY2012 National Defense Authorization Act ( H.R. 1540 / P.L. 112-81 ) House The House Armed Services Committee, in its report ( H.Rept. 112-78 of May 17, 2011) on H.R. 1540 , recommends rejecting the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project (page 471). The committee's report also recommends reducing by $15 million the Navy's FY2012 request for $84.36 million in MilCon funding for planning and design activities (page 472). Although the Navy states that about $2 million of the $84.36 million requested for planning and design activities is for establishing a CVN home port at Mayport, the committee's recommended reduction of $15 million appears to reflect a committee view that $15 million of the $84.36 million requested for planning and design activities is for work to facilitate the homeporting of a CVN at Mayport. The committee's report states: The committee recommends reduction or elimination of funding for several projects contained in the budget request for military construction and family housing. These reductions include: (1) $14,998,000 for the Massey Avenue Corridor Improvements and [2] $15,000,000 in Planning and Design for construction activities at Naval Station Mayport, Florida. The budget request included $14,998,000 to construct road improvements at Naval Station Mayport, Florida, and $15,000,000 to support planning and design efforts to facilitate the homeporting of a nuclear-powered aircraft carrier. The committee notes that the Department of the Navy has located a variety of strategic assets at one homeport for many years across the range of Navy assets to include aviation, surface, and subsurface combatants. Furthermore, the committee notes that the Department of the Navy has intentionally rejected the notion of strategic homeporting and has closed multiple locations that were deemed strategic homeports through the Base Realignment and Closure process. The committee believes that the Department of the Navy's assertion that strategic homeporting is required to maintain strategic access is inconsistent with previous naval decisions. As to costs, the onetime construction costs to implement the Department of the Navy's recommendation exceeds $500.0 million, and the recurring costs include a requirement to temporarily relocate nuclear capable shipyard workers from Norfolk, Virginia, to Mayport, Florida, to complete nuclear maintenance requirements. The committee believes that the overall costs to build a redundant carrier homeport do not appear to be in the Government's best interest. Accordingly, the committee recommends no funds, a reduction of $29,998,000, for this project. (Pages 277-278) Senate ( S. 1867 , As Reported) S. 1867 , an original measure reported by Senator Levin on November 15, 2011, without written report, in effect supersedes S. 1253 (see below). S. 1867 recommends approving the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project. (See Section 4501 of the bill. In the printed version of the bill, the relevant table within this section appears on page 667.) The bill recommends reducing by $15 million the Navy's FY2012 request for $84.36 million in MilCon funding for planning and design activities. (See Section 4501 of the bill. In the printed version of the bill, the relevant table within this section appears on page 668.) Senate ( S. 1867 , Floor Consideration) On November 30, 2011, as part of its consideration of S. 1867 , the Senate adopted by unanimous consent S.Amdt. 1210 , which requires a Navy analysis of the costs and benefits of stationing additional DDG-51 class destroyers at Mayport and a subsequent GAO assessment of the Navy analysis. The text of S.Amdt. 1210 is as follows: At the end of subtitle C of title X, add the following: SEC. 1024. ASSESSMENT OF STATIONING OF ADDITIONAL DDG-51 CLASS DESTROYERS AT NAVAL STATION MAYPORT, FLORIDA. (a) Navy Assessment Required.— (1) IN GENERAL.—Not later than one year after the date of the enactment of this Act, the Secretary of the Navy shall conduct an analysis of the costs and benefits of stationing additional DDG-51 class destroyers at Naval Station Mayport, Florida. (2) ELEMENTS.—The analysis required by paragraph (1) shall include, at a minimum, the following: (A) Consideration of the negative effects on the ship repair industrial base at Naval Station Mayport caused by the retirement of FFG-7 class frigates and the procurement delays of the Littoral Combat Ship, including, in particular, the increase in costs (which would be passed on to the taxpayer) of reconstituting the ship repair industrial base at Naval Station Mayport following the projected drastic decrease in workload. (B) Updated consideration of life extensions of FFG-7 class frigates in light of continued delays in deliveries of the Littoral Combat Ship deliveries. (C) Consideration of the possibility of bringing additional surface warships to Naval Station Mayport for maintenance with the consequence of spreading the ship repair workload appropriately amongst the various public and private shipyards and ensuring the long-term health of the shipyard in Mayport. (b) Comptroller General of the United States Assessment.—Not later than 120 days after the submittal of the report required by subsection (a), the Comptroller General of the United States shall submit to Congress an assessment by the Comptroller General of the report, including a determination whether or not the report complies with applicable best practices. Senate ( S. 1253 ) S. 1253 has been, in effect, superseded by S. 1867 (see above). S. 1253 as reported by the Senate Armed Services Committee ( S.Rept. 112-26 of June 22, 2011) recommends approving the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project and Navy's FY2012 request for $84.36 million in MilCon funding for planning and design activities. (See Section 4501 of the bill as reported by the committee. In the printed version of the bill as reported by the committee, the relevant table within this section appears on pages 651-652.) The committee's report states: Comptroller General report on aircraft carrier homeporting on the East Coast The committee directs the Comptroller General to conduct an independent analysis of alternatives on the Department of the Navy's plan to establish a second east coast homeport for a nuclear-powered aircraft carrier. The analysis should assess, at a minimum, the strategic, fiscal, and operational risks, requirements, and constraints the Navy's plan seeks to address. The committee directs that this report be provided to the congressional defense committees by February 1, 2012. The report will be submitted in an unclassified format, with the provision for a classified annex if necessary. (Page 241) Conference The conference report ( H.Rept. 112-329 of December 12, 2011) on H.R. 1540 / P.L. 112-81 of December 31, 2011, recommends approving the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project (page 952) and reducing by $15 million the Navy's FY2012 request for $84.36 million in MilCon funding for planning and design activities (page 953). The report states: The conferees determined that the Massey Avenue Corridor Improvements Project had merit to support requirements at the Naval Station Mayport, Florida, whether or not a nuclear powered aircraft carrier was home ported there. (Page 757) Section 1017 of the conference report states: SEC. 1017. ASSESSMENT OF STATIONING OF ADDITIONAL DDG-51 CLASS DESTROYERS AT NAVAL STATION MAYPORT, FLORIDA. (a) Navy Assessment Required- (1) IN GENERAL- Not later than one year after the date of the enactment of this Act, the Secretary of the Navy shall conduct an analysis of the costs and benefits of stationing additional DDG-51 class destroyers at Naval Station Mayport, Florida. (2) ELEMENTS- The analysis required by paragraph (1) shall include, at a minimum, the following: (A) Consideration of the negative effects on the ship repair industrial base at Naval Station Mayport caused by the retirement of FFG-7 class frigates and the procurement delays of the Littoral Combat Ship, including, in particular, the increase in costs (which would be passed on to the taxpayer) of reconstituting the ship repair industrial base at Naval Station Mayport following the projected drastic decrease in workload. (B) Updated consideration of life extensions of FFG-7 class frigates in light of continued delays in deliveries of the Littoral Combat Ship deliveries. (C) Consideration of the possibility of bringing additional surface warships to Naval Station Mayport for maintenance with the consequence of spreading the ship repair workload appropriately amongst the various public and private shipyards and ensuring the long-term health of the shipyard in Mayport. (b) Comptroller General of the United States Assessment- Not later than 120 days after the submittal of the report required by subsection (a), the Comptroller General of the United States shall submit to Congress an assessment by the Comptroller General of the report, including a determination whether or not the report complies with applicable best practices. FY2012 Military Construction and Veterans Affairs and Related Agencies Appropriations Act ( H.R. 2055 / P.L. 112-74 ) House The House Appropriations Committee, in its report ( H.Rept. 112-94 of May 31, 2011) on H.R. 2055 , recommends approving the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project (page 74) and the Navy's FY2012 request for $84.36 million in MilCon funding for planning and design activities (page 86). Senate The Senate Appropriations Committee, in its report ( S.Rept. 112-29 of June 30, 2011) on H.R. 2055 , recommends approving the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project (page 80) and the Navy's FY2012 request for $84.36 million in MilCon funding for planning and design activities (page 105). Conference In final action, H.R. 2055 became a consolidated appropriations act incorporating nine appropriations bills, including the FY2012 Military Construction and Veterans Affairs and Related Agencies Appropriations Act itself, which was incorporated as Division H. The conference report ( H.Rept. 112-331 of December 15, 2011) on H.R. 2055 / P.L. 112-74 of December 23, 2011, approves the Navy's FY2012 request for $14.998 million in MilCon funding for the Massey Avenue Corridor Improvements Project (page 1271) and the Navy's FY2012 request for $84.36 million in MilCon funding for planning and design activities (page 1283). FY2011 FY2011 Funding Request Of the $120.05 million in funding requested by the Navy for FY2011 for MilCon planning and design activities, about $2 million is for the project to establish a CVN home port at Mayport. FY2011 DOD and Full-Year Continuing Appropriations Act ( H.R. 1473 ) Section 2001 of Title X of Division B of the FY2011 Department of Defense and Full-Year Continuing Appropriations Act ( H.R. 1473 of the 112 th Congress, introduced on April 11, 2011, and passed by the House and Senate on April 14, 2011) provides $3,303.611 million for the Military Construction, Navy and Marine Corps account, or $575.493 million less than the requested figure of $3,879.104 million. The text of H.R. 1473 does not provide line-item funding details for the military construction accounts. FY2011 Military Construction, Veterans Affairs, and Related Agencies Appropriations Bill ( H.R. 5822 / S. 3615 ) House The House Appropriations Committee, in its report ( H.Rept. 111-559 of July 22, 2010) on H.R. 5822 of the 111 th Congress, recommends $123.75 million—a $3.7-million increase to the Navy's FY2011 request—for MilCon planning and design activities (page 124). The report does not discuss the issue of homeporting a CVN at Mayport. Senate The Senate Appropriations Committee, in its report ( S.Rept. 111-226 of July 19, 2010) on S. 3615 , recommends $124.148 million—a $4.098-million increase to the Navy's FY2011 request—for MilCon planning and design activities (page 102). The report does not discuss the issue of homeporting a CVN at Mayport. FY2011 Ike Skelton National Defense Authorization Act ( H.R. 6523 / P.L. 111-383 ) House ( H.R. 5136 ) Section 2201(c)(4) of the FY2011 defense authorization bill ( H.R. 5136 ) as reported by the House Armed Services Committee ( H.Rept. 111-491 of May 21, 2010) states: "None of the funds appropriated pursuant to this authorization of appropriations may be used for architectural and engineering services and construction design of any military construction project necessary to establish a homeport for a nuclear-powered aircraft carrier at Naval Station Mayport, Florida." H.Rept. 111-491 includes report language requiring the Navy and GAO to submit reports concerning the costs and maintenance impacts of homeporting a CVN at Mayport. H.Rept. 111-491 states: East Coast Homeport Cost Assessment The committee is concerned that the full costs associated with the planned second East coast homeport for a nuclear-powered aircraft carrier has been underestimated, introducing a measure of budgetary risk and potential shortfalls in future year's defense budget submissions. The committee directs that, not later than February 15, 2011, the Government Accountability Office (GAO) submit to the congressional defense committees a report containing an independent estimate of the total direct and indirect costs to be incurred by the Federal Government in homeporting a nuclear carrier at Mayport, Florida. (Page 507) The report also states: Naval Station Mayport, Florida, Homeporting Alternatives The committee directs the Secretary of the Navy to report to the congressional defense committees, not later than December 15, 2010, on the implementation and recurring costs of homeporting alternatives including the following homeporting options at Naval Station Mayport: (1) Nuclear-powered aircraft carrier; (2) Littoral Combat Ships; (3) Non-nuclear options considered in the "Environmental Impact Statement for Homeporting of Additional Surface Ships at Naval Station Mayport" signed January 14, 2009; and (4) Other options that the Secretary considers appropriate. Such a review shall include an assessment of one-time and recurring operation and maintenance requirements and military construction requirements associated with the various alternatives. This report shall review the benefits to the northeast Florida ship maintenance industrial base that could result from the homeporting of non-nuclear vessels at the installation. The committee notes that the estimates for the costs of homeporting a nuclear aircraft carrier at Naval Station Mayport continue to rise, and may cost as much as $1 billion in military construction and recurring operation and maintenance costs. The committee believes that a better assessment of these cost estimates of the various alternatives is warranted. The committee also believes that a complement of non-nuclear-powered surface combatants could be more compatible with the existing support structure at Naval Station Mayport and less expensive than duplicating a nuclear maintenance capability that already exists on the East Coast. The committee also notes that the northeast Florida ship maintenance industrial base could be enhanced if the Department of the Navy were to base non-nuclear-powered ships at Naval Station Mayport. Naval Station Mayport already has the pier infrastructure necessary to homeport non-nuclear-powered surface combatant ships, and the maintenance requirements of these alternative homeporting solutions appear to be more closely matched to the expertise of the existing local ship repair industrial base. Finally, the committee understands that a nuclear-powered aircraft carrier homeported at Naval Station Mayport could undergo at the installation only two of the four types of scheduled carrier maintenance availabilities: the Carrier Incremental Availability and the Planned Incremental Availability. These activities would likely provide the local private shipyards with combined yearly revenues of only approximately $20 million. Furthermore, the Navy has indicated that the remaining two types of scheduled nuclear maintenance availabilities can be conducted only in the Norfolk area, requiring a temporary shift in homeport to Norfolk to complete these availabilities. The committee believes that such a temporary shift in homeport could present an additional requirement on carrier crews and their families that could be avoided if Naval Station Mayport were resourced with non-nuclear-powered ships. (Pages 510-511) The report also states: Use of Temporary Shipyard Workforce for Nuclear Maintenance According to the final environmental impact statement for the proposed homeporting of additional surface ships at Naval Station Mayport, Florida, homeporting of a nuclear-powered aircraft carrier (CVN) would result in "temporary surges of maintenance employees associated with the three-year depot-level maintenance cycle for the CVN." The committee is concerned about the impact the addition of depot-level workload at Mayport would have on the sustainability, efficiency, capabilities, and stability of the fly-away teams from the nuclear propulsion depot maintenance workforce used under the Navy's "One Nuclear Shipyard" concept. The committee directs the Comptroller General of the United States to provide an assessment to the congressional defense committees by February 15, 2011, of the readiness and cost impacts of CVN homeporting and maintenance at Naval Station Mayport on the U.S. nuclear power-plant depot maintenance workforce. (Page 254) The report also states: Ship Maintenance Industrial Base Support The committee is concerned that the Navy's recommendation to homeport a nuclear-powered aircraft carrier (CVN) at Naval Station Mayport (NAVSTA Mayport), Florida, could result in the relocation of a critical warfighting asset to a region that may lack the ship maintenance industrial base necessary to meet the specialized repair, maintenance, and related readiness requirements of a nuclear-powered aircraft carrier. Even though the Navy plans to build the necessary facilities at considerable cost, no plan has been presented to address the lack of a trained, highly skilled workforce necessary to staff those facilities and maintain these complex systems. As a result, the committee understands that implementation of the Navy's recommendation would require maintenance teams from other nuclear-powered aircraft carrier homeport locations to be sent to NAVSTA Mayport temporarily to support maintenance requirements, potentially at significant additional cost. Additionally, the committee is aware that the existing private ship maintenance assets located in the Jacksonville, Florida, region has evolved to support the current fleet of non-nuclear-powered ships at NAVSTA Mayport. Under current ship retirement plans, these private ship maintenance capabilities will face severe work reductions, placing their continued existence in jeopardy. The committee does not believe that placing a critical warfighting asset at a location with inadequate maintenance support capabilities, implementing a recommendation that could result in significantly increased ship maintenance costs, or allowing the nation's ship maintenance industrial base to erode are acceptable outcomes. Therefore, the committee directs the Secretary of the Navy to provide a report to the congressional defense committees by December 15, 2010, on the ability of the private ship maintenance industrial base in northeast Florida to support nuclear-powered aircraft carrier maintenance requirements, the likely costs to the Navy that could result from establishing such maintenance capabilities within the local industrial base, and the impacts on costs and workforce scheduling that could result if the Navy must provide the maintenance workforce from another nuclear-powered aircraft carrier homeport location. In addition, the Secretary is directed to submit a copy of the report to the Comptroller General of the United States concurrent with submission to the congressional defense committees. The committee directs the Comptroller General to provide an assessment of the report to the congressional defense committees within 90 days after receiving the report by the Secretary of the Navy. The assessment should: (1) Review the Navy's report for thoroughness and completeness; (2) Assess the ability of the northeast Florida industrial base to develop capabilities to support nuclear-powered aircraft carrier maintenance requirements; (3) Assess how, over a 10-year budget window, the construction of CVN maintenance facilities at NAVSTA Mayport will affect CVN maintenance costs, including recurring and non-recurring costs; and (4) Assess whether homeporting a nuclear-powered aircraft carrier at NAVSTA Mayport would provide sufficient workload to allow the local ship repair industrial base to remain viable in light of current ship retirement plans. (Pages 260-261) Senate ( S. 3454 ) The FY2011 defense authorization bill ( S. 3454 ) as reported by the Senate Armed Services Committee ( S.Rept. 111-201 of June 4, 2010) does not contain a provision similar to Section 2201(c)(4) of H.R. 5136 as reported by the House Armed Services Committee (see above). S.Rept. 111-201 does not discuss the issue of homeporting a CVN at Mayport. Final Version ( H.R. 6523 / P.L. 111-383 ) The joint explanatory statement of the House and Senate Armed Services Committees on H.R. 6523 / P.L. 111-383 of January 7, 2011, stated: The House bill contained a provision (sec. 2201) that would authorize appropriations for the active component military construction and family housing projects of the Navy and Marine Corps for fiscal year 2011. This provision would also provide an overall limitation on the cost of the fiscal year 2011 military construction and family housing projects authorized for the active-duty component of the Navy and Marine Corps. The Senate committee-reported bill contained a similar provision (sec. 2204). The agreement includes the House provision with an amendment deleting a restriction on architectural and engineering services and design funds. While the agreement imposes no restrictions on architectural and engineering services and construction design funds, such restrictions may be warranted in the future. The lack of restriction in this agreement for such funds to establish a homeport for a nuclear-powered aircraft carrier at Naval Station Mayport, Florida, should not imply a position either for or against homeporting. Such a position will be determined should military construction projects be included in future budget submissions. We will review carefully any such projects that may be included in future budget requests, while closely examining evolving military construction cost estimates needed to achieve this capability. FY2010 FY2010 Military Construction Funding Request The Navy's proposed FY2010 budget requested $46.303 million in MilCon funding for channel dredging at Mayport to support the ability of a CVN to enter Mayport. The budget also requested $29.682 million in MilCon funding to repair a wharf (Wharf Charlie) at Mayport, but this request was not related to Mayport's ability to support a CVN—it was related to Mayport's current role as a home port to CGs, DDGs, and FFGs. Together, a total of $75.985 million was requested for channel dredging (CVN-related) and wharf repair (not CVN-related) at Mayport. FY2010 National Defense Authorization Act ( H.R. 2647 / P.L. 111-84 ) House The House Armed Services Committee, in its report ( H.Rept. 111-166 of June 18, 2009) on H.R. 2647 , recommended rejecting the Administration's FY2010 request for $46.3 million in MilCon funding for channel dredging at Mayport. (Page 496) The committee's report stated: The budget request included $46,303,000 to support construction dredging of the Naval Station Mayport turning basin, inner channel, and outer channel. The committee is concerned that a decision to complete the construction dredging of Naval Station Mayport would predispose a Quadrennial Defense Review's determination as to an East Coast Nuclear Aircraft Carrier basing. Accordingly, the committee recommends $0, a reduction of $46,303,000, to support this project. (Page 516). The committee's report also stated: Comptroller General Assessment of Military Basing Decision Process The committee directs the Comptroller General of the United States to submit a report to the congressional defense committees by May 1, 2010, on the military services' decision process used in making basing determinations, such as the decision to establish a second homeport for a nuclear-powered aircraft carrier on the East Coast of the United States. The committee believes this decision raises significant strategic, cost, and risk questions. It is not clear to the committee how the Navy has been determining its basing decisions. For example, the Navy's consideration of whether to homeport additional surface ships at Naval Station Mayport (NAVSTA Mayport), Florida, appears to lack strategic depth. The committee notes that homeporting a nuclear aircraft carrier at NAVSTA Mayport would cost at least $560.0 million in military construction, require the dredging and disposal of approximately 5.2 million cubic yards of dredge material, and increase long-term operation and maintenance costs. The Navy does not appear to have carried out a comprehensive process to determine the need for such expenditures with consideration for strategic rationale, fiscal realities, environmental impacts, and personnel impacts associated with the decision. In light of the substantial costs and the strategic and community impacts that result from basing decisions, the committee directs the Comptroller General to conduct a study on the manner in which the military services consider and utilize the following in making basing decisions: changes to military force structure, strategic imperative and risk assessment, input from combatant commanders, cost, and environmental and socio-economic impacts. Specifically, the review should address the following: (1) Military force structure considerations: When rebasing military assets from one installation to another, the processes the military services use to assess the impact associated with the current and future home stations or homeports. (2) Strategic imperative and risk assessment: The extent to which the military services consider strategic shifts in force posture, such as the shift of naval assets from the Atlantic Ocean to the Pacific Ocean, in basing decisions. When making basing decisions related to strategic dispersal of military assets, the process used by the services to conduct and consider risk assessments. In making the nuclear aircraft carrier homeporting decision, how the Navy weighed the comparative risk between the different needs of the Navy. For example, the consideration the Navy gave to building an additional nuclear aircraft carrier homeport at Naval Station Mayport versus failing to meet ship maintenance and repair shortfalls, or the need for a 313–ship Navy. (3) Cost: The extent to which the military services use a cost-benefit analysis in making basing decisions and the extent to which the budgetary requirements of the entire military service and Department of Defense are considered; the consideration given in the decision-making process to shortfalls in other service budgets and other internal budget accounts; and how the services' analyses compare the strategic benefits of expending funds for one purpose (such as the construction of additional infrastructure) to the use of funds for other purposes (such as meeting unfunded procurement requirements) in determining whether to proceed with a decision. (Pages 537-538) Senate Section 2201 of the FY2010 defense authorization bill ( S. 1390 ) as reported by the Senate Armed Services Committee ( S.Rept. 111-35 of July 2, 2009) recommended approving the Administration's FY2010 request for a total of $75.985 million for MilCon projects (including the channel dredging project) at Mayport. (See page 753 of the printed bill.) The committee's report did not contain any narrative language directly discussing the issue of carrier homeporting at Mayport. Section 114 of S. 1390 would require the Navy to submit a report to the congressional defense committees on a potential service life extension program (SLEP) for the Navy's Oliver Hazard Perry (FFG-7) class frigates. FFG-7s account for several of the surface combatants currently homeported at Mayport, and the FFG-7s homeported at Mayport are currently scheduled to be retired from Navy service by 2014. The text of Section 114 is as follows: SEC. 114. REPORT ON A SERVICE LIFE EXTENSION PROGRAM FOR OLIVER HAZARD PERRY CLASS FRIGATES. Not later than 90 days after the date of the enactment of this Act, the Secretary of the Navy shall submit to the congressional defense committees a report setting forth the following: (1) A detailed analysis of a service life extension program (SLEP) for the Oliver Hazard Perry class frigates (FFGs), including— (A) the cost of the program; (B) a schedule for the program; and (C) the shipyards available to carry out the work under the program. (2) A detailed plan of the Navy for achieving a 313-ship fleet as contemplated by the 2006 Quadrennial Defense Review, including a comparison for purposes of that plan of decommissioning Oliver Hazard Perry class frigates as scheduled with extending the service life of such frigates under the service life extension program. (3) The strategic plan of the Navy for the manner in which the Littoral Combat Ship (LCS) will fulfill the roles and missions currently performed by the Oliver Hazard Perry class frigates as they are decommissioned. (4) The strategic plan of the Navy for the Littoral Combat Ship if the extension of the service life of the Oliver Hazard Perry class frigates alleviates demand arising under the current capabilities gap in the Littoral Combat Ship. (5) A description of the manner in which the Navy has met the needs of the United States Southern Command over time, including the assets and vessels the Navy has deployed for military-to-military engagements, UNITAS exercises, and counterdrug operations in support of the Commander of the United States Southern Command during the five-year period ending on the date of the report. Section 112 of S. 1390 would require the Navy to submit a report to the congressional defense committees on the Navy's plans for homeporting Littoral Combat Ships (LCSs). Under current Navy plans, LCSs are to replace Oliver Hazard Perry (FFG-7) class frigates in the Navy's force structure. The text of Section 112 is as follows: SEC. 112. REPORT ON STRATEGIC PLAN FOR HOMEPORTING THE LITTORAL COMBAT SHIP. (a) Report Required- Not later than 90 days after the date of the enactment of this Act, the Secretary of the Navy shall submit to the congressional defense committees a report setting forth the strategic plan of the Navy for homeporting the Littoral Combat Ship (LCS) on the East Coast and West Coast of the United States. (b) Elements- The report required by subsection (a) shall include the following: (1) The requirements for homeporting of the Littoral Combat ship of the commanders of the combatant commands, set forth by geographic area of responsibility (AOR). (2) A description of the manner in which the Navy will meet the requirements identified under paragraph (1). (3) An assessment of the effect of each type of Littoral Combat Ship on each port in which such ship could be homeported. (4) A map, based on the current plan of 55 Littoral Combat Ships, identifying where each ship will homeport and how such ports will accommodate both types of Littoral Combat Ships, based on the current program and a 313-ship Navy. (5) An estimate of the costs of infrastructure required for Littoral Combat Ships at each homeport, including— (A) existing infrastructure; and (B) such upgraded infrastructure as may be required. Conference The conference report ( H.Rept. 111-288 of October 7, 2009) on H.R. 2647 / P.L. 111-84 of October 28, 2009, authorized the Administration's FY2010 request for $46.3 million in MilCon funding for channel dredging at Mayport. (Page 633) The report states: The conference agreement includes authorization for $46.3 million for channel and turning basin dredging at Naval Station (NS) Mayport, Florida. The Navy requested this project in order to allow a nuclear aircraft carrier to enter Naval Station Mayport on a temporary basis with an embarked air wing, full stores, and under any tidal conditions. The conferees authorize funding for this project based on the Secretary of the Navy and Chief of Naval Operations' assurances that the dredging is needed for current operational considerations to permit the use of Mayport as a transient dock and is ''required irrespective of the final decision on aircraft carrier homeporting at Mayport.'' The conferees emphasize that the inclusion of an authorization for dredging at NS Mayport is not an indication of conferee support for the establishment of an additional homeport for nuclear aircraft carriers on the east coast, or intended to influence the ongoing Quadrennial Defense Review, which may include a recommendation on the establishment of a second east coast homeport for nuclear aircraft carriers. Furthermore, the conferees note that this funding is provided solely to permit use of Mayport as a transient port, and that any potential designation of Mayport as a nuclear carrier homeport will require future authorizations from the Committees on Armed Services of the Senate and the House of Representatives. (Page 870) Section 127 required the Navy to submit a report to the congressional defense committees on a potential service life extension program (SLEP) for the Navy's Oliver Hazard Perry (FFG-7) class frigates. FFG-7s account for several of the surface combatants currently homeported at Mayport, and the FFG-7s homeported at Mayport are currently scheduled to be retired from Navy service by 2014. The text of Section 127 is as follows: SEC. 127. REPORT ON A SERVICE LIFE EXTENSION PROGRAM FOR OLIVER HAZARD PERRY CLASS FRIGATES. Not later than 90 days after the date of the enactment of this Act, the Secretary of the Navy shall submit to the congressional defense committees a report setting forth the following: (1) A detailed analysis of a service life extension program for the Oliver Hazard Perry class frigates, including— (A) the cost of the program; (B) a notional schedule for the program; and (C) the shipyards available to carry out the work under the program. (2) The strategic plan of the Navy for— (A) the manner in which the Littoral Combat Ship will fulfill the roles and missions currently performed by the Oliver Hazard Perry class frigates as such frigates are decommissioned; and (B) the year-by-year planned commissioning of Littoral Combat Ships and planned decommissioning of Oliver Hazard Perry class frigates through the projected service life of the Oliver Hazard Perry class frigates. (3) An analysis of the necessary procurement rates of Littoral Combat Ships if the extension of the service life of the Oliver Hazard Perry class frigates alleviates capability gaps caused by a delay in the procurement rates of Littoral Combat Ships. (4) A description of the manner in which the Navy has met the requirements of the United States Southern Command over time, including the assets and vessels the Navy has deployed for military-to-military engagements, UNITAS exercises, and counterdrug operations in support of the Commander of the United States Southern Command during the five-year period ending on the date of the report. Section 123 of the bill required the Navy to submit a report to the congressional defense committees on the Navy's plans for homeporting Littoral Combat Ships (LCSs). Under current Navy plans, LCSs are to replace Oliver Hazard Perry (FFG-7) class frigates in the Navy's force structure. The text of Section 123 is as follows: SEC. 123. REPORT ON STRATEGIC PLAN FOR HOMEPORTING THE LITTORAL COMBAT SHIP. (a) REPORT REQUIRED.—At the same time that the budget is submitted under section 1105(a) of title 31, United States Code, for fiscal year 2011, the Secretary of the Navy shall submit to the congressional defense committees a report setting forth the strategic plan of the Navy for homeporting the Littoral Combat Ship on the east coast and west coast of the United States. (b) ELEMENTS.—The report required by subsection (a) shall include the following: (1) An analysis of how the homeporting plan would support the requirements of the commanders of the combatant commands, by geographic area of responsibility, for the capabilities delivered by Littoral Combat Ships, including the notional transit times to the various geographic areas of responsibility. (2) An assessment of the effect that each type of Littoral Combat Ship would have on each port in which such ship could be homeported, including an identification of the infrastructure required to support each such ship with respect to— (A) the availability of pier space with supporting ship services infrastructure, taking into account the largest fleet size envisioned by the long-term plan for the construction of naval vessels submitted for fiscal year 2011; (B) the logistical and maintenance support services required in any port chosen for the Littoral Combat Ships; and (C) any investment in naval station infrastructure required for homeporting Littoral Combat Ships (including a plan for such investment). (3) With respect to the projected force structure size of the Navy in fiscal year 2020, a graphical depiction of the total planned ships berthing in the pier areas of any naval facility chosen to homeport Littoral Combat Ships, including the identification of the ships berthing plan for the maximum number of ships expected in-port at any one time. The report required by Section 123 was submitted to Congress in February 2010. FY2010 Military Construction and Veterans Affairs Appropriations Act ( H.R. 3082 / H.R. 3288 / P.L. 111-117 ) House The House Appropriations Committee, in its report ( H.Rept. 111-188 of June 26, 2009) on H.R. 3082 , recommended approving the Administration's FY2010 request for $46.3 million in MilCon funding for channel dredging at Mayport. (Page 107) Senate The Senate Appropriations Committee, in its report ( S.Rept. 111-40 of July 7, 2009) on the FY2010 military construction and veterans affairs appropriations bill ( S. 1407 ), recommended approving the Administration's FY2010 request for $46.3 million in MilCon funding for channel dredging at Mayport. (Page 88) Conference H.R. 3082 was incorporated as Division E of H.R. 3288 / P.L. 111-117 of December 16, 2009, a bill that became a consolidated appropriations act. The conference report ( H.Rept. 111-366 of December 8, 2009) on H.R. 3288 / P.L. 111-117 approved the Administration's FY2010 request for $46.3 million in MilCon funding for channel dredging at Mayport. (Page 1410) FY2009 FY2009 Duncan Hunter National Defense Authorization Act ( S. 3001 / P.L. 110-417 ) Section 2207 of the FY2009 defense authorization bill as passed by the House ( H.R. 5658 ; H.Rept. 110-652 of May 16, 2008) stated: SEC. 2207. REPORT ON IMPACTS OF SURFACE SHIP HOMEPORTING ALTERNATIVES. (a) Report Required- The Secretary of the Navy shall not issue a record of decision for the proposed action of homeporting additional surface ships at Naval Station Mayport, Florida, until at least 30 days after the date on which the Secretary submits to Congress a report containing an analysis of the socio-economic impacts and an economic justification on each location from which a vessel is proposed to be removed for homeporting at Naval Station Mayport under the preferred alternative identified in the final environmental impact statement for the proposed action. (b) Additional Reporting Requirement- If the final environmental impact statement does not contain a preferred alternative or if the Secretary intends to select an alternative other than the preferred alternative in the record of decision, then the Secretary shall submit to Congress a report (in the case where no preferred alternative is identified) or an additional report (in the case where the preferred alternative is not selected) containing an analysis of the socio-economic impacts and an economic justification on each location from which a vessel is proposed to be removed for homeporting at Naval Station Mayport. The FY2009 defense authorization bill as passed by the Senate ( S. 3001 ; S.Rept. 110-335 of May 12, 2008) did not contain a provision similar to Section 2207 of H.R. 5658 . In lieu of a conference report, there was compromise version of S. 3001 that was accompanied by a joint explanatory statement. The compromise version of S. 3001 , which was signed into law as P.L. 110-417 of October 14, 2008, did not contain a provision similar to Section 2207 of H.R. 5658 . FY2008 FY2008 National Defense Authorization Act ( H.R. 4986 / P.L. 110-181 ) The House Armed Services Committee, in its report ( H.Rept. 110-146 of May 11, 2007) on the FY2008 defense authorization bill ( H.R. 1585 ), stated: Carrier Basing The committee understands that the Navy has unused capacity at Naval Station Mayport, Florida, and is conducting an environmental impact statement on the feasibility of stationing additional surface ships, including a nuclear aircraft carrier, at Naval Station Mayport. The committee believes that Naval Station Mayport is an important defense asset that should be fully utilized. The committee is concerned that Naval Station Mayport has not previously served as homeport for a nuclear carrier and does not contain the considerable specialized infrastructure necessary to sustain and maintain such a vessel. Therefore, before the Secretary of the Navy recommends the stationing of a nuclear carrier at Naval Station Mayport, the committee directs the Secretary to determine the full range of costs associated with the construction of nuclear infrastructure and port improvements at Naval Station Mayport necessary to support a nuclear carrier, including a detailed assessment of alternative sites, and submit the results of this analysis to the congressional defense committees by October 1, 2007. (Page 518) FY2008 Military Construction, Veteran Affairs, and Related Agencies Appropriations Act ( H.R. 2764 / P.L. 110-161 ) The House Appropriations Committee, in its report ( H.Rept. 110-186 of June 11, 2007) on H.R. 2642 , which at that point was the FY2008 military construction, veteran affairs, and related agencies appropriations bill, stated: Carrier Homeporting .—The Committee understands that it is the Navy's publicly stated policy to maintain two nuclear carrier-capable homeports on the east coast. The Committee further understands that the Navy is in the process of drafting an environmental impact statement (EIS) that includes the evaluation of the necessary infrastructure and dredging required to make Naval Station Mayport the second such homeport in addition to Naval Station Norfolk, and that a draft EIS will be released in early 2008. The Committee directs the Navy to provide a report to the Committee identifying the military construction requirements and an estimated timetable for completion for making Mayport a nuclear carrier-capable homeport no later than 30 days after release of the draft EIS. (Page 17) H.R. 2642 later became the FY2008 supplemental appropriations act ( P.L. 110-252 of June 30, 2008). The FY2008 military construction, veteran affairs, and related agencies appropriations bill was eventually enacted as part of the FY2008 consolidated appropriations act ( H.R. 2764 / P.L. 110-161 of December 26, 2007). FY2007 FY2007 John Warner National Defense Authorization Act ( H.R. 5122 / P.L. 109-364 ) The Senate Armed Services Committee, in its report ( S.Rept. 109-254 of May 9, 2006) on the FY2007 defense authorization bill ( S. 2766 ), stated: The committee maintains its concern, expressed in the Senate report accompanying S. 1042 ( S.Rept. 109-69 ) of the National Defense Authorization Act for Fiscal Year 2006, regarding the declining size of the naval force and the reduction to the number of aircraft carriers. The committee agrees, however, with the Navy's determination that it is not feasible to maintain 12 operational aircraft carriers by restoring the USS John F. Kennedy (CV–67) to a deployable, fully mission-capable platform. The committee believes that it is vital to the national security of the United States that a fleet of at least 11 aircraft carriers be maintained to support the National Military Strategy, and has taken extraordinary action to support the CNO's force structure plan by authorizing increased procurement for shipbuilding and, specific to aircraft carriers, by authorizing additional advance procurement and incremental funding for the construction of the first 3 CVN–21 class aircraft carriers. Further, recognizing the increased need for timeliness of surge operations that today's smaller force structure places on the Fleet Response Plan, the committee reaffirms the judgment that the Chief of Naval Operations, Admiral Clark, provided in testimony before the Committee on Armed Services in February 2005, that the Atlantic Fleet should continue to be dispersed in two homeports. (Page 380) S.Rept. 109-254 also presented additional views of Senator Bill Nelson relating to the homeporting of aircraft carriers on the Atlantic Coast. (See pages 528-529) The conference report ( H.Rept. 109-702 of September 29, 2006) on the FY2007 defense authorization bill ( H.R. 5122 ) stated: The conferees agree with the CNO statement in his letter dated August 14, 2006, to the ranking Member of the Committee on Armed Services of the Senate, that ''Naval Station Mayport and the many resources of the Jacksonville area remain vitally important to Navy readiness,'' and support the CNO commitment ''to maintaining the infrastructure necessary to support the strategic dispersal of the Atlantic Fleet at this key east coast port.'' (Page 805) Appendix B. Additional Background Information from May 2010 GAO Report This appendix reprints Appendix II from a May 2010 GAO report on the Navy's basing decision process. Appendix C. Excerpts from January 2009 Navy Record of Decision (ROD) This appendix presents excerpts from the January 2009 Navy Record of Decision (ROD) document announcing the Navy's desire to transfer a CVN to Mayport. The document stated in part: SUMMARY: The Department of the Navy (DON), after carefully weighing the strategic, operational, and environmental consequences of the proposed action, announces its decision to homeport one nuclear-powered aircraft carrier (CVN) at Naval Station (NAVSTA) Mayport. Today's decision does not relocate a specific CVN to NAVSTA Mayport. It does initiate a multiyear process for developing operational, maintenance, and support facilities at NAVSTA Mayport to support homeporting of one CVN. This multiyear process includes implementing projects for dredging and dredged material disposal, construction of CVN nuclear propulsion plant maintenance facilities, wharf improvements, transportation improvements, and construction of a parking structure to replace existing parking that would be displaced by development of the CVN nuclear propulsion plant maintenance facilities. The projects necessary to create the capacity to support CVN homeporting could be completed as early as 2014. No CVN homeport change will occur before operational, maintenance, and support facility projects are completed. Selection of the CVN to be homeported at NAVSTA Mayport would not occur until approximately one year prior to the ship's transfer to NAVSTA Mayport. Selection of a specific CVN for homeporting at NAVSTA Mayport will be based upon then current operational needs, strategic considerations, and maintenance cycles. The DON decision to utilize the capacity at NAVSTA Mayport to homeport a CVN is the culmination of a two and a half year process involving environmental analysis under the National Environmental Policy Act (NEPA), identification of the recurring and nonrecurring costs associated with homeporting surface ships at NAVSTA Mayport, and an assessment of strategic concerns. The DON environmental analysis included extensive studies regarding impacts associated with dredging, facility construction, and homeport operations. The environmental analysis undertaken by the DON included lengthy and detailed consultations with regulatory agencies, such as the U.S. Fish and Wildlife Service (USFWS) and the National Marine Fisheries Service (NMFS), regarding impacts to endangered and threatened species, and the U.S. Army Corps of Engineers (USACE) and the Environmental Protection Agency (EPA) regarding dredging operations and the in-water disposal of dredged materials. Public awareness and participation were integral components of the Environmental Impact Statement (EIS) process. The DON ensured that members of the public, state agencies, and federal agencies had the opportunity to help define the scope of the DON's analysis as well as examine and consider the studies undertaken by the DON. Public review and comment on the DON's interpretation of those studies and the conclusions drawn from the DON's interpretation of associated data were robust. The decision reached by the DON, as further explained later in this Record of Decision, is based upon the DON's environmental, operational, and strategic expertise and represents the best military judgment of the DON's leadership. The need to develop a hedge against the potentially crippling results of a catastrophic event was ultimately the determining factor in this decision-making process. The consolidation of CVN capabilities in the Hampton Roads area on the East Coast presents a unique set of risks. CVNs assigned to the West Coast are spread among three homeports. Maintenance and repair infrastructure exists at three locations as well. As a result, there are strategic options available to Pacific Fleet CVNs should a catastrophic event occur. By contrast, NAVSTA Norfolk is homeport to all five of the CVNs assigned to the Atlantic Fleet and the Hampton Roads area is the only East Coast location where CVN maintenance and repair infrastructure exists. It is the only location in the U.S. capable of CVN construction and refueling. The Hampton Roads area also houses all Atlantic Fleet CVN trained crews and associated community support infrastructure. There are no strategic options available outside the Hampton Roads area for Atlantic Fleet CVNs should a catastrophic event occur.... ALTERNATIVES CONSIDERED: The Draft and Final EIS assessed the impacts of 12 action alternatives and the no action alternative. Consistent with the purpose and need for the proposed action, the alternatives addressed only options for utilizing capacities at NAVSTA Mayport for homeporting additional surface ships. Examination of homeporting options at other geographic locations was not relevant to the established purpose and need, so no such alternatives were considered. The 12 action alternatives evaluated a broad range of options for homeporting surface ships at NAVSTA Mayport. The alternatives included ship types currently homeported at NAVSTA Mayport: destroyers (DDGs), and frigates (FFGs), as well as additional types of ships identified by the Chief of Naval Operations (CNO), including amphibious assault ships (LHDs), amphibious transport dock ships (LPDs), dock landing ships (LSDs), and a CVN. In the Final EIS, the DON identified Alternative 4, as the Preferred Alternative. Alternative 4 involves homeporting one CVN at NAVSTA Mayport and included dredging, infrastructure and wharf improvements, on-station road and parking improvements, and construction of CVN nuclear propulsion plant maintenance facilities at NAVSTA Mayport. Factors that influenced selection of Alternative 4 as the Preferred Alternative included impact analyses in the EIS, estimated costs of implementation, including military construction and other operation and sustainment costs, and strategic considerations. Regulations implementing NEPA require the identification of the environmentally preferred alternative. The environmentally preferred alternative for this EIS is Alternative 2, homeporting two LHDs at NAVSTA Mayport. LHD homeporting would require no dredging or other major construction activities compared to dredging and construction activities required to implement the Preferred Alternative to homeport a single CVN. As such, the Preferred Alternative (Alternative 4) would have greater environmental impact than the environmentally preferred alternative (Alternative 2) on earth resources, water resources, air quality, noise, biological resources, and utilities. While the environmentally preferred alternative would have less environmental impact than the Preferred Alternative, it does not address strategic concerns or reduce risks to critical Atlantic Fleet assets and infrastructure. ENVIRONMENTAL IMPACTS: The EIS analyzed environmental impacts and the potential magnitude of those impacts relative to the following categories of environmental resources: earth resources, land and offshore use, water resources, air quality, noise, biological resources, cultural resources, traffic, socioeconomics, general services, utilities, and environmental health and safety. Analysis of these categories also included the radiological aspects of CVN homeporting. Only environmental impacts to NAVSTA Mayport and the project area were evaluated. There were no environmental impacts to the human environment outside of NAVSTA Mayport and the project area that were interrelated to the natural or physical environmental effects of the proposed action. The environmental impact of implementing each alternative was evaluated against the 2006 baseline. The baseline year 2006 best represents recent and historical operations at NAVSTA Mayport, and 2014 represents the end-state year by which all alternatives evaluated in the EIS could be implemented. Many impacts were found to be common among the alternatives.... DECISION: After considering the environmental impacts analyzed in the EIS, the recurring and nonrecurring costs associated with homeporting additional surface ships at NAVSTA Mayport, and strategic implications of a second CVN homeport on the East Coast to support the Atlantic Fleet, the DON elected to implement Alternative 4, the Preferred Alternative. That alternative provides for homeporting one CVN at Naval Station (NAVSTA) Mayport. The DON decision does not immediately relocate a specific CVN to NAVSTA Mayport. It does initiate a multiyear process for developing operational, maintenance, and support facilities at NAVSTA Mayport to support homeporting of one CVN. This multiyear process includes implementing projects for dredging and dredged material disposal, construction of CVN nuclear propulsion plant maintenance facilities, wharf improvements, transportation improvements, and construction of a parking structure to replace existing parking that would be displaced by development of the CVN nuclear propulsion plant maintenance facilities. The projects necessary to create the capacity to support CVN homeporting could be completed as early as 2014. No CVN homeport change will occur before operational, maintenance, and support facility projects are completed. Selection of the CVN to be homeported at NAVSTA Mayport would not occur until approximately one year prior to the ship's transfer to NAVSTA Mayport. Selection of a specific CVN for homeporting at NAVSTA Mayport will be based upon then current operational needs, strategic considerations, and maintenance cycles. The most critical considerations in the DON's decision-making process were the environmental impacts associated with the action, recurring and nonrecurring costs associated with changes in surface ship homeporting options, and strategic dispersal considerations. The need to develop a hedge against the potentially crippling results of a catastrophic event was ultimately the determining factor in this decision-making process. The consolidation of CVN capabilities in the Hampton Roads area on the East Coast presents a unique set of risks. CVNs assigned to the West Coast are spread among three homeports. Maintenance and repair infrastructure exists at three locations as well. As a result, there are strategic options available to Pacific Fleet CVNs if a catastrophic event occurred. By contrast, NAVSTA Norfolk is homeport to all five of the CVNs assigned to the Atlantic Fleet and the Hampton Roads area is the only East Coast location where CVN maintenance and repair infrastructure exists. It is the only location in the U.S. capable of CVN construction and refueling. The Hampton Roads area also houses all Atlantic Fleet CVN trained crews and associated community support infrastructure. There are no strategic options available outside the Hampton Roads area for Atlantic Fleet CVNs if a catastrophic event occurred. Environmental impacts: Environmental impacts were identified through studies and data collection efforts. The information culled from the studies and collected data was assessed and conclusions were drawn regarding the significance of environmental impacts. These conclusions, along with the underlying studies and data, were the subject of discussions and consultations with federal/state regulators over the course of the EIS process. This interagency process led to identification of mitigation measures, where appropriate, to address environmental impacts. Based on these consultations with regulators and their subject matter experts, the DON has committed to implementation of specific mitigation measures as outlined earlier in this Record of Decision. There are no environmental impacts associated with homeporting a CVN at NAVSTA Mayport that cannot be appropriately addressed or mitigated, including impacts to endangered species such as the NARW, Florida Manatee, and sea turtles. Recurring and nonrecurring costs: The DON's analysis and assessment of socioeconomic impacts in the EIS associated with the range of alternatives addressed short-term and long-term local economic impacts in the Mayport area. In addition to the socioeconomic impacts considered in the EIS, recurring and onetime costs associated with changes to surface ship homeporting were projected and considered in the DON's decisionmaking process. Recurring and nonrecurring costs for the preferred alternative are less than 10% of the cost of a single CVN and less than 1% of the cost of the DON's CVN assets. That investment in homeport capacity at NAVSTA Mayport provides additional security for CVN assets and enhances the DON's ability to maintain its effectiveness at a time when the ability to address contingencies and respond to the unexpected is essential. In terms of risk mitigation, DON gains a dispersal capability and its benefits at a fraction of the cost of an aircraft carrier. Recurring costs included costs associated with Sustainment, Restoration, and Modernization (SRM), Base Operations Support (BOS), training, air wing transportation, nuclear maintenance labor, and Basic Allowance for Housing (BAH) for Sailors and their families. Sustainment costs are for activities necessary to keep facilities in good condition and therefore enable them to achieve their intended useful life. Restoration and Modernization costs are life-cycle investments required to provide for recapitalized facilities that support new missions, return facilities to good condition, and improve facilities beyond original conditions or capabilities. BOS costs included Facilities Operations costs such as Utilities, Facility Services, Facility Management, and Fire and Emergency Services. Onetime costs included costs associated with MILCON projects (construction and Planning and Design), onetime maintenance costs for management and Industrial Plant Equipment (IPE) costs, and Permanent Change of Station (PCS) associated with the initial CVN homeport assignment at NAVSTA Mayport. PCS costs are those costs associated with moving the ship's crew and dependents to NAVSTA Mayport. PCS costs were estimated costs because the location from which crews and their families would be moved remains undetermined. Strategic dispersal: The strategic dispersal of surface ships, especially vital strategic assets such as CVNs that serve our national interests in both peace and war, was assessed through examination of potential vulnerabilities. These potential vulnerabilities were examined in the context of operational, training and maintenance requirements of East Coast assets. Strategic dispersal factors considered included: transit times to various deployment and training areas; shipping traffic volumes and associated risk of a maritime accident; port force protection postures and risk mitigation measures; integrated vulnerability and threat assessments; historic aircraft carrier loading; physical pier capacity; nuclear maintenance capability; homeporting options in response to a catastrophic event; geographic location of the aircraft carrier aircraft squadrons; transit times from port to the open sea; historic sortie rates due to hurricanes or other natural phenomena; and the risk to the ships, infrastructure and personnel who man, service and repair aircraft carriers associated with natural or man-made catastrophic events. In terms of these factors, the analysis concluded that the strategic value of NAVSTA Norfolk and NAVSTA Mayport as CVN homeports essentially was equal. The DON's strategic analysis, however, also demonstrated the value of having both NAVSTA Norfolk and NAVSTA Mayport as CVN homeports. Establishing CVN homeport capacity at NAVSTA Mayport can be accomplished without any adverse impacts on operations while at the same time providing the added strategic value of a second CVN homeport on the East Coast. The most significant strategic advantage offered by development of an additional East Coast CVN homeport is a hedge against a catastrophic event that may impact NAVSTA Norfolk, the only existing CVN homeport for Atlantic Fleet CVNs. It is difficult to quantify the likelihood of a catastrophic event, whether natural or man-made. Nonetheless, there is a need to plan and prepare for any such event. That planning and preparation must address CVN maintenance and repair infrastructure as well as operational considerations. The fact that quantifying the likelihood of a catastrophic event is so difficult underscores the need to ensure that our planning and preparation efforts do not underestimate or overlook the long-term effects of such event. Hurricane Katrina is a clear and recent example. The level of devastation in New Orleans in the aftermath of Hurricane Katrina was so extensive and so pervasive that more than three years after Katrina hit, the New Orleans industrial infrastructure, work force, and community support functions have not fully recovered. The potential impact of similar man-made or natural catastrophic events in the Hampton Roads area requires the DON to plan and prepare. A failure to do so presents an unacceptable risk. The aircraft carriers of the United States DON are vital strategic assets that serve our national interests in both peace and war. The President calls upon them for their unique ability to provide both deterrence and combat support in times of crisis. Of the 11 aircraft carriers currently in service, five are assigned to the Atlantic Fleet. NAVSTA Norfolk is homeport to all five of the CVNs assigned to the Atlantic Fleet and the Hampton Roads area is the only East Coast location where CVN maintenance and repair infrastructure exists. It is the only location in the U.S. capable of CVN construction and refueling. The Hampton Roads area also houses all Atlantic Fleet CVN trained crews and associated community support infrastructure. A second CVN homeport on the East Coast will provide additional CVN maintenance infrastructure, thereby providing added strategic value and allowing the DON to extract the added operational value of two CVN homeports in meeting its national defense obligations. Homeporting a CVN at NAVSTA Mayport would provide strategic options in case of a catastrophic event in the Hampton Roads area, and enhance distribution of CVN assets, thereby reducing the risks to aircraft carriers and associated maintenance and repair infrastructure supporting those crucial assets.... CONCLUSION: The decision to create the capacity to homeport a CVN at NAVSTA Mayport represents the best military judgment of the DON's leadership regarding strategic considerations. In reaching that decision, the DON considered the environmental impacts analyzed in the EIS, comments from regulatory agencies as well as those received from members of the public, mitigation measures that would lessen the extent and severity of environmental impacts, recurring and nonrecurring costs, and the strategic implications of developing a second CVN homeport on the East Coast to support Atlantic Fleet operational, training and maintenance needs. There will be no significant adverse environmental impacts associated with the CVN homeporting. That conclusion is based on the data collected and analyzed in the EIS, on interagency consultations, and on the mitigation measures developed as part of that consultation process. The cost of developing a CVN homeport at NAVSTA Mayport was balanced against the strategic need to create a hedge against a catastrophic event in the Hampton Roads area. The cost of developing a CVN homeport at NAVSTA Mayport is more than offset by the added security for CVN assets and enhanced operational effectiveness provided by the ability to operate out of two homeports. Ultimately, the need to develop a hedge against the potentially crippling results of a catastrophic event was the driver behind the decision to homeport a CVN at NAVSTA Mayport. Developing a second CVN homeport on the East Coast not only reduces potential risk to CVN assets through dispersal of those critical assets, it provides some maintenance and repair infrastructure and ensures access to that infrastructure by CVNs deployed at the time a catastrophic event in Hampton Roads occurred. Mayport allows DON to obtain the advantages of fleet dispersal and survivability without impacting operational availability. On the West Coast DON has accepted reduced operational availability in the interest of dispersal. By homeporting CVNs in the Northwestern U.S., DON loses operational availability during the additional transit time required to reach operational and training areas. By establishing a second CVN homeport on the East Coast, DON can gain the dispersal advantage without the increased transit time. The proximity to training areas and transit time to operating areas is about equal from Norfolk and Mayport. West Coast CVN homeports and maintenance facilities are not viable options in planning for Atlantic Fleet CVN assets in the event a catastrophic event occurs in the Hampton Roads area. The nuclear powered aircraft carriers are too large to transit the Panama Canal, requiring a 12,700 nautical mile voyage around South America to reach the closest CVN homeport on the West Coast at [ ]San Diego. Neither the DON, nor the nation, nor its citizens can wait for a catastrophic event to occur before recognizing the potential impacts of such an event and appropriately planning and preparing for continuity of operations. This lesson was learned all too well in the aftermath of recent catastrophic events such as Hurricane Katrina. The DON looked at the possible crippling effects - immediate and long-term - of a catastrophic event in the Hampton Roads area and recognized its responsibility to develop a hedge against such an event. That hedge is homeporting a CVN at NAVSTA Mayport and developing the requisite operational, training, maintenance and support facilities. Homeporting one CVN at NAVSTA Mayport best serves the interests of the DON and the nation, and can be accomplished in a manner that keeps environmental impacts at a less than significant level. Appendix D. Navy Data on Hurricane Risk This appendix presents information that the Navy has provided regarding the risk of hurricanes at Norfolk and Mayport. Navy Briefing Slide Figure D -1 is a Navy briefing slide on relative hurricane risk for the port of Norfolk and the port of Jacksonville, which is near Mayport. Excerpt from DOD Information Paper In response to questions and requests for information from congressional offices, the Navy in December 2008 provided, among other things, supplementary historical data regarding hurricanes in the Hampton Roads area and Mayport and their effect on Navy facilities and ship operations. The questions/requests for information regarding hurricanes, and the Navy's responses, are reproduced below. QUESTION/REQUEST: How much collateral damage did Norfolk and Mayport sustain from hurricanes that did NOT make a direct hit over the analyzed time period of 1851-2006? RESPONSE: a. MAYPORT: Since 1995, 8 named storms—of which 1 was a hurricane—have had a CPA of 75 nm or closer to NAVSTA Mayport From 1851-2008, there were 51 tropical cyclones that were classified as hurricanes at some point in their life that passed within 180 nm of Mayport. Of these, 22 came within 50 nm. Collateral damage (back to 2004): $6.1M b. NORFOLK: Since 1995, 15 named storms—of which 4 were hurricanes—came within 75 nm or closer to NAVSTA Norfolk From 1851-2008, there were 54 tropical cyclones that were classified as hurricanes at some point in their life that passed within 180 nm of Norfolk. Of these, 14 came within 50 nm. Collateral damage (all hurricanes, direct hit and near miss back to 1999): $11.8M c. Some ships undergoing maintenance must occasionally remain in port during hurricanes. A review of records since the 2004 hurricane season indicated no resulting ship damage for those ships remaining inport. QUESTION/REQUEST: How much hurricane damage has NAVSTA Norfolk and NAVSTA Mayport sustained over the time period analyzed? RESPONSE: Historical hurricane damage costs available include: Mayport: FY04: $1.2M FY05: $4.1M FY08: $0.8M Norfolk FY99: $1.0M FY03: $10.8M QUESTION/REQUEST: How many evacuation orders (sorties) have been issued to Navy ships at Norfolk and Mayport because of inclement weather? Provide historical data to the maximum extent possible. RESPONSE: Since 1995, ships at Mayport have sortied 6 times and ships at Norfolk have sortied 5 times: a. Mayport: i. Bertha (1996) ii. Bonnie (1998) iii. Floyd (1999) iv. Charley (2004) v. Ophelia (2005) vi. Fay (2008) b. Norfolk: i. Felix (1995) ii. Bertha (1996) iii. Bonnie (1998) iv. Floyd (1999) v. Isabel (2003) Carrier Sorties due to Hurricanes Notes: Data prior to 1992 is incomplete for tracking of hurricane sorties. QUESTION/REQUEST: Have any Navy ships remained pierside during past hurricane evacuation orders? If so, what happened? RESPONSE: No records exist that indicate any aircraft carriers were unable to sortie. Note: Shipyards are designated "safe havens," therefore CVNs in the shipyards are not required to sortie. Recent examples of non-aircraft carriers remaining inport during hurricanes include: a. In August 2005, the following ships were pierside at Northrop Grumman Shipbuilding—Ingalls Operations and NGSB Avondale Operations during Hurricane Katrina: i. DDG 98 (FORREST SHERMAN) ii. DDG 100 (KIDD) iii. LPD 17 (SAN ANTONIO) iv. LPD 19 (MESA VERDE) v. LPD 18 (NEW ORLEANS) LPD 17 and DDG 98 sustained minor damage during the storm and DDG 100 sustained more extensive hull damage. The cost of repairs is classified as "Business Sensitive." b. During hurricanes Gustav and Ike in 2008, the following ships were pierside at NGSB Avondale and NGSB Ingalls and did not sustain any damage: i. LPD 20 (GREEN BAY) ii. DDG 103 (TRUXTUN) iii. DDG 105 (DEWEY) QUESTION/REQUEST: Historically, how have hurricanes negatively affected CVN operations on the East Coast? RESPONSE: Hurricanes can and have affected aircraft carrier operations during all phases of the carrier schedule. CVNs inport will sortie when directed by the Fleet Commander and conduct hurricane avoidance. CVNs underway for training will suspend or cancel training evolutions and maneuver to avoid the hurricane's predicted track. QUESTION/REQUEST: Compare the amount of time required to sortie ships from Norfolk and Mayport. RESPONSE: Following issuance of the sortie order, ships in Mayport require approximately 1 hour to reach the open sea and ships in Norfolk require between 4 to 4.5 hours to reach open sea. QUESTION/REQUEST: When, if ever, has the Navy NOT been able to sortie ships? RESPONSE: Ships in maintenance at Norfolk Naval Shipyard and Northrop Grumman Newport News Shipbuilding do not sortie since the shipyards are considered safe havens for ships during hurricanes. No records exist that indicate any aircraft carriers not in safe havens were unable to sortie. Appendix E. Examples of Views from Members This appendix presents examples of views from Members regarding the Navy's desire to homeport a CVN at Mayport. These views are presented as examples only. Views of Members from Florida An October 23, 2009, press release from the office of Representative Ander Crenshaw states: WASHINGTON, DC—United States Senators George LeMieux (R-FL) and Bill Nelson (D-FL) and Representatives Ander Crenshaw (R-Jacksonville) and Corrine Brown (D-Jacksonville) signed and mailed the following letter to President Obama in advance of his trip to North Florida on October 26. The letter (10/22) underscores the importance of having two East Coast aircraft carrier homeports and calls on President Obama to reaffirm his commitment to strategic dispersal of critical assets such as aircraft carriers. The full text of the document reads: Dear President Obama: We are happy to hear you are traveling to the great state of Florida soon. While in the state, we hope you are able to see the many military strategic strengths Florida provides this Nation. We are home to the largest Air Force Base, Eglin, and Naval Station Mayport, the third largest naval port in the continental United States. Early this year, the Department of the Navy concluded an exhaustive two and a half year study weighing the strategic, operational and environmental consequences of upgrading Naval Station Mayport to homeport a nuclear carrier, and the upgrades must be done since consolidating ALL nuclear carrier homeporting and maintenance in one East Coast location greatly hampers the Navy's strategic options. Prior to 2007, the Navy had operational flexibility on the East Coast with carriers stationed both at Naval Station Norfolk and Naval Station Mayport. However, the Navy lost the flexibility with the decommissioning of the last East Coast conventional carrier in 2007. In order to reduce risk to the Atlantic Fleet carrier force and restore the proper balance to the Navy, Naval Station carriers and maintenance facilities are spread among three homeports. In fact, in a December 2008 letter to Senator Jim Webb, Secretary Gates reinforced the concept of strategic dispersal stating, "Having a single CVN homeport has not been considered acceptable on the west coast should not be considered acceptable on the east coast." The Norfolk area is the only east coast port in which nuclear aircraft carriers are repaired, built and housed. If tragedy, man-made or nature-related, intentional or accidental, rendered Norfolk out of reach the Navy would be forced to journey around the tip of South America to reach another nuclear aircraft carrier maintenance facility in San Diego, CA. While some would like to believe this is an acceptable back-up plan, common sense demands otherwise. Time and time again, aircraft carriers have proven to be key to the execution of our national security strategy. We believe as access to overseas land bases continues to decrease, the Navy's aircraft carriers will be more and more important. The Navy has alternate homeporting and maintenance options for all ships on the East Coast except aircraft carriers, its most valuable assets. The total cost for permanently homeporting a nuclear aircraft carrier at Mayport is less that 1% of the cost of the nuclear carrier fleet. While the cost is not inconsequential, when weighed against the possible risks to our carrier fleet, upgrading Mayport to homeport a nuclear carrier is a sound national security expense. The Department MUST make this investment in Naval Station Mayport to provide flexibility to the Combatant Commanders and protection to some of the nation's most valuable assets. While you are in Jacksonville, we encourage you to reaffirm the county's commitment to the protection and the flexibility that strategic dispersal affords. We look forward to continuing to provide the best homeport in the Navy. Views of Members from Virginia The website of the office Representative Glenn Nye presents a March 9, 2010, letter to Secretary of the Navy Ray Mabus and then-Chief of Naval Operations Admiral Gary Roughead on the desire to homeport a CVN at Mayport. The letter is signed by Senators Jim Webb and Mark R. Warner, Representatives Glenn C Nye III, J. Randy Forbes, Robert C. "Bobby" Scott, and Robert J. Wittman, and 27 other persons who are not Members of Congress. The text of the letter states: Dear Secretary Mabus and Admiral Roughead: We are the Hampton Roads Military Affairs Commission, a newly formed group from Virginia's Hampton Roads area, one of the largest military areas in the world. Our more than 30 members are experts and leaders in their respective fields, including elected officials, retired military officers and business leaders. In today's fiscal environment, we recognize that you encounter difficult tradeoffs as you seek to balance competing priorities and ensure necessary funding for aircraft procurement, building and maintaining our naval fleet, military construction, and taking care of our sailors. Like you, we fully support the Navy's goal to build a fleet of no fewer than 313 ships. We care deeply about national security and the future of our Navy. For this reason, we write today regarding the Quadrennial Defense Review (QDR) and its recommendation to construct facilities to support homeporting a nuclear-powered aircraft carrier (CVN) at Naval Station (NAVSTA) Mayport. We respectfully request that you provide us with a business-case analysis that objectively addresses the financial and operational tradeoffs of this proposal, as well as the threat assessment that warrants such an undertaking. We believe a more comprehensive public accounting is necessary before any change in East Coast homeporting is considered. We hope you will provide answers to our questions in the following areas: Creating a CVN homeport at NAVSTA Mayport is estimated to cost between $600 million and $1 billion when all one-time and recurring annual costs are calculated. In the current economic climate and with today's high operating tempo, the Navy has numerous unfunded priorities. If the cost of homeporting is $600 million to $1 billion, what specific elements of current year and out-year projects will be decremented from the budget to provide the money?" There is a pressing need for a more comprehensive strategic-risk assessment. The DoD has extensive capabilities to quantify risk and empirically evaluate the trade-offs and cost-benefit factors associated with any major investment. With respect to the proposed carrier homeport at NAVSTA Mayport, we have yet to learn of a strategic assessment or rigorous risk-based analysis that would identify the specific reasons for executing what is potentially a $1 billion decision. To date, in seeking to justify this project, the Navy has said that the risk that a catastrophic event could close Hampton Roads is "low." The phrase "strategic dispersal" has been used by many as an intuitive argument to justify the creation of an additional East Coast homeport for a CVN. However, we are concerned this argument also creates a slippery slope akin to a "reverse BRAC". Under Secretary for Policy Michelle Flournoy, testifying before the House Armed Services Committee, recently said that the logic of strategic dispersal also applies to other singularly based assets and infrastructure, to include fleet ballistic missile submarines. The immense cost and time of carrying out this additional dispersal would be extraordinary. What specific guidance has the Navy received, if any, to provide for strategic dispersal of any high value assets and infrastructure (carriers, subs, facilities)? Would this dispersal philosophy apply to other critical infrastructure such as the Pentagon or the U.S. Capitol? Even with one less CVN, NAVSTA Norfolk would remain the world's largest Naval Station and should be protected as such. Hundreds of millions of dollars have already been spent since 9/11 to improve port and base security in the Hampton Roads region. What security improvements are required in Mayport to accommodate a CVN and at what cost? Secondly, the Navy has cited the concern over possible blockage (either by natural or manmade causes) of the Norfolk channel. If harbor blockage of current CVN ports is considered a risk, are there any plans to mitigate the risk? Significant increases in personnel, both military and federal employees, will be required to accommodate a new CVN homeport. Have the corresponding billets been identified for funding? What is the manning increase required for 2013 and 2014 when the CVN is scheduled to be home ported at Mayport? What is the overall manning plan for the CVN move? Specifically, is there a plan detailing the station manning and the requirement for temporary additional duty (TAD) sailors? What is this recurring cost? What is the impact of such temporary assignments on the ability to support remaining CVN activities at Norfolk and what will the quality of life impact be on sailors and shipyard workers who will be away from home for additional periods of time if a CVN is homeported at NAVSTA Mayport? When the USS Kennedy (CV 67) left NAVSTA Mayport in 2007, much of the existing carrier-support infrastructure was decommissioned. If creating a new CVN homeport is of strategic importance, as some have indicated, why would the Navy decommission existing support infrastructure at Mayport only to rebuild much of it a few years later? What specific capabilities must be re-established and at what cost? Precisely what CVN maintenance will be supported at NAVSTA Mayport after all facilities have been constructed? How often and for how long will the Navy need to return the CVN to Norfolk for maintenance availabilities that are beyond the capability of fly-away teams? The Navy's Final Environmental Impact Statement (FEIS) proposes building nuclear propulsion repair facilities, but there is no mention of conventional requirements such as catapult and arresting gear maintenance. What conventional maintenance will be done by the maintenance personnel at NAVSTA Mayport? While the FEIS addressed possible local economic impacts at Mayport, why did the FEIS neglect a corresponding socio-economic evaluation of Norfolk? With the decommissioning of USS Enterprise (CVN 65) and a follow-on change in homeport for another Norfolk-based carrier to Mayport, why didn't the FEIS evaluate the negative impact on Norfolk's local housing market, schools, jobs, and small businesses? Thank you for taking the time to look into these queries. We commend you for your leadership. As this process evolves, we look forward to developing a better dialogue to ensure the concerns and issues we have identified are addressed in a timely, responsive way. The Commission's point of contact is John Panneton, Military Liaison for Congressman Glenn Nye, who can be reached at 757-326-6201, or 4772 Euclid Road, Suite E, Virginia Beach, VA 23462.
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The Navy's proposed FY2014 budget, like the Navy's proposed FY2013 budget, requested no funding for Military Construction (MilCon) projects required to homeport a nuclear-powered aircraft carrier (CVN) at Mayport, FL. The Navy's FY2013 budget deferred the Navy's plan to homeport a CVN at Mayport, and the Navy's FY2013-FY2017 Future Years Defense Plan (FYDP) contained no funding for MilCon projects required to homeport a CVN at Mayport. The Navy stated in its FY2013 budget submission: "Although the FY 2013 budget does not contain a construction project supporting the homeporting of a CVN in Mayport, FL, the Department [of the Navy] is committed to the requirement and policy to strategically disperse CVNs on each coast. This is a deferral at this time due to fiscal constraints." The Navy's Atlantic Fleet CVNs are all homeported at Norfolk, VA. The Navy wants to establish a second Atlantic Fleet CVN home port by homeporting a CVN at Mayport. Prior to the submission of the FY2013 budget, Navy plans called for having Mayport ready to homeport a CVN in 2019. Transferring a CVN from Norfolk to Mayport would shift from Norfolk to Mayport the local economic activity associated with homeporting a CVN, which some sources estimate as being worth hundreds of millions of dollars per year. The Navy's desire to homeport a CVN at Mayport is an issue of strong interest to certain Members of Congress from Florida and Virginia. Certain Members of Congress from Florida have expressed support for the Navy's desire to homeport a CVN at Mayport, arguing (as have DOD and the Navy) that the benefits in terms of mitigating risks to the Navy's Atlantic Fleet CVNs are worth the costs associated with moving a CVN to Mayport. Certain Members of Congress from Virginia have expressed skepticism regarding, or opposition to, the Navy's desire to homeport a CVN at Mayport, arguing that the benefits in terms of mitigating risks to the Navy's Atlantic Fleet CVNs are questionable or uncertain, and that the funding needed to implement the proposal could achieve greater benefits if it were spent on other Navy priorities.
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On June 26, 2006, the Supreme Court agreed to review Commonwealth of Massachusetts v. EPA , setting the stage for the Court's first pronouncements in a global warming case. In the decision below, the D.C. Circuit rejected a challenge to EPA's denial of a rulemaking petition under the Clean Air Act (CAA). The denied petition, filed by numerous states and environmental groups, requested EPA to impose limits on four pollutants emitted by new motor vehicles, owing to the alleged contributions of those emissions to global warming. In resolving the case, the Court might address, among other things, Article III standing doctrine; whether the CAA reaches the global warming impacts of motor vehicle emissions; and the latitude allowed an agency to inject policy considerations into its decisions when the governing statute makes no mention of them. In 1999, some 20 non-profit groups petitioned EPA to regulate emissions of "greenhouse gasses" (GHGs)—specifically, CO2, methane, nitrous oxide, and hydrofluorocarbons—from new motor vehicles. The petition cited the agency's alleged mandatory duty to do so under CAA section 202(a)(1), which directs the EPA Administrator to prescribe emission standards for "any air pollutant" from new motor vehicles "which, in his judgment cause[s], or contribute[s] to air pollution which may reasonably be anticipated to endanger public health or welfare." Petitioners argued that the GHGs above are "air pollutants" within the meaning of the CAA, citing the EPA General Counsel's opinion to that effect from 1998. In addition, they contended, EPA already has made findings that GHGs from motor vehicles "may reasonably be anticipated to endanger public health and welfare," a standard that does not require complete certainty. Further, the CAA's definition of "welfare" includes effects on "weather" and "climate." Thus, they concluded, EPA not only may, but must , regulate GHG emissions from new motor vehicles under section 202(a)(1). In 2003, after receiving almost 50,000 comments, EPA denied the petition. Much of its rationale followed a new EPA General Counsel opinion, issued the same day, reversing the 1998 General Counsel opinion by denying that GHGs are "air pollutants" under the CAA. In support of non-coverage, the new opinion made arguments drawing on both the CAA and other sources. As for CAA-based arguments, the new opinion points out that although three provisions in the 1990 CAA amendments expressly touch on global warming, none of them authorizes regulation; instead they seek to learn more about the problem. Moreover, the CAA contains a separate program explicitly addressing stratospheric ozone depletion, showing that Congress understands the need for specifically tailored solutions to global atmospheric issues such as global warming, rather than leaving such issues to the general regulatory structure in the CAA. As for arguments based outside the CAA, the new opinion contends that various congressional enactments from 1978 to 1990 reveal a Congress interested in developing a foundation for considering whether future legislative action on global warming was warranted. Also, the conclusion of the 1998 General Counsel memorandum that GHGs are "air pollutants" under the CAA was rendered prior to a key Supreme Court decision in 2000. That decision, FDA v. Brown & Williamson Tobacco Corp ., held that when Congress makes facially broad grants of authority to agencies, they must be interpreted in light of the statute's purpose, structure, and history. This decision suggests, argued the new opinion, that the CAA should not be read to delegate an authority of such profound economic significance as the power to address global warming in so cryptic a fashion as CAA section 202. Beyond the above issues of CAA authority, EPA disagreed as a matter of Bush Administration policy with the mandatory-standards approach urged by petitioners. Not surprisingly, EPA, in rejecting the petition, endorsed President Bush' non-regulatory approach to global warming. EPA's denial of the section 202 petition in 2003 was challenged in the D.C. Circuit by twelve states (CA, CT, IL, MA, ME, NJ, NM, NY, OR, RI, VT, WA), three cities (New York, Baltimore, and Washington, D.C.), two U.S. territories (American Samoa and Northern Mariana Islands), and several environmental groups. Opposing the suit, besides EPA, were ten state intervenors (AK, ID, KS, MI, ND, NE, OH, SD, TX, UT), plus several automobile- and truck-related trade groups. In Commonwealth of Massachusetts v. EPA , in July 2005, a split panel rejected the challenge. The two judges supporting rejection, however, did so for different reasons. Judge Randolph, author of the lead opinion, bypassed the standing issue and assumed arguendo that EPA has CAA authority to regulate GHG emissions. He then proceeded to resolve whether EPA properly exercised its discretion in choosing not to wield that authority. As to this discretion issue, recall that CAA section 202(a)(1) directs the EPA Administrator to prescribe standards for any motor vehicle emissions that " in his judgment " cause harmful air pollution. Judge Randolph read "in his judgment" broadly to allow EPA consideration of not only "scientific uncertainty" about the effects of GHGs but also "policy considerations" that justified not regulating. Thus, EPA in his view was entitled to rely, as it did, on such factors as the existence of efforts to promote fuel cell and hybrid vehicles, and the fact that new motor vehicles are but one of many sources of GHG emissions, making regulation of vehicle GHG emissions an inefficient piecemeal approach to global warming. He concluded that EPA had properly exercised its 202(a)(1) discretion in denying the petition for rulemaking. By contrast, Judge Sentelle, the other judge supporting rejection of the petition, did not shy away from the standing question. Finding that petitioners had not suffered the requisite injury required for standing, he endorsed rejection of the petition. Finally, Judge Tatel in dissent asserted that at least one petitioner had standing. Massachusetts, he said, had shown the possibility of harm from global-warming-caused rising sea levels. On the merits, he held first that EPA has authority under section 202(a)(1) to regulate GHG emissions, noting the section's coverage of " any air pollutant." Second, he concluded that EPA's 202(a)(1) discretion does not extend to policy considerations, as Judge Randolph held, but relates exclusively to whether the emissions cause harmful air pollution. That being so, he concluded that EPA had not presented a lawful explanation of its decision not to regulate and would have remanded the petition denial to the agency. Judge Tatel, joined by Judge Rogers, also dissented from the court's later rejection (4-3) of the petitioners' request for rehearing en banc. On June 26, 2006, the Supreme Court agreed to hear the case. To divine how the Supreme Court might decide the case, one should start with the petition for certiorari's statement of the questions presented by the case and EPA's version of the questions presented in its brief in opposition. The standing issue. Standing is a ubiquitous threshold issue in global warming litigation, given the difficulty faced by plaintiffs in showing that their specific injuries were caused by the particular actions of the defendants in the case. Commonwealth of Massachusetts fits the mold. Petitioners, EPA argues, cannot establish two of the three elements of Article III standing: causation and redressability. As to causation, EPA describes petitioners' declarations as saying only that GHGs emitted from many different sources all over the world cause global warming. However, it points out, to have standing, petitioners must assert that the subject matter of this case—emissions of GHGs from new motor vehicles in the U.S.—causes or meaningfully contributes to their injuries. As to redressability, EPA argues that petitioners' declarations do not establish that a mere reduction in the specified GHGs will be sufficient to eliminate or reduce the injury they will suffer. The petitioners do not include standing among the questions presented and thus do not address it. The CAA authority issue. Should the Court get past the standing issue, the opening question on the merits goes to EPA authority: did Congress in section 202(a)(1) empower EPA to regulate new motor vehicle emissions based on their global warming effects? Petitioners argue that the CAA text could hardly be plainer. Section 202(a)(1), they note, requires EPA to promulgate emission standards for "any air pollutant" that causes endangerment. And the CAA definition of "air pollutant" as any "physical" or "chemical" substance that enters the ambient air surely includes GHGs. Finally, there is nothing special, petitioners assert, about the kind of harm GHGs produce that places them beyond the CAA, since section 202(a)(1) is triggered by endangerment of "welfare," a term defined by the act to include effects on "climate." The EPA General Counsel memorandum's effort to avoid this obvious textual mandate on the basis of FDA v. Brown & Williamson Tobacco Corp , petitioners say, misreads that decision. In response, EPA notes that the authority question was not addressed by the majority judges below (nor by any other court) and that the Supreme Court rarely addresses an issue without the benefit of lower court explication. Thus, the agency contends, the Court should resolve this case on either standing grounds or the "in his judgment" issue (below). If the Court reaches the authority question, EPA maintains, Brown & Williamson counsels that the CAA be read as a whole, and doing so shows that the act does not confer authority on EPA to regulate emissions for the purpose of reducing global warming. The "in his judgment"/policy considerations issue. This question asks whether, as Judge Randolph found below, EPA may decline to issue the emission standards here for policy reasons not enumerated in CAA section 202(a)(1). Petitioners, of course, argue to the contrary. The "in his judgment" phrase in 202(a)(1), they say, refers only to the EPA Administrator's judgment whether public health or welfare may reasonably be anticipated to be endangered by the pollution—not to the many other considerations, many of a policy nature, that EPA cited in rejecting the petition to the agency. Section 202(a)(1)'s narrow focus is made all the more clear, argue petitioners, by the contrast with other provisions in section 202 that do mention factors other than endangerment of public health or welfare. "By allowing EPA to import into section 202(a)(1) policy factors not mentioned there," argue petitioners, "the appeals court has sanctioned a large-scale ... shift of power from Congress ... to the agency." In response, EPA's brief stressed one particular reason the agency had cited for rejecting the rulemaking petition: the assertedly uncertain state of the scientific record on global warming and EPA's desire to have the benefit of ongoing research. Surely, EPA's brief argues, the "in his judgment" phrase in section 202(a)(1) allows EPA to consider those factors in deciding whether to make an endangerment finding. EPA also points out the particular deference that courts owe agencies as to their decisions whether to grant rulemaking petitions. The federal brief, however, contains little discussion of the several policy factors on which the EPA General Counsel memorandum and Judge Randolph relied, and that, arguably, is the nub of the issue. The D.C. Circuit's decision in Commonwealth of Massachusetts was an unusual one for the Supreme Court to accept, given that few of the factors that have traditionally interested the Court in hearing a case are present. There is no split in the circuits, and the decision has little precedent value in that no rationale commanded the support of a majority of the D.C. Circuit judges. To be sure, however, cases presenting issues of unusual importance, as Commonwealth of Massachusetts assuredly does, are more likely to be accepted. Given that the Court has accepted the case, the three issues above suggest some ways the Court could rule. First, it could find that the petitioners lack standing. Environmental interests and standing doctrine have long had a tumultuous relationship in the Supreme Court, and the nature of global warming exacerbates the difficulties. As in the acid rain and toxic-exposure cases of decades ago, global warming is said to be caused by multiple actors (millions of GHG emitters around the globe) whose actions, possibly combined with natural phenomena, intermix in complex ways to cause adverse effects after a very long time. Linking a particular cause and a particular effect in this context may be quite difficult. Certainly Justice Scalia, the leader of the Court's efforts to narrow standing in a series of 1990s decisions, would be inclined to rule against the Commonwealth of Massachusetts petitioners on standing grounds. Alternatively, the Supreme Court might use the case to clarify when a court may, as Judge Randolph did, bypass its general edict that jurisdictional issues such as standing be addressed first, in order to decide the case on an easy merits issue. If the standing hurdle is surmounted, petitioners' case still could fall on either of the statutory issues raised in the briefs: whether "any air pollutant" includes emissions regulated on the basis of their global warming effects and whether "in his judgment" allows EPA considerations of factors other than those going to whether the pollutant endangers public health or welfare. In addition, there is an issue, sometimes raised in administrative law cases, whether the EPA Administrator has a mandatory duty to issue the "judgment" that triggers section 202(a)(1) regulation once he comes into possession of data allowing him to make it. Because this issue has not been raised by the parties, one suspects the Supreme Court will not address it. In sum, there are multiple ways the Court could resolve Commonwealth of Massachusetts or remand to the D.C. Circuit for that court to resolve. It is highly unlikely that the litigation will result in a direct judicial order to EPA to regulate new-motor-vehicle GHG emissions; at most, if petitioners win, one or another court will require additional determinations by the agency. Should regulation of motor-vehicle GHG emissions be the ultimate result, however, it would increase the pressure on EPA to regulate the GHG emissions of stationary sources (powerplants and factories) as well. A decision by the Supreme Court is expected by June 2007.
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On June 26, 2006, the Supreme Court agreed to review Commonwealth of Massachusetts v. EPA, a global warming-related case. In the decision below, the D.C. Circuit rejected 2-1 a challenge to EPA's denial of a petition under the Clean Air Act requesting the agency to limit four pollutants emitted by new motor vehicles, owing to their alleged contribution to global warming. In resolving the case, the Court might address, among other things, Article III standing doctrine; whether the Clean Air Act reaches the global warming impacts of motor vehicle emissions; and the latitude allowed an agency to inject policy considerations into its decisions when the governing statute makes no mention of them. It is unlikely, even should petitioners in the Supreme Court gain a favorable ruling, that the case will result in a direct order by the Court that EPA regulate the global warming impacts of auto emissions.
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Since 1870, numerous proposals have been introduced in Congress to establish permanent federal holidays. Eleven have thus far become law. Although these patriotic celebrations are frequently referred to as "national holidays," legally they are only applicable to federal employees and the District of Columbia. Neither Congress nor the President has asserted the authority to declare a "national holiday" that would be binding on the 50 states, as each state individually determines its legal holidays. Creating a holiday for federal employees does, however, affect each state in a variety of ways, including the delivery of mail and conduct of business with federal agencies. Federal holidays have been created for a number of reasons. In several instances, Congress created federal holidays after a sizeable number of states created state holidays. In other instances, Congress took the lead. Additionally, each holiday was designed to emphasize a particular aspect of American heritage or to celebrate an event in American history. In 1870, when Congress passed the first federal holiday law, the federal government employed approximately 5,300 workers in Washington, DC, and another approximately 50,600 around the country. The distinction between federal employees working in the District of Columbia and those elsewhere proved important because the initial holiday act only applied to the federal workforce in Washington, DC. Federal employees in other parts of the country did not receive holiday benefits until at least 1885, as federal holidays were initially interpreted as only applying to federal workers in the District of Columbia. For more information on applicability of federal holidays to federal employees, see " Federal Holidays and Employee Pay " below. On June 28, 1870, the first federal holidays were established for federal employees in the District of Columbia. Apparently drafted in response to a memorial drafted by local "bankers and business men," the June 28 act provided that New Year's Day, Independence Day, Christmas Day, and "any day appointed or recommended by the President of the United States as a day of public fasting or thanksgiving [were] to be holidays within the District [of Columbia]." This legislation was drafted "to correspond with similar laws of States around the District," and "in every State of the Union." In January 1879, Congress added George Washington's Birthday to the list of holidays observed in the District of Columbia. The principal intent of the law was to make February 22 "a bank holiday." In summarizing the bill, Representative Burton Cook explained Congress's intent in creating a bank holiday. ... and for all purposes of presenting for payment or acceptance or the maturity and protect and giving notice of the dishonor of bills of exchange, bank checks, promissory notes, and other negotiable commercial paper shall be treated and considered as is the first day of the week, commonly called Sunday; and that all notes, drafts, checks, or other commercial or negotiable paper falling due or maturing on either of said holidays shall be deemed as having matured the day previously. Enactment of the Uniform Monday Holiday Act in 1968 shifted the commemoration of Washington's Birthday from February 22 to the third Monday in February. Contrary to popular belief, neither the Uniform Monday Holiday Act, nor any subsequent action by Congress or the President, mandated that the name of the holiday observed by federal employees in February be changed from Washington's Birthday to Presidents Day. The " Uniform Monday Holiday Act " is examined in detail later in this report. In 1888, Decoration Day (now Memorial Day) became a holiday for federal workers in the District of Columbia. Decoration Day was likely created primarily because a sizable number of federal employees were also members of the Grand Army of the Republic, an organization of Union Civil War veterans who desired to participate in Memorial Day ceremonies honoring those who had died in the conflict. Their absence from work meant the loss of a day's wages. Some Members of Congress felt that federal employees should be "allowed this day as a holiday with pay, so that they might not suffer loss of wages by reason of joining in paying their respects to the memory of those who died in the service of their country." With the passage of the " Uniform Monday Holiday Act " in 1968, the observance of Memorial Day was permanently changed from May 30 to the last Monday in May. In 1894, Labor Day became a federal holiday. Created to honor the country's labor, the holiday stood in contrast to previous federal holidays designed to commemorate traditional celebrations (e.g., Christmas and New Year's), patriotic celebrations, war, or individuals. In its report on the legislation, the House Committee on Labor stated, "[t]he use of national holidays is to emphasize some great event or principle in the minds of the people by giving them a day of rest and recreation, a day of enjoyment, in commemoration of it." By honoring labor with a holiday, the committee report suggested, the nation will assure "that the nobility of labor [will] be maintained. So long as the laboring man can feel that he holds an honorable as well as a useful place in the body politic, so long will he be a loyal and faithful citizen." With time, the committee felt, the celebration of Labor Day as a national holiday on the first Monday in September would "naturally lead to an honorable emulation among the different crafts beneficial to them and to the whole public." It would also "tend to increase the feeling of common brotherhood among men in all crafts and callings, and at the same time kindle an honorable desire in each craft to surpass the rest." A reasonable amount of rest and recreation makes a workman "more useful as a craftsman." Providing further support for its position, the committee pointed out that 23 states already recognized Labor Day as a legal holiday. In 1938, Armistice Day was declared a federal holiday, and November 11, the date on which hostilities ceased, was chosen to commemorate the close of World War I. During the House debate preceding passage of this legislation, one Representative suggested that Armistice Day would "not be devoted to the exaltation of glories achieved in war but, rather, to an emphasis upon those blessings which are associated with the peacetime activities of mankind." Making Armistice Day a "national peace holiday" was a proposal that, according to one Representative, had the "enthusiastic approval" of all of the societies representing World War I veterans. In 1938, Armistice Day was already a holiday in 48 states. Although it was recognized that Congress did not have the authority "to fix a national holiday within the different States," enactment of this bill, one Senator stated, would bring the federal government "into harmony with sentiment in the United States." By 1954, however, the United States had been involved in two other military engagements: World War II and the Korean War. Instead of creating additional federal holidays to commemorate each war, Congress felt it would be better to commemorate the sacrifices of all American veterans on a single day. On June 1, 1954, the name of Armistice Day was officially changed to Veterans Day. This legislation did not establish a new holiday. Rather, it broadened the "significance of an existing holiday in order that a grateful nation, on a day dedicated to the cause of world peace, may pay homage to all of its veterans." In 1968, with the passage of the "Law," Veterans Day was designated as one of five holidays that would henceforth be celebrated on a Monday and the date was changed from November 11 to the fourth Monday in October. In 1975, Congress returned Veterans Day to November 11 after it became apparent that "veterans' organizations opposed the change, and 46 states either never changed the original observation date or returned the official observance to November 11." In the event that November 11 falls on a Saturday, the federal holiday is observed on the preceding Friday. For a holiday that falls on a Sunday, the federal holiday is observed on the following Monday. The evolution of Thanksgiving Day as a federal holiday developed differently than other holidays. On Thursday, November 26, 1789, President George Washington issued the first proclamation calling for "a day of public thanksgiving and prayer." Six years later, President Washington called for a second day of thanksgiving on Thursday, February 19, 1795. Not until 1863, however, did the nation begin to observe the occasion annually. That year, President Abraham Lincoln issued a thanksgiving proclamation inviting "my fellow-citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next as a day of thanksgiving and praise for our beneficent Father who dwelleth [sic] in the heavens." During the next three quarters of a century, each President, by proclamation, established the exact date for the celebration each year, either on the last Thursday in November or the first Thursday in December, with one exception. Between 1869 and 1939, the tradition of celebrating Thanksgiving on the last Thursday in November or the first Thursday in December was generally followed. That year, President Franklin D. Roosevelt proclaimed the third Thursday in November as Thanksgiving Day. By moving Thanksgiving up a week, Roosevelt "hoped to aid retail business by producing a longer Christmas shopping season." Although Roosevelt's decision was greeted enthusiastically by the business community, others, including a sizable portion of the public and a large number of state officials, protested against changing the long-standing American tradition of celebrating Thanksgiving on the fourth Thursday in November. Despite this criticism, Roosevelt repeated his action in 1940. By May 1941, however, the Administration concluded that the experiment of advancing the observance date had not worked. On December 26, 1941, President Roosevelt signed a joint resolution to settle the dispute and permanently established Thanksgiving Day as a federal holiday to be observed on the fourth Thursday in November. The intent of the joint resolution was to "stabilize the date so that there [would] be no confusion at any time in the future." President Roosevelt upon signing the resolution announced "that the reasons for which the change was made do not justify a continued change in the date." On January 11, 1957, Inauguration Day became a permanent federal holiday in the Washington, DC, metropolitan area. Signed by President Dwight D. Eisenhower, the law established the new holiday and also provided that whenever Inauguration Day fell on a Sunday, the following day would be considered a federal holiday. For several previous observances of the event, "inaugurations arrangements [had] been made for the Federal employees to be given a holiday in order that they [might] observe the historic and important activities associated with the inauguration." With the passage of this statute, the necessity of acting upon this matter for each inauguration was eliminated. In 1968, Columbus Day was made a federal holiday. Several reasons were offered for creating Columbus Day at the federal level. Among the most prominent was that observance was already an established holiday in 45 states. By also commemorating Columbus's voyage to the New World, Congress believed that the nation would be honoring the courage and determination which enabled generations of immigrants from many nations to find freedom and opportunity in America. Such a holiday would, according to a Senate report, also provide "an annual reaffirmation by the American people of their faith in the future, a declaration of willingness to face with confidence the imponderables of unknown tomorrows." In November 1983, President Ronald Reagan signed legislation creating a federal holiday commemorating Dr. Martin Luther King Jr.'s birthday. President Reagan's signing of the legislation creating the holiday ended a 15-year debate over a national holiday honoring the civil rights leader. In remarks at the White House Rose Garden signing ceremony, President Reagan saluted the slain civil rights leader as a man who "stirred our nation to the very depths of its soul." Proposals to honor Dr. King's memory by designating his January 15 birthday as a federal holiday were first introduced following his 1968 assassination. The House of Representatives came close to approving one of these bills in November 1979, when, under suspension of the rules, it voted 252-133 for a bill designating January 15 a federal holiday. That action, however, fell four votes short of the necessary two-thirds majority required for passage under suspension of the rules. Following a growing public campaign to honor Dr. King, on August 2, 1983, the House revisited the issue, passing legislation making the third Monday in January a federal holiday in his honor, starting in 1986. Following a lengthy debate, the Senate passed the bill on October 19. Two weeks later, President Reagan signed it into law. In June 1968, Congress approved the Uniform Monday Holiday Act. The "Monday Holiday Law" "provide[d] for uniform annual observances of certain legal public holidays on Mondays, and established a legal public holiday in honor of Christopher Columbus." Prior to the passage of this legislation, Washington's Birthday was observed on February 22, Memorial Day on May 30, and Veterans Day on November 11. The act changed the dates of these holidays to the third Monday in February, the last Monday in May, and the fourth Monday in October, respectively. Columbus Day was also designated as a Monday holiday, to be celebrated on the second Monday in October. By calling for the observance of these four holidays on a Monday, Congress felt there would be "substantial benefits to both the spiritual and economic life of the Nation." In addition, the House and Senate reports cited that the holidays would afford increased opportunities for families to be together, especially those families of which various members were separated by great distances; enable Americans to enjoy a wider range of recreational activities, since they would be afforded more time for travel; provide increased opportunities for pilgrimages [sic] to the historic sites connected with our holidays, thereby increasing participation in commemoration of historical events; afford greater opportunity for leisure at home so that Americans would be able to enjoy fuller participation in hobbies as well as educational and cultural activities; and stimulate greater industrial and commercial production by reducing employee absenteeism and enabling work weeks to be free from interruptions in the form of midweek holidays. In April 1968, the House Judiciary Committee reported that the Monday Holiday bill proposal was "responsive to the needs and desires of a great majority" of Americans. According to the House committee report, public opinion polls conducted in connection with the proposal indicated that "almost 93 percent of the persons polled supported the concept of uniform Monday holiday legislation, while a little more than 7 percent were opposed." Although there is no indication in the authorizing statutes (or accompanying floor debate) for either the 1870 and 1879 acts that any federal employees were to be paid for such holidays, an analysis of holiday legislation subsequently signed by President Rutherford B. Hayes in April 1880 seems to support such a conclusion. The 1880 legislation was prompted by a grievance filed by a group of employees who had been denied holiday pay for the previous New Year's Day while other federal workers had been paid. The House committee which favorably reported the bill that would become the law signed by President Hayes, stressed that while there were no existing laws requiring such payment, this group of employees, "in the committee's opinion, should be placed upon an equality in this regard" with those of other government departments. The committee went on to point out that, on the "question of legal holidays," the Revised Statutes of the United States were silent, but those relating to the District of Columbia were very precise on the issue. The implication was that the other federal employees in the District had already been paid for the holiday. In August 1903, Acting Attorney General James C. McReynolds issued an opinion that substantiated the reasoning applied by the House Committee on Printing. McReynolds indicated that, for "many years" prior to 1870, it was "customary to close the Executive Departments of the Government at Washington" on five holidays—New Year's Day, George Washington's Birthday, Independence Day, Thanksgiving Day, and Christmas Day—that had been "declared to be such by District laws." This practice, McReynolds reasoned, "must have been known to the Congress, and it must have been that those days were declared public holidays only by laws applicable to the District." As a consequence, McReynolds concluded that Congress intended with the 1870 and 1879 statutes "to designate all days made holidays by any law in effect within the District of Columbia" to be such for employees of the federal government as well. This was done even though Congress, as late as the turn of the century, had yet to enact legislation "absolutely requiring that the Executive Departments of the Government to be closed [sic] and the clerks and other employees therein to be released from work on such days." In 1885, Congress approved additional legislation making the five holidays thus far approved also applicable to per diem employees of the government "on duty at Washington, or elsewhere in the United States." This act, apparently for the first time, extended at least limited holiday benefits to all federal employees. For other holidays, the decision to pay federal workers was made at various times. For example, in 1870, Thanksgiving Day became a paid holiday for at least a portion of the federal workforce, after Congress gave the President power to designate a day of thanksgiving, which was to be a holiday within the District of Columbia. In recent Congresses, legislation has been introduced to create a new federal holiday or add celebrations to existing holidays. On several occasions, resolutions have been introduced in the House to express support for the creation of "Cesar E. Chavez Day." The proposed holiday would celebrate Chavez's life and recognize "the example he set by never wavering in his commitment to education, civic responsibility, and nonviolence." Another example of a proposal to create a new federal holiday is contained in H.R. 108 (112 th Congress). Introduced in January 2011 by Representative John Conyers, the bill, among other items, would establish the "Tuesday next after the first Monday" in November in even numbered years as "election day." To date, the bill has been jointly referred to the House Committee on the Judiciary, the House Committee on Oversight and Government Reform, and the House Administration Committee. No further action has been taken. Similarly, in the 112 th Congress, Representative John Yarmuth introduced H.J.Res. 97 , a proposed constitutional amendment that would set a "legal public holiday for the purposes of voting in regularly scheduled general elections for Federal office." The joint resolution was referred to the House Judiciary Committee and no further action has been taken. In addition to introducing legislation to create new federal holidays, legislation has been introduced to add to existing holidays. For example, in the 110 th Congress, H.R. 856 would have added Susan B. Anthony to the list of individuals celebrated on the "third Monday in February," or George Washington's Birthday. H.R. 856 was referred to the House Committee on Oversight and Government Reform and no additional action was taken.
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The United States has established by law the following 11 permanent federal holidays, listed in the order they appear in the calendar: New Year's Day, Martin Luther King Jr.'s Birthday, Inauguration Day (every four years following a presidential election), George Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day. Although frequently called public or national holidays, these celebrations are only legally applicable to federal employees and the District of Columbia, as the states individually decide their own legal holidays. The first four congressionally designated federal holidays were created in 1870, when Congress granted paid time off to federal workers in the District of Columbia for New Year's Day, Independence Day, Thanksgiving Day, and Christmas Day. In 1880, George Washington's Birthday was included. In 1885, Congress extended holiday coverage for some holidays to all federal employees. Although Thanksgiving Day was included in the first holiday bill of 1870, it was not until 1941 that Congress specifically designated the fourth Thursday of November as the official date. Since 1888, Congress has added six federal holidays, creating Decoration Day (now Memorial Day) in 1888, Labor Day in 1894, Armistice Day (now Veterans Day) in 1938, Inauguration Day in 1957 (quadrennially and only celebrated in the District of Columbia), Columbus Day in 1968, and Martin Luther King Jr.'s Birthday in 1983. In 1954, Armistice Day was broadened to honor Americans who fought in World War II and the Korean conflict, and the name of the holiday was changed to Veterans Day. In 1968, the Uniform Monday Holiday Act was enacted to "provide for uniform annual observances" of Washington's Birthday, Memorial Day, and Veterans Day. Additionally, the Monday Holiday Law established Columbus Day to be celebrated on the second Monday in October. In 1975, Veterans Day celebrations were returned to November 11 by Congress.
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On April 2, 2009, the House passed the Family Smoking Prevention and Tobacco Control Act ( H.R. 1256 ; H.Rept. 111-58 , part 1 and 2) by a vote of 298-112. H.R. 1256 , introduced by Representative Waxman (D-CA), would give the Food and Drug Administration (FDA) broad new statutory authority under the Federal Food, Drug, and Cosmetic Act (FFDCA) to regulate the manufacture, distribution, advertising, promotion, sale, and use of cigarettes and smokeless tobacco (e.g., snuff and chewing tobacco). Similar legislation passed the House in July 2008, but was never taken up by the Senate. On May 5, 2009, Senator Reid (D-NV) introduced the Family Smoking Prevention and Tobacco Control Act in the Senate, on behalf of its primary sponsor, Senator Kennedy (D-MA). S. 982 , which is almost identical to the House-passed measure, was approved with amendments by the Committee on Health, Education, Labor and Pensions on May 20 and now awaits Senate floor action. The Administration has signaled its strong support for the legislation. The Family Smoking Prevention and Tobacco Control Act would create a new FFDCA Chapter IX solely for the purpose of regulating tobacco products. Among its many provisions, the legislation would: require all tobacco product manufacturers to register with the FDA and provide the agency with a detailed product list; mandate biennial inspection of all registered establishments; replace the existing health warning labels with more explicit health warnings in bold type occupying at least 30% of the front and back of the product package; require the manufacturer of a new tobacco product to submit a marketing application for FDA approval before entering the market, unless the new product is determined to be substantially equivalent to a tobacco product already on the market or it represents a minor modification of an existing product; require manufacturers seeking FDA approval, in order to market a product with a reduced-risk or reduced-exposure claim (including the use of descriptors such as "light," "mild," and "low"), to provide scientific evidence substantiating that claim and agree to conduct postmarket surveillance; give FDA the authority to regulate the sale, distribution, advertising and promotion of tobacco products in order to protect public health; require FDA to regulate Internet tobacco sales; authorize FDA to establish tobacco product standards requiring changes to the design and characteristics of tobacco products in order to protect public health (e.g., reducing nicotine yields and eliminating other harmful constituents); require FDA to establish good manufacturing practices for tobacco product manufacturers; require FDA to develop new regulations for the testing, reporting, and public disclosure of tobacco product ingredients and smoke constituents; preserve the authority of states and localities to take additional measures to restrict the distribution, advertising, promotion, sale, access to, and use of tobacco products; instruct FDA to issue new recordkeeping requirements to help counter the illicit trade of tobacco products; and assess user fees on manufacturers to pay for the cost of FDA tobacco regulation. In addition, H.R. 1256 / S. 982 would require FDA to reissue its 1996 tobacco rule, which the U.S. Supreme Court struck down. The FDA rule consisted of three sets of provisions aimed at reducing underage tobacco use: restrictions on the sale and distribution of cigarettes and smokeless tobacco to reduce youth access to those products; restrictions on tobacco product marketing and advertising; and a new labeling requirement for packaging and advertising (see text box). Several provisions in the FDA rule were incorporated in the 1998 Master Settlement Agreement (MSA) between the states and the major cigarette companies. A summary of the MSA's public health provisions is provided in the Appendix . In asserting jurisdiction over tobacco products, FDA argued that the FFDCA gave it the authority to regulate tobacco products based on its determination that cigarettes and smokeless tobacco are delivery devices for nicotine, an addictive drug. Under the FFDCA, drug and device manufacturers must demonstrate that their products are both safe and effective in order to gain FDA marketing approval. The safety and effectiveness standard poses a difficult challenge for regulating tobacco products, which are manifestly unsafe when used as intended. In 2000, the U.S. Supreme Court invalidated the FDA tobacco rule, finding that the agency's action was inconsistent with the congressional intent expressed in the FFDCA's overall regulatory scheme and in other tobacco-related legislation. For example, the Court concluded that if the FDA asserted jurisdiction based on the FFDCA's existing drug and device authorities, it would have no choice but to prohibit the marketing of such harmful products. A ban on tobacco products, argued the Court, would plainly contradict congressional policy. The Court's decision made it clear that Congress would have to enact legislation giving FDA new statutory authority over tobacco products in order for the agency to assert jurisdiction. Lawmakers first drafted such language in the 105 th Congress (1997-1998) as part of an unsuccessful attempt to legislate the proposed national tobacco settlement. The language drew extensively on the FFDCA's existing drug and device provisions, but with modifications. By attempting to establish a new legal authority within the FFDCA for regulating tobacco products, the bill's sponsors sought to address the unique challenges tobacco products present and avoid the safety and effectiveness standard that applies to the regulation of drugs and devices. Under the new language, FDA would have to demonstrate that any proposed tobacco regulation was appropriate for the protection of public health. Such a determination would involve a consideration of the risks and benefits to the population as a whole, including both users and nonusers of tobacco products. Following the Supreme Court's decision, and building on the language developed in the 105 th Congress, a bipartisan, bicameral group of lawmakers first introduced the Family Smoking Prevention and Tobacco Control Act in the 108 th Congress ( H.R. 4433 , S. 2461 ). The legislation was the product of months of negotiations in which lawmakers sought to balance the competing interests of public health groups and the tobacco industry. Both sides supported giving FDA the authority to regulate cigarettes and smokeless tobacco products, but they disagreed on the central question of how much regulatory control the agency should be given. Public health advocates want FDA to have broad authority to take whatever actions the agency considers necessary to protect public health. They argue that giving FDA limited authority would invite tobacco companies to mount a legal challenge to every proposed regulatory action and would shield tobacco companies from liability. A weak FDA tobacco bill would, in their view, be worse than no bill at all. The tobacco companies, on the other hand, want to see certain restrictions placed on FDA's authority. They believe that having the federal government regulate and approve their products will help reduce future uncertainty and restore predictability for the industry by creating a uniform set of federal standards for the manufacture and marketing of tobacco products. But they oppose giving FDA unfettered authority to modify their products to the point that they are no longer acceptable to adult smokers, for example, by eliminating nicotine. The current Family Smoking Prevention and Tobacco Control Act ( H.R. 1256 , S. 982 ) represents a compromise between those two competing positions. Leading public health groups and Philip Morris, the nation's largest cigarette manufacturer with about half of the U.S. market, strongly support the bill's regulatory framework. The other major cigarette companies, however, have broken ranks with Philip Morris and are opposed to the legislation. While they continue in principle to support FDA regulation of their products, they fear that the sweeping new regulatory authority outlined in the legislation, including the likelihood of tight restrictions on marketing, will help further consolidate Philip Morris's market dominance. Comprehensive FDA tobacco legislation received an important endorsement from the Institute of Medicine (IOM). In a May 2007 report on reducing tobacco use in the United States, the IOM concluded that while strengthening existing tobacco control measures (e.g., state anti-smoking programs, excise taxes, indoor smoking restrictions) would result in some additional decline in smoking prevalence, more substantial and enduring reductions in tobacco use would only come from stronger federal regulation. Several of the IOM's recommendations would be implemented by the Family Smoking Prevention and Tobacco Control Act. They include conferring on FDA broad regulatory authority over the sale, distribution, and marketing of tobacco products; empowering FDA to regulate the design and characteristics of tobacco products; strengthening health warning labels on packages and advertising; and establishing science-based standards for evaluating reduced-harm products. This report focuses on the Family Smoking Prevention and Tobacco Control Act. It includes a brief discussion of the contrasting views of FDA tobacco regulation held by the public health community and the industry, and provides some analysis of a number of key regulatory issues that the bill raises. Table 1 provides a detailed summary of all the provisions in H.R. 1256 (as passed by the House) and the key differences in S. 982 (as reported out of committee). A companion report, CRS Report R40196, FDA Tobacco Regulation: History of the 1996 Rule and Related Legislative Activity, 1998-2008 , by [author name scrubbed] and [author name scrubbed], provides some analysis of the 1996 FDA tobacco rule and the industry's successful legal challenge that overturned it. It also reviews the 1997 proposed national tobacco settlement and the implementing legislation that was introduced and debated in the 105 th Congress. That report concludes with a summary of legislative activity on the Family Smoking Prevention and Control Act in the 108 th , 109 th , and 110 th Congresses. The Campaign for Tobacco-Free Kids is a leading anti-tobacco lobby. Working in partnership with the American Lung Association, the American Cancer Society, and the American Heart Association, the Campaign has championed comprehensive federal regulation of tobacco products. It argues that such regulation is necessary to reduce the enormous public health impact of tobacco use. According to the Centers for Disease Control and Prevention (CDC), more than 400,000 deaths each year are attributable to tobacco use, including one-third of all cancer deaths. Tobacco use accounts for almost $100 billion in annual health care costs. Despite the harm they cause, the Campaign notes that tobacco products are exempt not just from the FFDCA, but also from other federal consumer protections laws such as the Consumer Product Safety Act and the Controlled Substances Act. Thus, they are exempt from basic consumer protections like ingredient disclosure and product testing. The Campaign believes that the tobacco companies have taken advantage of this lack of regulation by marketing their products to youth, deceiving the public about the addictiveness of their products, and discouraging current tobacco users from quitting. The Campaign argues that strong and effective federal regulation is necessary to change industry practice. The Campaign believes that FDA is the only agency with the necessary scientific and regulatory expertise to effectively regulate the manufacture, marketing, labeling, and sale of tobacco products. Along with numerous pubic health and other organizations, it strongly supports H.R. 1256 / S. 982 . In 2001, Philip Morris issued a white paper in support of legislation giving FDA authority to regulate cigarettes. The company explained that its support for such legislation did not signal a reversal of its earlier opposition to the FDA's attempt to regulate cigarettes as restricted medical devices. Philip Morris opposed the 1996 FDA rule on the grounds that it would have left the agency with no choice but to ban the sale of cigarettes. The company argued that cigarettes simply cannot be found to be safe and effective as required under the FFDCA's existing drug and device provisions, a position with which the Supreme Court agreed in the FDA v. Brown & Williamson Tobacco Corp decision. In the white paper, Philip Morris argued for giving FDA new legal authority to regulate cigarettes, not as drugs or medical devices but in a manner that reflects the "unique challenges that cigarettes present." Such regulation, said the company, "would provide greater consistency in tobacco policy, more predictability for the tobacco industry, and an effective way to address issues that are of concern.... These issues include youth smoking; ingredient and [smoke] constituent testing and disclosure; content of health warning on cigarette packages and in advertisements; use of brand descriptors such as 'light' and 'ultra light'; good manufacturing practices for cigarettes; and standards for defining, and for the responsible marketing of any reduced risk or reduced exposure cigarettes." Philip Morris set out in the white paper several principles for FDA tobacco legislation: Tobacco regulation should reflect the unique health, social and economic issues associated with such products. Cigarettes should be regulated as cigarettes, not as a medical device. Regulation should not equal prohibition. Adults should be able to make their own decision whether to smoke. The government should continue to inform the public about the dangers of tobacco products and discourage their consumption, but should not restrict an adult's ability to make a decision about smoking. FDA should require that ingredients added by the manufacturers do not increase the inherent risks or addictiveness of smoking. The agency should have the authority to impose mandatory design changes to cigarettes to help reduce harm, provided the changes do not significantly diminish adult smokers' enjoyment of the product. Regulation should define reduced exposure and reduced risk products and establish guidelines for communications about such products in a way that is consistent and accurate and does not encourage smoking or discourage quitting. FDA should continue to address the broad issues of disclosure (e.g., the content of warning labels, information about ingredients and smoke constituents) so that adults smokers remain informed about health risks. Philip Morris maintains that any new legislation must recognize cigarettes as legal products and respect the decision of adults to smoke. The company opposes any proposals that would give FDA the authority to ban cigarettes outright or to achieve a de facto prohibition by imposing ever-lower tar and nicotine yields that would render the product unpalatable to adult smokers. Such product changes, argues the company, would drive smokers towards illicit, unregulated products, where there are no standards for ingredients or tar and nicotine levels. FDA used a similar line of reasoning in developing the tobacco rule when it concluded that banning tobacco products under the FFDCA's drug and device provisions was not an option. The agency reasoned that a ban on cigarettes would encourage cigarette smuggling and the development of a black market supplying smokers with unregulated and potentially more dangerous products. While Philip Morris actively supports the Family Smoking Prevention and Tobacco Control Act, the other major cigarette companies—R. J. Reynolds (which merged with Brown & Williamson in July 2004) and Lorillard—have criticized the legislation. Like Philip Morris, Lorillard supports additional regulation of tobacco manufacturers and tobacco products, but emphasizes that the FDA may "ultimately move to ban the conventional cigarette product" and that some legislation may "allow the FDA to alter what occurs naturally in the [tobacco] leaf." Lorillard believes that federal legislation "must advocate the research and oversee the development of potentially reduced exposure products" and "should codify the marketing and advertising restrictions already agreed to" in the Master Settlement Agreement. R.J. Reynolds would support additional "reasonable" regulation of tobacco products provided that tobacco remains legal and that any new regulation preserves the rights of adults to choose and purchase a wide range of "consumer-acceptable" cigarette brands. But they also stress the importance of maintaining a level playing field upon which manufacturers can compete for the business of adult smokers. This final point appears to lie at the heart of their opposition to the proposed legislation. R.J. Reynolds and Lorillard, which together account for approximately 38% of the U.S. cigarette market, may fear that sweeping new regulation of their products, including tight restrictions on marketing, will be to Philip Morris's advantage, allowing the nation's number one cigarette manufacturer to lock in its leading market share. They may worry that new restrictions on advertising would force consumers to rely on brand recognition and product placement, which would give industry-leader Philip Morris an advantage. The Family Smoking Prevention and Tobacco Control Act would result in a number of important changes in the labeling, advertising, and marketing of cigarettes and smokeless tobacco. As previously noted, H.R. 1256 / S. 982 would require the FDA to reissue its tobacco rule (minus the labeling provision). That would place new restrictions on youth access to tobacco products and on tobacco advertising, beyond those included in the MSA (see Appendix ). For example, all remaining brand-name sponsorship of sporting and other entertainment events would come to an end, and advertising in publications with a significant youth readership would be limited to black-on-white text. In addition, more explicit and conspicuous health warnings would appear on all tobacco product packaging and advertising. FDA would have the authority to revise the size and content of the warnings and add color graphics, if it determined that such changes would promote a greater public understanding of the health risks of tobacco use. H.R. 1256 / S. 982 also would give FDA the authority to develop regulations restricting the sale, distribution, advertising, and promotion of tobacco products, to the full extent permitted by the First Amendment. Any proposed regulation would have to meet a new public health standard. That standard would require FDA to demonstrate that the proposal was appropriate for the protection of the public health, taking into account the risks and benefits to the population as a whole, including users and nonusers of tobacco products. In addition, FDA would have the authority to require changes in the design and characteristics of current and future tobacco products, such as the reduction or elimination of harmful ingredients and additives. Again, the agency would have to show that any such proposal was appropriate for protecting public health, based on a consideration of the risks and benefits to the population as a whole. Under the legislation, manufacturers would have to obtain FDA approval in order to market a new product. The same public health standard would apply to such applications. Thus, FDA could deny a new product application if, among other things, the company failed to demonstrate that marketing the product would be appropriate for protecting public health. For conventional tobacco products, it is difficult to imagine how a manufacturer seeking approval of a new product would be able to meet that standard. However, H.R. 1256 / S. 982 provides two exceptions to the requirement that manufacturers obtain premarket approval for new products: (1) the manufacturer makes a claim and FDA, upon review, agrees that the new product is substantially equivalent (as defined in the bill) to a product already on the market; or (2) the new product is determined to be a minor modification of an existing product. For the first 21 months after the bill's enactment, manufacturers would be permitted to market a new product for which a substantial equivalence claim has been submitted, even if FDA has not reviewed and approved the claim. That final provision has attracted some criticism from public health officials. It was added to accommodate the industry's concern that it will take FDA some time to establish a tobacco regulatory program and have in place the necessary personnel and procedures to review industry submissions. Finally, H.R. 1256 / S. 982 would prohibit the use of descriptors such as "light" and "mild." Any product for which the manufacturer, explicitly or implicitly, wished to make a reduced-risk claim would have to provide evidence substantiating that claim and meet additional requirements in order to obtain FDA approval to market that product. Table 1 provides a detailed summary of all the tobacco control provisions in H.R. 1256 (as passed by the House) and the key differences in S. 982 (as reported out of committee). Unlike S. 982 , the House measure includes several provisions dealing with retirement benefits of federal employees. Those provisions, which are not included in Table 1 , are intended to offset the projected loss in federal excise tax revenue due to enactment of H.R. 1256 and the resulting decline in tobacco consumption. A more detailed discussion of some of the issues surrounding the regulation of reduced-risk tobacco products and FDA's authority to establish tobacco product standards follows. This section of the report concludes with a word about legislation's treatment of menthol cigarettes. Both the tobacco industry and the public health community are eager to establish a regulatory scheme for "reduced-risk" tobacco products. In recent years Philip Morris and the other leading cigarette companies have test marketed a variety of products that are potentially less harmful to the individual user than traditional tobacco products. They include cigarettes made using genetically modified tobacco, and cigarette-like products that deliver nicotine using a combustion process that involves lower temperatures and a more controlled burn. The companies want FDA's approval to market these products without fear of the agency taking regulatory action against them. FDA has in the past asserted jurisdiction when cigarette manufacturers have expressly promoted their products as beneficial to health. Public health advocates insist that FDA be given the authority not just to assess industry claims that a reduced-risk product is less harmful to the individual user under normal conditions of use, but also to weigh the risks and benefits to the wider population. They are concerned about recent efforts by the smokeless tobacco companies to market oral snuff and chewing tobacco as a safer alternative to smoking. The companies see the growing anti-smoking sentiment in the country and the spread of indoor (and outdoor) smoking restrictions as an opportunity to market their products to smokers who have trouble finding somewhere to smoke and who are considering alternative sources of nicotine. Epidemiological studies indicate that compared to smoking cigarettes, using smokeless tobacco products exposes an individual to less overall risk from a narrower range of diseases. But public health experts worry that promoting smokeless tobacco as a safer alternative to smoking will undermine efforts both to discourage youngsters from using smokeless tobacco and to encourage adult smokers to give up tobacco products altogether. As a consequence, there may be little if any overall improvement in the nation's health. Public health officials often point to the introduction of low-tar cigarettes in the 1960s and 1970s to illustrate the challenges of regulating reduced-risk products. The companies were careful not to make any explicit health claims when they started to market "light" and "ultralight" cigarettes, but the implicit message was that these products provided a less harmful way of smoking and many smokers believed and continue to believe that they are safer than regular-strength cigarettes. Light cigarettes emit lower levels of tar and nicotine than regular-strength cigarettes, as measured by a standardized smoking machine test developed by the Federal Trade Commission and commonly referred to as the FTC method. However, the National Cancer Institute (NCI) concluded that there is "no convincing evidence" that the introduction of such low-yield products "resulted in an important decrease in the disease burden" among smokers. Many smokers who switched to low-yield cigarettes changed the way they smoked so as to maintain the desired intake of nicotine. They smoked more intensely by inhaling more deeply and more often and by covering the ventilation holes at the base of the filter. This compensatory smoking behavior exposed them to higher amounts of tobacco toxins. H.R. 1256 / S. 982 would prohibit manufacturers from marketing "modified risk tobacco products" without FDA prior approval. The legislation defines modified risk tobacco products as any product: whose labeling or advertising indicates, explicitly or implicitly, that the product is less risky than other tobacco products or reduces exposure to a substance in the product or its smoke; whose manufacturer has taken any action (other than through labeling or advertising) that "would be reasonably expected to result in consumers believing" that the product or its smoke reduces risk or exposure; or whose labeling or advertising uses descriptors such as "light," "mild," or "low" to characterize the level of a substance in the product. In order to gain approval to market a modified risk tobacco product, a manufacturer would have two options. The first is to submit a reduced-risk claim. That would require the company to demonstrate to FDA that the product, "as it is actually used by consumers, will significantly reduce harm and the risk of tobacco-related disease to individual tobacco users; and benefit the health of the population as a whole.... " Alternatively, the manufacturer could assert that the product reduces exposure to a particular substance or substances. H.R. 1256 / S. 982 sets out detailed criteria for approving such a reduced-exposure claim in the absence of scientific evidence to make a reduced-risk claim . Those criteria, based on recommendations of the Institute of Medicine, include determining that the substance or substances are harmful; the exposure reduction is "substantial;" the reduced exposure is "reasonably likely" to lead to a "substantial and measurable and substantial reduction" in harm among individual users; and approval of such a product is "likely to benefit the health of the population as a whole." Applications for products that make exposure-reduction claims would be approved for five years at a time. All manufacturers of approved modified risk tobacco products, whether on the basis of a reduced-risk claim or a reduced-exposure claim, would be required to conduct postmarket surveillance and report their findings on an annual basis. H.R. 1256 / S. 982 would require manufacturers, within one year, to stop using terms such as "light" and "low-tar" on their low-yield brands. Those brands would be permitted to remain on the market provided the manufacturers made any other changes necessary to ensure that the products did not fall under the definition of a modified risk tobacco product. For example, manufacturers have for years reported tar and nicotine yields (as measured by the FTC method) on cigarette advertising and on some very low-tar cigarette packs. Because this information implies that the product reduces risk or exposure, it too would have to be removed. Under a separate provision in the legislation, FDA would be required to develop new regulations for the testing, reporting, and public disclosure of tobacco product ingredients and smoke constituents, including tar and nicotine levels (see Table 1 ). Those regulations would replace the current FTC method. It is difficult to imagine a company gaining FDA approval to market a modified risk tobacco product based on a reduced-risk claim, as least in the near term. Demonstrating that the product, as actually used by consumers, will reduce risk both to the individual user and to the population as a whole requires long-term epidemiological studies. However, gaining approval for a new product on the basis of a reduced-exposure claim in the absence of such studies does not require that the manufacturer meet such stringent requirements. For example, the company would have to show that the reduced exposure is "reasonably likely" to lead to a reduction in harm and that the product is "expected" to benefit the health of the population as a whole. Approving modified risk tobacco products under such criteria makes postmarket surveillance all the more important as a means of monitoring the product's actual impact on public health. H.R. 1256 / S. 982 also would give FDA the authority to require the manufacturer of an approved modified risk tobacco product to comply with certain labeling and advertising requirements. Such authority could be used to place tight restrictions on the ability of manufacturers to market their modified risk products to individual tobacco users. Philip Morris and the other companies believe that they should be able to provide adult consumers with information about reduced-risk and reduced-exposure products, provided the information is accurate and not misleading, to help them make an informed choice. H.R. 1256 / S. 982 would not permit cigarettes to contain any additive that is a "characterizing flavor" of the product or the smoke, other than tobacco or menthol. The legislation would give FDA the authority to develop product standards to reduce nicotine, reduce or eliminate other harmful constituents, or otherwise modify the composition and testing of tobacco products, if it determined that such regulation was appropriate to protect the public health. Once again, FDA would be required to make that determination based on a consideration of the risks and benefits to the population as a whole, which is the approach favored by public health officials. Unlike some of the previous FDA tobacco bills, there is nothing in H.R. 1256 / S. 982 to prevent the agency from requiring changes in the composition of tobacco products that would render them "unacceptable for adult consumption." Placing that restriction on FDA's ability to modify tobacco products had been a key requirement for the industry. Critics of the idea of reduced nicotine levels, including former FDA Commissioner Andrew von Eschenbach, argue that "if the FDA ordered a cut in nicotine levels, smokers would alter their smoking habits in order to maintain their current levels of the addictive substance." Von Eschenbach said that such a decision could "ma[k]e the public health radically worse." On the other hand, supporters of low-nicotine products say that smokers may not be able to compensate for sufficiently reduced nicotine levels by inhaling deeper or smoking more frequently. Rather, such reduced-nicotine products may help smokers quit altogether. The authority to set product standards would give FDA an important tool for modifying tobacco products already on the market so as to make them less harmful. However, developing such standards may be a long and difficult process. More than 4,000 chemical compounds have been identified in tobacco smoke, including about 60 known carcinogens. Researchers still know relatively little about the precise mechanisms by which individual compounds and groups of related compounds contribute to the overall health risks of smoking. It may take years to collect the data necessary to demonstrate that the reduction or elimination of a particular tobacco product constituent will lead to an improvement in public health. As part of the standard-setting process, FDA would be required to take into account the technical feasibility of compliance, as well as the existence of any patents that might make it impossible to meet a compliance deadline. Also, the agency must consider whether a proposed standard might lead to a "significant demand for contraband or other tobacco products that do not meet the requirements of the [legislation]." Until more is learned about the nature of nicotine addiction, that requirement may pose a significant challenge to any proposed reduction in nicotine yield. H.R. 1256 / S. 982 does not permit FDA to ban tobacco products, or to require the reduction of nicotine yields to zero. As discussed earlier, the industry has argued strenuously in favor of placing such restrictions on FDA's regulatory authority. Companies are fearful that the agency, left unchecked, could achieve a de facto ban by eliminating nicotine and making tobacco products unacceptable to adults. The public health community maintains that FDA should have unrestricted authority to take whatever actions it feels are necessary to protect public health. H.R. 1256 / S. 982 would ban the use of all artificial and natural flavors in cigarettes, except menthol. Menthol cigarettes are an important component of the U.S. cigarette industry, accounting for more than one-quarter of the approximately $70 billion domestic market. The exemption for menthol is widely viewed as an important compromise that was negotiated with Philip Morris in order to secure the company's support for the legislation. In June 2008, seven former HHS Secretaries from Democratic and Republican administrations wrote to members of the House and Senate urging them to ban the use of menthol in cigarettes. Their concern mirrors that of many in the public health community who question why menthol—by far the most widely used flavoring in cigarettes—is receiving special treatment. The menthol exemption is controversial because mentholated cigarettes are the most popular choice among African-American smokers. According to the Surgeon General, more than three-quarters of African American smokers smoke menthol cigarettes, as compared to about one-quarter of white smokers. Public health officials hypothesize that the widespread use of mentholated cigarettes among African Americans may, in part, be the reason why they suffer from higher smoking-related health risks. Despite smoking fewer cigarettes per day and beginning smoking later in life, the years of potential life lost before the age of 65 is two times higher in black smokers than white smokers. Furthermore, African-American teen smokers have a greater risk of developing long-term consequences from smoking than other ethnic groups, and are in danger of experiencing the negative effects of tobacco earlier in their lifetimes. Researchers point to studies suggesting that menthol smokers may be exposed to higher levels of dangerous compounds than smokers of regular cigarettes. Some menthol brands, including top-selling Newport, contain among the highest levels of nicotine among leading cigarettes. There is also evidence that it is harder to quit smoking menthol products. Tobacco companies, while acknowledging the health risks of smoking, contend that menthol does nothing to worsen those risks. Sponsors of H.R. 1256 / S. 982 argue that under FDA's broad new authority to promulgate tobacco product standards to reduce or eliminate harmful constituents, or otherwise modify the characteristics of tobacco products, the agency could ban menthol if it determined that such action was appropriate to protect the public health. Meeting that standard might perhaps require more definitive scientific evidence than is currently available. H.R. 1256 / S. 982 would require the Tobacco Products Scientific Advisory Committee, established by the legislation to advise the Secretary on nicotine addiction and other issues, to study and report on the public health impact of menthol cigarettes. This section of the report addresses First Amendment concerns with the requirement in H.R. 1256 / S. 982 that the HHS Secretary publish as a final rule the FDA's 1996 rule on cigarettes and smokeless tobacco and, in particular, the rule's ban on outdoor advertising for cigarettes or smokeless tobacco within 1,000 feet of a school or playground. In Lorillard Tobacco Co. v. Reilly , the Supreme Court held a similar provision unconstitutional. Unlike H.R. 1256 , the Senate version of the FDA tobacco legislation contains a provision, discussed below, that is designed to address these First Amendment concerns. This section also examines federal preemption of state law in the context of the FDA tobacco legislation, the Federal Cigarette Labeling and Advertising Act, and three Supreme Court cases. H.R. 1256 / S. 982 would give FDA broad authority to regulate tobacco product marketing if it determined that such regulation was appropriate to protect the public health. The HHS Secretary would be required to make that determination based on a consideration of the "risks and benefits to the population as a whole," including whether the agency's actions would discourage current users from quitting or encourage others to start using tobacco products. This section will review briefly the U.S. Supreme Court's decisions on government regulation of advertising and other forms of commercial speech, before analyzing the FDA's 1996 rule in the context of such decisions. In Central Hudson Gas & Electric Corp. v. Public Service Commission (1980), the Court established a four-part test for deciding the constitutionality of commercial speech regulation. First, in order to be protected by the First Amendment, the commercial speech must concern lawful activity and not be false or misleading. Second, the government must demonstrate that by restricting such speech, it is seeking to further a substantial government interest. Third, the restrictions must directly advance that interest. Fourth, there has to be a reasonable fit between the type of restrictions imposed and the government's objectives—in other words the regulation cannot be "more extensive than is necessary to service that interest." The U.S. Supreme Court has issued a series of decisions striking down government restrictions on commercial speech, including tobacco product advertising. In the 2001 case, Lorillard Tobacco Co. v. Reilly (2001), the Court found a number of Massachusetts state regulations restricting outdoor and point-of-sale advertising for cigars and smokeless tobacco products to be unconstitutional. The Court determined that the regulations restricted speech more than was reasonable to advance the state's interest in reducing underage (i.e., illegal) use of tobacco products and, thus, failed to meet the fourth part of the Central Hudson test. Banning all outdoor tobacco advertisements within 1,000 feet of a school or playground, in conjunction with other zoning restrictions, argued the Court, "would constitute a nearly complete ban on the communication of truthful information about smokeless tobacco and cigars to adult consumers." The Court found that the restrictions on outdoor advertising of cigars and smokeless tobacco were overbroad in that they prohibited advertising "in a substantial portion of the major metropolitan areas of Massachusetts," included oral communications, and imposed burdens on retailers with limited advertising budgets. The Court also upheld challenges by smokeless tobacco and cigar companies to the outdoor advertising restrictions on the grounds that adults have a right to information and the tobacco industry has a right to communicate truthful speech on legal products. H.R. 1256 / S. 982 would require the HHS Secretary to publish the agency's 1996 rule as a final rule, with some changes, within 180 days after enactment. In developing the 1996 tobacco rule, FDA created a set of advertising restrictions aimed at reducing underage smoking and smokeless tobacco use that it hoped would withstand a constitutional challenge. Whether the FDA's 1996 rule would have passed the Central Hudson test remains unclear. In FDA v. Brown & Williamson , the Supreme Court confined itself to a review of the agency's interpretation of its authority under the FFDCA. The Court did not address the constitutionality of the rule's marketing restrictions. The FDA's 1996 rule would have limited advertisements in publications with a significant teen audience to black text on a white background. The 1996 rule also included a ban on outdoor advertising within 1,000 feet of a school or playground. As noted, in Lorillard , the Court found a similar provision in the Massachusetts regulations unconstitutional. S. 982 addresses this concern, as discussed below. Analyzing this restriction on outdoor advertising in the context of Central Hudson , it does not appear that the 1996 rule's restriction on advertisements within 1,000 feet of a school or playground would survive the fourth step of the Central Hudson test—that the regulation cannot be "more extensive than is necessary" to serve the substantial government interest. In Lorillard , the Court stated that "[t]he broad sweep of the regulations indicates that the Attorney General did not 'carefully calculate the costs and benefits associated with the burden on speech imposed' by the regulations." The Supreme Court further explained that a "careful calculation of the costs of a speech regulation does not mean that a State must demonstrate that there is no incursion on legitimate speech interests, but a speech regulation cannot unduly impinge on the speaker's ability to propose a commercial transaction and the adult listener's opportunity to obtain information about products." First, the Court noted that "the Attorney General did not seem to consider the impact of the 1,000 foot restriction on commercial speech in major metropolitan areas." Rather, the Attorney General imposed a 1,000 foot restriction that was identical to the FDA's restriction in the 1996 rule. The Court noted that suppression of speech or limits on speech tend to be case-specific. However, "the FDA's regulations would have had widely disparate effects nationwide. ... The uniformly broad sweep of the geographical limitation demonstrates a lack of tailoring." In the FDA's final 1996 rule, the agency took note of comments that focused on the impact of the rule in major metropolitan areas, including a survey that "showed that outdoor tobacco advertising would be prohibited in 94 percent and 78 percent of the respective land mass of Manhattan and Boston under the [1,000 foot] proposal." However, the FDA attributed "the possibility that its restrictions effectively outlaw outdoor advertising in most urban areas" to population density in cities. The agency then stated that its intent in establishing the 1,000 foot restriction was "to restrict the accessible and intrusive communications of information about cigarettes and smokeless tobacco to children and adolescents at school and at play." The rule explained that the FDA "considered the cost of its [1,000 foot] restriction but conclude[d] that a narrower restriction would not adequately advance its purpose of protecting young people from unavoidable advertising." The Lorillard Court's declaration that a 87 to 91 percent ban on tobacco advertising "would constitute nearly a complete ban on the communication of truthful information about smokeless tobacco and cigars to adult consumers" and the Court's statement that the 1,000 foot restrictions' "breadth and scope ... [did] not demonstrate a careful calculation of the speech interests involved," appear to indicate that Court would strike the 1,000 foot restriction if the 1996 final rule became effective. Second, the Court stated that tailored restrictions on tobacco advertising and promotion "would involve targeting those practices [that appeal to children] while permitting others." The FDA stated in its responses to comments on the rulemaking: The prohibition on outdoor advertising within 1,000 feet of schools and playgrounds is designed to address a different problem. The concern is not the appeal of the advertising. If the problem were only appeal, the 1,000 foot restriction would not be necessary because the text-only requirement would eliminate this concern. The concern is the nature of the billboards themselves. Billboards near schools and playgrounds ensure that children are exposed to their messages for a prolonged period of time. Therefore, it does not seem likely that the Supreme Court would uphold the 1,000 foot restriction if, as the agency stated, it was not meant to target practices that appeal to children. Based on the Court's discussion in Lorillard , it does not appear likely that the 1996 FDA final rule's 1,000 foot restriction would survive a Central Hudson analysis. One approach would be for Congress to exclude the 1,000 foot restriction in the new final rule that would be published 180 days after the FDA tobacco legislation is enacted. The House version of the Family Smoking Prevention and Tobacco Control Act specifies (in §102(a)(2) of H.R. 1256 ) the portions of the new final rule that will be different from the 1996 rule. The House's specified alterations do not include a change to the part of the FDA 1996 final rule that addressed the 1,000 foot restriction, which would be codified at 21 C.F.R. § 897.30(b). On the other hand, the Senate bill (§ 102(a)(2)(E) of S. 982 ) states that the new version of the FDA 1996 final rule must "include such modifications of section 897.30(b), if any, that the Secretary determines are appropriate in light of governing First Amendment case law, including the decision of the Supreme Court of the United States in Lorillard Tobacco Co. v. Reilly ." Some public health law experts believe that the Supreme Court in its decisions on the regulation of commercial speech has left public health authorities with little room to craft tobacco advertising restrictions that meet both the third (effectiveness) and fourth (extensiveness) parts of the Central Hudson test. On the one hand, tobacco advertising restrictions that are narrowly tailored may not provide clear evidence of effectiveness, thus failing the third part of Central Hudson test. On the other hand, more sweeping (and potentially effective) restrictions may be viewed as too extensive and not reasonably related to the government's asserted interest, thus failing the fourth part of the Central Hudson test. In the event that the advertising restrictions are challenged, H.R. 1256 contains a severability clause that states: If any provision of this Act, the amendments made by this Act, or the application of any provision of this Act to any person or circumstance is held to be invalid, the remainder of this Act, the amendments made by this Act, and the application of the provisions of this Act to any other person or circumstance shall not be affected and shall continue to be enforced to the fullest extent possible. This section examines federal preemption of state law in the context of the FDA tobacco legislation. The Federal Cigarette Labeling and Advertising Act (FCLAA), which mandates health warnings on cigarette packaging and advertising, includes the following preemption provision: (a) Additional Statements. No statement relating to smoking and health, other than the statement required by [the labeling provisions] of this Act, shall be required on any cigarette package. (b) State Regulations. No requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this Act. The FCLAA's introductory declaration of policy indicates that Congress did not want "commerce and the national economy ... impeded by diverse, nonuniform, and confusing cigarette labeling and advertising regulations.... " To that end, the act's preemption provision (1) prohibits additional health-related statements on the labels of cigarette packages that are properly labeled in accordance with the act, and (2) prevents states and localities from imposing any other "requirement or prohibition based on smoking and health" regarding the advertising and promotion of cigarettes. The U.S. Supreme Court has issued three decisions regarding the FCLAA preemption provision. In these cases, the Court explored the constitutional questions that are raised when state statutes or common law causes of action impose requirements that conflict with federal laws that may preempt such state action (see box below). In Cipollone v. Liggett Group Inc. , the U.S. Supreme Court held that certain types of tort actions that are brought against cigarette manufacturers under state common law are preempted by the FCLAA. In the case, the son of a woman who died of lung cancer caused by smoking cigarettes sued cigarette manufacturers for causing his mother's death. His claims were based on New Jersey common (i.e., court-made) law. The plaintiff claimed, among other things, that the defendants had failed to provide adequate warnings of the health consequences of smoking cigarettes, had made and breached express warranties that their cigarettes did not present any significant health consequences, had fraudulently—through their advertising—attempted to neutralize the federally mandated warning labels, had fraudulently concealed medical and scientific data indicating that cigarettes were hazardous to health, and had conspired to deprive the public of such medical and scientific data. The defendant cigarette manufacturers argued that the FCLAA preempted state law claims. In other words, the defendants argued that, having complied with the federal warning requirements, they could not be held liable for the plaintiff's mother's death, even if everything the plaintiff asserted was true. The FCLAA contains two preemption provisions. It prohibits states from (1) requiring any statement, other than the warnings prescribed by the Act, to appear on any cigarette packages, and (2) imposing any requirement or prohibition based on smoking and health with respect to the advertising or promotion of cigarettes that are labeled in conformity with the federal statute. The Supreme Court treated the two preemption provisions separately. It construed the first, prohibiting the states from requiring additional statements on cigarette packages , to supersede "only positive enactments by legislatures or administrative agencies that mandate particular warning labels." In other words, the first provision did not preempt state courts from awarding damages and thereby in effect requiring additional warning labels. However, the Court construed the second provision, prohibiting states from imposing any requirement or prohibition with respect to cigarette advertising or promotion , as broader, and as intended to preempt some common law claims. The Court then delineated which state law claims are preempted and which may be brought. Failure-to-warn claims are preempted to the extent that they would require additional, or more clearly stated, warnings in cigarette advertising or promotions, but are not preempted to the extent that they rely on the defendants' "testing or research practices or other actions unrelated to advertising or promotion." Breach of express warranty claims are not preempted because express warranties, whether set forth in advertisements or elsewhere, are not imposed by the state but arise from the manufacturer's voluntary statements. Fraudulent misrepresentation claims are preempted to the extent they are predicated on advertising statements that tended to neutralize the federally mandated warning labels, because the federal statute prohibits states from imposing prohibitions , not just requirements, with respect to cigarette advertising or promotion. However, fraudulent misrepresentations claims, and conspiracy claims, based on concealment of the hazards of smoking are not preempted insofar as they rely on a state law duty to disclose such facts through channels of communication other than advertising or promotion. The Supreme Court next addressed FCLAA preemption in Lorillard Tobacco Co. v. Reilly . In addition to finding Massachusetts' regulations on smokeless tobacco and cigar advertising unconstitutional (discussed earlier), the Court in Lorillard ruled that the state's restrictions on cigarette advertising were preempted by the FCLAA. Specifically, the Court concluded that the regulations did relate to the "advertising or promotion" of cigarettes. It further concluded that the regulations, targeted at youth exposure to cigarette advertising, were "based on smoking and health" within the meaning of the FCLAA because "concern about youth exposure to cigarette advertising is intertwined with the concern about ... smoking and health." The fact that the regulations governed location rather than content of advertising did not remove them from the preemption language, which covers "all 'requirements' and 'prohibitions' imposed under state law." The Lorillard decision clarified that while the FCLAA preempts the ability of states to regulate the advertising and promotion of cigarettes, states retain the authority to regulate other aspects of tobacco use and sales. The FCLAA, for example, does not preempt state laws that prohibit sales to minors or restrict smoking in public places. The Supreme Court examined the scope of the FCLAA once again in Altria Group, Inc. v. Good . In this case, the Court addressed whether the FCLAA preempted a state law claim that Philip Morris USA and its parent company Altria Group violated the Maine Unfair Trade Practices Act (MUTPA) by using "light" and "low tar" descriptors on cigarettes, thereby delivering the message that "light" cigarettes deliver less tar and nicotine to consumers than regular brands, while knowing such message to be untrue. The MUTPA makes it unlawful to use "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." To determine whether the respondents' claims under the MUTPA were preempted by the FCLAA, the Court used the "predicate-duty" test it developed in Cipollone . This test asks "whether the legal duty that is the predicate of the common law damages action constitutes a 'requirement or prohibition based on smoking and health ... with respect to ... advertising or promotion.'" The Court held that the respondents' claims were not expressly preempted by the FCLAA because their claims under the MUTPA were predicated on the general duty not to deceive. The Court further rejected Philip Morris's argument that the state law claims were impliedly preempted because of its contention that the FTC has for decades promoted the development and consumption of low tar cigarettes and has encouraged consumers to rely on representations of tar and nicotine content in choosing among cigarette brands. In rejecting Philip Morris's implied preemption argument, the Court stated, "[i]n short, neither the handful of industry guidances and consent orders on which [Philip Morris] relies nor the FTC's inaction with regard to 'light' descriptors even arguably justifies the preemption of state deceptive practices rules like the MUTPA." While holding that lawsuits accusing cigarette-makers of fraudulent conduct under state law could proceed, the Court noted that the respondents "still must prove that the petitioners' use of 'light' and 'lowered tar' descriptors in fact violated the state deceptive practices statutes." The public health community strongly supports the elimination of the FCLAA preemption language so that states could impose their own restrictions on tobacco labeling and advertising. The tobacco companies, on the other hand, oppose any such change, in part to preserve the uniform national standards currently in effect. However, the industry also is anxious to preserve the FCLAA's preemption provision in light of the U.S. Supreme Court's ruling in Cipollone. If Congress were to amend that provision, such legislation, depending on the language, could either increase or restrict the types of lawsuits that currently may be brought against cigarette manufacturers on the basis of the warning contained on cigarette packages. H.R. 1256 / S. 982 appears to attempt to accommodate both sides by preserving the current language in the FCLAA preemption provision, while adding at the end the following: (c) Exception. Notwithstanding subsection (b), a State or locality may enact statutes and promulgate regulations, based on smoking and health ... imposing specific bans or restrictions on the time, place, and manner, but not content, of the advertising or promotion of any cigarettes. Thus, states would continue to be prohibited from adding their own warning labels to cigarette packages, but would be permitted to regulate certain aspects of cigarette advertising and promotion, subject to any First Amendment challenge. For the tobacco companies, the language in subsection (b) underlying Cipollone would remain intact. In addition to amending the FCLAA preemption provision, H.R. 1256 / S. 982 § 916 would include a general preemption provision in the new FFDCA language that would place certain restrictions on states (for example, with regard to tobacco product standards, adulteration, and misbranding) while allowing them to regulate the sale, advertising, and promotion of tobacco products (see Table 1 ). On November 23, 1998, attorneys general from 46 states, the District of Columbia, and the U.S. territories signed a contractual agreement (the Master Settlement Agreement, or MSA) with the major cigarette companies to settle state lawsuits to recover the costs, borne by Medicaid and other public programs, of treating smoking-related illnesses. The remaining four states — Mississippi, Florida, Texas, and Minnesota — had settled individually with the companies prior to the MSA. Under the terms of the MSA, the companies agreed to make annual payments totaling approximately $200 billion over the first 25 years and accept certain restrictions on tobacco product advertising, marketing, and promotion. Specifically, the MSA: prohibited tobacco companies from targeting youth in the advertising, promotion, or marketing of their products; banned the use of cartoons in advertising; limited each company to brand-name sponsorship of one sporting or cultural event a year, excluding concerts, team sports, events with a significant youth audience, or events with underage contestants; banned public transit advertising; banned outdoor billboard advertising, excluding billboard advertising for brand-name sponsored events; limited advertising outside retail stores to signs no bigger than 14 sq. ft; banned company payments to promote tobacco products in various media, including movies and TV; banned non-tobacco apparel with brand-name logos except at brand-name sponsored events; banned gifts of non-tobacco items to youth in exchange for tobacco products; restricted the use of nationally recognized non-tobacco brand names for tobacco products; and limited free samples of tobacco products to adult-only facilities.
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The 111th Congress is considering legislation that would give the Food and Drug Administration (FDA) broad new statutory authority to regulate the manufacture and marketing of cigarettes and smokeless tobacco products under the Federal Food, Drug, and Cosmetic Act (FFDCA). On April 2, 2009, the House passed the Family Smoking Prevention and Tobacco Control Act (H.R. 1256; H.Rept. 111-58, part 1 and 2). On May 20, the Senate Committee on Health, Education, Labor and Pensions approved an almost identical bill (S. 982). Similar legislation was first introduced in the 108th Congress and passed the Senate in 2004 and the House in 2008 with strong bipartisan support. The Administration strongly supports H.R. 1256/S. 982. H.R. 1256/S. 982 would create a new FFDCA Chapter IX solely for the regulation of tobacco products. While the bill's language draws extensively on the FFDCA's existing provisions for regulating pharmaceutical products and medical devices, tobacco products would be regulated under new legal authority based on a public health standard rather than the safety and effectiveness standard by which the FDA regulates drugs and devices. Under the new language, FDA would have to demonstrate that any proposed tobacco product regulation was appropriate for the protection of public health, taking into consideration the risks and benefits to the population as a whole. Among its many provisions, H.R. 1256/S. 982 would require all tobacco product manufacturers to register with FDA. All registered facilities would be inspected every two years. H.R. 1256/S. 982 would require the FDA to reissue its 1996 tobacco rule, which was struck down by the U.S. Supreme Court in 2000. The rule would place new restrictions on youth access to tobacco products, end all remaining brand-name sponsorship of sporting and other entertainment events, and limit tobacco advertising in publications with a significant youth readership to black-on-white text only. In addition, the existing health warnings on tobacco product packaging and advertising would be replaced with more explicit and conspicuous health warnings. H.R. 1256/S. 982 would give FDA the authority to develop regulations restricting the sale, distribution, advertising, and promotion of tobacco products, to the extent permitted by the First Amendment. The agency also would have the authority to require changes in the design and characteristics of current and future tobacco products, such as the reduction or elimination of harmful ingredients and additives. FDA would not have the authority to reduce nicotine yields to zero or ban tobacco products. Under H.R. 1256/S. 982, manufacturers would have to obtain FDA approval in order to market a new tobacco product, unless FDA determined that it was substantially equivalent to a product already on the market, or a minor modification of an existing product. The bill would prohibit the use of descriptors such as "light" and "mild" and require manufacturers seeking FDA approval to market a product for which they intend to make a reduced-risk claim to provide evidence substantiating that claim. H.R. 1256/S. 982 would require FDA to develop new requirements for testing and reporting tobacco product ingredients and smoke constituents, and to issue new recordkeeping requirements to help counter the illicit trade of tobacco products. FDA's new regulatory activities would be paid for by user fees assessed on the manufacturers. This report provides a detailed summary of the provisions in H.R. 1256/S. 982 and discusses some of the public health and legal issues it raises. A companion report, CRS Report R40196, FDA Tobacco Regulation: History of the 1996 Rule and Related Legislative Activity, 1998-2008, by [author name scrubbed] and [author name scrubbed], provides more background on the FDA rule and past efforts to give the agency the authority to regulate tobacco products.
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Congress established the Federal Election Commission (FEC) via the 1974 Federal Election Campaign Act (FECA) amendments. The six-member independent regulatory agency is responsible for civil enforcement of the nation's campaign finance law. The Commission also administers public financing of presidential campaigns (applicable to participating candidates) and presidential nominating conventions. In addition to enforcement and regulatory duties, the FEC conducts a variety of outreach and educational activities. Under FECA, no more than three Commissioners may be affiliated with the same political party. In practice, the Commission has been divided equally among Democrats and Republicans. Affirmative votes from at least four commissioners are required to (among other duties): make, amend, or repeal rules, issue advisory opinions (AOs), and approve enforcement actions. (For the purposes of this report, enforcement actions can include finding "reason to believe" FECA has been violated, which can prompt an enforcement investigation. ) Matters without at least four votes for or against an action can have the effect of leaving questions of law, regulation, or enforcement unresolved, as some view the issues in question as having been neither approved nor rejected. Throughout its history, the Commission has been criticized for failing to reach at least a four-vote consensus on some key policy and enforcement issues, resulting in what are commonly termed deadlocked votes. The issue of deadlocked votes has received renewed attention since late June 2008, when most of the current Commissioners took office (see Table 1 ), and following a six-month loss of the agency's policymaking quorum. Some deadlocked votes among current (and previous) Commissioners were marked by controversy and apparently staunch, public disagreement. For example, two enforcement cases—one involving the 527 organization the November Fund and another involving Arjinderpal Sekhon, a former congressional candidate—featured an exchange of sharply worded "statements of reasons" articulating Commissioners' justifications for their votes. In the November Fund case, which focused on whether the organization should have registered with the Commission as a political committee, a deadlock resulted in the Commission rejecting an already-signed conciliation agreement. In the Sekhon case, a deadlock forced the Commission to refund a civil-penalty check that had already been submitted. Amid deadlocks in these and other cases, some Members of Congress, media organizations, and interest groups began to comment on what was characterized as the "increasingly public and acrimonious" nature of deadlocked votes. In August 2009, citing deadlocks and other issues, Senators Feingold and McCain introduced legislation ( S. 1648 ) to restructure the agency. Deadlocks also reportedly motivated congressional concern about FEC nominations. Although the topic of deadlocked votes arises frequently, empirical analyses of the phenomenon are rare. Those that exist rely on older data. Nonetheless, it is clear that deadlocked votes are sometimes controversial and are a regular topic of interest among those who monitor the Commission. What is less clear, however, is whether deadlocks are common or whether deadlocks fall along party lines. Both points are commonly cited (although often without quantitative data) in anecdotal accounts. This report addresses those questions by exploring deadlocks in rulemakings, enforcement matters, and AOs during the current Commission's first year in office—from July 2008 through June 2009. In doing so, the report presents data on how many issues—and which ones—resulted in deadlocked votes. Matters (rulemakings, enforcement actions, or advisory opinions (AOs)) voted on by the Commission are the unit of analysis. As such, the quantitative analysis that follows is based on the number of rulemakings, enforcement actions, and AOs the Commission considered during the period—not the number of individual votes that occurred on each issue. Although this report examines deadlocks that can occur during rulemakings, enforcement matters, and AOs, it is not intended to provide an exhaustive account of Commission operations, procedures, or processes. As such, detailed discussion of Commissioners' deliberations, the FEC enforcement process, or other issues that might be relevant for the broader context in which some deadlocks arise is beyond the scope of this report. The following analysis is based on data provided by the FEC and on other publicly available FEC documentation. Although certain matters remain outside the public record (e.g., votes on negotiations over civil-penalty amounts), the data presented here account for all publicly available deadlocks that occurred during the year under review. The analysis also provides an overview of the policy or legal issues considered in each of those deadlocks. The data show that although deadlocks occurred throughout the year, they occurred in a minority of the matters the Commission considered. Those issues on which deadlocks occurred, however, featured strong disagreement among Commissioners and reflected apparently unsettled positions on some major policy questions, such as: political committee status, when particular activities triggered filing requirements or other regulation, and questions related to investigations and other enforcement matters. In addition, the deadlocks that did occur always fell along partisan lines. If Congress chooses to examine FEC deadlocked votes, a variety of perspectives and options could be relevant, as discussed at the end of this report. This report discusses substantive deadlocks (or simply deadlocks ). As used here, the term means votes that precluded the Commission from reaching a consensus about how to proceed on a rulemaking, enforcement action, or AO. This includes 3-3 tie votes and 2-2, 2-3, 3-2 split votes that had the same effect as a tie (i.e., cases in which at least one Commissioner recused or otherwise did not vote). Substantive deadlocks are rarely the final vote on a matter, as the Commission usually votes to close the file after a substantive deadlock has occurred. In the cases explored here, however, the deadlocked vote essentially halted substantive Commission action on the matters in question. During the first year of the current Commission, no substantive deadlocks occurred on rulemaking issues. During the period, the FEC held votes on four rulemakings: reporting bundled campaign contributions, extension of the Administrative Fine Program (AFP), repealing increased contribution limits following the Supreme Court's invalidation of the so-called Millionaire's amendment, and adjusting certain penalties for inflation. Although the FEC was able to reach agreement on these four issues, the lack of deadlocks does not necessarily indicate that no conflicts exist on rulemakings. In fact, only one of the four rulemakings (the bundling regulations) approved during the period was controversial. Other rulemaking matters remain open—perhaps because consensus has not been reached. In short, it might be expected that no deadlocks occurred on rulemakings given that Commissioners appear to value consensus surrounding rulemakings and might, therefore, postpone formal consideration of proposed rules until at least a four-vote majority can be attained. As the data in Table 2 and Figure 1 show, evaluating the frequency of substantive deadlocks depends on what segment of the data is analyzed. FEC enforcement actions are handled through three mechanisms: the Administrative Fine Program (AFP), alternative dispute resolution (ADR), and matters under review (MURs). It is perhaps unsurprising that no substantive deadlocks occurred in AFP cases, which are limited to comparatively simple matters involving late filings. Similarly, although ADR cases can involve a variety of issues, the program is designed to facilitate negotiation that leads to relatively speedy resolution on fairly simple cases. Both the administrative fine and ADR programs typically involve cases that can be closed with little controversy and without the complexity and potential litigation involved in some MURs. By contrast, MURs can be complex and cumbersome. They may entail lengthy investigations or audits, protracted negotiations between the Commission and respondents, substantial civil penalties, or litigation—although the pace can vary depending on individual circumstances. Votes on each of those elements (where applicable)—and others—can generate deadlocks if the questions under consideration are controversial. Unlike ADR and AFP matters, MURs are also likely to involve cases in which facts or substantial questions or law or policy are in dispute. Substantive deadlocks occurred in approximately 13% of publicly available MURs closed between July 2008 and June 2009. Substantive deadlocks occurred in about 6% of cases during the period if the data are combined to include action on MURs, AFP, and ADR cases. Advisory opinions (AOs) allow requesters to ask the Commission for guidance about how campaign finance law applies to a specific situation. Typically, requesters use AOs to determine whether a planned campaign activity is permissible. The degree to which AOs are controversial can vary substantially depending on the request and complexity of the issues involved. As Table 3 shows, substantive deadlocks affected 5 of 29 (17.2%) AOs considered during the period. In three of those cases, however, the Commission was able to reach sufficient agreement to issue partial guidance. It is unclear whether substantive deadlocks occurred because of party affiliation, but every deadlock during the review period involved party-line votes. As noted previously, Commissioners Bauerly, Walther, and Weintraub are widely regarded as Democratic appointees; Commissioners Hunter, McGahn, and Petersen are widely regarded as Republican appointees. Notes accompanying the FEC data and a review of the individual vote certifications make clear that in every instance in which a deadlock occurred—whether on MURs or AOs—Democratic and Republican Commissioners voted in partisan blocs (although not every Commissioner voted in every case). In addition, in each case of a deadlocked vote in a MUR, Democratic votes would have resulted in additional enforcement action, while Republican votes would not. In most cases, this meant that Democratic Commissioners "voted to approve" Office of General Counsel (OGC) enforcement recommendations, while Republican Commissioners voted against those recommendations. In some cases, however, Democratic Commissioners voted to pursue additional enforcement despite OGC recommendations to the contrary. As noted previously, especially in complex matters, the Commission can hold multiple votes on various issues associated with particular cases. In enforcement matters, for example, the Commission might vote on whether to: proceed with an investigation, accept factual and legal analyses, accept proposed conciliation agreements, etc. Motions, made by Commissioners, determine exactly what the Commission is considering during individual votes. For example, in the American Future Fund case (MUR 5988), the Commission deadlocked 3-3 on a motion containing six elements, including finding "reason to believe" that multiple provisions of FECA and FEC regulations had been violated, approving a factual and legal analysis, and other issues. Deadlocks on AOs were also typically complicated; in some cases, disagreement occurred over competing drafts or amendments. Exploring the intricacies of individual motions and votes is beyond the scope of this report. It is clear, however, that deadlocks are not confined to a single policy issue. Table 4 provides an overview of the 24 MURs in which substantive deadlocks occurred; Table 5 does so for the five AOs. (Multiple MURs listed on one line in Table 4 indicate that the Commission handled those issues as a single matter.) As the tables show, deadlocks occurred throughout the year and involved a variety of respondents and issues. Deadlocks affected MURs on a variety of campaign spending issues and political committee status (e.g., whether groups regulated primarily under Sections 527 or 501(c) of the Internal Revenue Code (IRC) should have registered with the Commission as political committees), and other issues. The AOs in question also concerned various issues, particularly questions related to how campaign funds could be raised or spent. Because most cases involved multiple elements, the information in the tables is provided for illustrative purposes, but is not intended to provide a detailed overview of each case. In addition, in some cases, deadlocks appear to have had more to do with whether an investigation should proceed or whether a penalty was appropriate than with the substance of the policy or legal issue in the MUR or AO. Therefore, although the tables note the major policy or legal issues affected by deadlocks, those issues were not necessarily the cause of the deadlocked vote that halted Commission action. As Congress determines whether oversight or other action regarding deadlocked votes is necessary, a threshold issue may be to consider whether deadlocks represent a public policy concern and if so, how. On one hand, occasional deadlocks could be expected given the complexity (and sometimes controversy) embodied in federal campaign finance law and regulation. Also, Congress appears to have anticipated that the Commission might be unable to reach consensus in some controversial cases, and perhaps even intended for deadlocks to occur. According to one analysis, "In order to ensure that the Commission would not become a vehicle for partisan purposes, the Congress created an unusual conflict within the FEC." Commenting on the four-vote requirement, former Commissioner Scott E. Thomas and his executive assistant, Jeffrey H. Bowman, continued, "These provisions were specifically designed to ensure that formal action on a matter before the Commission could go forward only on the affirmative vote of a mixed majority of Commission members." In addition, deadlocks might even be viewed as positive, particularly if enforcement actions being considered are perceived as unwarranted or excessive. On the other hand, substantive deadlocks mean that the Commission has been unable to reach consensus about some element of law or regulation. Even if the Commission is in agreement about a particular element of law or regulation generally, deadlocks can signal disagreement about how law and regulation apply to particular circumstances. As a result, at least in specific instances, substantive deadlocks prevent campaign finance law from being enforced or preclude those seeking guidance from clearly knowing whether their planned activities will run afoul of the law. Indeed, in the cases discussed above, the Commission was unable to reach consensus on major questions of campaign finance law and policy, such as: political committee status, determining civil penalties, and whether particular activities trigger reporting or other requirements under FECA. In addition, there is some evidence that deadlocks may be on the rise. For example, although external examinations of deadlocks are rare, a recent scholarly study found that between 1996 and 2004, deadlocks on MURs occurred in 4.6% of cases—well below the 13.1% figure reported here for 2008-2009. If deadlocks are, in fact, on the rise over time (a question that would require additional data to assess), Congress may wish to examine the Commission's long-term ability to reach consensus and to consider whether that ability enhances or inhibits campaign finance regulation. As the data show, during the current Commission's first year, substantive deadlocks occurred in about 13% of votes in MURs and less than 6% of all enforcement actions when combining MURs with ADR and AFP cases. By extension, the Commission did not deadlock in almost 87% of MURs and 94% of enforcement actions overall. Therefore, if Congress determined that action were warranted only if deadlocks occupied a sizable portion of Commission business (e.g., a large plurality or majority), the quantitative data could be interpreted to suggest that congressional action is not needed—at least based on the time frame examined here. In addition, despite some deadlocks on key issues, during the same period the Commission was able to reach consensus on a wide variety of other cases—including some that were also potentially controversial. Congress may wish to explore FEC deadlocks through oversight—either with or without other legislative action. On a related note, the Senate could also choose to examine deadlocks as part of its advice and consent responsibilities surrounding FEC nominees. Oversight would provide an opportunity to learn more about how and why deadlocks occur, and to assess whether additional congressional action or internal reform, such as changes in Commission enforcement procedures or practices, is needed. Oversight has the potential advantage of addressing deadlocks without necessarily inviting the stalemate that often accompanies campaign finance legislation. Oversight would also permit Congress to determine whether a recent procedural change at the Commission has any affect on deadlocked votes. Specifically, in July 2009, the Commission announced a pilot program to permit AO requesters to appear before the Commission to answer questions about the requests. This initiative is designed to address the "frustrat[ing]" situation in which requesters or their attorneys were in the audience during open meetings at which AOs were considered, but were not permitted to answer questions Commissioners raised. If the pilot program provides greater clarity about specific facts surrounding AOs, the potential for deadlocks might be reduced—at least in cases in which deadlocks occur because of uncertainty or misimpression. Oversight alone, however, would not necessarily reduce the number of deadlocks or otherwise change agency practices or behavior. At least two broad legislative options are open to Congress. First, Congress could restructure the Commission in an effort to avoid deadlocks. In August 2009, Senators Feingold and McCain introduced S. 1648 , a bill that would replace the six-member FEC with a three-member Federal Election Administration (FEA). Similar legislation has been introduced since 2003. Restructuring the FEC in any form that eliminated an even number of Commissioners could reduce or eliminate the potential for deadlocks. Revamping the agency, however, would entail reforms well beyond addressing the comparatively narrow topic of deadlocked votes. In addition, a legislative overhaul of the agency is likely to be controversial. Particularly in recent Congresses, even arguably modest efforts to change campaign finance law have typically been seen as potential legislative vehicles for those wishing to pursue broad policy reform. No major campaign finance legislation has been enacted since the 2002 Bipartisan Campaign Reform Act (BCRA). This context suggests that efforts to revamp the FEC may be difficult. On the other hand, the cyclical nature of support for campaign finance reform legislation suggests that changing the Commission—or pursuing other major policy goals—could be accomplished provided sufficient demand exists within Congress or perhaps the broader public sphere. Second, Congress could pursue legislation to clarify those issues on which deadlocks have occurred. Overall, deadlocks appear not to be isolated to particular policy or legal issues. The political committee issue provides a prominent example. By providing clearer guidance to the Commission, legislation to clarify when 527s and 501(c) organizations must register as political committees might reduce the potential for deadlocked enforcement. Nonetheless, pursuing legislative clarity on controversial issues might not be practically attainable in all circumstances. For example, partially because of the controversy surrounding the political committee issue, legislation concerning 527s has not been enacted in recent Congresses. In addition, legislating individual policy issues would not necessarily address the fact that the Commission deadlocked on a variety of issues, which suggests that structural reform could be more expedient route to curtailing deadlocked votes. The data presented above suggest that substantive deadlocks occurred throughout the current Commission's first year in office, but Commissioners reached consensus far more frequently than not. Between July 2008 and June 2009, substantive deadlocks occurred in about 13% of MURs and about 17% of AOs. No deadlocks occurred on rulemakings. Nonetheless, substantial disagreement occurred on some issues. Deadlocks always occurred in partisan blocs, and the tone of debate surrounding deadlocks received prominent attention in Congress and the media. A variety of options are available to Congress if it chooses to address the deadlocks issue, ranging from maintaining the status quo to clarifying those areas of the law on which deadlocks occur or restructuring the agency.
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In the mid-1970s, Congress designed the Federal Election Commission (FEC) to be a bipartisan independent regulatory agency. The agency's structure is intended to guard against partisan enforcement of campaign finance law. Consequently, the six-member Commission has been evenly divided among Democrats and Republicans. The Federal Election Campaign Act (FECA) also requires that the Commission muster at least four votes to exercise core functions—meaning that no measure can advance without at least some bipartisan support. Perhaps because of that structure, however, the Commission has been criticized for sometimes failing to achieve consensus on key policy issues, resulting in what are typically termed deadlocked votes, in which matters of law or regulation may be left unresolved. In August 2009, citing deadlocks and other issues, Senators Feingold and McCain introduced legislation (S. 1648) to restructure the agency. Although the topic of deadlocked votes arises frequently, empirical analyses of the phenomenon are rare. Those that exist focus on older data. Accordingly, this report asks whether deadlocks are as common as popular wisdom suggests and whether deadlocks fall along party lines. Both points are commonly cited (although often without quantitative data) in anecdotal accounts. The report addresses those questions by providing an overview of deadlocks in rulemakings, enforcement matters, and advisory opinions (AOs) during the current Commission's first year in office—from July 2008 through June 2009—when concern over deadlocks has most recently reemerged. Although this report examines deadlocks that can occur during rulemakings, enforcement matters, and AOs, it is not intended to provide an exhaustive account of Commission operations, procedures, or processes. The data show that deadlocks occurred throughout the current Commission's first year in office, but they affected a minority of the matters considered. Specifically, deadlocks occurred in about 13% of matters under review (MURs) and in about 17% of AOs. No deadlocks occurred on rulemakings. Those issues on which deadlocks occurred, however, featured staunch disagreement among Commissioners and reflected apparently unsettled positions on some major policy questions. In addition, when deadlocks occurred, Commissioners always voted in partisan blocs. Deadlocked votes can be interpreted from various perspectives, which may influence whether Congress decides to maintain the status quo or pursue oversight or legislative action. This report will be updated periodically to reflect new data or as developments warrant.
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On October 4, four members of U.S. Special Operations Forces were killed and two wounded in an attack near the town of Tongo Tongo in western Niger ( Figure 1 , below). The Defense Department (DOD) has stated that the U.S. servicemembers were "conducting an advise and assist mission" to conduct reconnaissance with Nigerien counterparts, several of whom were also killed and injured. For many Members of Congress, the incident has thrown a spotlight on evolving security threats in West Africa's central Sahel region, as well as the growing presence of U.S. military forces engaged in counterterrorism support in Africa and throughout the world. This report provides background information and context on the U.S. military presence in Niger, and several related issues, in response to frequently asked questions. U.S. officials have stated that a local group affiliated with the Islamic State (IS, aka ISIS/ISIL) was responsible for the attack, which would make it the first known incident in which an Islamist militant group in the Sahel has killed U.S. soldiers on active duty. Islamist extremists have, however, killed Western civilians, including a handful of U.S. citizens, in a series of mass-casualty attacks in North and West Africa since 2013 (see chronology in the Appendix ). The first U.S. citizen reportedly held as a hostage for a prolonged period by an Islamist group in the Sahel was kidnapped in western Niger in October 2016; some news reports suggest that he is being held by the same group that carried out the October 4, 2017, attack, but this has not been confirmed. Niger's relative stability, willingness to partner with Western militaries, and close historic relationship with former colonial power France have made it an attractive partner for the U.S. military and a useful location from which to conduct activities with a regional scope. Congress has shaped U.S. engagement with Niger and the U.S. military footprint in the country through its authorization and appropriation of funding for U.S. security cooperation and assistance programs, and through its authorization of funding for U.S. military construction. Congressional committees of jurisdiction have also influenced U.S. policy and programs in Niger through oversight activities, for example probing the capacity of fragile states such as Niger to absorb U.S. counterterrorism assistance and directing DOD to seek to mitigate associated risks (see " For what purposes are U.S. military personnel in Niger? "). In response to heightened public attention to the circumstances of the October 4 incidents, many Members of Congress have noted unanswered questions about the precise nature of the DOD mission that came under attack, commanders' determinations regarding the circumstances of the mission, and the timeline under which U.S., French, and contractor-administered military assets responded to the attack. Those issues, among others, are the subject of ongoing DOD and FBI investigations, and are beyond the scope of this report. Niger is surrounded by countries beset by armed conflicts, including Mali, Nigeria, and Libya. Niger has arguably managed its security challenges more adeptly than some countries in the region, but political instability, ethnic rebellions, and military interference in politics have posed recurrent challenges. Niger has never had a democratic transition between two civilian leaders. It is among the world's poorest countries and has faced periodic humanitarian emergencies. Niger is also a key transit point for African migrants seeking to reach Europe via Libya's Mediterranean coast. Smuggling of goods and people has long been a key source of income for communities in Niger's border regions—some of whom have periodically rebelled against the government. The number and geographic spread of Islamist armed groups in the central Sahel have ballooned since the Libya and Mali crises began in 2011. Several groups claiming affiliation with either Al Qaeda or the Islamic State are active in various parts of Niger. Elements of Al Qaeda in the Islamic Maghreb (AQIM), an Algerian-led regional network active in North and West Africa, are active along Niger's western border with Mali and in the vast desert north of the country, along with several AQIM splinter factions and offshoots. One AQIM offshoot has pledged allegiance to the Islamic State (see " What do we know about the perpetrators? " below). Separately, southeastern Niger is affected by the Boko Haram conflict, which spilled beyond Nigeria's borders into the surrounding Lake Chad Basin subregion in 2015. Group allegiances and alliances in the Sahel tend to be fluid, and the practical implication of pledges of allegiance to transnational actors is often hard to assess. Thus far in Niger, Islamist extremist groups have posed a threat primarily to the country's internal security and to Western personnel and interests located there. Such groups regularly attack local targets—especially government officials, prisons, schools, and individuals accused of collaborating with the state or with French-led counterterrorism operations—in the triborder region between Niger, Mali, and Burkina Faso (see Figure 1 , above). On the Mali side of the border, there have been frequent attacks against U.N. peacekeepers, many of whom are West African. Islamist extremist groups active in the Sahel have kidnapped multiple Western nationals for ransom over the past 15 years, and since 2015, AQIM-aligned groups have carried out a string of mass-casualty attacks targeting locations popular with Westerners (see Appendix ). In addition to aforementioned Islamist factions, a range of other armed groups operate in western Niger and in adjacent areas of Mali and Burkina Faso. These include ethnic militias, separatist rebels, drug traffickers, smugglers, and bandits, with the lines among categories often blurred. In their efforts to recruit local adherents, Islamist armed groups in the central Sahel have exploited local communal-level conflicts and grievances, as well as reportedly widespread frustrations at perceived local government ineptitude and corruption. Some analysts assert that the often heavy-handed counterterrorism approach of local security forces in the subregion has contributed to worsening instability. In a press conference on October 23, Joint Chiefs of Staff Chairman General Joseph Dunford acknowledged that the area where U.S. troops came under fire is "inherently dangerous," noting, "we're there because ISIS and Al-Qaeda are operating in that area. That's why our forces are providing advice and assist to local forces is to help them to deal with that particular challenge." He added, with respect to the October 4 incident, that the decision to approve the mission was premised on a "judgment of [potential] contact with the enemy ... at a particular location at a particular time." The State Department "recommends U.S. citizens avoid travel to Niger's border regions, particularly the Malian border area, Diffa region and Lake Chad Basin area because of activity by extremist groups." On October 21, unidentified gunmen killed 13 Nigerien gendarmes in a village not far from the site of the October 4 attack. Niger's government seeks to work with other countries in the region to counter terrorism and has welcomed outside assistance, including from Western militaries. In the southeastern region of Diffa, Niger's military participates in a Nigeria-led Multi-National Joint Task Force (MNJTF) to counter Boko Haram. Five countries known as the G-5 Sahel, including Niger, have also proposed a similar joint force to pursue terrorist groups and enhance border security, starting in the Niger/Mali/Burkina Faso triborder region. The G-5 Sahel member states have developed a budget estimate of about $500 million to make the force fully operational, and they and the African Union (AU) have requested greater donor support. Troops from Niger have also partnered closely with France's Operation Barkhane, under which French troops are conducting counterterrorism operations in the Sahel, both unilaterally and with African partner forces. Some Nigeriens have protested the increased deployment of Western troops in Niger since 2013, and some observers have raised concerns that a popular backlash against the growing foreign military presence could pose new challenges to Niger's internal stability. The U.S. military presence in Niger is among the largest the United States has in Africa. In June 2017, the White House reported to Congress that about 645 U.S. armed military personnel were stationed in Niger to support counterterrorism operations by "African partners." Following the October 4 attack, DOD officials have publicly cited a larger figure of 800 U.S. military personnel in Niger. These figures presumably comprise personnel stationed in the capital, Niamey, as well as those deployed in more remote areas. Notably, a U.S. Air Force facility is under construction in the northern city of Agadez ( Figure 1 ), which the Air Force has described as supporting U.S. logistical and intelligence capacities in the subregion, and which U.S. diplomats have described as supporting the Niger government's capacity to secure its borders. U.S. Africa Command (AFRICOM) describes the U.S. military presence in Niger, as in most places in Africa, as a "light footprint," suggesting that a more extensive and/or conventional military mission could require more extensive airlift, close air support capacity, and contingency planning. The bulk of U.S. military personnel in Niger, as elsewhere in Africa, appear to be engaged in short-term missions, which may lead personnel figures to vary over time. The U.S. military presence in Niger has grown significantly since 2002, when the George W. Bush Administration first launched an initiative to build the capacity of Niger and neighboring countries to counter terrorism, and since 2013, when President Obama reported to Congress the deployment to Niger of some 100 military personnel for intelligence, surveillance, and reconnaissance (ISR) activities. Based on public documents issued by the Obama and Trump Administrations, the U.S. military presence since appears to have grown incrementally. This trend is the product of several overlapping developments, including: A stated U.S. interest in responding to the proliferation and spread of Islamist insurgent groups in West Africa since the collapse of the Qadhafi regime in Libya in 2011, the start of Mali's internal crisis in 2012, and the escalation of the Boko Haram insurgency in 2014; DOD's provision of logistical and intelligence support for France's multicountry counterterrorism operation in the Sahel, Operation Barkhane, which France launched in 2014 following its 2013 military intervention in Mali; and An interest, both in Congress and under the George W. Bush and Obama Administrations, in "building partner capacity" to counter terrorism, in part as a stated effort to preclude large-scale U.S. combat operations (see " What are the broader implications of building partner capacity? "). AFRICOM stated on October 20, 2017, that the U.S. military did not have an "active, direct combat mission" in Niger. Some news reports suggest that DOD could initiate direct military strikes there in the future, including possibly as a result of the October 4 attack. DOD officials have declined to comment publicly on any such plans, and have not publicly discussed the potential implications of any change in mission for the U.S. military posture in the region. News reports and statements by Trump Administration officials suggest that the Administration has generally sought to reduce policy limitations on military operations in countries where Islamist militants are active but where the United States has not previously engaged in combat operations, which could have implications for countries such as Niger. More broadly, the United States has pursued counterterrorism goals in the Sahel on an interagency basis for at least the past 15 years through a range of programs, including security assistance, military-to-military engagement, development and democracy-promotion assistance, and programs that aim to counter violent extremist ideology. Since the early 2000s, U.S. officials have come to see Niger as a key counterterrorism partner in North-West Africa due to its relative stability within a turbulent region and its openness to partnering with Western militaries, including those of the United States and France. State Department and DOD resources for security assistance and cooperation programs in the Sahel have increased significantly in recent years in the aftermath of events in Mali in 2012, when AQIM and related groups briefly asserted control over northern Mali, and following the escalation in 2014 of the Boko Haram conflict in northeast Nigeria and the adjacent Lake Chad Basin region. According to public documents issued by the Obama and Trump Administrations, U.S. military personnel in Niger are involved in a range of activities, including: ISR operations based out of sites in Niamey and/or Agadez. Military construction activities in Agadez (as discussed above). Logistical and intelligence support to France's Operation Barkhane. Implementation of security cooperation and assistance programs for Niger, focusing on goals ranging from counterterrorism to peacekeeping and "defense institution building." Periodic joint combined exercises and training engagements (JCETs), along with larger annual multinational exercises in the region, such as Flintlock. Advisory activities in which U.S. personnel are embedded with local security forces, as was apparently the case in the mission that came under attack on October 4, according to DOD officials. This mix of activities has evolved over time. A number of counterterrorism assistance programs are carried out in the Sahel under the State Department-led Trans-Sahara Counterterrorism Partnership (TSCTP), an interagency initiative launched over a decade ago to build the capacity of countries in North and West Africa, including Niger. U.S. military personnel implement some aspects of TSCTP, and at least one DOD named operation in the Sahel supports the program by providing training, equipment, assistance, and other advice to partner nation armed forces. Congress has periodically sought to assess the effectiveness of TSCTP and conducted oversight of its funding resources. DOD-administered security cooperation activities have expanded in Niger and elsewhere in Africa over the past decade, as Congress has provided increased authorities and funding for DOD efforts to build the capacity of foreign partner forces for counterterrorism and certain other purposes. Under evolving authorities, DOD has funded and implemented programs in countries, such as Niger, that have generally received relatively limited State Department-administered security assistance resources. Niger has become a top beneficiary in Africa of DOD "global train and equip" programs for counterterrorism purposes, with about $170 million in planned funding cumulatively notified to Congress to date. The influx of DOD security cooperation resources for these programs has been accompanied by congressional concerns as to their effectiveness, and with the ability of fragile states to absorb and maintain U.S.-origin equipment and capabilities. Such concerns have been expressed in recent strategy and reporting requirements, and in directives related to monitoring-and-evaluation, that have been enacted in defense authorization measures (e.g., §1211 and §1278 of P.L. 113-291 ; §1202 of P.L. 114-92 ; and §1205 and §1273 of P.L. 114-328 ). Reflecting similar concerns, Congress has directed DOD to conduct foreign "defense institution building" (DIB) activities in countries receiving DOD-administered security cooperation for certain purposes, including counterterrorism, under Section 333(c)(4) of P.L. 114-328 . Among other issues, recent trends have also raised challenges with regard to DOD's global force management (as discussed below). DOD support to French military operations in the Sahel has been another area that Congress has encouraged through legislation. Notably, the FY2016 NDAA authorized DOD to "provide support to the national military forces of allied countries for counterterrorism operations in Africa," including "logistic support, supplies, and services," on a nonreimbursable basis. Finally, Congress has authorized funds for the Air Force's construction of the facility in Agadez, which is being pursued by active duty military personnel. With regard to U.S. Armed Forces operating in Niger, President Obama first notified Congress, "consistent with the War Powers Resolution," of a deployment of U.S. Armed Forces to that country on February 22, 2013, stating: This deployment will provide support for intelligence collection and will also facilitate intelligence sharing with French forces conducting operations in Mali, and with other partners in the region.... The recently deployed forces have deployed with weapons for the purpose of providing their own force protection and security. Providing an explanation of applicable constitutional and/or legislative authority, President Obama stated that he had directed the deployment "pursuant to my constitutional authority to conduct U.S. foreign relations and as Commander in Chief and Chief Executive" but did not cite other authority, such as the 2001 Authorization for Use of Military Force (AUMF; P.L. 107-40 ; 50 U.S.C. §1541 note), which Congress passed after the September 11, 2001, terrorist attacks against the United States. Subsequent notifications updating Congress on the status of U.S. Armed Forces in Niger and elsewhere in West Africa—including a letter issued by President Trump, "consistent with the War Powers Resolution," in June 2017—also have not specifically referred to 2001 AUMF authority as the legislative basis for a deployment to Niger. Questions that Congress may pose to the Administration include whether armed extremist groups operating in Niger that reportedly have links to Al Qaeda and the Islamic State might therefore be considered "associated forces" of the terrorist groups responsible for the 9/11 attacks. Members of Congress may also consider new legislative language to address U.S. military operations in Niger and elsewhere in Africa. U.S.-Niger diplomatic ties have grown as successive Administrations have come to see the country as a bulwark against terrorism in the Sahel, and as a result of efforts by Congress and the Obama Administration to expand U.S. food security assistance to poor countries in Africa. Secretary of State Rex Tillerson, in an August 2017 statement recognizing Niger's National Day, pledged to "continue to work with Niger to encourage economic growth, assist with counterterrorism efforts, and support a vibrant civil society." In his Senate confirmation hearing in early October, U.S. Ambassador to Niger-Designate Eric Whitaker stated that, "If confirmed, I'll draw upon my experience to expand the strong partnership between Niger and the United States of America as we continue to work together toward our mutual goals of combating extremism throughout the region, strengthening democratic governance and respect for fundamental freedoms, and fostering inclusive economic growth and prosperity." Niger has been a top recipient of U.S. security assistance in Africa over the past decade. A number of programs administered by the State Department and DOD aim to improve Niger's capacity to counter terrorism, secure its borders, and participate in international peacekeeping operations. Niger has also received security sector assistance under the Security Governance Initiative, launched by the Obama Administration, centered on Niger's national security framework and effective use of defense resources. U.S. officials have described Niger's military as relatively effective by regional standards, and Niger's human rights record has not been as severely troubled as those of other key U.S. counterterrorism partners in West Africa, such as Nigeria and Cameroon. Executive branch officials have nonetheless periodically expressed concern that high levels of U.S. security assistance for Niger, which has no bilateral USAID mission and has generally received relatively little assistance for development or democracy promotion, could have negative unintended consequences. Possibly reflecting, in part, an effort to address a perceived imbalance between military and civilian engagement with Niger, USAID-administered regional aid funding for Niger increased during the latter years of the Obama Administration, and in 2016, the United States and Niger signed a $437 million Millennium Challenge Corporation (MCC) Compact focusing on agricultural development. Ambassador-designate Whitaker also said during his confirmation hearing that, "I will be consulting with AFRICOM as well [to] get a better handle on their programs, and trying to make sure we have some greater balance in our relationship." Niger's continued eligibility to receive MCC assistance is contingent on its respect for democratic norms and the effectiveness of its anticorruption efforts. Notably, the U.S.-based organization Freedom House, whose research helps determine MCC eligibility, downgraded Niger's political rights rating in 2017 due to "repressive conditions surrounding the 2016 presidential and legislative elections, including harassment of the opposition, as well as alleged irregularities in the balloting itself." The new rating will presumably be reflected in future MCC scorecards. The Trump Administration has proposed changes to foreign aid that could have implications for bilateral ties, if implemented. In its FY2018 foreign aid budget request, the Administration proposed to eliminate the global Food for Peace program under P.L. 480 Title II, through which Niger received $33.8 million in food aid in FY2016 (latest available), and to decrease other bilateral aid for Niger to $1.6 million, from $3.1 million in FY2016. These figures, however, do not encompass MCC-administered funding or funds administered via USAID regional initiatives. General Dunford, in his October 23 press conference, stated that there are about 6,000 U.S. troops deployed in Africa, including personnel charged with guarding U.S. diplomatic facilities. The vast majority are reportedly positioned in Djibouti, the only country in Africa to host an enduring U.S. military "forward operating site." News reports, citing DOD sources, indicate that the 6,000 figure includes an estimated 1,000 members of Special Operations Forces, including those involved in advise-and-assist missions in various countries. In his 2017 Posture Statement, AFRICOM Commander General Thomas D. Waldhauser stated that the command was operating in support of the following five "Lines of Efforts." Neutralize al-Shabaab and transition the security responsibilities of the African Union Mission in Somalia (AMISOM) to the Federal Government of Somalia; Degrade violent extremist organizations in the Sahel [and] Maghreb and contain instability in Libya; Contain and degrade Boko Haram; Interdict illicit activity in the Gulf of Guinea and Central Africa with willing and capable African partners; Build peacekeeping, humanitarian assistance, and disaster response capacity of African partners. Below is a list of countries where U.S. officials have publicly confirmed a U.S. military deployment. The list is not necessarily comprehensive. U.S. news media, for example, have reported a U.S. military presence in several countries not listed below, such as Burkina Faso and Nigeria. Furthermore, nearly every country in Africa hosts some U.S. military personnel presence, for example as part of the Defense Attaché Office, Office of Security Cooperation, and/or Marine Security Detachment at U.S. Embassies. (Such personnel would appear to be included in the overall 6,000-troop figure above.) In several African countries, a limited number of DOD personnel also serve as military staff officers in U.N. peacekeeping operations. The Defense Department also conducts regular joint combined exercises and training engagements, and periodic military exercises, with African partners, which involve the temporary deployment of U.S. military personnel to the continent. Cameroon . A letter submitted by the White House to House and Senate leadership in June 2017, "consistent with the War Powers Resolution" (henceforth, the June 2017 WPR report), stated, "In Cameroon, approximately 300 United States military personnel are also deployed, the bulk of whom are supporting United States airborne intelligence, surveillance, and reconnaissance operations in the region." Chad . In his March 9, 2017, AFRICOM Posture Statement to the Senate Armed Services Committee, AFRICOM Commander General Waldhauser stated that the United States had assumed six-month rotational leadership of the Chad-based "Coordination and Liaison Cell," which coordinates international support to the Nigerian-led Multinational Joint Task Force against Boko Haram. Djibouti . In his 2017 AFRICOM Posture Statement, General Waldhauser stated that U.S. forces "remain deployed to Djibouti, including for purposes of posturing for counterterrorism and counter-piracy operations in the Horn of Africa and Arabian Peninsula and contingency support for embassy security augmentation in East Africa." Kenya . The June 2017 WPR report stated that, "Additional United States forces are deployed to Kenya to support counterterrorism operations in East Africa." Libya . The June 2017 WPR report noted several U.S. airstrike campaigns against ISIS targets in Libya since 2016, which it described as "conducted at the request of and with the consent of the Government of National Accord." Mali . In his 2017 AFRICOM Posture Statement, General Waldhauser stated that "we continue to support France's counterterrorism operations in Mali ... and seek to increase our synchronization and coordination with their efforts. Continued [U.S.] airlift and logistical support is essential to France's efforts, and we must continue to provide this support if progress is to happen in this volatile region." Senegal . A U.S.-Senegal bilateral defense access agreement was notified to the Senate in 2016, and was described by the then-U.S. Ambassador in remarks to the press. Somalia . The June 2017 WPR report stated that, "In Somalia, United States forces continue to counter the terrorist threat posed by al-Qa'ida and its Somalia-based associated force, al-Shabaab, and ISIS-Somalia. United States forces also advise, assist, and accompany regional forces, including Somali and African Union Mission in Somalia (AMISOM) forces, during counterterrorism operations." Tunisia . General Waldhauser, during a press briefing on March 24, 2017, stated in response to a question, "flying intelligence, surveillance and reconnaissance drones out of Tunisia has been taking place for quite some time ... it's not a secret base. And it's not our base, it's the Tunisians' base." Central Africa . The June 2017 WPR report noted that the six-year U.S. advisor mission to help regional forces counter the Lord's Resistance Army, known as Operation Observant Compass, ended in April 2017 and that the approximately 410 military personnel who remained at that point deployed to the subregion—in Uganda, Central African Republic, South Sudan, and Democratic Republic of the Congo—were "conducting retrograde activities." General Waldhauser also told reporters in April that, "We will continue to work with those countries with training and exercises ... we do not want to leave a void there." The future U.S. military footprint remains to be seen. In the initial aftermath of the October 4 attack, news reports questioned whether DOD had adhered to a "golden hour standard" for medical evacuation. The "golden hour" is described as the first 60 minutes following trauma or the onset of acute illness, where chances of a patient's survival are considered greatest if advanced trauma life support can be provided. DOD notes that, "historically, wound data and casualty rates indicate that more than 90 percent of all casualties die within the first hour of severe wounding without advanced trauma life support." U.S. military medical support is generally structured to meet this standard of one hour or less. Transporting a soldier to advanced trauma care within 60 minutes is viewed, however, as a standard but not an absolute requirement. Lack of medical assets—particularly aerial medical evacuation—along with distances from the site of wounding or injury to a military medical facility, the tactical situation on the ground (e.g., hostile fire), the nature of the mission (e.g., clandestine or in a remote or denied area), and adverse weather might make the one hour advanced treatment standard difficult to achieve. In these instances, commanders may assume a greater degree of risk and possibly implement mitigation measures, such as providing additional on-the-spot medical support. AFRICOM officials have long bemoaned what they characterize as the "tyranny of distance" within the command's area of operations, and, in the aftermath of the 2012 Benghazi attacks, have sought to improve the command's ability to respond more rapidly to crises involving U.S. government personnel, while continuing to call for more resources. In the case of the October 4 Niger ambush, at least one Special Forces medic (see below) was present, but he was killed during the ambush. DOD stated the two U.S. soldiers wounded during the ambush were medically evacuated by French air assets to Niamey during the firefight, and that this medical evacuation was "consistent with the casualty evacuation plan that was in place for this particular operation." The strategic rationale for which many U.S. soldiers are deployed to Niger is to assist local partners as they build their military capabilities and capacities. The September 11, 2001, terrorist attacks and the subsequent "global war on terror" provided the impetus for Congress and the executive branch to expand DOD's security cooperation and assistance tools under the rubric of building partner capacity (BPC). According to the 2006 Quadrennial Defense Review (QDR), BPC was, in essence, a maximalist interpretation and employment of a concept normally executed by Special Operations Forces when working "by, with, and through" partner forces on the ground. An increasing interest in BPC reflected assumptions that, much like Afghanistan before 9/11, fragile or "ungoverned" states could ultimately become areas in which terrorist groups could plan and execute attacks against the United States and its allies. Over time, BPC has become a preferred, if not primary, means by which the United States could secure its interests—as well as a national security objective in its own right. Yet persistent challenges with U.S. BPC missions have led some observers to question the overall strategic efficacy of conducting them. Challenges associated with such efforts in Afghanistan and Iraq, in particular, have called into question whether these BPC programs can achieve their desired effects. In the Sahel, as well, some DOD officials have negatively assessed the impact of certain types of BPC missions for counterterrorism purposes. These questions become starker when juxtaposed against larger concerns that DOD is overstretched relative to the challenges with which it must grapple. On October 4, 2017, four U.S. soldiers reportedly participating in a joint U.S.-Nigerien train, advise, and assist reconnaissance mission were killed in southwest Niger, as a result of hostile fire. All the soldiers who were killed were assigned to 3rd Special Forces Group (Airborne) from Fort Bragg, North Carolina: Staff Sergeant Bryan C. Black, 35, of Puyallup, Washington, Military Occupation Specialty (MOS) 18D, Special Forces Medical Sergeant; Staff Sergeant Dustin M. Wright, 29, of Lyons, Georgia, MOS 18C Special Forces Engineer Sergeant; Staff Sergeant Jeremiah W. Johnson, 39, of Springboro, Ohio, MOS 74D Chemical, Biological, Radiological, and Nuclear Specialist; and Sergeant La David T. Johnson, 25, of Miami Gardens, Florida, MOS 91B Wheeled Vehicle Mechanic. Two unidentified U.S. soldiers were also wounded in the attack. General Dunford stated on October 23 that Sergeant La David T. Johnson became missing in action (MIA) during the ambush and was killed on October 4, 2017, but that his body was not located until October 6, 2017, by Nigerien forces. There has been a great deal of speculation as to why Sergeant Johnson's remains were not located and evacuated until October 6, 2017, in response to which DOD officials note that an investigation of the incident is ongoing. As of October 26, no one has publicly claimed responsibility for the October 4 attack. DOD officials have identified the perpetrators as local militants "affiliated" with the Islamic State organization (IS or ISIS/ISIL). Given the location of the attack, analysts have interpreted the term as referring to the so-called Islamic State-Greater Sahara (IS-GS), a militant faction formerly associated with the Algerian-led regional network AQIM. IS-GS emerged in May 2015, when Abu Walid al Sahrawi, a leader in the Movement for Unity and Jihad in West Africa (MUJAO after its French acronym)—itself a splinter faction of AQIM—pledged allegiance to the Islamic State. In September-October 2016, the group reportedly carried out three relatively sophisticated attacks, two deadly assaults on local security forces in Burkina Faso and an attempted prison break in Niger on the outskirts of Niamey. The "core" Islamic State organization subsequently appeared to recognize the IS-GS pledge of allegiance in a public release in October 2016, although IS leadership apparently has not referred to a full "province" in the Sahel region, as it has with affiliated groups in Nigeria and Libya, for example. The degree of antagonism and/or coordination between Al Qaeda and Islamic State affiliates in West Africa is a matter of debate. While the two franchises may compete for recruits and prominence, some analysts see evidence of possible cooperation. Al Sahrawi's nationality is unclear; some news sources allege that he is a refugee from the disputed territory of Western Sahara. MUJAO, the group in which Al Sahrawi first rose to prominence, was formed in 2011 as a Malian- and Mauritanian-led dissident faction of AQIM. In 2012, after the collapse of state institutions in northern Mali, MUJAO asserted control over Mali's Gao region (bordering Niger), where it appointed local administrators, security forces, and judges. During that year, AQIM and other AQIM-related groups asserted control over other parts of northern Mali and generally coexisted. In 2013, amid France's military intervention in Mali, MUJAO joined with another AQIM splinter faction led by longtime AQIM figure—and periodic AQIM rival—Mokhtar bel Mokhtar to form Al Murabitoun. Al Sahrawi's 2015 split from Al Murabitoun took place around the same time that the latter group was undertaking a rapprochement with AQIM, culminating in the formation of a new Al Qaeda-aligned coalition in Mali in early 2017 (known as Jama' at Nusrat al Islam wal Muslimeen or "Group for Supporting Islam and Muslims," aka JNIM). (See chronology in the Appendix .) Since its pledge to the Islamic State in May 2015, observers have attributed to IS-GS a number of attacks against local targets, including local security forces, officials, teachers, and prisons, in the triborder region joining Niger, Mali, and Burkina Faso. Some news reports indicate that the group is holding a Romanian national kidnapped in Burkina Faso in April 2015—a kidnapping for which MUJAO claimed responsibility—and that it may be holding the American kidnapped in Niger in October 2016, an incident that no group has publicly claimed. IS-GS has openly claimed responsibility for a small handful of attacks, making its involvement in various attacks and its broader level of activity difficult to ascertain. Niger's Interior Minister Mohamed Bazoum stated in a media interview on October 19 that those who carried out the attack were "youths under the influence of Abu Walid al Sahrawi" who were based in the Niger/Mali border region. Possibly reflecting the extremely complex nature of militant allegiances in the subregion, Bazoum also suggested that the assailants were loyal to Iyad ag Ghali, a Malian national who heads the Al Qaeda-aligned JNIM, although some analysts portray JNIM and IS-GS as rivals rather than allies. The Interior Minister indicated in his remarks that Niger's government had yet to identify the precise assailants. In 2012, the State Department designated MUJAO and two of its founders as Specially Designated Global Terrorists under Executive Order 13224. (One of the two founders was subsequently killed in a French strike in Mali.) The State Department designated Al Murabitoun (aka Al Mulathamun) in 2013 as a Foreign Terrorist Organization. Abu Walid al Sahrawi is not individually designated for U.S. sanctions. For many Members of Congress, the events of October 4 and their aftermath have highlighted broad issues and challenges related to the effective congressional oversight of U.S. military deployments, U.S. counterterrorism policy in remote regions, and executive-legislative branch information sharing. Some issues and questions for congressional consideration include the following: Counterterrorism Strategy. On October 23, 2017, Joint Chiefs of Staff Chairman General Joseph Dunford stated, "our soldiers were operating in Niger to build capacity of local forces to defeat violent extremism in West Africa. Their presence is part of a global strategy." What is the current U.S. global counterterrorism strategy and how does the presence of troops in Niger support this strategy? Through what means are DOD's counterterrorism activities in Africa coordinated with those of other federal entities, including the State Department, intelligence community, and law enforcement? What alternatives exist to the deployment of U.S. military personnel on advise and assist missions? Train, Advise, and Assist Missions. What is the policy and legal framework for the deployment of U.S. military personnel to work "by, with, and through" partner nation forces in locations, such as Niger, where there is no U.S. "active, direct combat operation"? What are the appropriate rules of engagement and roles for U.S. military personnel serving in such missions? Are new reporting or notification requirements needed for congressional oversight of such activities? Framework for Military Engagement in the Sahel. Is the legal and policy framework for U.S. military activities in the Sahel appropriate given the region's threat profile and its level of importance for U.S. national security? What might be the potential unintended consequences of an expanding U.S. military presence in the area, and how are current activities structured to avoid or mitigate them? Impact of Building Partner Capacity. Are U.S. "building partner capacity" (BPC) activities having their intended effect in Niger and elsewhere in the Sahel? How should Congress evaluate the potential risk, reward, and opportunity costs of such activities? What are the implications of Congress's expansion and consolidation of DOD's authority to conduct a range of "building partner capacity" activities under the FY2015 and FY2017 National Defense Authorization Acts (NDAAs, P.L. 113-291 and P.L. 114-328 , respectively)? What considerations should be taken into account by Members of Congress when authorizing and overseeing U.S. counterterrorism capacity-building activities that may take place in countries such as Niger—that is, fragile, impoverished states with a history of military coups and internal conflicts? What are the potential unintended consequences of U.S. counterterrorism assistance in such settings? Military Posture. Successive Commanders of U.S. Africa Command (AFRICOM) have requested additional resources for contingency planning (including personnel recovery) and intelligence, surveillance, and reconnaissance activities in support of missions in Africa. Is the military posture in the Sahel adequate and suited to the missions in which U.S. forces are engaged, as well as the security and logistical environment in the region? What new capabilities and assets might AFRICOM require, if any? At what cost should they be provided relative to other priorities? To what extent might the current set of DOD missions or prospective future missions require changes to the U.S. military posture in the region—including new assets, new access to host-nation airfields and ports, updates to any status-of-forces agreements, and changes to supply chains? Contingencies: Role of Allies and Other Actors . What role do allied countries, such as France, play in enabling U.S. military missions in the Sahel, including contingency planning? How are U.S. military activities coordinated with those of these allied forces? What role do military contractors play? DOD Global Force Management . Are deployments of U.S. military personnel for BPC missions creating strains on U.S. forces globally? Has the strategic focus on BPC come at the expense of other national security priorities? Is DOD making appropriate planning and force structure decisions to be able to respond to multiple contingencies affecting BPC missions, if necessary? To what extent might DOD need to adjust its force planning construct due to these considerations?
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A deadly attack on U.S. soldiers in Niger and their local counterparts on October 4, 2017, has prompted many questions from Members of Congress about the incident. It has also highlighted a range of broader issues for Congress pertaining to oversight and authorization of U.S. military deployments, evolving U.S. global counterterrorism activities and strategy, interagency security assistance and cooperation efforts, and U.S. engagement with countries historically considered peripheral to core U.S. national security interests. This report provides background information in response to the following frequently asked questions: What is the security situation in Niger? How big is the U.S. military presence in Niger? For what purposes are U.S. military personnel in Niger, and what role has Congress played in the U.S. military presence there? Is the U.S. military presence in Niger related to the 2001 Authorization for Use of Military Force (AUMF)? What is the state of U.S.-Niger relations and aid? Where else in Africa are U.S. military personnel deployed? Medical evacuation: What is the "golden hour" and does it apply to troop deployments in Africa? What are the broader implications of building partner capacity in Niger for DOD? Who were the four U.S. soldiers killed in Niger on October 4? What do we know about the alleged perpetrators of the October 4 attack? It also identifies potential issues for Congress as Members look ahead to ongoing and future authorization, appropriations, and oversight activities. A chronology of terrorist attacks in the Sahel and related developments is provided in an Appendix. Additional details surrounding the October 4 ambush and its aftermath may continue to emerge as information becomes available. The following CRS products provide additional analysis of issues discussed in this report: CRS In Focus IF10172, Al Qaeda in the Islamic Maghreb (AQIM) and Related Groups, by [author name scrubbed]; CRS Report R44563, Terrorism and Violent Extremism in Africa, by [author name scrubbed] and [author name scrubbed]; CRS Report R42699, The War Powers Resolution: Concepts and Practice, by [author name scrubbed]; CRS Report R43983, 2001 Authorization for Use of Military Force: Issues Concerning Its Continued Application, by [author name scrubbed]; CRS Report R44313, What Is "Building Partner Capacity?" Issues for Congress, coordinated by [author name scrubbed]; CRS Report R44602, DOD Security Cooperation: An Overview of Authorities and Issues, by [author name scrubbed] and [author name scrubbed]; CRS Report RS21048, U.S. Special Operations Forces (SOF): Background and Issues for Congress, by [author name scrubbed].
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The Temporary Assistance for Needy Families (TANF) block grant provides grants to states, territories, and Indian tribes for benefits and services to help ameliorate, or address the root causes of, childhood economic disadvantage. It was created in the 1996 welfare reform law (the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, PRWORA, P.L. 104-193 ), which ended the pre-welfare reform program of cash assistance, rewrote the federal rules for cash assistance for needy families, and gave states broad flexibility to meet TANF's statutory goals. This report discusses the financing of the TANF block grant. It describes the national funding level, the distribution of funds among the states, and the basis for these funding levels; describes how states may use TANF funds; describes how states have actually used TANF funding; and discusses selected policy issues regarding TANF funding. The 1996 welfare reform law that created TANF based the bulk of its funding on historical expenditures in its predecessor programs. Therefore, the amount of funding a state receives in TANF today depends on the size of its pre-TANF programs before the enactment of that law. Before the 1996 welfare reform law, federal grants helped states fund the Aid to Families with Dependent Children (AFDC) programs of cash assistance for needy families with children; Emergency Assistance (EA) for families with children; and the Job Opportunity and Basic Skills (JOBS) training program, which provided employment services and education to AFDC recipients. These three programs provided matching grants to states, reimbursing them for a share of the expenditures in their programs. Thus, the federal government and the states shared in the costs of these programs. The system of matching grants for cash assistance for needy families dated back to the Social Security Act of 1935 (P.L. 74-271). Under the pre-TANF cash welfare program of AFDC, federal funding was generally provided at the Medicaid matching rate. Under that rate, states with lower per-capita incomes received a higher match, with a statutory minimum matching rate of 50% (for higher income states) and a maximum matching rate of 83% (for the lowest income states). Federal grants for AFDC benefits, AFDC administration (matched at a 50% rate), and EA (matched at a 50% rate) were not subject to caps; federal funds reimbursed states in full for a share of expenditures in their programs. Federal grants for JOBS were subject to annual caps, with matching funds provided up to the cap. The matching rate for JOBS was the Medicaid matching rate, though the statutory minimum matching rate for JOBS was 60% instead of 50%. The amount of federal funding in the predecessor programs for a state depended on the expenditures in the state. While there were some federal rules for these predecessor programs, states had a great deal of discretion in determining which families were financially "needy," and hence eligible for benefits, and the amount of benefits received in the state. Under AFDC, there was a great deal of state variation in both income eligibility thresholds and benefits paid in the states, creating variation in state grants relative to their cash assistance caseloads or population related to the program (e.g., number of poor children). This variation is depicted in Figure 1 , which shows the relationship between the AFDC maximum benefit for a family of three in January 1995 and the amount of federal funding per poor child under AFDC and related programs in 1995. As shown, there is a clear relationship between the size of the AFDC benefit provided by a state and federal funding provided per poor child: states with higher maximum benefits also received more federal funding per poor child. For example, in January 1995 Mississippi paid a maximum benefit for a family of three of $120 per month; its grant per poor child in FY1995 was $343. On the other hand, in that month Alaska paid a maximum benefit of $923 per month for a family of three; its FY1995 grant per poor child was $2,403. The 1996 welfare reform law substantially rewrote the rules for state cash assistance programs, imposing time limits on benefit receipt and revamping work requirements for adult recipients of aid. Along with these policy changes was a change in the financing of state cash assistance programs and other activities from matching grants to a block grant. The 1996 law consolidated into TANF the three predecessor programs—AFDC, EA, and JOBS—creating a single funding stream. The bulk of the funding is provided in a basic block grant. That block grant reflects peak spending for each state during the FY1992 to FY1995 period in TANF's predecessor programs. (For the formula used in the computation and TANF basic block grant per state, see Table A-1 .) The total of the basic block grant distributed to the 50 states and the District of Columbia is $16.5 billion per year. This is also known as the State Family Assistance Grant. It is not adjusted for changes in conditions either nationally or in each state, such as changes in prices (inflation), the cash assistance caseload, or the population (e.g., poor children). According to the House Committee report accompanying the legislation that became the 1996 welfare reform law, states were given fixed funding to provide them "with an incentive to help recipients leave welfare because, unlike current law, States do not get more money for having more recipients on the welfare rolls." Though the 1996 welfare reform law contemplated no increases in the basic TANF block grant for future years, it also provided that a state could receive no less under the block grant than it historically did under the old system of matching grants to the states. That is, it was "held harmless" for the change in financing. However, having the TANF block grant based on historical expenditures had a number of additional implications. One of these is that it also "froze" the differences among the states in federal funding relative to their populations. Figure 1 shows how these differences were related to state decisions about their AFDC program; Figure 2 shows a sharp regional pattern in these differences, portraying FY1995 federal funding in TANF's predecessor programs per poor child. Grants per poor child for FY1995 varied from $2,530 in Connecticut to $263 in Arkansas. Generally, grants per poor child in states in the South were less than grants per poor child in states in the N ortheast and Midwest, along the Pacific Coast, and Alaska and Hawaii. These state differences have been continued over time as each state's basic block grant has remained "frozen" since FY1997. Figure 3 shows the basic TANF block grant (State Family Assistance Grant) per poor child in FY2013. The regional pattern of historical funding differences per poor child from the pre-TANF programs remained in place during that year. In general, funding per poor child was lower in FY2013 than in FY1995 (there were more poor children in 2013 than in 1995), but states in the South continue to have lower grants per poor child than those in the Northeast and Midwest, and along the Pacific Coast. Note that these dollars per poor children are in nominal dollars, not adjusted for inflation. The impact of inflation is discussed in the " Selected TANF Financing Issues " section of this report. Though funding became more limited, states were given increased flexibility in how funds could be spent. Under TANF, states have the authority to spend their block grants on activities to address both the effects of economic disadvantage (e.g., cash assistance) and what were viewed as some of the root causes of childhood disadvantage (e.g., preventing out-of-wedlock pregnancies and promoting the formation and maintenance of two-parent families). The $16.5 billion basic block grant has constituted the bulk of federal funding each year since the enactment of TANF. However, this basic funding has been supplemented in most years by some additional grants to states funded in the TANF law. The additional funding streams are listed below: Supplemental grants . During consideration of legislation that led to the 1996 law, funding frozen at levels based on historical expenditures was thought to disadvantage two groups of states: (1) those that had relatively high population growth and (2) those that had historically low welfare grants relative to poverty in the state. One of the purposes of supplemental grants was to address the differences in state funding per assistance family or per poor person shown in Figure 2 . The other purpose was to provide additional funding to states with high rates of population growth. In total, 17 states qualified for supplemental grants: Alabama, Alaska, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Louisiana, Mississippi, Montana, Nevada, New Mexico, North Carolina, Tennessee, Texas, and Utah. Funding for TANF supplemental grants was discontinued after June 30, 2011. Welfare-to-Work Grants . In 1997, President Clinton proposed additional funding for "welfare-to-work" grants on the presumption that the basic TANF block grant provided insufficient funding for the increased emphasis on moving cash assistance recipients to work. Congress accepted the proposal in the Balanced Budget Act of 1997 ( P.L. 105-33 ), providing $3 billion over two years (FY1998 to FY1999) to augment TANF funds with special "welfare-to-work" grants. These grants were administered through the Department of Labor (DOL) rather than the Department of Health and Human Services (HHS), where TANF is administered, and at the state and local level through the workforce system. Additionally, funding was split between formula grants to states (and then passed-through to local workforce boards) and competitive grants. No new welfare-to-work funding was provided after FY1999. Contingency Fund. The fixed basic grant under TANF also led to concerns that funding might be inadequate during economic downturns. The 1996 welfare reform law established a $2 billion "regular" TANF contingency fund. To draw upon contingency funds, a state must both (1) meet a test of economic "need" and (2) spend from its own funds more than what the state spent in FY1994 on cash, emergency assistance, and job training in TANF's predecessor programs. The original $2 billion in the contingency fund was depleted in early FY2010; annual appropriations have provided new contingency fund monies for FY2011 through FY2015. Emergency Contingency Fund . The American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) provided an additional $5 billion for FY2009 and FY2010. This was partially in response to the anticipated depletion of the regular contingency fund and partially to address that the contingency fund had not always responded to changes in economic circumstances (see Figure 9 ). Unlike regular contingency funds, which could be used for any TANF activity, the ARRA "Emergency Contingency Fund" (ECF) financed only increased spending on basic (cash) assistance, short-term emergency aid, and subsidized employment. No ECF funding was provided after FY2010. Bonus Funds . The 1996 welfare reform law, while giving states flexibility, had a number of provisions to hold a state accountable for its performance in meeting TANF's statutory goals. These accountability provisions included two "bonus funds"—one for states with reduced out-of-wedlock pregnancy rates and a second that provided bonuses for states with "high" levels of performance in meeting TANF's statutory goals. The bonus for reduced out-of-wedlock pregnancies was funded at up to $100 million per year and up to five states could receive funds; the "high-performance bonus" provided an average of $200 million per year to states that qualified for it. FY2005 was the last year for which states received bonus funds. Figure 4 shows total TANF state grant funding for FY1997 through FY2015. As shown, funding has remained at approximately the same level with slight annual variations since FY1998, with the exception of a spike in funding from the "Emergency Contingency Fund" during FY2009 and FY2010. (The funding level discussed here is without adjustment for inflation. The impact of inflation on grants is discussed in the "Issues" section of this report.) However, there were no additional "Emergency Contingency Funds" after FY2010, and supplemental grants were ended after FY2011. Though the overall level of federal TANF grants to states in FY2015 is about the same as in earlier years, the composition of the grants differs. In the earlier years, funding in addition to the basic block grant came from welfare-to-work grants, supplemental grants, and bonus funds. For FY2012 through FY2015, the only funds in addition to the basic block grant for states were from the contingency fund. While overall funding levels in FY2015 were similar to overall levels in the early 2000s, the group of states that received contingency funds in that year differed from the group of states that received supplemental grants and bonus funds in earlier years. Also, as discussed in " Recessions and the TANF Block Grant ," the level of funding provided by the contingency fund has not been responsive to improvements in the economy over the FY2011 through FY2015 period. TANF consolidated and replaced programs that provided matching grants to the states. This meant that there were considerable state dollars contributing to the pre-TANF programs. It also meant that the federal and state shares in financing these programs varied by state, as the Medicaid matching rate is higher in states with lower per-capita incomes than in those with higher per-capita incomes. TANF requires states to maintain spending from their own funds on TANF or TANF-related activities. States are required in the aggregate to maintain at least $10.4 billion in spending on specified activities for needy families with children. The $10.4 billion, called the maintenance-of-effort level, represents 75% of what was spent from state funds in FY1994 in TANF's predecessor programs of cash, emergency assistance, job training, and welfare-related child care spending. States are required to maintain their own spending of at least that level, and the MOE requirement increases to 80% of FY1994 spending for states that fail to meet TANF work participation requirements (discussed below). State expenditures under this requirement are often referred to as state MOE funds. (MOE levels by state are shown in Table A-2 .) It should be noted that the MOE sets a minimum amount for required state spending. There are incentives in TANF law for states to spend more than this minimum amount. First, more state spending than the minimum is required to access the TANF contingency fund. Second, states may receive a "credit" (reduction) in their TANF work participation standards if they expend more than the minimum required under the MOE. TANF is a broad-purpose block grant that gives states the flexibility to use its funds to address both the effects of, and the root causes of, childhood economic disadvantage. There are two sets of rules: those that relate to the use of federal TANF grants, and those for which state expenditures count toward meeting the TANF MOE state spending requirement. States have broad discretion on how they expend federal TANF grants. States may use TANF funds "in any manner that is reasonably calculated" to accomplish the block grant's statutory purpose. That purpose is to increase the flexibility of states in operating a program designed to 1. provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives; 2. end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage; 3. prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and 4. encourage the formation and maintenance of two-parent families. In addition, states may also expend federal TANF grants on any activity financed by pre-TANF programs. These are known as "grandfathered" activities." Examples of activities that do not meet a TANF goal but may be financed by TANF grants include foster care payments and funding for juvenile justice activities, if they were financed in the pre-TANF programs. In addition to expending federal funds on allowable TANF activities, federal law permits a limited amount of the federal TANF basic block grant to be used for other programs. A maximum of 30% of the TANF block grant may be used for the following combined transfers or expenditures: Transfers to the Child Care and Development Block Grant; Transfers to the Social Services Block Grant (SSBG), with a maximum transfer to the SSBG set at 10% of the basic block grant; As a state match for "reverse commuter grants," providing public transportation from inner cities to the suburbs. States may reserve unused federal TANF funds for use in later fiscal years. Funds may be reserved without fiscal year limit. This permits states to "save" any federal funds not needed in one fiscal year for use in other years—for example, to save for a recession or any other event (e.g., natural disaster) that might cause an increase in the demand for TANF funds. The range of expenditures on activities that states may count toward the maintenance of effort requirement is—like the authority to spend federal funds—quite broad. The expenditures need not be in the "TANF program" itself, but in any program that provides benefits and services to TANF-eligible families in cash assistance, child care assistance, education and job training, administrative costs, or any other activity designed to meet TANF's statutory goals. States may count expenditures made by local governments toward the MOE requirement. Additionally, there is a general rule of federal grants management that permits states to count as a state expenditure "third-party" (e.g., nongovernmental) in-kind donations, as long as they meet the requirements of providing benefits or services to TANF-eligible families and meet the requirements of the types of activities that states may count toward the MOE requirement. TANF allows states to spend their funds on a wider range of activities than did the pre-1996 programs. AFDC was a cash assistance program; Emergency Assistance provided grants to states for a range of activities that provided short-term assistance; and JOBS was an employment services and education and training program for AFDC adult recipients. The number of families receiving cash assistance reached its historical peak in March 1994, at 5.1 million families. In the mid- and late 1990s, the cash assistance caseload shrank rapidly, with a 64% decline in the number of families with children receiving cash assistance from FY1995 to FY2000. (See CRS Report R43187, Temporary Assistance for Needy Families (TANF): Size and Characteristics of the Cash Assistance Caseload , by [author name scrubbed].) Spending on cash assistance declined correspondingly. Figure 5 shows both the level and composition of spending in FY1995 under the pre-TANF programs and in FY2000 and FY2014 under TANF. While the overall funding levels in FY1995 and FY2014 were similar, the composition of spending was different. The figure shows that in FY1995, AFDC cash assistance accounted for 70% of all spending under TANF's predecessor programs. In FY2014, cash assistance accounted for 26% of all TANF and MOE dollars. Child care expenditures represented 3% of total pre-TANF expenditures in FY1995, a share that grew to 16% of all spending in FY2014. On the other hand, work, education, and training expenditures grew only from 5% to 7% of total spending from FY1995 to FY2014. "Other work supports" represents spending for state refundable tax credits (such as state versions of the earned income tax credit) and transportation aid. Other work supports represented $4.5 billion in FY2014, or 14.3% of total TANF and MOE dollars. The figure shows that the largest increase in expenditures (particularly during the FY2000 to FY2014 period) was in "other spending." Under TANF, this category represents a wide range of benefits and social services related to families with children. It includes funding for services related to child abuse and neglect, pre-kindergarten and other early childhood programs, short-term emergency aid, state responsible-fatherhood and marriage programs, and programs for adolescents. The expenditure reporting system in place for FY2014 did not have enough information to categorize much of this spending properly. However, the Department of Health and Human Services (HHS) implemented a new reporting system for FY2015 and later years that will permit a better characterization of spending in the "other" category. The TANF funding level, both nationally and for each state, is rooted in what states spent in the early to mid-1990s in the pre-TANF programs that were focused on cash assistance for needy families with children. The 1996 welfare reform law contemplated no adjustments for changes that have been made to those funding levels since the enactment of TANF. The law also authorized and provided TANF funding through FY2002. However, extensions of TANF funding since FY2002 have maintained basic block grant funding at the $16.5 billion level with no change—neither increases or decreases—extending the "freeze" in funding for now close to 20 years. Addressing any of TANF's financing issues would be done in the context of the current federal budget environment and rules that govern the congressional budget process. Though TANF law says that its benefits and services are not entitlements to individuals, the amount of block grant funding is set in authorizing law (the Social Security Act) and thus represents an entitlement to the states. Thus, in the federal budget process, TANF is considered "mandatory" spending. Mandatory spending is subject to "pay-as-you-go" rules. These rules would require legislation to increase spending for TANF to be offset by corresponding decreases in other mandatory spending programs or through increases in revenue. In congressional budgeting, spending increases or decreases are measured relative to a current law budget baseline that is computed under the rules of the Budget Act. For the basic TANF block grant, this represents the $16.5 billion funding amount because that amount is statutorily determined. Like the block grant itself, the baseline for future years contemplates no changes to this funding amount due to changes in circumstances (e.g., inflation or population change). The rules for computing the TANF baseline are the same as for other mandatory spending programs with statutorily set grant amounts, such as the Social Services Block Grant (SSBG) or mandatory funding for the Child Care and Development fund. However, these rules differ from those of mandatory programs that provide direct benefits for individuals. The baselines for those programs are based on estimates of their caseloads (families, individuals served) and benefit amounts. In addition, the TANF baseline differs from those computed for discretionary grant programs in that they generally are provided an annual adjustment for inflation. Under current budget rules, total discretionary programs are subject to a statutory cap and the baseline for discretionary spending is limited to the cap. Over time, price inflation reduces the purchasing power of a dollar. Hence, the frozen $16.5 billion per year basic TANF block grant can "buy" less in FY2015 than it did in FY1997. Figure 6 shows the gradual reduction in "real" funding from the TANF basic block for FY1997 through FY2014, and as projected under the Congressional Budget Office (CBO) August 2015 economic forecast for FY2015 through FY2025. In FY2013, the TANF basic block grant could "buy" 31% less in goods and services than it could in FY1997. In FY2015, the block grant is estimated to purchase 33% less than it did in FY1997. If the basic block grant remains at the current funding level and prices increase over the FY2015 through FY2025 period as forecast by CBO, the block grant's purchasing power would in FY2025 be close to half of what it was in FY1997 (a 46% reduction). As discussed in " The Budget Baseline and TANF ," adjusting the basic block grant for inflation would be viewed as increased spending under the current congressional budget rules. If Congress sought to increase TANF funding to keep pace with inflation, CBO estimates it would increase cumulative spending by $22 billion over the next 10 years. Under current budget rules, this cost would have to be offset by a corresponding decrease in other mandatory spending and/or increase in revenues. In addition to not being adjusted for inflation, the basic TANF block grant is also not adjusted for changes in the relevant population for TANF. However, with TANF there is no clear-cut answer about a relevant population to which TANF funding should be compared. The relevant population depends on opinions about whether TANF should be focused on providing benefits and services to the cash assistance population; whether the current size of the cash assistance caseload is indicative of meeting the needs of the population eligible for TANF cash assistance; or whether TANF should be viewed as a block grant to address child poverty more broadly. This report examines inflation-adjusted TANF funding relative to the following three populations: The number of families receiving TANF cash assistance . As discussed in the "How States Have Used TANF Funds" section of this report, a large share of actual TANF expenditures were made on activities that were not related to traditional cash assistance programs (cash aid, administration, or work activities), and hence were made on populations other than families receiving cash assistance. Thus, showing TANF funding relative to the cash assistance population is an illustrative measure showing the amount of federal dollars that would be available if TANF funds were focused on those families receiving cash assistance. The estimated number of families eligible for TANF-funded cash assistance . This reflects the number of families estimated as eligible under state TANF program rules regarding family types and income and asset rules. Not all families who are eligible for TANF cash assistance actually receive benefits. Some families who are eligible do not apply or do not receive benefits for other reasons. It is estimated that a large share of the decline in the TANF cash assistance caseload resulted from a decline in the share of families eligible for cash assistance who actually received assistance. In 1997, an estimated 73% of families eligible for assistance received TANF-funded cash aid. By 2012, this percentage had declined to 30%. This is an illustrative measure showing the amount of federal dollars that would be available per family for all families eligible for cash aid. The estimated number of poor families with children . This is an illustrative measure to show TANF funding relative to the broader population targeted by all TANF benefits and services to address both the effects of and the root causes of child poverty. Figure 7 shows TANF basic funding per family receiving cash assistance, eligible for cash assistance, and with children and in poverty for 1997, 2000, and 2013. The figure shows that by any of these three measures, TANF basic funding per family increased from FY1997 to FY2000. In the late 1990s, the cash assistance caseload, the number of families eligible for cash assistance, and the number of poor families with children all declined sufficiently to more than offset the effects of inflation. That is, even adjusted for inflation, states had more resources per family in 2000 than in 1997 under any of the three measures. However, the circumstances in the post-2000 period differed substantially from those in TANF's early years. Child poverty increased during the 2000s, with some of the increase occurring even before the deep 2007-2009 recession. The number of families estimated as eligible for TANF cash assistance rose together with child poverty. Yet the TANF cash assistance caseload continued to decline, albeit at a slower pace than it did in the late 1990s. The figure shows that by any of these three measures, basic TANF funding per cash assistance family declined from 2000 to 2013. However, in 2013 basic TANF funding per family receiving cash assistance remained above that of 1997. For the other two measures, TANF funding per family had declined sufficiently by 2013 so that its inflation-adjusted value was below that of 1997. In 2013, TANF basic funding per family eligible for cash assistance was 35% below its 1997 level when considering the effects of inflation. That year, TANF basic funding per poor family with children was 37% below its 1997 level when considering the effects of inflation. In addition to the total basic block grant being based on the early to mid-1990s levels, each state's funding is also based on what it received in federal grants in TANF's predecessor programs during this period. As discussed in " The 1996 Law: "Freezing" Historical Funding Levels in the Basic TANF Block Grant ," when the law was enacted there were differences among the states in terms of funding per family receiving assistance or per poor child. The block grant froze these historical state differences in the current allocation of federal TANF funds. How would a TANF block grant representing equal grants per poor child change the TANF allocations among the states? If the basic TANF block grant was altered to base state funding on poor children (equal grants per poor child) rather than historical expenditures, the allocation among the states would be very different. If this allocation is done in a budget-neutral way—maintaining the total basic block grant at $16.5 billion—such a change would result in large increases in funding for some states, and large decreases for others. States that have lower than national average grants per poor child under the current formula would be the states with funding increases, and those with higher than national average grants per poor child would experience funding decreases. Thus, there would be a regional pattern to the reallocation of funding: typically, states in the South would have their grants increased, and California and those in the Northeast and Midwest would experience funding decreases. Figure 8 shows this regional pattern, and provides information on the percentage change from the current allocation that would occur with a reallocation of funds based on equal grants per poor child (child poverty in 2013). The state that would experience the largest increase would be Texas, with a 267% rise in its basic block grant relative to current law. The District of Columbia would be the jurisdiction with the largest decrease in block grant funding, with a cut of 64.5%. (For dollar allocations under equal grants per poor child and comparison with current law, see Table C-1 .) During the consideration of the 1996 welfare reform law, the fixed basic grant under TANF led to concerns that funding might be inadequate during economic downturns. TANF law includes two provisions to address such concerns: reserve funds and a "contingency fund." TANF law permits states to "reserve" unused basic block grant funds; for example, saving funds during periods of economic growth to have extra funding available during recessions. However, at the end of FY2013, unspent funds were at their lowest (inflation-adjusted) level in the history of the block grant. There was a slight increase in unspent TANF funds from the end of FY2013 to the end of FY2014. Figure 9 shows the amount of unspent TANF funds in inflation-adjusted (constant 2014) dollars for FY1997 through FY2014. As shown in the figure, states accumulated unspent funds in the early years of the block grant. However, the value of unspent funds declined after FY2000. At the end of FY2014, the constant dollar value of unspent funds was 66% lower than it was at the end of FY2000. The 1996 welfare reform law created a separate $2 billion fund to provide extra TANF funding during periods of economic hardship through a contingency fund. States would need to meet criteria of economic need in order to access the fund. The criteria of economic need are (1) a three-month average state unemployment rate of at least 6.5% and at least 10% higher than in the corresponding three months of either of the prior two years; or (2) the state's Supplemental Nutrition Assistance Programs (SNAP) caseload is at least 10% higher than it was in FY1994 or FY1995. Additionally, in order to access the TANF contingency fund states also have to spend more from their own funds than they spent in FY1994 on TANF-related programs. Figure 10 shows TANF contingency fund grants and their relationship to the unemployment rate for FY1998 through FY2014. As shown in the figure, the contingency fund often has not behaved as a countercyclical source of extra TANF funds. The fund was little used before FY2008. Grants did not increase together with the unemployment rate during the 2001 recession. States generally did not sufficiently increase their own spending, criteria required to access this fund, during that recession. Beginning in 2008, grants did increase with the more severe recession of 2007-2009. With the increase in access, it was projected that the $2 billion contingency fund would be exhausted. In fact, the fund was exhausted in early FY2010. Figure 10 also shows grants from the ARRA ECF. It was the ECF—and not the regular contingency fund—that provided the bulk of extra TANF funding in response to the recent severe recession. The ECF expired at the end of FY2010. Following the exhaustion of the original $2 billion for the TANF contingency fund, Congress provided it with annual appropriations in subsequent years. Over all years from FY2010 to FY2014, all states except Wyoming (which became ineligible during FY2014) were considered economically needy because they had higher SNAP caseloads than prior to welfare reform (FY1994 or FY1995). SNAP caseloads are projected to remain above those levels for the indefinite future. Therefore, the TANF contingency fund may continue to spend most of its annual appropriations into the future despite the economic recovery. There are some implications of the potential lack of a counter-cyclical funding source for TANF. During the past recession, state government budgets were stressed, with many states cutting back on spending to meet balanced budget requirements. However, for the period when the ECF provided states with extra funds, states generally maintained their TANF benefit amounts. When the ECF expired at the end of FY2010, a number of states reduced their benefits and tightened eligibility for cash assistance. Congress could opt to redesign the TANF contingency fund so that it would be more responsive to changes in economic conditions than the current contingency fund. That is, it could create a fund that would spend less than is currently projected during good economic times, and would provide a higher level of funding in case the economy falls into recession. Though a fund to provide extra grants during recessions might help TANF respond to future economic downturns, there are a number of difficulties in developing such a fund. Each recession is different—and there is no guarantee that a program that would have been responsive in past recessions will be responsive in future recessions. The uses of TANF grants by states to fund a wide range of benefits and services—some well outside the scope of benefits and services related to families receiving cash assistance—have raised some fundamental questions about the TANF block grant. Is its primary purpose to fund cash assistance and services for families receiving cash assistance, particularly those services that could move families from assistance to work? or Is TANF truly a broad-purpose block grant giving states the financial flexibility to provide a wide range of benefits and services to address childhood economic disadvantage? State organizations, in general, have argued in favor of retaining the flexibility of the TANF block grant. There have been calls to rein in spending on certain activities to focus more dollars on cash assistance families. There has also been interest in tightening certain rules related to what expenditures can be counted toward the TANF MOE, restricting the ability of states to count "third-party" donated services as part of their MOE. The bulk of TANF funding is based on what states spent in the pre-TANF programs in the early to mid-1990s. A freeze in the bulk of TANF funding that was originally authorized for 5 years (FY1997-FY2002) has now extended to close to 20 years. However, a number of considerations are raised by any potential changes in TANF funding, including the following: Under current budget rules any increase in TANF funding would have to be offset by spending reductions or revenue increases elsewhere in the budget. Addressing certain issues in a budget-neutral manner—such as disparities in funding among the states—could result in a large redistribution of funding from some states to others. There are different perspectives with which to evaluate the adequacies of TANF funding. These different perspectives lead policymakers to fundamental questions about TANF and its goals in conjunction with addressing its financing issues. History of the TANF Block Grant Funding Table A-1 shows how the TANF basic block grant was derived. The TANF basic block grant (state family assistance grant) provides each state a grant based on its peak funding during the early to-mid 1990s. The data underlying the formula were the federal share of expenditures in TANF predecessor programs for FY1992 through FY1995. The formula provided that each state receive the greatest of the average federal share of expenditures in these programs for FY1992 through FY1994 (column A); the federal share of expenditures for these programs in FY1994, adjusted for states that amended their EA programs in FY1994 or FY1995 (column D); or 4/3 times the federal share of expenditures for these programs in the first three quarters of FY1995 (column E). Table A-2 provides the amount of federal funding through the TANF basic block grant by state as well as state MOE levels at 75% and 80% rates of FY1994 predecessor program state expenditures. The MOE is 75% of FY1994 predecessor program state expenditures, but if a state fails to meet TANF work participation standards, the MOE rises to 80% of FY1994 expenditures. Table A-3 shows the total TANF grants to states for FY1997 through FY2015. Federal and State Expenditures Under TANF and its Predecessor Programs Table Showing Allocations Based on Poor Children Compared with the Current TANF Basic Block Grant Unspent TANF Funds
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The Temporary Assistance for Needy Families (TANF) block grant provides grants to states, Indian tribes, and territories to help them fund a wide range of benefits and services for needy families with children. It was created in the 1996 welfare reform law, which rewrote the rules for cash assistance programs for these families. The 1996 law also created TANF as a broad-purpose block grant with state flexibility to design programs to address both the effects of and root causes of childhood economic disadvantage. TANF funding is based on the amount of federal and state expenditures in its predecessor programs (Aid to Families with Dependent Children (AFDC), and related programs) in the early to mid-1990s. The bulk of federal TANF funds is in a basic block grant. Both the national total of the basic block grant, $16.5 billion per year, and each state's grant are based on federal funding in the predecessor programs during this period. States must also expend a minimum amount of their own funds on TANF or TANF-related programs under the maintenance of effort (MOE) requirement. That minimum totals $10.4 billion per year. The MOE is based on state expenditures in the predecessor programs in FY1994. Over time, states have received some extra TANF funding: welfare-to-work grants, contingency funds, supplemental grants, and bonus funds. However, these grants were small relative to the basic block grant and MOE funding. The cash assistance caseload declined substantially in the late 1990s from its 1994 peak, resulting in a decline in spending on TANF basic assistance. In FY1995, under TANF's predecessor programs, AFDC cash assistance represented 70% of total expenditures in the programs consolidated into TANF. By FY2000 cash assistance had declined to 40% of total TANF and MOE funds; in FY2014 cash assistance represented 26% of all TANF and MOE funds. TANF also provides funds for state-subsidized child care programs ($5.1 billion or 16% of total FY2014 TANF and MOE funds) as well as a wide range of services, including those addressing child abuse and neglect and pre-kindergarten programs. Most of TANF's financing issues relate to its fixed level of funding, based on programs and conditions that existed in the early and mid-1990s. Neither the national total funding level nor each state's level of funding has been adjusted for changes since then, such as inflation, the size of the cash assistance caseload, or changes in the poverty population. From FY1997 through FY2014, the TANF block grant lost 32% of its value due to inflation alone. The TANF allocation "locked in" historical differences among the states that resulted in a wide range of funding levels relative to the number of poor children. Further, TANF potentially lacks a source of sufficient additional funding in case of a future economic downturn. Should Congress seek to address these issues, it would do so in the context of budget rules that apply to TANF as a mandatory program with fixed funding. Current budget rules would require legislation to increase TANF funding to contain corresponding offsets by reducing other mandatory funds and/or increasing revenues.
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Nearly 105,000 horses were slaughtered for human food in 2006, all in two foreign-owned Texas plants and a third foreign plant in Illinois, according to the U.S. Department of Agriculture (USDA). Virtually all the meat was for export, the largest markets being France, Belgium, Switzerland, Italy, Japan, and Mexico. The United States exported more than 17,000 metric tons of horse meat valued at about $65 million in 2006. Most of these horses were raised for other purposes, like riding. Dealers collected them for the plants from auctions, boarding facilities, and elsewhere. Although U.S. horse slaughter had been rising since 2002—before a series of court actions closed the three plants in 2007—it remained below levels of the 1980s, when more than 300,000 were processed annually in at least 16 U.S. plants. Although U.S. slaughter has ended for the present, advocates continue to support federal legislation to ban it permanently. They—and those who have opposed a permanent ban—also express concern about the shipment of more U.S. horses to Canada and Mexico, where plants can still slaughter them for food. Outside of recent appropriations measures (see below), federal laws neither ban the use of equines for food nor set on-farm care standards. Protection usually has been subject to varying state and local laws. Some of these laws may set care standards, although more are likely to be anti-cruelty measures. However, U.S. horse slaughter plants were long subject to the Federal Meat Inspection Act (FMIA) of 1906, as amended (21 U.S.C. 601 et seq.), which requires USDA to inspect all cattle, sheep, swine, goats, and equines slaughtered and processed into products for human food. This act, administered by USDA's Food Safety and Inspection Service (FSIS), aims to ensure that meat and meat products from these animals are safe, wholesome, and properly labeled. FSIS safety inspection is mandatory, and most costs must be covered by appropriated funds, except for overtime and holiday periods. Meat inspectors also are charged with enforcing the Humane Methods of Slaughter Act (7 U.S.C. 1901 et seq.), which requires that livestock (but not poultry) be rendered unconscious prior to slaughter. Plants also can request that graders from USDA's Agricultural Marketing Service (AMS) be placed in their plants to assign official grades to their products based on quality traits and yield. Plants pay user fees for this inspection service, which is voluntary and conducted under authority of the Agricultural Marketing Act (AMA) of 1946 as amended (7 U.S.C. §§1621 et seq.). The 1946 AMA is also the authority FSIS uses to provide voluntary food safety inspections of animals and products not specifically covered by either the Federal Meat Inspection Act or the Poultry Products Inspection Act. Horses often had to be shipped long distances to reach the few U.S. plants that, until 2007, were slaughtering them. Horse advocates and animal welfare groups gained passage of language in the 1996 farm bill ( P.L. 104-127 , Title IX-A, Commercial Transportation of Equine for Slaughter, 7 U.S.C. note) that authorized the Secretary of Agriculture to issue guidelines for regulating such transport, subject to available appropriations. USDA's Animal and Plant Health Inspection Service (APHIS) developed the guidelines with the cooperation of horse groups, and they became effective on February 5, 2002. APHIS has amended its regulations regarding the commercial transportation of equines to slaughter. In particular, the amended regulations (9 C.F.R. Part 88) will extend the humane treatment regulations for horses bound for slaughter, but delivered first to an assembly point, feedlot, or stockyard. The new regulations, effective October 7, 2011, also banned the use of double-deck trailers when equines are transported directly to slaughter houses. Several states have laws aimed at preventing the slaughter of horses for human food. A federal lawsuit filed by the owners of the two Texas slaughter plants, Beltex Corporation and Dallas Crown, Inc., sought to clarify that the Texas state law banning the sale of horsemeat, first passed in 1949, was not enforceable and that they should not be prosecuted. The U.S. District Court for the Northern District of Texas in Fort Worth had earlier agreed with the plants' owners that the law had been repealed, was preempted by the FMIA, and violated the dormant Commerce Clause of the U.S. Constitution. However, on January 19, 2007, a panel of the U.S. Court of Appeals for the Fifth Circuit rejected all three arguments, declaring the Texas law to be in force and clearing the way for the state attorney general to prosecute the plant owners if they continued to operate. The two plants have ceased slaughtering horses for human food. The Illinois legislature in May 2007 passed a law banning horse slaughter. The Illinois plant (owned by Cavel International) was able to operate until September 2007, when the U.S. Court of Appeals for the Seventh Circuit ruled that the state law does not violate the interstate and foreign commerce clauses of the U.S. Constitution. The plant appealed to the U.S. Supreme Court, which in June 2008 declined to hear the case. Several states (e.g., South Dakota, North Dakota, Tennessee, Missouri, Idaho), however, are considering establishing horse processing facilities since the federal legislation was enacted. Legislation to permit investor-owned equine processing facilities in Montana went into effect in May 2009. In Nebraska, a bill was introduced in 2011 to create a state meat inspection program that could sidestep mandates of the FMIA. The Oklahoma legislature passed two bills in February 3013 that would allow horse slaughter, but still continue a ban on the sale of horsemeat for consumption in the state. During debate on USDA's FY2006 appropriation ( H.R. 2744 ), the House on June 8, 2005, approved, 269 to 158, an amendment by Representative Sweeney to prohibit funds provided in the measure to pay for the ante-mortem inspection of horses under the meat inspection act. On September 20, 2005, the Senate adopted an identical floor amendment by Senator Ensign, by a 69 to 28 vote. The final conference report ( H.Rept. 109-255 ), signed as P.L. 109-97 on November 10, 2005, retained this amendment, but delayed the effective date for 120 days. Because the FMIA has long required FSIS inspection of equines (like other designated livestock species) before the meat may enter commerce, the amendment's supporters presumed that the plants could no longer process them for human food. However, the final House-Senate report stated: "It is the understanding of the conferees that the Department is obliged under existing statutes to provide for the inspection of meat intended for human consumption (domestic and exported). The conferees recognize that the funding limitation in §794 prohibits the use of appropriations only for payment of salaries or expenses of personnel to inspect horses." Subsequently, the three plants, on November 23, 2005, petitioned USDA for voluntary ante-mortem inspection under the 1946 AMA, with the ante-mortem portion funded by user fees. The plants and other horse slaughter supporters noted that the relatively narrow wording of the Sweeney-Ensign language only prohibited use of funds for ante-mortem horse inspection under the FMIA, not for other, post-slaughter inspection activities. They also cited the conference report language, which stated that USDA still was obliged to conduct inspections. On February 8, 2006, USDA cited the AMA authority to publish such an interim rule. FSIS amended existing regulations that apply to "exotic species" (bison, deer, etc.), adding a new subpart that applied to horses starting March 10, 2006. Under the rule, USDA used many of the same FMIA guidelines for ante-mortem horse inspection. Also, post-mortem horse inspection could continue under the FMIA, using appropriated funds. Congressional supporters of the original Sweeney/Ensign amendment objected to the rule, declaring that it circumvented their clear intent to halt horse slaughter. The version of the FY2008 USDA appropriation ( H.R. 3161 , §738) passed by the House in late July 2007 continued the prohibition against using appropriated funds to inspect horses prior to slaughter for human food. Furthermore, the measure prohibited the USDA-FSIS rule (see above) that provided for the collection of user fees as well. The committee-reported Senate version ( S. 1859 ) did not include the ban. In lieu of a freestanding FY2008 bill, Congress included USDA funding as Division A of the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ). This consolidated act (§741) included the House language to ban both appropriated funds and user fees for horse inspection (although, as noted, slaughter at the three plants already had been halted by the courts and by state law). The Omnibus Appropriations Act, 2009 ( P.L. 111-8 ), which includes USDA funding as Division A, continued this prohibition (at §739), as does the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2010 ( P.L. 111-80 ). The recently enacted continuing resolution for FY2013 ( H.R. 933 ) continues the policy of P.L. 112-55 , the FY2012 appropriations bill, by permitting FSIS to inspect horse slaughtering facilities through FY2013. The Safeguard American Food Exports (SAFE) Act ( S. 541 / H.R. 1094 ) was also introduced in the 113 th Congress. The bill would amend the Federal Food, Drug, and Cosmetic Act to prohibit the sale or transport of equines and equine parts in interstate or foreign commerce for human consumption. The House bill was referred on March 12, 2013, to the both the Committee on Energy and Commerce and the Committee on Agriculture. The Senate bill was referred on the same day to the Committee on Health, Education, Labor, and Pensions. Companion bills entitled the American Horse Slaughter Prevention Act of 2011 ( S. 1176 / H.R. 2966 ) were introduced by Senator Landrieu and Representative Burton in June and September 2011, respectively. The bills would have amended the Horse Protection Act of 1970 (P.L. 91-540) to prohibit shipping, transporting, possessing, purchasing, selling, or donating horses and other equines to be slaughtered for human consumption. A general provision in the House-passed FY2012 Agriculture appropriations bill ( H.R. 2112 , §739) would have continued to prohibit any funds to pay salaries or expenses of Food Safety Inspection Service personnel to inspect horse meat. The general provision stated that no funds could be used to pay salaries and expenses of personnel to (1) inspect horses under Section 3 of the Federal Meat Inspection Act (21 U.S.C. 603); (2) inspect horses under Section 903 of the Federal Agriculture Improvement and Reform Act of 1996 ( P.L. 104-127 ); or (3) implement or enforce Section 352.19 of Title 9, Code of Federal Regulations. This general provision was not included in the Senate-passed version of H.R. 2112 , nor was it included in the final bill ( P.L. 112-55 ). Without this provision, FSIS can again inspect horse meat. USDA stated that, although the limitation on FSIS inspection had been lifted, there were still significant regulatory obstacles to resurrecting horse slaughter in the United States. For example, any processing facility has to obtain a federal grant of inspection, conduct a hazard analysis, and develop a Hazard Analysis and Critical Control Points (HACCP) plan prior to the processing of any horses for human consumption. A facility in New Mexico—Valley Meats, Inc.—was granted a permit by USDA on June 28, 2013, to begin horse slaughter. USDA has stated that it would grant similar operating permits to plants in Iowa and Missouri in early July 2013. The New Mexico plant had sued USDA in February 2013, accusing it of intentionally delaying the approval process. Both the House ( H.R. 2410 ) and Senate ( S. 1244 ) 2014 Agriculture appropriations bills would again prohibit FSIS from inspecting horses under the Federal Meat Inspection Act. The Administration and USDA have also requested that the ban on horse slaughter continue. As discussed above, the provision had been included in Agriculture appropriations bills since 2008. Its absence in P.L. 112-55 may have reflected a June 2011 Government Accountability Office report that recommended action on the unintended consequences of ending horse slaughter in 2007. The report provided evidence of a rise in state and local investigations for horse neglect and more abandoned horses since 2007. Some opponents of the horse slaughter ban, including the American Veterinary Medical Association, argued that humane slaughter in the United States is preferable to less regulated slaughter in Mexican abattoirs, or more humane than abandoning unwanted horses to starve because owners can no longer afford to feed and care for the animals. A group of horse owners in New Mexico (the New Mexico Horse Council) had sent a letter to the governor in support of the facility that was granted an operating permit. The letter argued that humane slaughter is preferable to abandonment, starvation, or long-distance transport to slaughter facilities in other countries. The New Mexico administration has opposed horse slaughter and had called on USDA to deny the petition. H.R. 503 , introduced by House Judiciary Committee Chairman Conyers, and S. 727 , introduced by Senator Landrieu, were companion bills to amend the criminal portion (Title 18) of the U.S. Code to make it illegal to knowingly possess, ship, transport, purchase, sell, deliver, or receive any horse, horseflesh, or carcass intended for human consumption. Violators would have been subject to fines or up to three years in prison. (A different measure, H.R. 305 , would have prohibited the transportation of horses in double-decker trailers, subjecting violators to civil penalties of between $100 and $500 for each horse involved). H.R. 503 and S. 727 were referred to the House Subcommittee on Crime, Terrorism, and Homeland Security and the Senate Committee on the Judiciary, respectively, where no further action was taken in the 111 th Congress. H.R. 305 was reported by the House Committee on Transportation ( H.Rept. 111-645 ) and placed on the Union Calendar, but no further action was taken. The Conyers bill had been introduced into the 110 th Congress as H.R. 6598 . The Judiciary Committee held a hearing on H.R. 6598 on July 31, 2008, and ordered the bill to be favorably reported ( H.Rept. 110-901 ) on September 23, 2008. Full House action did not occur. (The Kirk bill banning the movement of horses in double-decker trailers was H.R. 6278 in this Congress.) Also in the 110 th Congress, companion bills to prohibit permanently the movement and slaughter of horses for human food were introduced by Representative Schakowsky and Senator Landrieu ( H.R. 503 , S. 311 ). These measures would have amended the Horse Protection Act (15 U.S.C. §1821 et seq.), which currently makes it a crime to exhibit or transport for the purpose of exhibition any "sore" horse (i.e., one whose feet have been injured to alter its gait). The Schakowsky and Landrieu bills would have prohibited the "shipping, transporting, moving, delivering, receiving, possessing, purchasing, selling, or donation of any horse or other equine to be slaughtered for human consumption." The bills would have permitted USDA to detain for examination and evidence any horse for which it has probable cause that the animal will be slaughtered for food. Violators would have been subject to specified criminal and civil penalties and prison terms. The bills would have increased authorized appropriations for administering the act from $500,000 to $5 million annually. The Senate Commerce Committee ordered the bill to be favorably reported ( S.Rept. 110-229 ) on April 25, 2007; full Senate action did not occur. In the 109 th Congress, the full House had approved H.R. 503 by a 263-146 vote on September 7, 2006, turning aside opposition, and major changes made earlier, by the House Agriculture Committee. Senate action on S. 1915 did not occur. In the 108 th Congress, proposed bills ( H.R. 857 and S. 2352 ) to halt horse slaughter differed in detail from the more recent measures. For example, these earlier bills did not amend the Horse Protection Act. H.R. 857 and S. 2352 also explicitly would have required officials to work with animal welfare societies and animal control departments to place confiscated horses temporarily with a nonprofit animal rescue facility, required the owner of a confiscated horse to post a bond sufficient to provide for 60 days of care, and required the Secretary to make grants to specified rescue facilities willing to accept confiscated horses. A somewhat related issue revolves around provisions of the Wild Free-Roaming Horses and Burros Act of 1971 (16 U.S.C. §1331 et seq.), which seeks to protect wild horses and burros on federal lands. At issue has been whether, and under what conditions, such horses could be acquired and eventually sold for slaughter. While not concerned with horse slaughter, a bill was introduced in the 112 th Congress that directed the Secretary of the Interior to enter into agreements to manage free-roaming wild horses in and around the Curritick National Wildlife Refuge in North Carolina ( H.R. 306 / S. 3448 , Corolla Wild Horses Protection Act). The bill was referred to the Committee on Environment and Public Works and no further action was taken. The bill was reintroduced in the 113 th Congress as H.R. 126 . As noted above, the American Horse Slaughter Prevention Act of 2011 ( H.R. 2966 / S. 1176 ) would have prohibited the slaughter of other equines as well as horses. An explanation of wild horse and burro management can be found in CRS Report RL34690, Wild Horses and Burros: Issues and Proposals , by [author name scrubbed]. The foods that humans find acceptable to eat, at least under normal conditions, are for the most part culturally determined. The consumption of "bush meat" in some African societies, bird nests and shark fins in China, canines in parts of Indonesia and Korea, and kangaroo in Australia are practices that seem foreign to most North American residents, but may be normative among many groups in those societies. The same is generally true for how horse meat is regarded in the United States, while France, Belgium, and Italy, among other countries, consider horse meat a normal item of consumption. Most U.S. and Canadian consumers today view horses as performance and companion animals rather than food animals. Horse protection and animal welfare groups contend that Americans overwhelmingly favor an end to horse slaughter for human food, a practice such groups have called cruel and unnecessary. According to these groups, horses are transported long distances often in deplorable conditions in poorly equipped trucks and trailers, where they are exposed to bad weather and often inadequate rest, food, and water. However, a veterinary journal article counters: "Market demand for horsemeat for human consumption is almost certain to continue and may grow in the foreseeable future. It is therefore proper and necessary that we continue to work with national and international groups to provide humane care for horses intended for slaughter and maintain as much consensus and practicality on these issues as possible." The American Veterinary Medical Association (AVMA) and the American Association of Equine Practitioners actively opposed H.R. 503 . The AVMA opposed the bill because it did not provide for the care of unwanted horses, or provide funding for the care and placement of horses seized by the government in accordance with H.R. 503 . One concern expressed by opponents of a ban on horse slaughter is that "rescued" horses are more likely to become neglected and abused by owners who lack the knowledge, financial resources, and/or interest to care for them. At the same time, the existing U.S. horse infrastructure cannot absorb the large numbers of animals that would be confiscated or otherwise diverted from slaughter as a result of a slaughter prohibition, opponents of such a ban believe. The American Horse Protection Association (AHPA) is opposed to the slaughter of horses for food but did not endorse the slaughter ban bills in the 108 th Congress. AHPA, which maintains a list of U.S. and foreign horse sanctuaries, had observed that not all sanctuaries may have the means or business skills to take in large numbers of horses, and that no nationwide standard-setting or oversight system exists for them. A Texas rescue group stated: "Some equine rescues are large organizations with a system of checks that keep everyone honest. Others may be small one or two person operations. There are no national oversight organizations that can verify the honesty of a nonprofit equine rescue." The National Horse Protection Coalition (NHPC) asserted that sanctuary associations have accreditation programs and "strict guidelines," and that state and local animal welfare laws exist to ensure humane animal care. Others counter that such guidelines, if they exist, have not been endorsed or overseen by any nationally recognized authority, and that most state and local laws are anti-cruelty measures, not proactive care standards. Some, including the Humane Society of the United States (HSUS), have observed that equine shelters are less well-established than cat and dog shelters, which often are associated with local governments and humane societies. Citing the "extreme costs" and staff time needed to shelter horses, HSUS warned of needing to be aware of "distinctions between sheltering horses and sheltering other companion animals." The American Association of Equine Practitioners estimated that the cost of a horse's basic care approximates $1,825 annually, exclusive of veterinary and farrier care. A more recent study estimated the annual cost of caring for an unwanted horse at $2,340. NHPC has argued: "Not every horse currently going to slaughter will be rescued by one of these non-profit organizations, but many horses will be kept longer, will be sold directly to a new owner ... or will be humanely euthanized by a licensed veterinarian," among other alternatives. Euthanasia methods—primarily chemical injection and in some emergency situations, gunshots—are considered by the NHPC and others to be more humane than slaughter, which generally involves stunning with a captive bolt to make the animal unconscious before it is killed and bled. Euthanasia averages from $50 to $150 per horse, a "tiny fraction of the cost of keeping a horse as a companion or work animal," NHPC has stated in response to arguments about the high expense of dealing with a horse diverted from slaughter. Opponents of a slaughter ban contend that disposing of many additional horses each year could create environmental problems, such as soil and groundwater contamination. Ban supporters counter that hundreds of thousands of U.S. horses die naturally or are euthanized each year, and are now safely disposed of. Many are not buried but sent to rendering plants, where their remains are used in industrial products and animal feeds. Renderers already handle millions of cattle and hogs that die before slaughter; another 90,000 horses easily could be absorbed into the existing system, ban supporters maintain. One issue has been whether the unwanted horses that had been sent to U.S. packing plants are now simply moving into Canada and Mexico to be slaughtered there—and if so, what if anything should be done to halt the practice. According to USDA, the United States in 2006 exported nearly 26,000 live horses to Canada and more than 19,000 to Mexico. In 2007, the year all three U.S. slaughter plants closed, 47,000 U.S. horses went to Canada and 45,000 to Mexico. In 2008, Canada and Mexico imported approximately 77,000 and 69,000 U.S. horses, respectively. In 2010, nearly 138,000 were transported to Mexico and Canada for slaughter. The American Veterinary Medical Association, which generally has opposed the slaughter ban legislation, has asserted that the majority of these horses have been slaughtered for food in those countries, and otherwise would have been transported and slaughtered in the United States under close U.S. regulatory oversight and humane conditions. Supporters of legislation to ban horse slaughter argue that one intention of bills such as H.R. 503 and S. 727 in the 111 th Congress was to prevent such exports, by prohibiting the possession, shipment, transport, purchase, sale, delivery, or reception of a horse "with the intent that it is to be slaughtered for human consumption." Critics have countered that enforcement and oversight are problematic once horses leave the country. In a June 2011 report, the Government Accountability Office (GAO) provided evidence of a rise in state and local investigations for horse neglect and more abandoned horses since 2007. California, Texas, and Florida also reported more horses abandoned on private or state land since 2007. Certain animal welfare organizations, however, questioned the relation of ending slaughter to these problems. The GAO report also noted that with the cessation of domestic horse slaughter, USDA now lacks the staff and resources at the borders and foreign slaughtering facilities that it once had in domestic facilities to help identify problems with shipping paperwork or the condition of horses before they are slaughtered.
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In 2006, two Texas plants and one in Illinois slaughtered nearly 105,000 horses for human food, mainly for European and Asian consumers. In 2007, court action effectively closed the Texas plants, and a ban in Illinois closed the plant in that state. However, U.S. horses continue to be shipped to Mexico and Canada for slaughter. Several states have explored opening horse slaughtering facilities, and Oklahoma enacted to lift the state's 50-year-old ban on processing horsemeat. Animal welfare activists and advocates for horses have continued to press Congress for a federal ban. The Prevention of Equine Cruelty Act of 2009 (H.R. 503/S. 727) in the 111th Congress would have made it a crime to knowingly possess, ship, transport, sell, deliver, or receive any horse, carcass, or horse flesh intended for human consumption. No further action on the bills was taken. Companion bills entitled the American Horse Slaughter Prevention Act of 2011 (S. 1176 and H.R. 2966) were introduced in the 112th Congress. The bills would have amended the Horse Protection Act (P.L. 91-540) to prohibit shipping, transporting, possessing, purchasing, selling, or donating horses and other equines to be slaughtered for human consumption. No further action was taken on these bills. A general provision in the House-passed FY2012 Agriculture appropriations bill (H.R. 2112, §739) would have continued to prohibit funds to pay salaries or expenses of Food Safety Inspection Service personnel to inspect horses under the Federal Meat Inspection Act (21 U.S.C. 603). This provision was not included in the Senate-passed version of H.R. 2112 or in the final bill (P.L. 112-55). Although an amendment by Senator Landrieu to the FY2013 continuing resolution (H.R. 933) would have prohibited FSIS inspection, the CR continues the policy of P.L. 112-55, permitting FSIS to inspect horse meat through FY2013. On June 28, 2013, a facility in Roswell, New Mexico—Valley Meats, Inc.—became the first horse processing plant approved by USDA since 2007. USDA has indicated that they would grant similar permits to companies in Iowa and Missouri in early July 2013. The New Mexico plant had sued USDA in February 2013, accusing it of intentionally delaying the approval process. Both the House (H.R. 2410) and Senate (S. 1244) 2014 Agriculture appropriations bills would again prohibit FSIS from inspecting horses under the Federal Meat Inspection Act. The Administration and USDA have also requested that the ban on horse slaughter continue. The provision prohibiting FSIS inspection had been included in Agriculture appropriations bills since 2008. The ban does not prohibit the transport of U.S. horses to Canada or Mexico for slaughter. The ban's absence in the FY2012 appropriations bill may have reflected a June 2011 Government Accountability Office report that recommended action on the unintended consequences of ending horse slaughter in 2007. That report provided evidence of a rise in state and local investigations for horse neglect and more abandoned horses since 2007. Some opponents of the horse slaughter ban, including the American Veterinary Medical Association, have argued that humane slaughter in the United States is preferable to less-regulated slaughter in Mexican abattoirs, and more humane than abandoning unwanted horses to starve because owners can no longer afford to feed and care for the animals. Animal welfare groups have countered the argument that large numbers of unwanted horses are being abandoned. Recent news from the EU that horse meat was found in various processed foods has raised the profile of the horse slaughter issue in the United States. The Safeguard American Food Exports (SAFE) Act (S. 541/H.R. 1094) was introduced in the 113th Congress. The bill would amend the Federal Food, Drug, and Cosmetic Act to prohibit the sale or transport of equines and equine parts in interstate or foreign commerce for human consumption. The House bill was referred to the both the Committee on Energy and Commerce and the Committee on Agriculture. The Senate bill was referred to the Committee on Health, Education, Labor, and Pensions.
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The international law of armed conflict, in particular, those parts relating to belligerentoccupation, applies in Iraq. (4) The four Geneva Conventions of 1949 (5) and the HagueRegulations (6) play animportant role. Other international law relevant to human rights and to the treatment of prisonersmay also apply. For example, the International Covenant on Civil and Political Rights prohibits"cruel, inhuman or degrading treatment." (7) The Convention Against Torture (CAT) is also relevant. (8) The purpose of the four Geneva Conventions of 1949 is to mitigate the harmful effects of waron all persons who find themselves in the hands of a belligerent party. Each of the conventionsprovides specific protections for a defined category of persons who are not, or are no longer, takingpart in hostilities, including those who are detained for any reason. Whatever status a particulardetainee may be assigned, the Geneva Conventions prohibit torture and inhumane or degradingtreatment in all circumstances, including for purposes of interrogation. Prisoners of War (POW). POW status under thethird Geneva Convention ("GPW") offers the highest level of protection, including the right to betried by court martial (or national court, if a soldier of the Detaining Power could be tried that way)if accused of a crime. In case of doubt as to whether a particular captive is entitled to POW status,the Detaining Power must treat the detainee as a POW until a competent tribunal determines thestatus of the individual. (GPW Article 5). Article 13, GPW, provides that "prisoners of war must at all times be protected, particularlyagainst acts of violence or intimidation and against insults and public curiosity." Article 14 states thatprisoners of war "are entitled in all circumstances to respect for their persons and their honor."Article 17 states that "[n]o physical or mental torture, nor any other form of coercion, may beinflicted on prisoners of war to secure from them information of any kind whatever. Prisoners of warwho refuse to answer may not be threatened, insulted, or exposed to any unpleasant ordisadvantageous treatment of any kind." Interrogators are permitted to ask questions, but POWs arerequired to divulge only their name and limited identifying information. Tactics such as trickery orpromises of improved living conditions are not foreclosed. (9) Civilians Detainees. Civilians who inhabitoccupied territory are "protected persons" under the fourth Geneva Convention ("GC"), (10) and are entitled underarticle 27 "in all circumstances, to respect for their persons, their honor, their family rights, theirreligious convictions and practices, and their manners and customs." While an occupying power ispermitted to "take such measures of control and security in regard to protected persons as may benecessary as a result of the war," Article 27 provides further that "[t]hey shall at all times behumanely treated, and shall be protected especially against all acts of violence or threats thereof andagainst insults and public curiosity." Article 32 forbids any "measure of such a character as to causethe physical suffering or extermination of protected persons in their hands. . . [including] not only. . . murder, torture, corporal punishment, mutilation and medical or scientific experiments notnecessitated by the medical treatment of a protected person but also to any other measures ofbrutality whether applied by civilian or military agents." Civilians may be detained or interned by an occupying power only if "security requirementsmake such a course absolutely necessary." (GC art. 42). Internment or assigned residence is themost severe measure allowed in the cases of protected civilians who pose a definite security threat(GC art. 41(1)), and these measures are to be reviewed by a court or administrative board at leasttwice annually. (GC art. 43). Article 31 provides that "[n]o physical or moral coercion shall beexercised against protected persons, in particular to obtain information from them or from thirdparties." Protected civilians may be imprisoned as a punitive measure only after a regular trial, subjectto the protections in articles 64 through 77. Additionally, article 33 provides that "[c]ivilians maynot be punished for an offence he or she has not personally committed," and prohibits all forms ofcollective penalties and intimidation. There is also a prohibition against removing protected persons from occupied territory. GCart. 49 states: Individual or mass forcible transfers, as well as deportations of protected persons fromoccupied territory to the territory of the Occupying Power or to that of any other country,occupied or not, are prohibited, regardless of their motive. There is an exception that allows the temporary evacuation of an area when absolutely necessary forthe security of the population or for imperative reasons of military necessity. However, evacueesare not to be transported outside the occupied territory unless such a measure is unavoidable. UnderGC art. 147, the "unlawful deportation or transfer or unlawful confinement of a protected person"is a "grave breach" of the convention. It may also be permissible to relocate persons outside of theoccupied territory when it is to their benefit. GC art. 132 allows parties to the Geneva Conventionsto "conclude agreements for the . . . accommodation in a neutral country . . . certain classes ofinternees, in particular children, pregnant women and mothers with infants and young children,wounded and sick, and internees who have been detained for a long time." A report that the U.S. Central Intelligence Agency transferred certain detainees outside ofIraq for interrogation purposes has brought some accusations that the United States is in breach ofinternational law. (11) The Administration reportedly relies for legal support on a draft opinion from the JusticeDepartment's Office of Legal Counsel (OLC) construing the prohibition as applying to the expulsionfrom Iraq of persons who have a lawful right to be there, but not to the deportation of illegal aliensin accordance with local law or the temporary removal of persons who have not been charged witha crime to undergo interrogation at some location outside Iraq. (12) Regarding the crux of GCart. 49 as a prohibition on the "forceful uprooting of residents from their homes," (13) the OLC memorandumconcludes that the temporary transfer abroad of protected persons is not among the historical wartimepractices GC art. 49 was intended to alleviate. Thus, it concludes that the relocation of protectedpersons for a "brief but not indefinite" period is permissible so long as the transferee has not beencharged with any offense, but that the treaty's other protections would continue to apply. Other Detainees. Some argue that "unlawfulcombatants" are neither entitled to POW status nor civilian rights under the GenevaConventions. (14) TheDepartment of Defense has not determined, however, that any of the detainees in Iraq are "unlawfulcombatants." (15) Othersassert that persons who commit hostile acts but are not entitled to POW status have the status ofcivilians. (16) TheDepartment of Defense maintains that the Geneva Conventions have applied in Iraq since the onsetof combat operations, (17) unlike in Afghanistan, apparently indicating that insurgents in Iraq are treated as protected civiliansunder the GC rather than as "unlawful combatants." (18) However, the Administration had earlier determined that theTaliban were covered by the Geneva Conventions, but were nonetheless not entitled to status asPOWs or protected persons because they failed to meet the standards for POW treatment under GPWart. 4. (19) Someobservers have argued that this apparent inconsistency is at least partially to blame for the confusionwith respect to the permissibility of harsh interrogation techniques in detention facilities in Iraq. Ithas recently been reported that the Administration considers non-Iraqi detainees to be excluded fromthe status of "protected persons." (20) GC art. 5 provides some exceptions for the treatment of protected persons deemed securityrisks (21) : Where in occupied territory an individual protectedperson is detained as a spy or saboteur, or as a person under definite suspicion of activity hostile tothe security of the Occupying Power, such person shall, in those cases where absolute militarysecurity so requires, be regarded as having forfeited rights of communication under the presentConvention. (22) In each case, such persons shall nevertheless be treatedwith humanity, and in case of trial, shall not be deprived of the rights of fair and regular trialprescribed by the present Convention. They shall also be granted the full rights and privileges of aprotected person under the present Convention at the earliest date consistent with the security of theState or Occupying Power, as the case may be. GC art. 143, providing that the delegates of the Protecting Power or ICRC are to haveunlimited access to prisoner of war camps and internment facilities for interviewing protectedpersons, also contains an exception for security. The Detaining Power may prevent such visits forreasons of "imperative military necessity," but only as an "exceptional and temporary measure." Itis apparently under this exception that ICRC representatives were denied access to some detaineesat Abu Ghraib. (23) However, most undocumented "ghost detainees" appear to have been kept from the view of ICRCrepresentatives by the CIA, operating outside military procedures for documenting detainees. (24) (25) (26) (27) Such persons may also be protected by article 75 of Additional Protocol I to the GenevaConventions. (28) Article75 provides that "persons who are in the power of a Party to the conflict and who do not benefit frommore favorable treatment under the Conventions . . . shall be treated humanely in all circumstances"and that each state party "shall respect the person, honor, convictions and religious practices of allsuch persons." Paragraph 2 of Article 75 prohibits, "at any time and in any place whatsoever, whethercommitted by civilian or military agents. . . violence to the life, health, or physical or mentalwell-being of persons, in particular . . . torture of all kinds, whether physical or mental," "corporalpunishment," and "mutilation"; "outrages upon personal dignity, in particular humiliating anddegrading treatment . . . and any form of indecent assault"; as well as "threats to commit any of theforegoing acts." Responsibility for Breaches. The propertreatment of prisoners is the responsibility of the detaining power and the individuals directlyresponsible for their conditions. (29) Mistreatment of prisoners of war may incur individual liabilityunder both international norms and the Uniform Code of Military Justice (UCMJ) and may amountto "grave breaches" under the Geneva Conventions. Grave breaches under the GPW include "wilfulkilling, torture or inhuman treatment, including biological experiments, wilfully causing greatsuffering or serious injury to body or health, compelling a prisoner of war to serve in the forces ofthe hostile Power, or wilfully depriving a prisoner of war of the rights of fair and regular trial " inconnection with an armed conflict. (GPW art. 130). (30) Grave breaches under the GC include "wilful killing, torture orinhuman treatment, including biological experiments, wilfully causing great suffering or seriousinjury to body or health, unlawful deportation or transfer or unlawful confinement of a protectedperson, . . . or wilfully depriving a protected person of the rights of fair and regular trial prescribedin the present Convention . . ."). (GC art. 147). The Geneva Conventions obligate detaining powers to "enact any legislation necessary toprovide effective penal sanctions for persons committing, or ordering to be committed" gravebreaches, and to "search for persons alleged to have committed, or to have ordered to be committed,. . . grave breaches, and shall bring such persons, regardless of their nationality, before its owncourts." (GPW art. 129). In addition to the foregoing penal provisions for grave breaches, Article129 directs each party to take measures to suppress all violative acts short of grave breaches. Article127 obligates parties to instruct their people, in particular members of the military, about therequirements of the GPW. Article 127 provides further that "[a]ny military or other authorities, whoin time of war assume responsibilities in respect of prisoners of war, must possess the text of theConvention and be specially instructed as to its provisions." Detainees have the right to protest theirtreatment to the detaining power or to a neutral power or organization serving as the protectingpower (ordinarily the International Committee of the Red Cross) (GPW art. 78). U.S. Military Implementation. U.S. Implementationof the Geneva Conventions with respect to prisoners is found primarily in United States ArmyRegulation (AR) 190-8. (31) AR 190-8 prescribes the rules for the treatment of enemyprisoners of war (EPW), retained personnel (RP -- medical personnel, chaplains, and Red Crossrepresentatives), civilian internees (CI), and other detainees (OD -- whose status has not yet beendetermined but who are to be treated as EPW in the meantime), who are in the custody of the U.S.Armed Forces. Paragraph 1-5 of AR 190-8 sets forth the general standards: a. U.S. policy, relative to the treatment of EPW, CI andRP in the custody of the U.S. Armed Forces, is as follows: (1) All persons captured, detained, interned, orotherwise held in U.S. Armed Forces custody during the course of conflict will be givenhumanitarian care and treatment from the moment they fall into the hands of U.S. forces until finalrelease or repatriation. (2) All persons taken into custody by U.S. forces willbe provided with the protections of the GPW until some other legal status is determined bycompetent authority. (3) The punishment of EPW, CI and RP known to have,or suspected of having, committed serious offenses will be administered [in accordance with] dueprocess of law and under legally constituted authority per the GPW, GC, the Uniform Code ofMilitary Justice and the Manual for Courts Martial. (4) The inhumane treatment of EPW, CI, RP isprohibited and is not justified by the stress of combat or with deep provocation. Inhumane treatmentis a serious and punishable violation under international law and the Uniform Code of MilitaryJustice (UCMJ). b. c. All persons will be respected as human beings. Theywill be protected against all acts of violence to include rape, forced prostitution, assault and theft,insults, public curiosity, bodily injury, and reprisals of any kind. They will not be subjected tomedical or scientific experiments. This list is not exclusive. EPW/RP are to be protected from allthreats or acts of violence. d. Photographing, filming, and video taping ofindividual EPW, CI and RP for other than internal Internment Facility administration orintelligence/counterintelligence purposes is strictly prohibited. No group, wide area or aerialphotographs of EPW, CI and RP or facilities will be taken unless approved by the senior MilitaryPolice officer in the Internment Facility commander's chain of command. e. A neutral state or an international humanitarianorganization, such as the ICRC, may be designated by the U.S. Government as a Protecting Power(PP) to monitor whether protected persons are receiving humane treatment as required by the GenevaConventions. The text of the Geneva Convention, its annexes, and any special agreements, will beposted in each camp in the language of the EPW, CI and RP. . . . War Crimes Act. War crimes committed by personsnot subject to the UCMJ may be prosecuted in federal court under the War Crimes Act of 1996. (32) Under that statute, warcrimes committed by or against U.S. nationals are punishable by fine or imprisonment, and a warcrime that results in the death of a victim, is subject to the death penalty. (18 U.S.C. § 2441 (a-b)). War crimes are defined to include grave breaches under the Geneva Conventions and violations ofCommon Article 3. (33) (18 U.S.C. § 2441 (c)(1-3)). The United Nations has a duty under its Charter to the promote "universal respect for, andobservance of, human rights and fundamental freedoms for all without distinction as to race, sex,language or religion." (34) The U.N. Charter obligates U.N. member states to take joint and separate action to promote humanrights and fundamental freedoms for all persons without distinction as to race, sex, language orreligion. (35) The UnitedNations General Assembly adopted the UDHR in 1948 to codify those human rights andfundamental freedoms referred to in the U.N. Charter. (36) The UDHR prohibits arbitrary arrest, detention or exile, (37) as wellas torture and cruel,inhuman or degrading treatment or punishment. (38) Although it is a General Assembly Resolution rather than atreaty, and is therefore technically non-binding, some if not most provisions are considered to becustomary law. (39) TheUDHR does not contain an enforcement mechanism. The International Covenant on Civil and Political Rights was adopted by the United Nationsto set forth in greater detail the Universal Declaration of Human Rights. The ICCPR prohibitsarbitrary detention (40) and "cruel, inhuman or degrading treatment." (41) Article 10 provides that "[a]ll persons deprived of their libertyshall be treated with humanity and with respect for the inherent dignity of the human person." Article 4 provides for derogation "in time of public emergency which threatens the life of the nationand the existence of which is officially proclaimed . . . to the extent strictly required by theexigencies of the situation, provided that such measures are not inconsistent with their otherobligations under international law and do not involve discrimination solely on the ground of race,colour, sex, language, religion or social origin." However, no derogation is permitted from certainrules, including articles 6 (pertaining to the death sentence), 7 (prohibiting cruel, inhuman ordegrading treatment), 8 (paragraphs 1 and 2 -- prohibiting slavery and servitude), 15 (prohibitingretroactive penal sanctions), and 16 (providing all persons are to be recognized as such by the law). The United States ratified the ICCPR in 1992, subject to a number of reservations,understandings and declarations, including a declaration that the ICCPR is non-self-executing -- thatis, it does not give rise to a private action in court. The United States notified the UN that itinterprets "cruel, inhuman or degrading treatment or punishment" to mean the cruel and unusualtreatment or punishment prohibited by the Fifth, Eighth, and/or Fourteenth Amendments to theConstitution. President Clinton established the Interagency Working Group on Human RightsTreaties to implement the ICCPR and other human rights treaties (42) with the mandate to"provide guidance, oversight, and coordination with respect to questions concerning the adherenceto and implementation of human rights obligations and related matters." (43) In 2001, theresponsibilities of the Working Group were transferred to the newly created National SecurityCouncil (NSC) Policy Coordination Committee (PCC) on Democracy, Human Rights, andInternational Operations. (44) The United States has not officially proclaimed an emergencyor named measures that would derogate from the ICCPR. In 1994, the United States ratified the United Nations Convention Against Torture and OtherCruel, Inhuman, or Degrading Treatment or Punishment (CAT). (45) CAT requires parties totake measures to prevent torture from occurring within any territory under their respectivejurisdictions, regardless of the existence of "exceptional circumstances," such as a war or threat ofwar, internal political instability or other public emergency. (46) CAT defines torture as "any act by which severe pain or suffering, whetherphysical or mental, is intentionally inflicted on a person for such purposes as obtaining from him ora third person information or a confession, punishing him for an act he or a third person hascommitted or is suspected of having committed, or intimidating or coercing him or a third person,or for any reason based on discrimination of any kind, when such pain or suffering is inflicted by orat the instigation of or with the consent or acquiescence of a public official or other person actingin an official capacity." (47) Torture does not include "pain or suffering arising only from, inherent in or incidental to lawfulsanctions." Nor does it include conduct that unintentionally causes severe pain and suffering. CAT obligates its parties to proscribe and punish acts of torture under their criminal laws,including any attempt to commit torture or any act that constitutes complicity to torture. (48) Additionally, memberStates are to make the crime of torture an extraditable offense under their domestic laws, if necessaryunder their laws pertaining to extradition. (49) States parties also undertake to provide necessary training toprevent torture and "other acts of cruel, inhuman or degrading treatment or punishment which do notamount to torture" to "law enforcement personnel, civil or military, medical personnel, publicofficials and other persons who may be involved in the custody, interrogation or treatment of anyindividual subjected to any form of arrest, detention or imprisonment," (50) and to "keep undersystematic review interrogation rules, instructions, methods and practices as well as arrangementsfor the custody and treatment of persons subjected to any form of arrest, detention or imprisonmentin any territory under its jurisdiction, with a view to preventing any cases of torture." (51) Statements induced bytorture are not to be admitted as evidence in a criminal proceeding against the victim. (52) Victims have a right,under the CAT, to have their allegations investigated by impartial officers and to pursue means ofredress that afford fair and adequate compensation to the victim or the victim's heirs. (53) U.S. Implementation of CAT. Congress passedlegislation in 1994 to implement the requirements of the CAT (18 U.S.C.§ 2340 et seq .). Section2340, along the lines of the CAT, defines torture in subsection (1) as "an act committed by a personacting under the color of law specifically intended to inflict severe physical or mental pain orsuffering (other than pain or suffering incidental to lawful sanctions) upon another person within hiscustody or physical control." "Severe mental pain or suffering" means the prolonged mental harmcaused by or resulting from the infliction or threat to inflict severe physical pain or suffering; the useor threat to use "mind-altering substances or other procedures calculated to disrupt profoundly thesenses or the personality"; threats of imminent death; and threats to inflict the above forms of abuseon third persons. (18 U.S.C. § 2340). Persons who commit violations outside the United States (54) are subject to fine orimprisonment for not more than 20 years, or both, and if death results, violators may receive up tolife in prison or the death penalty. (18 U.S.C. § 2340A). Those convicted of conspiracy to committorture may be punished to the same extent as violators themselves, except that they are not eligibleto receive the death penalty. (18 U.S.C. § 2340A(c)). Torture Victim Protection Act (TVPA). In 1990,Congress enacted the Torture Victim Protection Act (TVPA) (55) to provide an avenue ofredress for victims of torture overseas. The TVPA created a cause of action for any person to seekrecovery for acts of torture committed under color of foreign law from an individual responsible forthe acts who can be "found" within the United States for the purpose of serving process. (56) Only individuals with acertain level of personal responsibility may be sued under the TVPA; other entities are not amenableto suit. Persons acting as U.S. officials may not be sued under the TVPA, but it may be possible forabused prisoners to bring suit against them under the Alien Tort Statute. (57) It was established during the Nuremberg Tribunals after World War II that persons whocommit war crimes or crimes against humanity may be held individually accountable, whether theyare members of the military or civilians. (58) Members of the armed forces are directly subject to the laws of war and may be tried byinternational or national tribunals for violations. Military personnel stationed overseas are alsosubject to the domestic law of the country where they are stationed, ordinarily under the terms of astatus of forces agreement (SOFA) with the host country. Under current law, U.S. service membersare not subject to legal process in the Iraqi courts unless the government waives their immunity. (59) International Law. Members of the armed forcesof a party to an international armed conflict may be held individually liable for breaches of the lawof war, including for maltreatment of prisoners under their control, whether such prisoners are undertheir immediate control or indirect control through the chain of command. It is not a defense againsta charge of any grave breach of the Geneva Conventions that an accused was merely followingorders, (60) although suchcircumstances may mitigate liability. Commanders may be held vicariously liable for abusescommitted by persons under their command even where no orders were issued, if it can be proventhat the commander knew or should have known that such abuses were taking place. (61) U.S. Military Law. Service members are subjectto military jurisdiction under the Uniform Code of Military Justice (UCMJ). They may be tried forserious crimes by general court-martial, and for less serious crimes by summary court-martial orspecial court-martial. Service members may also receive administrative sanctions or non-judicialpunishment. The mistreatment of prisoners may be punishable as a crime under article 93, UCMJ, whichforbids "cruelty toward, or oppression or maltreatment of, any person subject to [the] orders [or theaccused]. . . ." (62) Article97 prohibits the arrest or detention of any person except as provided by law. (63) The UCMJ also punishesordinary crimes against persons such as assault and assault consummated by a battery, (64) assault with intent tocommit rape, (65) rape, (66) sodomy, (67) indecent assault, (68) murder, (69) manslaughter (70) and maiming. (71) Article 134, UCMJ, alsopunishes, "[t]hough not specifically mentioned in [the UCMJ], all disorders and neglects to theprejudice of good order and discipline in the armed forces, all conduct of a nature to bring discreditupon the armed forces, and crimes and offenses not capital, of which persons subject to [the UCMJ]may be guilty. . . ." (72) Attempts, conspiracy, and solicitation to commit a crime are also punishable. (73) U.S. Federal Law. U.S. service members are alsosubject to federal statutes and may be tried in federal court to the same extent as civilians. Ordinarily,soldiers who are accused of committing a crime overseas would be prosecuted by court-martial, andwould be protected by the Double Jeopardy Clause (74) from being prosecuted in federal court for the same crime. Soldiers accused of participating in criminal activity with civilians who are covered by the MilitaryExtraterritorial Jurisdiction Act (MEJA) may also be tried in federal court. (75) Former service memberswho committed crimes overseas prior to their separation from military service may also beprosecuted under MEJA. International Law. The status of contractpersonnel that serve as part of an occupying or peacekeeping force falls into a grey area. Whilecivilians accompanying the armed forces in the field are generally entitled to treatment as prisonersof war if captured by an enemy State, they are considered non-combatants who are not authorizedto take part in hostilities. To the extent that they carry out military functions in support of U.S.forces, they are liable under international law if they commit war crimes. (76) In particular, their actscould amount to "grave breaches" under the Geneva Conventions, giving rise to both personalliability and state responsibility attributable to the United States. U.S. Federal Law. U.S. contractor personnel andother U.S. civilian employees in Iraq are subject to prosecution in U.S. courts under a number ofcircumstances. Jurisdiction of federal statutes extends to U.S. nationals at U.S. facilitiesoverseas. (77) Inaddition, many federal statutes prescribe criminal sanctions for offenses committed by or againstU.S. nationals overseas, (78) including the War Crimes Act of 1996. (79) The federal prohibitionon torture, 18 U.S.C. § 2340 et seq , applies to acts outside the United States regardless of thenationality of the perpetrator (non-U.S. nationals need only be "found" in the United States to beprosecuted). (80) Additionally, persons who are "employed by or accompanying the armed forces" overseasmay be prosecuted under the Military Extraterritorial Jurisdiction Act (MEJA) of 2000 (81) for any offense that wouldbe punishable by imprisonment for more than one year if committed within the special maritime andterritorial jurisdiction of the United States. (18 U.S.C. § 3267). Persons "[e]mployed by the armedforces" is defined to include civilian employees of the Department of Defense (DoD) as well as DoDcontractors and their employees (including subcontractors at any tier). (18 U.S.C. § 3267 (1)(A)). The National Defense Authorization Act for FY2005 ( P.L. 108-375 ) § 1088, enacted October 28,2004, expanded the coverage of MEJA over civilian contractors and employees from other federalagencies and "any provisional authority" (e.g., the CPA), to the extent that their employment isrelated to the support of the DoD mission overseas. The amended language will clarify that contractemployees like those working alongside military personnel in Abu Ghraib are covered, irrespectiveof which agency administers the contract in question. However, it does not cover civilian andcontract employees of agencies engaged in their own operations overseas. Courts may be confrontedwith the question of what constitutes a DoD mission overseas, as opposed, perhaps, to a diplomaticor intelligence mission of some other agency. Whether jurisdiction is expanded retroactively mayalso become an issue in some cases. In February, 2004, the Department of Defense issued proposedregulations for implementing MEJA, but those rules never went into effect and will likely need tobe adjusted for the new scope of the law. (82) Military Law. It is less clear whether contractpersonnel are amenable to military prosecution under the UCMJ for conduct that took place in Iraq. Article 2(a)(10), UCMJ, extends military jurisdiction, in "time of war," to "persons serving with oraccompanying an armed force in the field." As a reflection of the constitutional issues that arisewhenever civilians are tried in military tribunals, recognized by the Supreme Court in Reid v.Covert , (83) courts laterinterpreted the term "war" to mean only wars declared by Congress. (84) However, the Reid Courtdistinguished the case at issue from Madsen v. Kinsella , (85) in which a military spouse was tried by military commission inoccupied Europe, on the basis that [that case] concerned trials in enemy territory which hadbeen conquered and held by force of arms and which was being governed at the time by our militaryforces. In such areas the Army commander can establish military or civilian commissions as an armof the occupation to try everyone in the occupied area, whether they are connected with Army ornot. (86) If Madsen remains valid, if and for so long as the United States is considered an "occupying power"in Iraq, it may be acceptable under the Constitution to subject contractors there to militaryjurisdiction. Additionally, if offenses by contract personnel can be characterized as violations of thelaw of war, the UCMJ may extend jurisdiction to try suspects by court-martial (87) or by militarycommission. (88) However, the validity of Madsen may have been undermined for the purposes of operations in Iraqby later case law requiring a congressional declaration of war and otherwise limiting militaryjurisdiction over civilians. (89) Iraqi Government Authority over Contractors. Contractors to U.S. agencies or any of the multinational forces or diplomatic entities in Iraq operateunder the law of the interim government in Iraq, which includes orders issued by the CPA prior tothe hand-over of sovereignty to the Iraqi Interim Government. (90) Under CPA OrderNumber 17, as revised June 27, 2004, contractors are exempt from Iraqi laws for acts related to theircontracts. (91) That orderprovides that "[c]ontractors shall not be subject to Iraqi laws or regulations in matters relating to theterms and conditions of their Contracts. . . ," but that they are subject to all relevant regulations withrespect to any other business they conduct in Iraq (section 4(2)). Contractors are also immune fromIraqi legal processes for acts performed under the contracts (section 4(3)). Iraqi legal processes couldcommence against contract personnel without the written permission of the Sending State, but thatState's certification as to whether conduct at issue in a legal proceeding was related to the terms andconditions of the relevant contract serves as conclusive evidence of that fact in Iraqi courts (section4(7)). In addition to criminal punishment of those responsible for torture, there may also be a legalright to compensation for the victims. This section briefly summarizes international law regardingthe right to compensation in cases involving breaches of international law, followed by a discussionof available means under U.S. law. Conduct that violates international obligations is attributable to a State if it is committed bythe government of the State or any of its political subdivisions, or by any official, employee, or agentoperating within the scope of authority of any of these governments, or under color of suchauthority. (92) Principlesof State responsibility require a State in breach of an obligation to another State or internationalorganization, without justification or excuse under international law, to terminate the violation andprovide redress. (93) The matter of reparations for war crimes is ordinarily something that is negotiated througha peace treaty at the end of the armed conflict. Reparations may take the form of monetarycompensation for the damages caused by the violation, but they may also take such forms asrestitution in kind, restoration of the status quo ante , or specific performance of an undertaking. (94) It is possible that therespective governments may reach an agreement for some type of reparation, and yet the individualvictims are not guaranteed any compensation at all. (95) The primary remedy for a breach of State responsibility with respect to the maltreatment ofdetainees appears to be the payment of reparations. The Red Cross commentary on the GPW statesthat [c]ompensation for damage resulting from the unlawfulact, although not stipulated explicitly, is undoubtedly implied by the authors of Article 12. Consequently, a State which bears responsibility for a violation of the Convention is in duty boundto make good the damage caused, either by restoring everything to the former condition . . . or bypaying damages, the choice resting, as a general rule, with the injured party. In many cases,however, reparation will have to be limited to the payment of damages, when the nature of theprejudice caused makes restoration impossible. An example of this would be the physical andmental injury suffered by prisoners . . . . (96) Even though compensation may be contemplated, however, an individual who is harmed may notbe able to seek redress directly, particularly when, as under the Convention, no private right of actionexpressly is granted. Under traditional international practice, the State of an individual's nationalityis regarded as having suffered the harm when an international agreement is breached, and it is up tothat State alone to press for reparation. However, international law may be changing in that regard. For example, the Rome Statute of the International Criminal Court provides for the compensationof victims of international crimes out of a trust fund. (97) In the aftermath of Iraq's occupation of Kuwait, the U.N.Security Council set up a compensation commission to adjudicate claims submitted by victims ofwar crimes through their respective home countries. As a general rule, the United States may not be sued in its own courts unless it has waivedits sovereign immunity. (98) Congress has provided a waiver for certain types of claimsthrough the Federal Tort Claims Act (FTCA), (99) but it does not include tort claims involving injuries that occurredoverseas. (100) Victimsmay also be able to sue for damages in U.S. courts, for example, under the Alien Tort Statute or theTorture Victim Protection Act. (101) Congress may provide for compensation without waiving U.S.sovereign immunity through administrative procedures, and has done so in several instances. (102) The Military Claims Act. Persons injured by U.S.military officials may seek compensation under the Military Claims Act, 10 U.S.C. § 2733. TheMCA compensates for personal injury, death, or property damage caused by military personnelor civilian employees acting within the scope of their employment or by "noncombatant activities of a peculiarly military nature." The Secretaries of the military departments prescribe regulationssetting forth the circumstances under which claims will be paid. (103) A claimant may appealto the JAG, but there is no right to sue the United States in federal court if the military departmentinvolved denies the claim. Compensation under the MCA is generally limited to $100,000. Claims for personal injury or death may include items such as medical expenses, lost earnings, diminished earningcapacity, pain and suffering, and permanent disability. Ordinarily, the law of the locale where theinjuries occurred is applied. Enemy nationals, as well as nationals of an ally of a country at war withthe United States, are ineligible for relief under the MCA unless the individual claimant isdetermined to be friendly to the United States. The Foreign Claims Act. Inhabitants of foreigncountries who are injured by military personnel or incidental to noncombat activities of the U.S.military may be compensated for injury, death, or property damage under the Foreign Claims Act(FCA), 10 U.S.C. § 2734-2736. The Department of Defense has assigned single-serviceresponsibility for processing claims in Iraq to the Army. All FCA claims are decided by a ForeignClaims Commission, ordinarily consisting of one or three military attorneys appointed by the SeniorJudge Advocate in a foreign area of operations. (104) Like the MCA, the FCA relies on local law to determinewhether claims are compensable and what level of compensation is appropriate. Where the claimantis a national of a country at war with the United States, compensation is available only if theclaimant is determined by the commission or by the local commander to be friendly to the UnitedStates. Relief provided under the FCA is considered to be ex gratia and does not preclude a recipientfrom pursuing a court action, but the FCA does not constitute a waiver of sovereign immunity anddoes not provide a cause of action in court. The United States may pursue subrogation againstindividual U.S. tortfeasors in order to recoup funds expended. Congress has the authority under the Constitution to make rules regarding capture on landor water, (105) to defineand punish violations of international law, (106) and to make regulations to govern the armed forces. (107) However, it hasnotpreviously taken a very active rule in prescribing the treatment of prisoners of war and civilianinternees. (108) Thefollowing sections summarize the congressional reaction to the Abu Ghraib scandal and legislativeproposals to prevent a recurrence. The 108th Congress took up issues related to the Abu Ghraib scandal and the treatment ofdetainees in numerous committee hearings, and reaffirmed that torture is unlawful. Section 9011 ofthe Department of Defense Appropriations Act of 2005, P.L. 108-287 , states that Congress, consistent with international and UnitedStates law, reaffirms that torture of prisoners of war and detainees is illegal and does not reflect thepolicies of the United States Government or the values of the people of the UnitedStates. Also during the 108th Congress, the House of Representatives and the Senate each passedresolutions condemning the abuses at Abu Ghraib and calling for investigations. (109) Several Houseresolutions of inquiry that would have called for the Administration to turn over pictures, film anddocuments related to the abuse of Iraqi prisoners were reported adversely out of committee and neverreached a vote by the full house. (110) Hearings. At least five committees -- the SenateArmed Services Committee, Senate Select Committee on Intelligence, House Select Committee onIntelligence, House Armed Services Committee, and Senate Foreign Relations Committee -- heldhearings during the 108th Congress where the Abu Ghraib scandal was discussed. In a series ofhearings held in May, 2004, the Armed Services Committees of both houses took testimony fromnumerous Department of Defense officials, including Secretary of Defense Donald Rumsfeld,General Richard B. Myers, Chairman, Joint Chiefs of Staff; Acting Secretary of the Army LesBrownlee; U.S. Army Chief of Staff General Peter J. Schoomaker; and CENTCOM DeputyCommander Lieutenant General Lance L. Smith. The Committees also interviewed General Taguba,who investigated the MP unit at Abu Ghraib, and Stephen Cambone, Undersecretary of Defense forIntelligence, as well as other intelligence officials. The Senate Armed Services Committee tooktestimony from CENTCOM Commander General John Abizaid, Lieutenant General RicardoSanchez, Commander of the Multinational Force-Iraq; Major General Geoffrey Miller, DeputyCommander for Detainee Operations in Iraq, and Colonel Marc Warren, Army Judge AdvocateGeneral. In July, 2004, the Senate Armed Services Committee interviewed Lieutenant General PaulMikolashek, Army Inspector General, about the findings of his investigation into the matter. OnSeptember 9, the Senate and House Armed Services Committee held hearings to receive testimonyfrom general officers who conducted a formal investigation into the allegations of abuse, (111) and from JamesSchlesinger and Harold Brown, appointed by the Secretary of Defense to head the Independent Panelto Review DOD Detention Operations. (112) The following laws enacted by the 108th Congress address the treatment of prisoners in Iraq. National Defense Authorization Act for FY2005, P.L.108-375. In addition to the jurisdictional modifications described above, Congressaddressed the detention issue in the Defense Authorization Act, which was signed into law by thePresident October 28, 2004. The Senate had included a measure in its version that would haveapplied to CIA interrogators, as well as intelligence personnel from other agencies, the same rulesthat apply to the military, (113) but the Administration objected that the provision "would haveprovided legal protections to foreign prisoners to which they are not now entitled," (114) and the measure wasstripped out in conference. (115) The National Defense Authorization Act does not specifically prohibit torture or cruel,inhuman or degrading treatment of detainees, as the Senate bill would have provided. (116) Instead, it sets forththe sense of the Congress that "the Constitution, laws, and treaties of the United States and theapplicable guidance and regulations of the United States Government prohibit the torture or cruel,inhuman, or degrading treatment of foreign prisoners held in custody by the United States," and thatno detainee shall be subject to such treatment. (117) Section 1091 states that the policy of the United States is toensure that no detainee in its custody is subjected to the treatment described above, to promptlyinvestigate and prosecute instances of abuse, to ensure that U.S. personnel understand the applicablestandards, to accord detainees whose status is in doubt the protection for prisoners of war under theGeneva Conventions, and to "expeditiously process and, if appropriate, prosecute detainees in thecustody of the United States, including those in the custody of the United States Armed Forces atGuantanamo Bay, Cuba." Required Regulations. Section 1092 requires themilitary to implement, within 150 days of the passage of the act, a policy to ensure detainees aretreated in accordance with the obligations set forth in section 1091. The required DOD regulationsare to contain, at a minimum, the following elements: (1) Commanding officers of detention and interrogationfacilities must educate their troops, including military personnel and civilian contractors, about theGeneva Convention Relative to the Treatment of Prisoners ofWar. (2) DoD contracts in which civilian contract personnelwill be required to interact with detainees must include a requirement that such personnel havereceived training regarding the international obligations and applicable U.S. law. (3) Detainees must be informed in their own languagesof their rights under the Geneva Convention. (4) The Department of Defense must provide forperiodic inspections, both announced and unannounced, of detention and interrogationfacilities. (5) Guard-detainee contact must be same-sex exceptunder exigent circumstances. The first two requirements of section 1092 codify the GPW, art. 127 requirements that StatesParties provide for education in the requirements of the Geneva Conventions, except that it is limitedto military personnel and civilian contractors working at detention and interrogation facilitiesoperated under DOD. The third requirement also corresponds to an obligation under the GPW. (118) With respect to thefourth requirement, the GPW does not specifically require inspections by the military chain ofcommand. However, subparagraph 3 would provide a means to satisfy the obligation to preventabuse. The fifth requirement also echoes an obligation under the GPW, at least as the Conventionapplies to women prisoners. (119) Reporting Requirements. Section 1093 of PL 108-375requires DOD to submit copies of regulations, policies and orders prescribed under section 1092 tothe armed services committees of both houses within 30 days after their implementation, along witha report setting forth steps taken to implement section 1092 as of that time. (120) Section 1093 alsorequires DOD to submit an annual report giving notice of any investigation into any violation of lawsregarding the treatment of detainees, as long as ongoing criminal or administrative actions are notcompromised through such notice. Further, the report will contain aggregate data relating to thedetention operations of the Department of Defense, including how many persons are held and inwhat status, and how many have been transferred to the jurisdiction of other countries. Section 1206 requires DOD to submit a report on contractors supporting deployed forces andreconstruction efforts in Iraq, including a description of the overall chain of command and oversightmechanisms to ensure adequate command and supervision and an explanation of their legal statusafter the transfer of sovereignty in Iraq. The report is to be submitted within 180 days of theenactment of P.L. 108-375 , and will include a description of sanctions that may be imposed in caseof misconduct, a list of actions taken against contractor personnel as of the date of the initiation ofmilitary operations in Iraq, May 1, 2003. Prohibition on Funds to Justify Torture. Congressincluded in the Consolidated Appropriations Act for FY2005, P.L. 108-447 , a prohibition on the useof funds by the Justice Department to "be used in any way to support or justify the use of torture byany official or contract employee of the United States Government." (Sec. 632). As investigations continue into U.S. detention operations outside the United States, calls forfurther congressional action and for more rigorous investigation will likely continue. (121) Hearings. The Senate Judiciary Committee heldhearings June 15, 2005, on the subject of Detainees. The Senate Armed Services Committee,Subcommittee on Personnel, held hearings July 14, 2005 on Detention Policies and Military Justice. On that same day, the House Permanent Select Committee on Intelligence held a hearing entitled"Critical Need for Interrogation in the Global War on Terror." The Armed Services Committee ofthe House of Representatives held hearings June 29, 2005, entitled "Detainee Operations atGuantanamo Bay." Detainee operations were also discussed during nominations hearings, includingthe nomination of Attorney General Alberto Gonzales and the nomination of General Peter Pace forthe position of Chairman of the Joint Chiefs of Staff. Legislation. The Emergency SupplementalAppropriations Act for Defense, the Global War on Terror, and Tsunami Relief, 2005 ( P.L. 109-13 ),enacted into law May 11, 2005, contains a prohibition on the use of funds appropriated by that act"to subject any person in the custody or under the physical control of the United States to torture orcruel, inhuman, or degrading treatment or punishment that is prohibited by the Constitution, laws,or treaties of the United States." (Sec. 1031). The prohibited treatment is defined to coincide withthe statutory definition of torture and the Senate declaration that accompanied the ratification ofCAT, which defined "cruel, unusual, and inhumane treatment or punishment" as actions that areprohibited by the Fifth, Eighth or Fourteenth Amendments to the Constitution. However, withrespect to cruel, unusual and inhumane treatment, the Administration has taken the position thatneither the Constitution nor CAT, as implemented by the United States, applies to aliens heldoverseas. (122) It isthus unclear whether section 1031 will be interpreted to impose any new restrictions on Defensespending. Two bills would create an independent commission to investigate detainee abuse( H.R. 3003 , S. 12 § 224). The House of Representatives passed a provisionas part of its Defense Authorization bill for FY2006, H.R. 2863 , that would "reaffirm[]that torture of prisoners of war and detainees is illegal and does not reflect the policies of the UnitedStates Government or the values of the people of the United States." (Sec. 9009). H.R. 112 would require detainee interrogations, whether conducted by military or civilian personnel (including contractors), to be videotaped. The resulting videotapes could beclassified, but would be available to any party in any military or civilian criminal proceeding, ifrelevant, under seal if appropriate. The bill would also require that immediate and unfettered accessto detainees be accorded to representatives of the International Committee of the Red Cross, the UNHigh Commissioner for Human Rights, and the UN Special Rapporteur on Torture. The Senate Defense Authorization bill ( S. 1042 ) contains a section that wouldrequire the Secretary of Defense to establish a DoD policy with respect to the role of military medicaland behavioral science personnel in the interrogation of detainees. (Sec. 1071). The Senate is alsoconsidering amendments to that bill to require the Defense Department to adhere to the Army'sinterrogation manual (SA 1557), to prohibit cruel, inhumane and degrading treatment of prisonersin U.S. custody no matter where they are held (SA 1556), to authorize the Combatant Status ReviewTribunals to determine detainees' status (SA 1505), and to establish an independent commission toinvestigate detainee abuse (SA 1494). (123) After the White House reportedly threatened to veto the billif it includes measures that would impede the President's ability to conduct the war onterrorism, (124) the billwas returned to committee and further action on it was postponed. The Senate version of the Defense Department FY2006 Appropriations bill( H.R. 2863 ) contains a provision, introduced as an amendment by Senator McCain, thatwould prohibit the "cruel, inhuman and degrading treatment" of detainees. (125) Section 8154 of thebill, as amended, would limit interrogation techniques used by the Department of Defense to thosedefined in U.S. Army Field Manual (FM) 34-52, Intelligence Interrogation (126) ("FM 34-52"). Thisrequirement would not apply with respect to persons detained under criminal or immigration laws. The provision would not restrict DoD's authority to revise the regulation, but would require that DoDprescribe uniform interrogation procedures for all detainees in DoD custody who are undergoinginterrogation for intelligence purposes. Section 8155 of H.R. 2863 , as passed by the Senate, applies more broadly. Itwould prohibit the cruel, inhuman, or degrading treatment or punishment of all persons in U.S.custody, regardless of the agency in whose custody the person is held and without geographicallimitation. The prohibited treatment is defined as that which would violate the Fifth, Eighth, andFourteenth Amendments to the U.S. Constitution, as the Senate has interpreted "cruel, inhuman, ordegrading" treatment banned by the U.N. Convention Against Torture. (127) The Administrationhas reportedly sought to have the Central Intelligence Agency excepted from this provision on thegrounds that "the president needed maximum flexibility in dealing with the global war onterrorism." (128) Senator McCain has criticized the Administration's proposal, arguing that an express CIA exemptioncould be interpreted as tantamount to statutory authority for the CIA to subject detainees to thetreatment his amendment seeks to ban. (129) The Targeting Terrorists More Effectively Act of 2005, S. 12 , contains aprovision to define U.S. policy with respect to detainees in the war against terrorism. Section 223would express the sense of the Congress that, at a minimum, Common Article 3 of the GenevaConventions applies to the war. The bill would expressly mandate that "no detainee shall be subjectto torture or cruel, inhumane, or degrading treatment or punishment that is prohibited by theConstitution, laws, or treaties of the United States." It would further state that the policy of theUnited States is to treat all foreign persons in the custody of the United States "humanely and inaccordance with the legal obligations under United States law and international law, including theobligations in the Convention Against Torture and in the minimum standards set forth in the GenevaConventions." The bill would further proclaim as U.S. policy that "all officials of the United Statesare bound both in wartime and in peacetime by the legal prohibitions against torture, cruel,inhumane, or degrading treatment set out in the Constitution, laws, and treaties of the United States." It may be argued that it is unnecessary for Congress to provide more express prohibitions toenforce executive compliance with what already is the law of the land. (130) However, a series ofdocuments released by the executive branch that discuss legal aspects of the treatment of detaineesin the war on terrorism may be read to suggest that relevant treaties are inoperative with respect tothe executive branch unless Congress has enacted specific implementing legislation, or that thePresident has inherent authority to set aside treaty obligations. (131) As investigations intoalleged abuse of detainees at Guantanamo Bay Naval Station continue, the issue of detaineetreatment seems likely to continue to draw the attention of Congress.
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Photographs depicting the apparent abuse of Iraqi detainees at the hands of U.S. militarypersonnel at Abu Ghraib prison in Iraq resulted in numerous investigations, congressional hearings,and prosecutions, raising questions regarding the applicable law. The international law of armedconflict, in particular, those parts relating to belligerent occupation, applies in Iraq. The four GenevaConventions of 1949 related to the treatment of prisoners of war (POW) and civilian detainees, aswell as the Hague Regulations define the status of detainees and state responsibility for theirtreatment. Other international law relevant to human rights and to the treatment of prisoners mayalso apply. For example, the International Covenant on Civil and Political Rights prohibits "cruel,inhuman or degrading treatment." The U.N. Declaration on Human Rights and the U.N. ConventionAgainst Torture (CAT) is also relevant. Federal statutes that implement the relevant internationallaw, such as the War Crimes Act of 1996 and the Torture Victim Protection Act, as well as othercriminal statutes with extraterritorial application may also come into play. Finally, the law of Iraqas amended by regulations that were issued by the Coalition Provisional Authority (CPA) may applyin some circumstances. This report summarizes pertinent provisions of the Geneva Conventions Relative to theTreatment of Victims of War (Geneva Conventions) and other relevant international agreements. The report begins with a discussion of international and U.S. standards pertaining to the treatmentof prisoners. A discussion of accountability in case of breach of these standards follows, includingpotential means of asserting jurisdiction over alleged violators, either in military courts under theUniform Code of Military Justice (UCMJ) or U.S. federal courts, by applying U.S. criminal statutesthat explicitly apply extraterritorially or within the special maritime or territorial jurisdiction of theUnited States (as defined in 18 U.S.C. § 7), or by means of the Military Extraterritorial JurisdictionAct (MEJA). The section that follows discusses international requirements to provide redress forthose whose treatment at the hands of U.S. officials may have fallen below the standards outlinedin the first section of the report. Finally, the report summarizes relevant congressional activityduring the 108th and 109th Congresses, including a brief discussion of the anti-torture provision of P.L.109-13 ( H.R. 1268 ) as well as relevant pending legislation ( H.R. 3003 , S. 12 , H.R. 112 , H.R. 2863 , S. 1042 ). This reportwill be updated.
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Coupled with increasing concerns about the environment, the magnitude of federal spending on contracts has prompted numerous questions from Members of Congress and the public about the role of environmental considerations in federal procurement. These include: to what extent do agencies consider environmental factors when procuring goods or services? What legal authorities presently require or allow agencies to take environmental factors into account when acquiring goods or services? How are existing provisions authorizing agencies to consider environmental factors implemented? This report provides an overview, answering these and related questions. It does not address green building initiatives, energy-savings performance contracts, policy documents, agency-specific laws, or environmental laws of general applicability that effectively shape the products available for purchase. Beginning with President Obama's 2009 Executive Order on "Federal Leadership in Environmental, Energy, and Economic Performance," the Obama Administration has taken steps to promote consideration of environmental factors in federal procurement. Recently, for example, the General Services Administration (GSA) reported on plans to incorporate consideration of greenhouse gas emissions inventories into federal procurement decisions, and the Federal Acquisition Regulation was amended to require that contractors report on their purchases of biobased products under service and construction contracts. Certain such initiatives have prompted controversy, however. Some Members of Congress sought to restrict the Department of Defense's purchase of biofuels as part of the National Defense Authorization Act for FY2013, and some commentators have objected to GSA's use of the Leadership in Energy and Environmental Design (LEED) rating system for buildings. Fundamentally, federal procurement involves agencies acquiring the goods and services they need to carry out their missions. The vision for federal acquisition, as presented in the FAR, is "to deliver on a timely basis the best value product or service to the customer, while maintaining the public's trust and fulfilling public policy objectives." Environmental objectives have historically constituted one of the "public policy objectives" to be furthered by federal procurement, and environmental interests were among the "competing interests" in the federal procurement system. However, they were arguably one among many, sometimes competing, policy objectives until the May 2011 amendments to the FAR articulated a "sustainable acquisition policy," which generally requires that agencies shall advance sustainable acquisition by ensuring that 95 percent of new contract actions for the supply of products and for the acquisition of services (including construction) require that the products are— (1) Energy-efficient (ENERGY STAR® or Federal Energy Management Program (FEMP)-designated); (2) Water-efficient; (3) Biobased; (4) Environmentally preferable (e.g., EPEAT-registered, or non-toxic or less toxic alternatives); (5) Non-ozone depleting; or (6) Made with recovered materials. While many of the products to be purchased under this policy (e.g., energy-efficient, biobased) were previously "preferred" in federal procurements, as discussed below, the policy could be said to create increased impetus for their purchase by requiring federal agencies to ensure that 95% of their new "contract actions" entail the acquisition of such products. However, even with the May 2011 amendments to the FAR, agencies would generally not be required to purchase energy-efficient, water-efficient, biobased, environmentally preferable, non-ozone depleting, or recovered-content products in any specific procurement. Rather, they are to ensure that 95% of their new contract actions generally involve such products. It is also important to note that the May amendments generally rely upon, rather than expand, existing legal authorities (discussed below) requiring or permitting agencies to prefer certain products based upon their environmental attributes. In addition, the amendments do not purport to address which "sustainable" product agencies should purchase when two or more different products—each of which agencies purportedly "must" purchase because of its environmental attributes—could meet agency requirements. Moreover, as agencies implement the requirement that 95% of their new contract actions entail the purchase of energy-efficient and similar products, questions could arise about the relationship between the sustainable acquisition policy and other long-standing federal procurement policies. For example, some small businesses that participated in a pilot project to reduce greenhouse gas emissions in the federal supply chain have reported being concerned that they might appear less "environmentally friendly" to contracting officers than competitors that travel shorter distances or can afford more fuel-efficient vehicles. Various legal authorities currently require or allow contracting officers to take environmental considerations into account when procuring goods or services. These authorities can be broadly divided into three categories: (1) "attribute-focused" authorities, generally requiring agencies to avoid or acquire products based on their environmental attributes (e.g., ozone-depleting substances, recovered content); (2) general contracting authorities, allowing agencies to purchase goods with certain environmental attributes when they have bona fide requirements for such goods; and (3) responsibility-related authorities, which require agencies to avoid certain dealings with contractors that have been debarred from government contracting for violations of the Clean Air Act or Clean Water Act. Numerous statutes, regulations, and executive orders enacted or issued since the mid-1970s authorize agencies to "prefer" certain products because of their environmental attributes. This generally means that agencies must purchase products with these attributes instead of competing products that lack them. However, the exact nature of the preference varies by product, as discussed below and illustrated in Table 1 and the Appendix . Because the attribute-focused authorities developed over time and through the actions of different branches of the federal government, they arguably do not represent a holistic framework for or ensure consistency in agencies' treatment of products or vendors on environmental grounds. A number of products are eligible for various preferences in federal procurement, discussed below, because of their environmental attributes. In some cases, the products and their attributes are defined fairly narrowly (e.g., plastic ring carriers, electric motors of 1 to 500 horsepower, solar hot water heaters), although generally not so narrowly as to be identified by brand name. These preferences are typically not incorporated in the FAR, which thus serves as only a partial guide to the products preferred because of their environmental attributes. In other cases, products and attributes are defined more broadly (e.g., biobased products, recovered-content products, etc.). These broader preferences are generally incorporated in Part 23 of the FAR. Many of these preferred products have their own definitions for purposes of federal procurement, as illustrated in the Glossary below. These definitions do not necessarily correspond to everyday or environmentalists' usage of these terms. Moreover, certain attributes which are currently widely discussed in environmental contexts (i.e., "green") are not presently defined for purposes of federal procurement and are not among the attributes in terms of which current preferences are stated. Some commentators have suggested that "green" products could be preferred under the existing authorities pertaining to "environmentally preferable products," which is probably the case in most circumstances. However, it is important to be clear that, absent changes in the law, any preferences given to such products are based on their being "environmentally preferable products," not "green products." The exact nature of the preference(s) given to products based upon their environmental attributes varies by product, but agencies could be required or encouraged to purchase products with the desired environmental attributes instead of competing products that lack these attributes; avoid or minimize purchases of products with certain attributes; draft specifications for goods or services so as to maximize the purchase and use of products with certain environmental attributes; develop "affirmative procurement plans" to maximize the acquisition of products with certain environmental attributes; insert clauses regarding the provision or use of designated products into certain service or construction contracts; use certain environmental considerations as evaluation factors when considering bids or offers; meet goals for the procurement of certain types of products; or report agencies' performance in acquiring preferred products to executive branch authorities, Congress or congressional committees, or the public. In a few cases, agencies are also required to use contract terms that obligate contractors to certify that they have provided designated products, or disclose information about certain environmental impacts of designated products. Table 1 illustrates which preferences generally apply to the major categories of preferred products included in the Glossary. These preferences are seldom absolute, however, not even when agencies are "required" to purchase products with certain attributes. There are several reasons for this. First, the requirements themselves are generally either conditional or subject to exemptions that allow agencies to purchase products without the desired attributes in certain circumstances. Any preferences that agencies give to alternatives to ozone-depleting substances must be "cost-effective," for example, while there are exemptions allowing agencies to purchase products that do not contain biobased content if biobased products cannot be acquired competitively within a reasonable time frame or do not meet reasonable performance standards. Agencies may also exempt certain procurements related to intelligence, law enforcement, or national security activities from the sustainable acquisition requirements under certain circumstances. Second, certain preferences apply only to procurements conducted in particular places, or whose price exceeds certain thresholds. Prior to the May 2011 amendments to the FAR, such preferences generally applied only to contracts for goods and service contracts involving the supply of goods or contractor operation of government-owned facilities. However, both the May 2011 amendments to the FAR and Executive Order 13514 arguably place increased emphasis on environmental considerations in the acquisition of services. Among other things, the May 2011 amendments to the FAR require that [t]he contracting officer shall (1) [s]pecify the [Environmental Management System] EMS directives with which the contractor must comply; and (2) [e]nsure contractor compliance to the same extent as the agency would be required to comply, if the agency operated the facilities and vehicles. While the FAR only requires agencies to incorporate the clause implementing these requirements in contracts for contractor operation of government-owned or -leased facilities or vehicles, certain provisions of Executive Order 13514 have broader applicability. These provisions allow reductions in greenhouse gas emissions resulting from changes in contractors' manufacturing processes, utility or delivery services, modes of transportation, or supply chain activities to count toward agencies' goals for reducing such emissions, and have been implemented in a way which suggests that agencies will take environmental considerations into account when contracting for services. However, their doing so would appear to entail the use of evaluation factors permissible under the general contracting authorities, discussed below, rather than the attribute-focused authorities discussed here. The Appendix provides an overview of the purchase requirements pertaining to the categories of products listed in Table 1 , including any conditions or limitations on these requirements or product-specific exemptions thereto. Such attribute-focused authorities generally would not unconstitutionally deprive vendors of competing products of due process or equal protection in violation of the U.S. Constitution. Because contractors lack property rights in prospective government contracts, they generally are not deprived of due process when the government opts to buy goods and services other than those they provide. Similarly, because distinctions between vendors based on the environmental attributes of their products do not involve "suspect classifications," such as race or sex, or the exercise of fundamental rights, a court would probably not find that vendors whose products lack the desired environmental attributes are denied equal protection. Absent a suspect classification or fundamental right, a party challenging a government program on equal protection grounds must show that the program is not rationally related to a legitimate government objective by "negativ[ing] every conceivable basis which might support" the program. Such challenges frequently fail because rational basis review is a deferential standard of review and "serves to invalidate only 'wholly arbitrary acts.'" Regulations or executive orders that mandate certain forms of preferential treatment for products or vendors based on environmental considerations could, however, potentially violate both procurement integrity regulations and the Competition in Contracting Act (CICA) of 1984. Subpart 3.1 of the FAR requires that "Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation , with complete impartiality and with preferential treatment for none." CICA is arguably even more stringent, requiring that contracts be awarded through "full and open competition" unless (1) a small business set-aside is used; (2) one of seven circumstances exist that permit other than full and open competition (e.g., sole-source, urgent and compelling need); (3) the simplified procedures for "small purchases" (generally, less than $150,000) are used; or (4) agencies use procedures "otherwise expressly authorized by statute ." Thus, while Subpart 3.1 of the FAR would permit "preferential treatment" under the authority of a regulation, CICA would generally prohibit such treatment if it resulted in other than "full and open competition." These two provisions, taken together, could effectively require that certain proposed "preferences" for products or vendors based on environmental considerations originate in statute (e.g., set-asides and, potentially, price evaluation preferences). Among the major attribute-based preferences, the only one not currently based in statute is that for environmentally preferable products. However, where such products are involved, agencies must "[e]mploy acquisition strategies that … maximize the utilization of environmentally preferable products and services (based on EPA-issued guidance)" and require contractors operating or providing support services at government-owned facilities to establish "program[s] to promote cost-effective waste reduction in all operations and facilities covered by th[e] contract." These types of preferences are unlikely to violate Subpart 3.1 or CICA because they do not favor certain products or vendors in the source selection process and, thereby, impermissibly restrict competition. In addition to the attribute-specific authorities, there are also general contracting authorities that would allow agencies to purchase products based on environmental considerations in certain circumstances. While CICA would arguably not allow agencies to prefer certain products or vendors across the board without statutory authority, it provides explicit statutory authority for agencies to define their requirements based on their needs. Thus, if there were a situation where an agency required a product with specific environmental attributes, the agency could generally draft its solicitation so as to obtain that product because CICA provides them with explicit statutory authority to do so. Agencies' specifications articulate their requirements to prospective contractors and form the basis upon which agencies select contractors. Only bids or offers that conform to agency specifications or statements of work are deemed "responsive" and could form the basis for the award of a government contract. Although requirements tied to environmental attributes could potentially be used in procurements conducted by sealed bidding or negotiated procurement, there are other aspects of negotiated procurement that some commentators have suggested could be more congenial to consideration of environmental attributes. While agencies using sealed bidding award contracts on the basis of price alone (i.e., to the lowest-priced qualified responsible bidder), agencies conducting negotiated procurements use agency-determined evaluation factors in selecting the contractor. Certain uses of evaluation factors based on environmental considerations have been upheld by the Government Accountability Office (GAO) in bid protests. In Sunshine Kids Service Supply Company , for example, the GAO upheld an agency's award of a contract based, in part, on consideration of the vendors' "environmental stewardship," while in Future Solutions, Inc. , it upheld a similar award based, in part, on consideration of the vendors' recycling programs for toners and cartridges; use of green delivery vehicles; and implementation of environmental management systems. However, although agencies' use of evaluation factors tied to environmental considerations has been generally upheld, agencies are subject to certain limitations in the use of such factors, the most significant of which is arguably that evaluation factors must "represent [a] key [area] of importance and emphasis … and [s]upport meaningful comparison and discrimination between and among competing proposals." In other words, any evaluation factors based on environmental considerations would have to be related to the goods or services being acquired. Additionally, agencies must also generally consider price or cost, past performance, and the quality of the product or service as evaluation factors in every procurement. This means that any environmental factors would be one among many—possibly competing—factors on the basis of which the award is made. Similarly, while some commentators have suggested that the focus on "best value" in negotiated procurements would result in de facto preferences for products with desirable environmental attributes, such commentators may confuse "best value" as the goal of all federal procurements and "best value" as a synonym for the cost/technical tradeoff process involved in negotiated procurements. "Best value" is the goal of all federal procurements, but there is no special legal authority for implementing this goal independent of existing statues and regulations, of which only the attribute-focused statutes would authorize agencies to prefer products or vendors based on environmental considerations. "Best value" is also the desired result of the cost-technical tradeoff process in negotiated procurements, but the use of this process is subject to all the limitations discussed above (e.g., evaluation factors must represent a key area of importance and emphasis). This makes it unlikely that the reportedly lower life cycle costs of environmentally sound products would necessarily result in the selection of such products in all or even most procurements. While agencies do not have authority to prefer certain contractors over others based on environmental considerations, they are required to avoid dealings with environmentally irresponsible contractors in certain circumstances. Agencies are prohibited by statute from contracting with vendors who have been debarred from federal contracts by the Administrator of the Environmental Protection Agency (EPA) for certain violations of the Clean Air and Clean Water Acts. Such debarments are mandatory for specified violations; last until the EPA Administrator certifies the condition is corrected; and can be waived only if the President determines that doing so is in the "paramount interests of the United States" and notifies Congress. However, these debarments apply only to the vendors' operations at the facility at which the violations occurred. This means that vendors with multiple facilities are not excluded from all federal contracts. There could also potentially be circumstances in which a particular contractor who is not debarred from federal contracting is found to be nonresponsible for purposes of the award of a federal contract because of environmental considerations. Federal law requires that agencies determine that prospective contractors are "responsible" before awarding any contract. This determination is based on a number of factors, including the contractors having the necessary technical skills and facilities to perform the contract, or the ability to obtain them. Certain contractors could conceivably be found nonresponsible for certain contracts because of environmental considerations under these factors. However, because responsibility determinations must be made on the basis of the most recent information available, vendors who have remedied previous environmental problems could not repeatedly be found nonresponsible on the basis of these problems. Implementation of the attribute-specific and general authorities that could allow agencies to prefer certain products or vendors based on environmental considerations involves two components: identification of prospective products and contractors, and implementation of various purchasing methods. In the case of the attribute-specific authorities, contracting officers generally rely on third-party designations of eligible (or ineligible) products, rather than making their own determinations of which products qualify on a case-by-case basis. In fact, the statutes and executive orders providing such authority often require both that (1) one agency, with appropriate technical expertise, designate eligible products and (2) other agencies purchase these products. Where recovered-content products are involved, for example, the EPA designates eligible products, while the U.S. Department of Agriculture designates biobased products. When relying on the general contracting authorities, program managers or other program personnel identify their requirements and communicate these requirements to the contracting officer, who incorporates them into a solicitation. Parties excluded from government contracting because of violations of the Clean Air and Clean Water Acts, among other things, are listed in the Excluded Parties List System (EPLS). Responsibility determinations are made on a case-by-case basis by contracting officers considering information included in the Federal Awardee Performance and Integrity Information (FAPIIS), as well as information submitted by the prospective contractor and from other sources. When purchasing products or services under either the attribute-focused or general contracting authorities, agencies rely on the same vehicles or methods generally available for their use in purchasing goods or services. This includes (1) bilateral contracts; (2) the Federal Supply Schedules; and (3) government-wide commercial purchase cards. When determining which of these options to use, contracting officers consider various factors, such as the nature or type of the agency's requirements (i.e., goods or services, or both); the anticipated cost (or price); and the complexity of the procurement. Probably the best-known procurement vehicle is the bilateral contract, which "means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them." Contracts are the end result of a process that begins when agencies identify their requirements and craft solicitations to procure goods or services meeting these requirements. Solicitations identify, or describe, what agencies want to buy and also include applicable information, instructions, or guidance related to, for example, packaging and marking, inspection and acceptance, contract administration, special contract requirements, applicable contract clauses, representations and certifications, and evaluation factors for award. As discussed earlier, these factors may include ones that address environmental considerations and attributes. For example, an agency that uses the tradeoff source selection method for a specific procurement could include environmental considerations as a non-cost, or non-price, evaluation factor provided that they have a bona fide need for goods or services with specific environmental attributes. Another option available to agencies procuring goods or services with desirable environmental attributes involves the General Services Administration's (GSA's) Federal Supply Schedules. A schedule is an online "catalogue" that contains goods or services offered by multiple vendors. Each schedule focuses on a particular category of goods and services, and GSA has established and maintains over 40 schedules, covering things such as "advertising and integrated marketing solutions" (Schedule 541) and "professional engineering services" (Schedule 871). Federal agencies can use GSA's online shopping and ordering system, GSA Advantage!®, to procure goods and services off the Schedules. Several special buying programs are listed on this Web page, including "Environmental," which leads to a separate Web page ("Go Environmental with GSA Advantage!®"). This Web page enables prospective buyers to identify the type of product or service they plan to purchase and then select one or more environmentally based criteria or filters. Among the 14 criteria listed are biobased, Energy Star® compliant, and EPEAT. However, GSA leaves it up to vendors to determine and identify, as applicable, the environmental attributes of the products or services they provide. GSA notes that, for some products, "vendors denote whether the product meets the specifications and determine which symbols [environmental criteria] to display." Elsewhere on its website, GSA offers the following caveat regarding vendors' claims about environmental attributes: To assist customers' [agencies'] efforts in complying with the requirements of environmental laws and Executive Orders (considering price, availability, and performance requirements), Schedule contractors have been requested (where possible and/or feasible) to identify items that: Have recycled content (e.g., EPA-designated items with specific content requirements); Are energy and/or water saving (e.g., Energy Star); [or] Have reduced pollutants (e.g., low volatile organic compounds (VOCs) and chromate-free). Note : Customers should review contractor literature and contact the contractor directly to obtain complete information regarding environmental claims. Moreover, recent court decisions suggest that vendors' misrepresentation of their products on GSA Advantage!® is not sufficient for liability under the False Claims Act absent government purchases of the misrepresented products through the site. Agency personnel authorized to make "micro-purchases" can also use government purchase cards, which are similar to credit cards, to purchase so-called green products or services. A micro-purchase is "an acquisition of supplies or services using simplified acquisition procedures [e.g., a purchase card], the aggregate amount of which does not exceed the micro-purchase threshold," which is generally $3,000. When using a government-wide commercial purchase card, agency personnel may generally buy any commercially available supply or service not prohibited by either federal or agency-specific procurement regulations. However, the May 2011 amendments to the FAR expressly provide that federal environmental policies pertaining to energy, water efficiency, and renewable energy extend to all acquisitions, including those at or below the micro-purchase threshold and made with government-wide commercial purchase cards: The Government's policy is to acquire supplies and services that promote a clean energy economy that increases our Nation's energy security, safeguards the health of our environment, and reduces greenhouse gas emissions from direct and indirect Federal activities. To implement this policy, Federal acquisitions will foster markets for sustainable technologies, products, and services. This policy extends to all acquisitions, including those below the simplified acquisition threshold and those at or below the micro-purchase threshold (including those made with a Government purchase card) . In procurements not covered by the May 2011 amendments, though, agency personnel could retain substantial discretion in determining what to purchase. Personnel could thus select goods or services based on their environment attributes, although they would not necessarily be required to do so.
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Coupled with increasing concerns about the environment, the magnitude of federal spending on contracts has prompted questions from Members of Congress and the public about the role of environmental considerations in federal procurement. These include: to what extent do agencies consider environmental factors when procuring goods or services? What legal authorities presently require or allow agencies to take environmental factors into account when acquiring goods or services? How are existing provisions authorizing agencies to consider environmental factors implemented? This report provides an overview, answering these and related questions. The federal procurement system is designed "to deliver on a timely basis the best value product or service to the customer, while maintaining the public's trust and fulfilling public policy objectives." Environmental objectives can generally be among the public policy objectives that factor into federal procurement. However, they are not necessarily the most significant objectives overall or in any specific procurement. There are numerous other objectives (e.g., obtaining high quality goods and services at low prices, promoting American manufacturing, protecting small businesses, fostering affirmative action) that can also factor into procurement decisions. The relationship and prioritization among these different objectives is not always clear. Various legal authorities currently require or allow contracting officers to take environmental considerations into account when procuring goods and services. These authorities can be broadly divided into three categories: (1) "attribute-focused" authorities, generally requiring agencies to avoid or acquire products based on their environmental attributes (e.g., ozone-depleting substances, recovered content); (2) general contracting authorities, allowing agencies to purchase goods with certain environmental attributes when they have bona fide requirements for such goods; and (3) responsibility-related authorities, which require agencies to avoid certain dealings with contractors that have been debarred for violations of the Clean Air or Clean Water Acts. "Attribute-focused" authorities arguably do not deprive vendors of ineligible products of due process or equal protection in violation of the U.S. Constitution. However, certain preferences for products with desired environmental attributes, or vendors of such products, could potentially violate procurement integrity regulations and the Competition in Contracting Act if not based in statute. Use of evaluation factors based on environmental considerations is possible in negotiated procurements, but subject to certain conditions, and the reportedly lower lifecycle costs of "green" products do not, per se, mean that their acquisition is justified on a "best value" basis. Agencies generally implement these authorities by relying on third-party designations of products with specific environmental attributes and using standard purchasing methods, including bilateral contracts, the Federal Supply Schedules, and government-wide commercial purchase cards. Beginning with President Obama's 2009 Executive Order on "Federal Leadership in Environmental, Energy, and Economic Performance," the Obama Administration has taken steps to promote consideration of environmental factors in federal procurement. Recently, for example, the General Services Administration (GSA) reported on plans to incorporate consideration of greenhouse gas emissions inventories into federal procurement decisions, and the Federal Acquisition Regulation was amended to require that contractors report on their purchases of biobased products under service and construction contracts. Certain such initiatives have prompted controversy, however. Some Members of Congress sought to restrict the Department of Defense's purchase of biofuels as part of the National Defense Authorization Act for FY2013, and some commentators have objected to GSA's use of the LEED rating system for buildings.
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The attacks of September 11, 2001, prompted an increased federal focus on protecting the United States against terrorist nuclear or radiological attack. Since that time, the federal government has expanded existing programs, developed new programs, and deployed new equipment at U.S. borders and elsewhere. The global nuclear detection architecture has multiple facets, including source security to make acquiring threat material more difficult, intelligence activities, law enforcement activities, and deployment of radiation detection equipment. New technologies have been proposed to replace or augment existing radiation detection equipment and enhance its effectiveness. Primary among these new systems is an improved type of radiation detection device known as the Advanced Spectroscopic Portal (ASP). This report provides an overview of the ASP program's history and outlines issues for Congress as the program moves forward. The ASP program is an effort by the Department of Homeland Security (DHS) to develop, procure, and deploy a successor to the existing radiation detection portals. Radiation detection portals, also known as radiation portal monitors, are designed to detect the emission of radiation from objects that pass by them. The current portals are generally deployed at the U.S. land and sea borders by DHS's Domestic Nuclear Detection Office (DNDO) and operated by DHS's Customs and Border Protection (CBP). Current DHS procedures generally include the following steps: When entering the United States, cargo conveyances, such as trucks, pass through a radiation detection portal. This process is called primary screening. If radiation is present, a CBP officer is alerted. The conveyance is directed to a second radiation detection portal, which confirms the presence of radiation. Additional equipment can be used to identify the origin of the radiation and determine whether it comes from a potential threat. This process is called secondary screening. The current approach to radiation detection at the border is thus a two-step process using two different types of equipment. In contrast, the ASP is designed to both detect radiation and identify its source. An increase in system efficacy might provide both security and economic benefits. More effective detection could increase the likelihood of preventing a nuclear threat from entering the United States. More effective source identification could reduce the costs and delays associated with "nuisance alarms" from innocuous radiation sources, such as cat litter or ceramic tiles. The ASP program was begun in 2004 by the DHS Directorate of Science and Technology, which funded initial research and development through two broad agency announcements (BAAs). When DNDO was established in April 2005, responsibility for the ASP program was transferred to DNDO. In 2005, under DNDO auspices, ASP advanced technology prototypes were tested at the Nevada Test Site. Subsequent to this testing, DNDO issued a request for proposals regarding procurement of ASP systems. In March 2006, the Government Accountability Office (GAO) expressed concern that "in tests performed during 2005, the detection capabilities of the advanced technology prototypes demonstrated mixed results—in some cases they worked better, but in other cases, they worked about the same as already deployed systems." The GAO recommended that the Secretary of Homeland Security work with the Director of DNDO to prepare a cost-benefit analysis for the deployment of ASPs. In May 2006, DNDO reported on a cost-benefit analysis that it said supported the proposed ASP procurement. In July 2006, it awarded contracts to three companies—Raytheon Company, Thermo Electron Corporation (now known as Thermo Fisher Scientific), and Canberra Industries—to further develop and manufacture ASP systems. The Raytheon and Thermo systems used medium-resolution detectors made of sodium iodide (NaI); the high-resolution Canberra system used high-purity germanium (HPGe). The DHS stated that it planned to procure and deploy 80 systems quickly and ultimately to deploy a total of about 1,400 at land and sea ports of entry. In October 2006, GAO reported that the DNDO cost-benefit analysis did "not provide a sound analytical basis for DNDO's decision to purchase and deploy new portal monitor technology." The GAO's concerns involved both the cost of ASPs and their performance relative to existing radiation detection systems. In the Department of Homeland Security Appropriations Act, 2007 ( P.L. 109-295 , signed October 4, 2006), Congress prohibited DHS from obligating FY2007 funds for full-scale procurement of ASPs "until the Secretary of Homeland Security has certified ... that a significant increase in operational effectiveness will be achieved." The act did not define or explain the phrase "significant increase in operational effectiveness." Faced with criticism of its test results and cost-benefit analysis, DNDO engaged in a further round of ASP testing in 2007. These tests were to generate the data needed to support secretarial certification and to provide additional information regarding the capabilities of the ASP systems. The GAO reviewed the 2007 ASP tests and criticized them as being methodologically flawed. The aspects that GAO criticized included the use of the same radiation sources and shielding material for both calibration and performance testing and the inclusion of test results that might not have statistical significance. In September 2008, GAO issued another report critical of DNDO's ongoing ASP testing. It found that further testing by DNDO "provide[d] little information about the actual performance capabilities of the ASPs," and that the resulting test report should not be used in determining whether ASPs are a significant improvement over currently deployed equipment. The DNDO strongly disputed these criticisms. In response to GAO's initial critique, DHS convened an Independent Review Team to address the criticisms and determine their validity. The purpose of this review was described as "to assist the Secretary in determining whether he should certify that there will be a significant increase in operational effectiveness with the procurement of the ASP system." The Independent Review Team found no bias in the test results, but it concluded that some aspects of the testing process were "not ideal." The Independent Review Team also concluded that the test results and measures of effectiveness were not properly linked to operational outcomes, that the testing up to that point was properly characterized as developmental, and that no independent operational testing and evaluation had been conducted. Following the Independent Review Team review, DNDO undertook another round of ASP system testing. The DNDO agreed to perform computer simulation of certain combinations of threat objects and masking materials in response to feedback from Department of Energy personnel. These computer simulations, known as injection studies, used synthesized signals created by combining the spectrum of a threat object with non-threat data taken from the stream of commerce. The ASP system was then tested with these combined signals to determine whether the system could detect the threat object even in the presence of other material. The DNDO intended these injection studies to address a limited number of scenarios, and DNDO asserted that any certification would not be solely dependent on the results of the injection studies. At the time of the Independent Review Team report, these injection studies were under way. In the Consolidated Appropriations Act, 2008 ( P.L. 110-161 , signed December 26, 2007), Congress prohibited the obligation of FY2008 funds for full-scale ASP procurement until the Secretary of Homeland Security certified a "significant increase in operational effectiveness"—the same language as in the FY2007 act. This time, the act also directed the Secretary to consult with the National Academy of Sciences (NAS) before issuing the certification and to submit separate certifications for ASP's use in primary and secondary screening. (If primary screening detects a potential threat, secondary screening is undertaken to confirm the detection and identify the source.) The Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110-329 , signed September 30, 2008), continued the requirements for secretarial certification before obligation of FY2009 funds for full-scale ASP procurement, consultation with the NAS before making such certification, and submission of separate certifications for primary and secondary screening. Again, the phrase "significant increase in operational effectiveness" was neither defined nor explained in these acts. The National Academies issued an interim report on the ASP program in 2009. Although generally supportive of how the most recent ASP system testing was performed, the National Academies report identified several shortcomings in the ASP test campaigns. These included too limited a range of configurations of test objects and masking materials, not enough operational testing, and no plan for incremental deployment of ASP systems to allow for further refinement of the systems based on field operation. The report recommended that DNDO expand its computer modeling to allow simulation of ASP performance for combinations of threat and shielding materials beyond those already tested or available. The report also suggested different metrics to assess the performance of the existing radiation portal monitors and ASP systems and provided guidance to DNDO for future cost-benefit assessment of the ASP systems. The Department of Homeland Security Appropriations Act, 2010 ( P.L. 111-83 , signed October 28, 2009) expanded the prohibition on obligation of funds. The act prohibited the obligation of "funds appropriated under [the Systems Acquisition] heading in this Act or any other Act" for full-scale ASP procurement until the Secretary of Homeland Security certifies a "significant increase in operational effectiveness" will be achieved. The act continued the requirements to consult with the NAS before making a certification and to submit separate certifications for primary and secondary screening. In addition, the conference report accompanying the act directed DNDO to implement NAS recommendations to incorporate computer modeling in addition to testing so that the results of one can be used to validate the other; use available low-rate initial production ASPs for primary and secondary inspection at various sites to assess capabilities in multiple environments; and complete a more rigorous cost benefit analysis that takes a broader approach to assessing the cost of reducing risk in one area versus another. In 2009, GAO again reviewed the most recent test campaign and, like the National Academies, reported improvement in the rigor of the tests. The GAO stated that the preliminary results from the testing were mixed and that the difference in sensitivity between the ASP and existing systems varied depending on the amount of shielding. It recommended that DNDO continue testing the ASP systems against modified versions of the existing radiation portal monitors. The GAO also recommended that DNDO complete the injection studies before a secretarial certification decision is made. The DNDO continues to engage in additional operational testing and evaluation, which it expects will lead to a secretarial decision regarding certification in late FY2011. DNDO officials have stated that they will move forward with the certification decision only when the available test results and other information are sufficient to support it, but they have not committed to waiting for the completion of other efforts. The DNDO has asserted that existing test results are sufficient for ASPs to demonstrate a significant increase in operational effectiveness. The FY2010 homeland security appropriations act and accompanying conference report permit the deployment of a limited number of ASP systems acquired through low rate initial production (LRIP) to gain data regarding capabilities in different fielded locations. The DHS has not yet decided whether to deploy any of these systems and is instead "working through the logistics of completing operational testing to get to Secretarial certification before making an LRIP deployment decision." The DHS has established an ASP Governance Board to oversee the future use of the ASP system if secretarial certification occurs. The ASP Governance Board has recommended, based on system performance to date and cost estimates, that the ASP program no longer be considered for use in a primary screening capacity, but instead only in a secondary screening capacity. The Secretary of Homeland Security has agreed with the ASP Governance Board recommendations. If the Secretary of Homeland Security certifies that a "significant increase in operational effectiveness" has been achieved, DNDO may be able to obligate FY2009 and FY2010 funds that have already been appropriated for ASP procurement, if they have not expired or been reprogrammed for another purpose. Following secretarial certification, DNDO may choose to begin immediate acquisition and deployment of ASPs at ports of entry, conduct further ASP system testing, or take some other course. The most recent ASP Project Execution Plan, which describes the number of ASPs to be procured and how they would be deployed, reportedly no longer reflects DNDO's current plans. The DNDO asserts that the ASP program does not require additional appropriated funds for ASP procurement; the Administration requested and received no FY2010 acquisition funds for ASP procurement. The Administration also requested no new ASP procurement funding for FY2011. Under the Continuing Appropriations Act, 2011 (as amended by P.L. 111-322 ) funding for DHS in FY2011 is at FY2010 levels (i.e. no new funding for ASP procurement) through March 4, 2011. Through hearings, letters, legislation, and report language, members of Congress have expressed both concern about the ASP program and support for it. Congress faces policy issues in several areas: the effectiveness of ASP technology at detecting and identifying threats, the ASP program's costs relative to its benefits, the Secretary's criteria for determining whether ASPs will provide a "significant increase in operational effectiveness," and future actions following secretarial certification. The effectiveness of ASP technology hinges on its ability to both detect radiation and identify its source. These tasks are currently performed sequentially, using two different types of equipment. The ASP technology would integrate the tasks into a single step. A key question for Congress is whether ASPs would perform sufficiently better than the existing systems to make investment in ASPs worthwhile. Since the ASP technology is intended to perform both detection and identification, this question can be asked with respect to both functions. The DNDO's ongoing testing is intended to provide the remaining information needed to compare ASP performance with the performance of existing systems. Because of the criticism of past ASP test campaigns by GAO and others, Congress directed DHS to have the National Academies examine the methodology and results of the ASP test campaigns and evaluate how DNDO uses those results to assess ASP performance. The National Academies issued an interim report in 2009. This report contained advice and recommendations for DHS in continuing its ASP evaluation. These recommendations included that DHS take an iterative approach with modeling and physical testing complementing each other in order to make the testing and evaluation more scientifically rigorous; that DHS employ an iterative process for incremental deployment and continuous improvement, with experience leading to refinements in both technologies and operations over time, including deploying currently unused low-rate initial production ASPs at various sites to assess their capabilities in multiple environments; and that DHS not proceed with further procurement until it has addressed the findings and recommendations of the NAS report and the ASP is shown to be a favored option in a cost-benefit analysis. Congress directed DNDO to implement the NAS recommendations to incorporate computer modeling in addition to testing so that the results of one can be used to validate the other; use available low-rate initial production ASPs for primary and secondary inspection at various sites to assess capabilities in multiple environments; and complete a more rigorous cost benefit analysis that takes a broader approach to assessing the cost of reducing risk in one area versus another. According to DNDO, it has "appropriately incorporated or responded to the recommendations." With regard to the NAS recommendations on testing and evaluation, DNDO believes that the ASP program, through development activities carried out by vendors, to test programs executed by the government, to replay tools and injection tools used for analysis, has followed the spirit of this recommendation. The performance of the ASP systems in controlled performance tests has mirrored predictions extremely well. The issue that remains for ASP is one of threshold settings against real-world cargo which must be determined through empirical evidence. With regard to the NAS recommendations on procurement, DNDO agrees "with the NAS in principle and are evaluating this approach. This approach is consistent with the ASP Acquisition Plan and will be reflected in actual deployments when they begin." With regard to the NAS recommendations on cost-benefit analysis, DNDO agrees that a complete cost-benefit analysis is necessary before decisions are made and that NAS-suggested cost-benefit elements should be factored into the cost-benefit analysis. Congress may wish to consider the sufficiency of DNDO's response to the National Academies' recommendations and DHS's plans for further ASP development, procurement, and deployment in light of the National Academies' assessment. Some nongovernmental critics believe that even if ASPs are better than existing radiation portal monitors at detecting and identifying radioactive material, they cannot provide a sufficient defense. These critics state that nuclear material can be shielded or divided into amounts too small to be detected and that detection equipment can be avoided by illegally entering the United States away from official ports of entry. These arguments challenge the belief that better detection systems are an effective way to protect against the threat of nuclear and radiological terrorism. In 2006, DNDO developed a cost-benefit analysis, based on performance assumptions and systems requirements developed by DHS. Based on the cost-benefit analysis performed then, DHS stated that the value of the reduced impact on commerce outweighed the cost of the ASP program and caused deployment of the ASP systems to be a preferred outcome. The GAO disagreed with this conclusion, asserting that the 2006 cost-benefit analysis did not provide a sound analytical basis. Additional DNDO cost-benefit analyses are to be used as input to the Secretary's certification decision. It appears that the analyses conducted so far have focused mainly on the economic costs of implementation and the economic benefits to commerce of improving the efficiency of the radiation screening process. According to the National Academies, it appears likely that the costs of the ASP program will outweigh these economic benefits. Therefore, factors more difficult to quantify, such as risk reduction related to nuclear terrorism, may determine the benefits of the ASP systems. The expected economic cost of procuring and deploying ASP systems has changed since the inception of the program, as have the number, type, and purpose of the systems themselves. Rather than an all-inclusive suite of ASP varieties, DNDO has chosen to focus on a single type of ASP used to screen trucks and shipping containers. According to life cycle cost analysis by GAO, the cost of the ASP program has increased from the original $1.2 billion to approximately $3.1 billion for the originally planned full deployment or approximately $2.1 billion for the reduced deployment planned as of 2008. The DNDO told GAO that the actual number of deployed systems might change dramatically depending on the results of ongoing testing. The Secretary's decision in 2010 to only consider ASP deployment for secondary screening may reduce the ASP program's projected cost. The DNDO based its 2006 cost-benefit analysis on deployment of ASPs in both primary and secondary screening. It asserted that the number of nuisance alarms, in which radiation is detected correctly but comes from an innocuous source, would be greatly reduced following deployment of the ASP systems. This reduction would result from the ASP's ability to identify the source of the radiation it detects and discriminate between dangerous and innocuous sources. Because of this expected reduction, the number of conveyances that would be required to go through subsequent, more in-depth screening would be reduced, and as a result, the radiation screening process would have less impact on commerce. With the Secretary's decision to no longer consider deployment in primary screening, this justification no longer applies. It appears that DNDO's cost-benefit analyses have not attempted to quantify the security benefit of making radiation screening more effective: the avoided cost of a nuclear or radiological attack in the United States that a more effective system might prevent. The omission of this avoided cost from a cost-benefit analysis might be justified in several ways. One might be that the likelihood of an avoided successful attack is the same between existing radiation portal systems and the ASP systems. Another might be that it is too difficult to determine quantitatively the benefit from an incremental increase in detection effectiveness. Because the potential consequences of a nuclear or radiological attack would vary widely depending on the location of the attack, and the likelihood and timing of an attack occurring would depend on a terrorist adversary having the requisite intent and capability, calculating the benefits of an avoided attack may have significant uncertainties. Absent such an analysis, however, it is difficult to assess whether a small increase in detector effectiveness would lead to a substantial reduction of the overall security risk. The National Academies recommended that DNDO consider alternatives to cost-benefit analysis, even though these approaches will not provide fully quantitative and definitive results. These alternative analytical approaches are Capability-based planning to provide a structured assessment of how alternative detection technologies or deployment strategies reduce the risk of a nuclear detonation in the United States. Game theory to provide insight into the benefits from deterrence associated with the ASPs. Cost-effectiveness analysis and break-even analysis to determine the amount of specific benefits gained per dollar spent or the conditions for which benefits exceed costs. The last approach may be the most tractable given the large uncertainties associated with understanding the likelihood of a nuclear terrorist attack. The Office of Management and Budget, discussing cost-benefit analysis for regulatory purposes, has noted that It will not always be possible to express in monetary units all of the important benefits and costs. When it is not, the most efficient alternative will not necessarily be the one with the largest quantified and monetized net-benefit estimate. In such cases, you should exercise professional judgment in determining how important the non-quantified benefits or costs may be in the context of the overall analysis. If the non-quantified benefits and costs are likely to be important, you should carry out a "threshold" analysis to evaluate their significance. Threshold or "break-even" analysis answers the question, "How small could the value of the non-quantified benefits be (or how large would the value of the non-quantified costs need to be) before the rule would yield zero net benefits?" In addition to threshold analysis you should indicate, where possible, which non-quantified effects are most important and why. The National Academies also recommended that DNDO not limit its consideration strictly to the ASP program. The ASP program is one of many programs assembled into a framework called the Global Nuclear Detection Architecture (GNDA). In the GNDA framework, various programs intersect and overlap in an effort to provide a defense-in-depth approach to preventing detonation of a nuclear device within the United States. The National Academies recommended that DNDO "clearly define the ASP program objectives, including describing the new and unique capabilities of the ASPs in the context of their role in the Global Architecture" and "consider tradeoffs and interactions among different elements of the Global Architecture." The DNDO plans to present a finalized cost-benefit analysis to the DHS Acquisition Review Board (ARB) once the ASP has completed testing and evaluation. The ARB will consider this cost-benefit analysis while providing a recommendation to the Secretary whether to certify a significant increase in operational effectiveness. The increased cost of the ASP program and related changes in procurement and deployment plans have led to uncertainty regarding the total costs and benefits of the program. Congress is likely to continue to be interested in the scope of the ASP program, its total cost, how ASP systems would be deployed, the calculated benefits of that potential deployment, and the degree to which this next-generation technology increases homeland security. Additionally, Congress may be particularly interested in the degree to which potential deployment of ASP systems reduces the likelihood of a successful attack and how such considerations are weighed and balanced against other economic factors. A recurring theme regarding the performance of the ASP systems has been the use of computational modeling and analysis to determine ASP performance against certain combinations of threat objects and masking materials. The DNDO initially suggested initiating injection studies to resolve concerns raised by Department of Energy experts. The GAO, at the time, expressed a preference for expansion of actual, rather than simulated, testing, but GAO has subsequently stated that the injection studies should be completed prior to a secretarial certification decision. The National Academies have also called for computer modeling of the ASP systems. The National Academies recommendations go beyond injection studies to building a comprehensive model of the ASP system and performing physical testing for the purposes of validating the ASP model. Once the model is validated, the model could be used to predict the performance of the ASP against combinations of threat object and masking material not normally available. Although DNDO has initiated injection studies, it has not attempted to meet the National Academies recommendation to develop a comprehensive model of the ASP system for simulated testing purposes. The existing radiation portal monitors use polyvinyl toluene, a form of plastic, to detect radiation. In contrast, the ASP uses sodium iodide crystals. These materials and their supporting infrastructure have differing costs. The GAO has attempted to determine the likely life cycle cost of the ASP program. As described above, this total cost will depend on the number of ASP systems actually deployed in the field, and DNDO has stated that the number of deployed systems may change dramatically depending on the results of ongoing testing. Comparison between individual systems may be illustrative of the cost disparity. The GAO estimated the life cycle cost of each PVT standard cargo portal as approximately $308,000 compared with about $822,000 for the standard cargo version of the ASP. Similarly, DHS estimates that current PVT radiation portal monitors cost approximately $12,000 per year to operate and maintain, while it expects ASP maintenance costs to be between $65,000 and $100,000 per year per unit. In secondary screening, the costs of a radioisotope identification device would need to be added to those of the PVT radiation portal monitor. Although the estimates of ASP system capital and operations and maintenance costs are notably higher than those for existing PVT systems, this premium might be offset by greater benefits, efficiencies, or effectiveness. This comparison would likely be made clearer by a cost-benefit or cost-effectiveness analysis. The appropriations acts that established the certification requirement provided no definition or explanation of the phrase "significant increase in operational effectiveness." Absent further congressional guidance, DHS established a definition based on a list of criteria and published it as a memorandum for the record. The GAO and others have criticized these criteria. Congress may be interested in examining whether the criteria meet the certification requirement's intent. On the other hand, considering that Congress has provided no explanation of the requirement in statute or report language, it may have intended to leave the definition to DHS's discretion. The DHS issued a memorandum for the record in July 2008. In the memorandum, DHS agencies, including DNDO and CBP, jointly established certification criteria that constitute their definition of "significant increase in operational effectiveness." The memorandum is unclassified and less than two pages long. It is possible that additional details supporting the certification criteria are provided elsewhere, but the memorandum gives no indication that this is the case. The memorandum for the record documents a decision-making process internal to DHS and may be altered or overturned at the discretion of the current Secretary of Homeland Security. The Secretary of Homeland Security could direct the signatory DHS agencies to revisit the memorandum's criteria, revise them, or negate them entirely, establishing a new set of criteria with which to judge the operational effectiveness of the ASPs. Alternatively, the Secretary of Homeland Security may choose to uphold the memorandum for the record and maintain the existing certification criteria. These criteria were developed through a joint process and represent needs and goals established by the technology users (CBP) and the technology developers (DNDO). As such, they may fully capture the priorities of the participating agencies. Several of the criteria require an improvement in some aspect of performance without specifying a minimum amount of improvement. For the criteria that do specify a minimum amount of improvement, DHS does not explain how it determined that amount. For those with no specified minimum, an improvement so small as to be operationally insignificant would apparently be sufficient. The GAO criticized this approach, which it said set a low bar for improvement—for example, by requiring ASPs to perform at least as well as current generation equipment when nuclear material is present in cargo but not specifying an actual improvement. Similarly, the National Academies refer to the criteria as a modest set of goals which do not require significantly improved ability to detect special nuclear material in primary screening. On the other hand, if the performance of existing systems is already sufficient in certain respects, it may be appropriate simply to preclude backsliding in those areas while seeking to make larger improvements in other areas where current performance is less acceptable. For example, DNDO states that for some threat types, current systems are already expected to detect correctly 100% of the time, so that further improvement would be impossible. Providing fewer quantitative targets might also allow the criteria to be reused for future decisions about further equipment upgrades. The memorandum establishing the criteria does not define under what test conditions or with which test data the criteria are to be verified. For example, it does not specify the types, amounts, or configurations of threat material that are to be detected. Other documents may provide these details, or DNDO may have specific plans that it has not documented formally. In some cases, DNDO officials have stated how particular criteria will be assessed. For example, previously scheduled field validation tests that involve the screening of trucks in actual commerce are to be used to assess the time required for secondary screening, and the results of a specific test campaign at the Nevada Test Site are to be used to assess the ASP's ability to detect special nuclear material. The DNDO does not consider that injection studies, simulations previously described by DNDO as addressing certain special cases, are necessary to meet the certification criteria. The GAO asserts that these injections studies should be completed prior to a certification decision, and the National Academies recommends performing extensive modeling to determine the performance of the ASP system for configurations that cannot be directly tested. The criteria address certain system aspects, such as detection rates and false alarm rates, but do not expressly address others, such as reliability, ease of use, and cost. For example, the criteria compare ASP performance versus the performance of current systems on a one-to-one basis, without regard to cost, even though ASPs are more expensive than current systems. As the technology developer, DNDO, and the technology user, CBP, jointly established these criteria, these choices presumably reflect DHS's conclusions about which system aspects are most important. Nevertheless, some experts have expressed concern about the criteria's balance, asserting that the criteria should focus more on increasing the likelihood of detecting a genuine threat, rather than on reducing the false alarm rate. The memorandum establishing the criteria states that performance comparisons against currently deployed systems are to be made on the basis of current concepts of operations (CONOPs) and standard operating procedures (SOPs). The ASP systems are to combine radiation detection (the goal of primary screening) with identification of the radiation source (the goal of secondary screening). One might expect that either adding an identification capability to the detection stage or adding a detection capability to the identification stage would be accompanied by changes in CONOPs and SOPs, but the criteria do not reflect such changes. If changes in CONOPs and SOPs could improve the performance of the ASPs in the field, then assessing performance using test data based on current procedures may not reflect their full capabilities. Finally, the criteria compare ASP performance against the performance of current systems as currently configured. They do not compare performance against the same equipment set at other operational detection thresholds that might have different operational ramifications, such as higher detection and false positive rates. In addition, GAO has recommended that DNDO compare the performance of the ASPs against current PVT systems equipped with "energy windowing" software expected to slightly increase the performance of existing systems. The DHS has considered such scenarios in some past analyses but does not require such consideration in the context of the certification criteria. Similarly, the DNDO plans to begin deploying the next generation of handheld detectors in CBP, but it is unclear whether DNDO will compare ASP performance with the performance of existing handheld detectors or these new next-generation detectors. The date for secretarial certification has been postponed several times. The current reported date is during FY2011, but DNDO officials have stated that they will move forward with the certification decision only when the available test results and other information are sufficient to support it. The decision to proceed with full-scale production of the ASP system is no longer coupled to the secretarial certification. Instead, the secretarial certification and the full-scale production decision will be made separately. According to DHS, "the Secretarial certification requirement is in addition to and in advance of the ... deployment decision." If the Secretary of Homeland Security decides to make the required certification on the basis of the existing or new certification criteria, several choices would remain about how to proceed. The Secretary may decide that ASP systems should be fully deployed. The DHS could use whatever funds remain available from prior-year appropriations for ASP procurement to begin this process. According to DNDO, in June 2009, approximately $78 million remained unobligated from FY2007-FY2009 funds appropriated for ASP system acquisition. The DNDO did not request or receive additional ASP systems acquisition funds for FY2010: it stated that existing funds were sufficient to meet current deployment needs. DNDO also did not request additional ASP systems acquisition funds for FY2011. It received none for FY2011 through March 4, 2011, under the continuing resolution ( P.L. 111-322 ). The Secretary may decide that while ASP systems do represent a "significant improvement in operational effectiveness," their costs make them less desirable than other possible detection improvements. For example, rather than procure ASP systems, DHS might invest in additional secondary inspection systems of the type currently deployed, achieving comparable reductions in secondary screening time. The DHS has stated that cost-benefit analyses will inform the Secretary's certification decision, even though the criteria do not mention cost. The Secretary has issued a decision directive stating that DHS will now consider the ASP only in the context of secondary screening. As such, even if DNDO procures ASP systems, it will likely procure fewer than it originally projected when ASPs were to be used in both primary and secondary screening. The Secretary's decision may therefore reduce the cost of the program. The Secretary may decide to acquire and deploy ASP systems on a limited basis. For example, ASP systems might be deployed at high-throughput locations only. It is possible that the benefits of ASPs outweigh their cost in some locations but not others. While preferring to procure ASP systems in large numbers for system performance uniformity and economies of scale, DNDO has stated that it will present various deployment strategies to the Secretary. Upon secretarial certification, Congress may be interested in the manner and scale of ASP procurement, where and how initial ASP systems would be deployed, and the projected future deployment of these systems. The existing radiation portal monitor program has been a multiyear program with continued phased deployment. Consequently, the required time to replace these systems may be of congressional interest. Finally, if the existing radiation portals are superseded by ASP systems, Congress may be interested in the expected lifetime of those ASP systems and DHS's expectation of the development of a next-generation system to replace those ASP systems. The normal life expectancy of an ASP system is approximately 10 years, based partly on the projected operational life of the sodium iodide crystals used to detect the radiation. The federal government has identified a shortage of helium-3, a key component of the ASP system. Helium-3 is used in both the current radiation portal monitors and in the ASP systems to detect the emission of neutrons, a signature of special nuclear material. Because of the shortage, helium-3 is no longer being provided for radiation portal monitors or other neutron detection systems. This shortage draws into question the viability of the neutron detection system incorporated in the ASP system. The ASP system was designed to have greater sensitivity and contain more helium-3 than the current radiation portal monitors. The DNDO expects that the ASP system can be adjusted to have equivalent sensitivity and helium-3 demand as the currently deployed radiation portal monitor. To address the helium-3 shortage, DNDO plans that, if the Secretary certifies the ASP system for deployment in secondary screening, each deployed ASP system will replace an existing radiation portal monitor. Consequently, since the helium-3 from the replaced radiation portal monitor will be recovered, DNDO expects that sufficient helium-3 will be available to deploy the ASP systems. Sufficient helium-3 may not be available to complete the planned deployment of radiation portal monitors. If sufficient helium-3 is not available, then a shortfall in radiation portal monitor deployment will likely occur. Such a shortfall will likely require the DNDO and CBP to prioritize using the available helium-3 to further deploy radiation portal monitors or to take radiation portal monitors out of service in order to replace them with ASP systems. The DHS and DOE are in the process of testing neutron detection systems using other materials, but DOE has testified that such a system is not likely to be available for deployment for several years. The fact that DNDO plans to lower the amount of helium-3 used by the ASP system may pose an additional challenge with respect to testing and evaluation. The DNDO plans to use previous test data to support the Secretary's determination regarding any increase in operational effectiveness. This test data is likely to have been obtained with an ASP system with a greater amount of helium-3 than projected for future use. Critics might question whether DNDO should continue to rely on these earlier test results or instead repeat the tests with the reduced amount of helium-3. Since helium-3 is only used for neutron detection and is not part of the analysis of other (gamma) radiation, supporters of using the previous test results might note that such changes in helium-3 amounts do not affect the spectroscopic performance of the ASP. Congress has several options for addressing the ASP program. These options include awaiting further departmental action; providing legislative guidance to DHS regarding certification of the ASP systems; increasing congressional oversight; reviewing any secretarial decisions regarding testing, certification, and procurement; assessing funding needs; and changing the direction of the ASP program. Congress may continue to perform oversight on the ASP program and await further action by DNDO. Such an approach may provide DNDO with sufficient time to develop the requisite data and analyses to support a secretarial certification or to determine that the ASP system should not be further developed. A key question of possible congressional interest might be whether the approach taken by DHS in determining a "significant increase in operational effectiveness" meets congressional intent. The definition developed by DHS for a "significant increase in operational effectiveness" may meet congressional intent, and Congress may be fully supportive of DNDO moving forward with ASP procurement and deployment based on this definition. Alternatively, Congress might find that the definition used by DHS does not meet congressional intent. If so, Congress might choose to restrict the Secretary's discretion by defining the phrase "significant increase in operational effectiveness" for DHS or by delineating what areas need to be addressed when DHS defines a "significant increase in operational effectiveness." For example, Congress might clarify what activities must be included in determining a "significant increase in operational effectiveness," such as assessment of simulations and modeling or specific cost-benefit assessment approaches, or define a process by which governmental or non-governmental experts provide input into developing the definition. Congress might also set a deadline for secretarial certification. The DHS has not met previous expectations for the date of certification. Instead, it has engaged in further development and testing following criticisms of its test procedures and results. Congress might direct DHS to make a determination regarding the "significant increase in operational effectiveness" by a specified date rather than continuing with more tests and developmental work. Congress might focus on oversight activities. Congressional committees have held several series of oversight hearings on the ASP program. Further scrutiny of DHS and oversight of the testing, certification, or procurement process may help to ensure that DHS's decision to certify and procure the ASP system is well founded. Congress took such an approach with the original cost-benefit analysis developed by DNDO for the ASP program. In order to assess the robustness and rigor of these decisions, Congress might direct DNDO to develop and provide documentary support for its programmatic decisions to GAO or the National Academies for review. Such an approach might further delay the ASP program, lengthening the time before ASP systems were deployed. If secretarial certification occurs, Congress might review the certification decision to determine if the certification met its legislative intent. If it did not, Congress might place additional restrictions or requirements on the ASP program. Examples of such restrictions or requirements might include limiting the rate of procurement of ASP systems, directing DHS to reevaluate its decision-making process, or requiring analysis of the certification decision by a third party. Congress might assess the available and required funding needed to procure, deploy, operate, and maintain the ASPs. Depending on the number or rate of ASPs deployed, DHS may need to request additional appropriations. Some ASPs might be procured using currently unobligated prior-year appropriations. Congress could allow the use of prior-year funds and provide further requested funds as necessary, or Congress could rescind unobligated funding and not appropriate additional funds. Lastly, Congress might choose to change the direction of the program if secretarial certification does not go forward as planned. Policymakers might choose to direct DNDO to change its expectations of the ASP technology performance and scope, so as to match the tested capabilities. Alternatively, policymakers might direct DNDO to invest additional funds into further development for a fixed period of time, to transfer the program focus away from procurement and towards development milestones. Policymakers might direct DNDO to enhance their development of alternate technologies beyond those incorporated in the ASP systems, attempting to achieve a breakthrough in technology development. Finally, policymakers might direct DNDO to cease its efforts to develop the ASP system. The Department of Homeland Security Appropriations Act, 2010 ( P.L. 111-83 ) prohibits the obligation of "funds appropriated under [the Systems Acquisition] heading in this Act or any other Act" for full-scale ASP procurement until the Secretary of Homeland Security certifies a "significant increase in operational effectiveness." Separate certifications are required for primary and secondary deployment. The Secretary is required to consult with the National Academies before certifying. The conference report accompanying P.L. 111-83 provided additional direction regarding the ASP program. The conference report stated that DHS should ensure that certification decisions are made with the best possible test information, that NAS recommendations related to development and certification should be followed as discussed in the Senate report (see below), that these NAS recommendations should be implemented prior to the certification decision or ASP procurement; and that DHS should brief the appropriations committees if the NAS recommendations are not followed. The conference report also advocated an independent cost-benefit analysis and supported the language of the House and Senate reports regarding the deployment of low rate initial production ASP systems to obtain data and inform future decisions. The House and Senate Appropriations Committee reports on FY2010 appropriations both contained limitations on the expenditure of funds for full-scale procurement of ASP systems. The House report directed DHS to submit a reprogramming proposal for the procurement of existing radiation portal monitors to meet any remaining requirements if the secretarial certification was delayed beyond the first quarter of FY2010 (as it was). The House report also urged the department to base its decision on adequate test information, including modeling, and robust cost-benefit analysis. Finally, the House report allowed the deployment of existing ASP systems to generate data to inform the secretarial certification decision. The Senate report on FY2010 appropriations directed DNDO to implement three National Academies recommendations prior to making a secretarial certification or procurement decision. The three recommendations are (1) incorporate computer modeling in addition to testing; (2) use available ASPs in operational environments to assess their capabilities; and (3) complete a more rigorous cost-benefit analysis that takes a broader approach to assessing the cost of reducing risk in one area versus another. The report directed DHS to brief the Senate Appropriations Committee if these recommendations are not followed. In addition, the Senate report asserted that an independent cost-benefit analysis would be beneficial. Finally, the Senate report encouraged DHS to review its decision to place acquisition of the ASPs with DNDO rather than within an operational component and suggested that placing currently unobligated and any future requested funds within U.S. Coast Guard, Customs and Border Protection, and Transportation Security Administration might be more appropriate. The Continuing Appropriation Act, 2011 (as amended by P.L. 111-322 ) provides DHS with FY2011 funds at the FY2010 level through March 4, 2011. As there is no special mention of the ASP program in this act, the statutory provisions in the FY2010 act carry over into FY2011 through March 4, 2011. The Homeland Security Science and Technology Authorization Act of 2010 ( H.R. 4842 , 111th Congress) also contained provisions addressing the ASP program. The bill would have expressed the sense of Congress that viable alternatives to existing primary screening technology must be identified. It would have required the Director of DNDO to analyze and report to Congress on "existing and developmental alternatives to existing radiation portal monitors and advanced spectroscopic portal monitors that would provide the Department with a significant increase in operational effectiveness for primary screening for radioactive materials."
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The Domestic Nuclear Detection Office (DNDO) of the Department of Homeland Security (DHS) is charged with developing and procuring equipment to prevent a terrorist nuclear or radiological attack in the United States. At the forefront of DNDO's efforts are technologies currently deployed and under development whose purpose is to detect smuggled nuclear and radiological materials. These technologies include existing radiation portal monitors and next-generation replacements known as advanced spectroscopic portals (ASPs). Customs and Border Protection officers use radiation portal monitors to detect radiation emitted from conveyances, such as trucks, entering the United States. When combined with additional equipment to identify the source of the emitted radiation, radiation portal monitors provide a detection and identification capability to locate smuggled nuclear and radiological materials. The ASPs currently under testing integrate these detection and identification steps into a single process. By doing this, DHS aims to reduce the impact of radiation screening on commerce while increasing its ability to detect illicit nuclear material. The speed of ASP development and deployment, the readiness of ASP technology, and the potential benefits of the ASP program relative to its cost have all been topics of extensive congressional interest. Congress has held oversight hearings on the ASP program since 2006. Additionally, since FY2007, Congress has each year required that the Secretary of Homeland Security certify that ASPs will result in a "significant increase in operational effectiveness" before DHS can obligate appropriated funds for full-scale ASP procurement. Secretarial certification for use in secondary screening is still pending. Certification for use in primary screening is no longer being pursued. The DNDO states that the secretarial certification and the full-scale production decision will be made separately. Laboratory and field tests of the ASPs, cost-benefit analyses, and other activities are under way to inform the Secretary's certification decision. Among the issues Congress faces are whether to further define the expected performance of the ASP systems through additional legislation; how to assess whether the ASP systems are technologically ready to be deployed; how to weigh the potential economic and security benefits of ASP deployment against its financial cost; and whether the certification process developed by DHS to establish a "significant increase in operational effectiveness" is well founded.
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On August 5, 2004, the United States Trade Representative (USTR) and trade ministers from Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic signed the Dominican Republic-Central America-United States Free Trade Agreement (the CAFTA-DR; see Appendix A , Chronology of Negotiations). The CAFTA-DR is a regional trade agreement with all parties subject to "the same set of obligations and commitments," but with each country defining its own market access schedule with the United States. It is a comprehensive and reciprocal trade agreement, replacing U.S. unilateral preferential trade treatment extended to these countries under the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA), and the Generalized System of Preferences (GSP). The U.S. Congress did not consider implementing legislation for nearly a year after the CAFTA-DR was signed because it was so controversial. On June 30, 2005, however, the Senate passed S. 1307 by a vote of 54 to 45. The House followed on July 28, 2005, passing H.R. 3045 by a vote of 217 to 215. President Bush signed the bill into law on August 2, 2005 ( P.L. 109-53 , 119 Stat. 462). El Salvador, Honduras, Guatemala, the Dominican Republic, and Nicaragua also ratified the agreement, in that order. The CAFTA-DR was expected to enter into force on January 1, 2006, but none of the ratifying countries had completed the legal and regulatory measures needed to comply with the agreement. The USTR announced that the CAFTA-DR would take effect on a rolling basis when countries fulfilled these obligations. It entered into force on March 1, 2006 and was implemented for El Salvador, Honduras, Nicaragua, Guatemala, and the Dominican Republic within the next year. In Costa Rica, CAFTA-DR was highly controversial because it required major restructuring of public sector monopolies over electricity, insurance, and telecommunications. Public sector unions were at the center of this concern, but small farmers and other workers also voiced opposition. Oscar Arias won a slim presidential victory in 2006 on a pro-CAFTA platform, but opposition in the National Assembly was able to delay consideration of the agreement. In the end, the Electoral Tribunal ruled in favor of a petition to hold a national referendum on the CAFTA-DR. On October 7, 2007, with a 60% participation rate, the people of Costa Rica voted 51.6% to 48.4% in favor of CAFTA-DR. Following passage of 14 implementing bills in the Costa Rican National Assembly, the United States implemented the agreement with Costa Rica on January 1, 2009. This report discusses negotiation issues and evolution of the CAFTA-DR agreement from the time negotiations commenced on January 27, 2003 until its implementation by the last country on January 1, 2009. It will not be updated. The CAFTA-DR was the most controversial free trade agreement (FTA) vote since the North American Free Trade Agreement (NAFTA) implementing legislation was passed in 1993. Many lawmakers were uncomfortable with the agreement as written, particularly the labor provisions, treatment of certain sensitive industries (sugar and textiles), investor-state relations, pharmaceutical data protection, and basic sovereignty issues. It was also caught up in an overarching congressional controversy over how trade negotiation objectives should be defined in FTAs based on the Trade Promotion Authority (TPA) framework, as well as, concern by some Members over the perceived ineffectiveness of the executive-legislative consultation process. These issues were raised repeatedly in "mock markups" of draft implementing bills held by the Senate Finance and House Ways and Means Committees on June 14 and 15, 2005, respectively. The Senate Finance Committee voted 11-9 to approve the draft legislation, with one non-binding amendment that would have extended the trade adjustment assistance program to cover workers in services industries. The House Ways and Means Committee voted 25-16 for approval of the draft legislation, also adding a non-binding amendment with "a requirement that the Administration report on activities conducted by the CAFTA-DR countries and the United States to build capacity on labor issues," and a provision requiring monitoring of CAFTA-DR's effects on U.S. services industries. A "mock conference" was not held, to the expressed consternation of some Members. The Bush Administration sent the final implementing bill to Congress on June 23, 2005. It included a new Section 403, the House amendment requiring that the Administration transmit biennial reports on progress made in implementing the labor provisions, including the Labor Cooperation and Capacity Building Mechanism. It also called for monitoring progress in meeting the challenges outlined in the so-called White Paper on labor produced by the vice ministers of trade and labor of the CAFTA-DR countries. Under TPA procedures, identical bills were introduced jointly as H.R. 3045 and S. 1307 and referred to the House Ways and Means and Senate Finance Committees. The Senate Finance Committee acted first, favorably reporting out S. 1307 by voice vote on June 29, 2005. The House Ways and Means Committee followed suit, reporting favorably by a vote of 25 to 16 on June 30, 2005. The measure came before the full Senate on June 30, 2005, where, following 20 hours of floor debate, S. 1307 passed 54 to 45. H.R. 3045 did not come before the House until July 28, 2005, where, following two hours of debate, it narrowly passed 217 to 215. On the same day, the Senate voted 56 to 44 to substitute H.R. 3045 for S. 1307 , a necessary procedural vote to comply with the constitutional requirement that revenue bills originate in the House. President Bush signed H.R. 3045 into law on August 2, 2005 ( P.L. 109-53 , 119 Stat. 462). Passage in the Senate was by a slimmer margin than with earlier trade agreements and required accommodation outside the implementing legislation to labor, textile, and sugar interests. In a letter from USTR Rob Portman to Senator Jeff Bingaman, the Administration promised to allocate $40 million of fiscal 2006 foreign operations appropriations for "labor and environmental enforcement capacity building assistance," and to continue to request this level of funding in budgets for fiscal years 2007 through 2009. Some $3 million is to be used for funding International Labor Organization (ILO) reporting on progress in labor law enforcement and working conditions in these countries. An additional $10 million annual commitment for five years was made for transitional rural assistance for El Salvador, Guatemala, and the Dominican Republic, or until these countries can qualify for anticipated assistance from the U.S. Millennium Challenge Corporation. In another letter, Secretary of Agriculture Mike Johanns assured Senator Saxby Chambliss and Representative Bob Goodlatte, the respective agriculture committee chairs, that the Administration would not allow the CAFTA-DR to interfere with the operation of the sugar program as defined in the Farm Security and Rural Investment Act of 2002 (the Farm Bill) through FY2007, when it expires. In particular, he promised to take steps should additional sugar imports due to the CAFTA-DR, NAFTA, and other trade agreements jeopardize the sugar program operations by exceeding the import trigger threshold. Should this occur, the U.S. Secretary of Agriculture agreed to preclude entry of additional sugar imports into the domestic sweetener market by either making direct payments to exporters or using agricultural commodities to purchase sugar to be used for nonfood use (ethanol production). Separately, for the textile and apparel issues, promises were made to: (1) change the rules of origin to require that all pocketings and linings come from the CAFTA-DR countries (rather than third party countries like China); (2) negotiate a new stricter customs enforcement agreement with Mexico before the CAFTA-DR cumulation rules take effect allowing Mexican inputs to be used in CAFTA-DR textile and apparel products; and (3) require Nicaragua to increase use of U.S. fabric to qualify as duty-free under their tariff preference levels. Other accommodations were made to win House support of H.R. 3045 , including passage in the House on July 27, 2005, of the U.S. Trade Rights Enforcement Act ( H.R. 3283 ). This bill would allow greater recourse to pursue trade complaints against China and other non-market economies. Not all interest groups, however, could be appeased. Despite efforts to win over all groups, the sugar industry and some textile groups chose not to support the bill and strong Democratic opposition remained over a number of other issues that may prove to be enduring challenges to future trade agreements, if crafted from the CAFTA-DR framework. Countries trade because it is in their national economic interest to do so, a proposition long supported by theory and practice. Comparative advantage has been recognized for nearly 200 years as a core principle explaining the efficiency gains that can come from trade among countries by virtue of their fundamental differences. It states that countries can improve their overall economic welfare by producing those goods at which they are relatively more efficient, while trading for the rest. Intra-industry trade is the other major insight that explains trade patterns, in which the benefits from exchange among countries occur based on specialized production, product differentiation, and economies of scale. Many Latin American countries have liberalized trade policies recognizing the contribution that trade (and related investment) can make to economic growth and development. As an important caveat, trade is at best only part of a broad development agenda, and is no substitute for the promotion of political freedom, macroeconomic stability, sound institutions, and the need for complementary social and economic policies. Comparative advantage provides the rationale for U.S.-Central American (and Dominican Republic) trade in agriculture, textiles, apparel, and capital goods. Intra-industry trade (e.g., goods within the same harmonized tariff system (HTS) code number) is based on specialized production, but in this case relies in large part on differences in wages, skills, and productivity. Certain specialized jobs have developed in Central America (and other developing countries), where they frequently reside in production sharing (maquiladora) facilities. Economists have come to refer to such specialized production as "breaking up the value added chain" and it accounts for why products (and particularly parts thereof) as diverse as automobiles, computers, and apparel are often made or assembled in Central America and other countries in partnership with U.S. firms. This relationship, discussed in more detail later, provides the basis for much of the labor policy debate on the CAFTA-DR, and FTAs more generally. Measuring the benefits of freer trade is another difficult issue. There is a tendency to count exports, imports, and the oft-misrepresented importance of the trade balance as indicators of the fruits of trade. This approach often gives undue weight to exports at the expense of understanding benefits from imports, where the gains from trade are better understood by their contribution to increased consumer selection, lower priced goods, and improved productivity. For example, high-tech intermediate goods imported from developed countries are the basis for future, more sophisticated, production in developing countries. In developed countries, imports from developing countries, whether final goods for consumers or inputs for manufacturing enterprises, reduce costs and contribute to productivity and economic welfare. For all countries, exports are the means for paying for these imports and their attendant benefits. Three caveats related to negotiating FTAs are important. First, the discussion of costs and benefits generally assumes that FTAs are implemented in a multilateral setting. In fact, given the slow pace of World Trade Organization (WTO) negotiations, many countries are pursuing preferential arrangements, that is, regional and bilateral agreements like the CAFTA-DR. Latin America is full of them and depending on how they are defined, they may actually be trade distorting if they promote trade diversion. This occurs when trade is redirected to countries within a limited agreement that does not take into account countries outside the agreement, some of which may be more efficient producers. Preferential trade agreements are also cumbersome to manage, requiring extensive rules of origin, and economists disagree as to whether FTAs help or hinder the movement toward multilateral trade liberalization. Second, trade, much like technology, is a force that changes economies. It increases opportunities for internationally competitive sectors and challenges import competing firms to become more efficient or do something else. This fact gives rise to the policy debate over adjustment strategies, because while consumers and export sector workers benefit, some industries, workers, and communities are hurt. Economists generally argue that it is far less costly for society to rely on various types of trade adjustment assistance than opt for selective protectionism, the frequent and forcefully argued choice of trade-affected industries. The public policy difficulty is that both options have costs and benefits, but result in different distributional outcomes. Because trade agreements raise difficult political choices for legislators in all countries, many of whom represent both potential winners and losers, FTA provisions are typically limited in scope (so continue to protect partially or completely certain products, industries, or sectors) and are phased in over a long period of time (typically up to 15-20 years for very sensitive products). Third, there are implications in the trade negotiation process for smaller countries' bargaining leverage when they choose to negotiate with a large country in a bilateral rather than multilateral setting. Both Chile and the Central American countries realized early in the process that there were negotiating issues over which they would be able to exert little or no leverage. Both agreements, for example, do not address antidumping and subsidies, reflecting an ongoing congressional concern, and negotiations on certain agriculture issues were also limited, given the politically sensitive nature of this issue. The United States was motivated by both commercial and broader foreign economic policy interests in deciding to negotiate preferential trade agreements with Central America and the Dominican Republic. Geopolitical and strategic concerns also sparked interest by all parties in pursuing the CAFTA-DR. Proponents expected the CAFTA-DR to reinforce regional stability by providing institutional structures that can undergird gains made in democracy, the rule of law, and efforts to fight terrorism, organized crime, and drug trafficking. The CAFTA-DR may also be a way to expand support for U.S. positions in the Free Trade Area of the Americas (FTAA), and given that the January 2005 completion date has slipped, may also help rationalize the system of disparate preferential trade agreements that currently define Western Hemisphere trade relations. Critics of the CAFTA-DR pointed to equally broad themes, such as the pervasive social and economic inequality in much of the region, and so supported strong labor and environment provisions as important negotiating objectives. There was concern, for example, over the adequacy of working conditions and enforcement of labor laws in the CAFTA-DR countries. The CAFTA-DR countries argued that the agreement is one of many forces that can have a positive effect in raising labor standards, although it is not sufficient to accomplish this goal on its own. With the proliferation of regional agreements around the world, trade negotiations have also become a tactical issue of picking off gains where they are perceived relative to what other countries are doing. It was repeatedly argued by the U.S. business community, for example, that the U.S.-Chile agreement, the first FTA after NAFTA, was necessary to equalize treatment of U.S. businesses competing with Canadian firms that already enjoyed preferential treatment with Chile. The case was made for Central America as well, which has trade agreements with Canada and Mexico, each with firms that compete with U.S. businesses in the region. Delays with WTO and Free Trade Area of the Americas (FTAA) negotiations only reinforced this attitude. In the context of regional trade agreements, history, geographic proximity, and economic complementarities also made the CAFTA-DR an apparently logical step. Economic fundamentals shaped a trade relationship based on exports of traditional agricultural products, and later apparel. From the early days of independence, agricultural exports were the centerpiece of Central American economic growth. The British controlled primary export production (coffee, bananas, sugar, and beef) until about 1850, when U.S. interests won over. This trend continued until the 1980s and passage of the Caribbean Basin Initiative (CBI). By becoming eligible for unilateral preferential tariff treatment, U.S. investment increased in the region, fostering growth in Central American export sectors. A major change to the CBI relationship occurred with passage of the Caribbean Basin Trade Partnership Act of 2000 ( P.L. 106-200 ). In response to repeated concerns over trade benefits negotiated with Mexico under NAFTA, Congress passed essentially NAFTA-equivalent treatment for the CBI countries. CBTPA targeted preferences on textile, apparel, and other high-volume export goods not covered under the original CBI legislation. The benefits were extended temporarily for a period ending September 30, 2008, or until a beneficiary country enters into an FTA with the United States. The U.S.-Central American/Dominican Republic economic relationship changed importantly under the CBTPA, creating an environment in which businesses forged strategic partnerships in the increasingly complex world of textile and garment manufacturing. From 1974 until 1995, global rules restricting trade in apparel between developed and developing countries (mostly quotas) were set out in the Multifiber Arrangement (MFA) and its successor, the WTO-sponsored Agreement on Textiles and Clothing (ATC), which served as a transitional arrangement to a quota-free system begun on January 1, 2005. In this context, the CBTPA preferences provided an import benefit for the region's export sectors. The United States created the CBI/CBTPA to foster Caribbean economic development and to assist U.S. industry in responding to competition from similar production-sharing arrangements in Asia that were taking a toll on U.S. production and employment in the textile and apparel industries. Still, U.S. textile and particularly apparel industries have been hit hard by foreign competition, resulting in a total job loss of over 540,000 employees from 1998-2002. The textile industry (e.g., fiber, yarns, fabric) has remained marginally competitive through use of sophisticated production technologies. The apparel manufacturing industry (e.g., shirts, pants, undergarments) by contrast, is highly labor intensive, and in striving to reduce costs, has moved production offshore to lower-wage countries. As defined in the CBTPA, U.S. firms, through subsidiary or contractual arrangements, are required to use mostly U.S. textiles as inputs to products that are assembled and exported back to the United States—a mutually beneficial strategy. In 2002, some 56% of U.S. apparel and textile imports from Central America was assembled from U.S. materials, compared to less than 1% for apparel imports from China. Although this was a controversial move because of the reliance on foreign low-wage workers to the detriment of some U.S. employment, many economists argued that the alternative would have been an even greater and more rapid loss of textile and garment jobs to Asian competitors that use no U.S. inputs. With the removal of textile and apparel quotas in January 2005, the trade picture changed again. The CAFTA-DR countries were already losing U.S. market share, which from 1997 to 2002 declined from 11.7% to 9.4%. Over the same time period, China's market share increased from 9.1% to 13.0%. Given that U.S. textile and apparel imports from CAFTA-DR countries are heavily concentrated in products previously covered by quotas, the dominance of China and other low-cost Asian producers is likely to continue. CAFTA-DR producers are less competitive on a pure cost basis because of their higher labor costs relative to some countries in Asia, the CBTPA requirement to use more expensive U.S. inputs, and the additional administrative costs associated with U.S. preferential trade requirements. Low-cost labor, however, is not the only or even the most important factor driving competitiveness. Studies suggest that the economic and social networks that developed between U.S. and Central American firms effectively created a niche market in the region for certain apparel that has held up even with the growing presence of China in the market. This relationship was made possible by the proximity of production, operational efficiencies, and quick turn around times for meeting increasingly shortened deadlines demanded by large retailers. In a post-quota trading world, these advantages may allow a certain portion of textile and apparel production to remain in the CAFTA-DR countries. Although CAFTA-DR country representatives have emphasized that the passage of the free trade agreement is a critical component for maintaining this strategy, it is not certain that it can counter the long-term trend in market share loss to Asia. Strategic considerations were important, but ultimately it is fair to ask what each country expects to gain commercially from the detailed agreement that has emerged. The dollar value of U.S. trade with Central America makes the region the United States' third largest Latin American trading partner, right behind Brazil, but a far distant third from Mexico. Still, these are small economies (see Appendix B for economic data) and although firms engaged in this trade may find its effects significant, total CAFTA-DR trade in 2004 represented only 1.5% of U.S. foreign commerce, and so can be expected to have only a small macroeconomic effect. For the United States, an FTA is a more balanced trade arrangement than the unilateral preferences provided in the CBI/CBTPA. Market access issues (e.g., tariff rates, quotas, rules of origin) were core negotiating areas. Although Central American and Dominican tariffs were already relatively low, they were reduced further. In particular, U.S. business interests wanted equal or better treatment than that afforded to exports from Canada and Mexico based on their FTAs with Central American countries. Permanent and clarified trade rules also supported the joint production arrangements already in place between U.S. firms and those in the region. Finally, a bilateral agreement offered the United States a chance to deepen other trade commitments that affect some of its most competitive industries, including rules covering the treatment of intellectual property, foreign investment, government procurement, e-commerce, and services. From the Central American and Dominican perspectives, reducing barriers to the U.S. market (especially for textile and agricultural products) was cause enough to proceed. The CAFTA-DR also made permanent and expanded U.S. benefits given under the CBTPA legislation, but which require reauthorization by Congress. Permanence in trade rules is an enticement for U.S. foreign direct investment (FDI), which in turn can support the region's export driven development strategy. The CAFTA-DR countries also faced important vulnerabilities, such as the possibility that U.S. agricultural exports of key staples, such as corn and rice, might overwhelm their small markets. Sensitivity to these and other key industry sectors were addressed in the extended tariff phase-out and safeguard schedules, and as a matter of development policy, by CAFTA-DR country efforts to diversify the agricultural sector into non-traditional exports and non-farm employment. Finally, there were two significant negotiation challenges. The first was the need for better Central American integration as part of CAFTA-DR, which historically has been hampered. Having multiple trade rules and rules of origin in a small sub-region would complicate the trade picture. For the CAFTA-DR to work well, the United States needed assurance that goods would flow efficiently within the region, which will be a significant benefit of the agreement. Second, there was a difference in negotiating capacity between Central America and the United States. U.S. and multilateral offers to assist these countries in developing such capacity were viewed as generous, but also a little self-serving, which required sensitivity in the negotiation process. "Docking" the Dominican Republic FTA to CAFTA added the largest of six trading partners covered by the CAFTA-DR agreement. Total U.S. trade with the Dominican Republic in 2004 was one-third greater than with either Costa Rica or Honduras, which tie as the next largest U.S. trading partner in Central America. What made the process feasible was the Dominican Republic's willingness to accept the basic framework and rules of CAFTA, while negotiating market access and some other issues bilaterally, as was done with each of the five Central American republics. In addition, the Dominican Republic's economy and export regime are, in many ways, similar to those of Central America. U.S.-Dominican Republic trade was added to an earlier version of this report and is discussed in more detail separately. Because of its huge size and geographical proximity, the U.S. market is a natural destination for Central American exports. Merchandise trade with the United States has dominated Central America's foreign commerce for 150 years, and as seen in Figure 1 , remains in that role today. The United States is by far the largest of Central America's trading partners, accounting for some 56% of its exports and 44% of its imports. The rest of Latin America collectively is the next largest trading partner, accounting for 25% of Central America's exports and 31% of its imports. The European Union and Asia together account for about 14% of Central American exports and 21% of imports. This distribution is not uniform throughout the region. Honduras, for example, exports 67% of its merchandise goods to the United States, compared to 44% for Costa Rica. Honduras also has the highest import percentage from the United States at 53% compared to Nicaragua's 25%, which is the lowest. Total trade (exports plus imports) with the United States is also somewhat uneven country by country. Costa Rica accounts for 30% of total Central American trade with the United States, whereas Nicaragua amounts to only 5% of the total. Guatemala, Honduras, and El Salvador account for 25%, 22%, and 18% respectively. Trade volume with the United States varies among countries, but in most cases the trend has been one of growth at a rate higher than the average for U.S. trade with the world. Over the past five years, U.S. exports to Central America grew by 34.7% (25.3% including the Dominican Republic), compared to 17.6% with the world and 21.2% with Latin America as a whole (see Appendix C for the data). U.S. imports from Central America increased by 19.3% (15.4% including the Dominican Republic) over the same time period, compared to 43.4% from the world and 51.4% from Latin America. Importantly, in 2003 some 80% of imports from Central America and the Dominican Republic entered the United States duty free under either normal trade relations (NTR) status or the CBI or GSP programs. For 2004, although trade growth varied among the five countries, U.S. export growth to Central America doubled average export growth to the world, with all five countries experiencing solid growth. U.S. imports from Central America, by contrast, grew by less than half that of average import growth from the world. As these trends suggest, the United States tends to run small merchandise trade deficits with all the Central American countries and the Dominican Republic. In part, this is the nature of a production-sharing trade relationship, where parts and materials are sent abroad for value-added processing and then returned to the United States. Importantly, when services trade is added to the trade balance, the United States tends to run trade surpluses with all these countries. This trend, too, is indicative of the basic relationship between the United States, a service-based economy, and developing countries. Nearly three-quarters of U.S. imports from Central America fall into three main categories: fruit (mostly bananas) and coffee; apparel; and integrated circuits. These three distinct categories, for various reasons, are not traded uniformly by the five countries (see Table 1 ). First, Central America has traditionally exported bananas and coffee, which is dominated by Costa Rica and Guatemala. Coffee has actually declined for all countries except Costa Rica and constitutes only 3.8% of U.S. imports from the region. This reflects the competitive nature of trade in coffee, which is grown in vast quantities by Brazil, Colombia, and countries in Africa as well. Banana trade has also declined in importance and accounts for only 5.0% of U.S. imports from Central America. Second, knit and woven apparel has become the primary export goods for all countries except Costa Rica and accounts for nearly 57% of total U.S. imports from Central America. Because of the CBTPA benefits, some 56% of textiles and apparel imported from the six CAFTA-DR countries in 2002 was assembled from U.S. fabric (from U.S. yarns). Of that amount, the Dominican Republic had 33% of the total followed by Honduras with 30%, El Salvador with 18%, Costa Rica with 9%, Guatemala with 8%, and Nicaragua with 2%. Under the CBTPA, these countries may engage in greater value-added operations such as cutting and dyeing, which has allowed them to remain selectively competitive with low-cost Asian exports. These restrictions are further relaxed under the CAFTA-DR. The USITC points out that the CAFTA-DR countries have been losing market share to Asia since at least 1997, and the CAFTA-DR is seen as a way to help abate this trend. Third, Costa Rica attracted $500 million in foreign direct investment for a computer chip assembly and testing plant, which has become its major export generator. This investment was augmented by an additional $110 million in October 2003 for the production line of "chipsets" for personal computers. In 2004, U.S. imports of integrated circuits constituted 18% of total imports from Costa Rica. Similar importance may be seen in the imports of Costa Rica's medical equipment, another indicator of its relatively sophisticated production capabilities. Costa Rica is the fastest growing and most diversified trader in Central America, which explains, in part, why it has outpaced its neighbors on the development path. The CAFTA-DR is intended to build on these trends, support export diversification, and provide a long-term stable trade environment that will increase U.S. foreign investment in the region. Evidence is already seen in alternative agricultural exports such as cut flowers and miniature vegetables (in multiple CAFTA-DR countries), as well as, developing maquiladora operations to supply coil wrapped cables for the automotive sector (Honduras) and adapting apparel cutting technology to supply insulation for aircraft engines (Costa Rica). Many non-apparel items that the United States imports from Central America face minimal or no tariffs. Bananas, coffee, oil, most fish products, and Costa Rica's integrated circuits and medical equipment enter duty free. Some enter the United States under preferential arrangements, but the majority is free of duty under normal (most favored nation—MFN) tariff rates. Rules on U.S. apparel imports were enhanced and made permanent under CAFTA-DR. As seen in Table 2 , the major U.S. exports to Central America include electrical and office machinery (computers), apparel, yarn, fabric, and plastic. Many of these goods are processed in some form and re-exported back to the United States under production-sharing arrangements. For example, nearly 60% of electrical machinery exports to Central America is integrated circuits going to Costa Rica for processing and re-export. The same may be said for fabric and yarns that are exported to all countries, sewn and otherwise assembled, and re-exported back to the United States. Some of these goods are consumed in the CAFTA-DR countries along with capital goods (machinery and parts) and agricultural products. Similar trends for U.S. import trade are evident in U.S. exports. In 2004, 78% of knit apparel and 76% of knit, cotton, and yarn fabric went to Honduras and El Salvador. Although the United States exports machinery and parts to all five countries, electrical machinery and particularly integrated circuits, are sent to Costa Rica. All five countries import U.S. cereals and some, such as corn and rice, are among the more import sensitive products for the CAFTA-DR countries because they are staple crops and grown by small, often subsistence farmers. The significant aspects of this trade structure are that it reflects: 1) the continued historical trend of (largely duty-free) regional dependence on the large U.S. market as an important aspect of trade and development policy; 2) a deepening economic integration; and 3) growing U.S. direct investment over the long run. The Dominican Republic is the 28 th largest U.S. export market (6 th in Latin America) and ranks as the 41 st largest import country (8 th in Latin America). More so than any of the Central American countries, Dominican trade is dominated by the United States (see Table 3 for bilateral trade data.) The United States absorbs 80% of its exports, with 12% going to other developed countries and only 8% entering developing countries. The Dominican Republic imports 50% of its merchandise goods from the United States, 13% from other developed economies, and 37% from various developing countries. Although the largest of the CAFTA-DR trading partners, U.S. exports grew by only 1.6% in 2004 as the Dominican Republic continued to recover from a severe recession. The joint-production arrangements are evident in apparel and jewelry-making industries. Apparel and textiles constitute 16% of U.S. exports and 48% of U.S. imports. Other significant U.S. exports include various types of machinery, refined oil products, and plastic. Other important U.S. imports include medical instruments, electrical machinery, tobacco, and plastic. In many ways, the structure of the U.S.-Dominican trade is similar to that of U.S.-CAFTA trade, and hence the economic logic of "docking" it to the Central American agreement. The CAFTA-DR countries also benefit from foreign direct investment (FDI) as part of the trade relationship with the United States, which is the largest foreign investor in all six countries. To the extent that an FTA can be considered a stabilizing factor in economic relationships, it is expected to encourage more FDI and thereby promote longer term economic growth and development. U.S. FDI in the CAFTA countries is presented in Table 4 . The trends suggest that U.S. direct investment in the area is relatively small and has stagnated or grown erratically in recent years. Some countries have fared better than others and net foreign investment may increase or decrease because of both economic and political trends, as well as opportunities in other parts of the world that can affect business decisions. Investment patterns have been skewed toward Costa Rica, which has over half of U.S. FDI in Central America. One aspect of the congressional debate over trade agreements focused on their potential economic effects on the United States. Congress mandated that the United States International Trade Commission (USITC) assess these effects and it released its final report in August 2004. This report provides quantitative and qualitative estimates of the CAFTA-DR effects on the U.S. economy as a whole and for selected sectors. Overall, it found that the "welfare value" or aggregate effect on U.S. consumers and households of trade liberalization under the CAFTA-DR would be approximately $166 million (less than 0.01% of GDP) for each year the agreement is in effect. With respect to trade flows, the reduction of relatively higher tariff rates on U.S. goods is expected to increase U.S. exports more than imports with the region. The USITC model estimates that when the CAFTA-DR is fully implemented, U.S. exports to the CAFTA-DR countries will increase by $2.7 billion or 15%, while imports will increase by $2.8 billion, or 12%. The effect of this trade growth on aggregate U.S. output and employment is estimated to be minimal. The largest sector increases were estimated to occur for U.S. grains (0.29% for output and 0.31% for employment) and the greatest decrease to occur for sugar manufacturing (-2.0% for both output and employment). These estimates are in line with expectations voiced prior to the negotiations that the marginal effects of the CAFTA-DR would be small, but positive for the U.S. economy as a whole, given the CAFTA-DR countries had small and already largely open economies. The rest of this section briefly summarizes the major negotiation issues and references the ITC's conclusions with respect to each major issue area, where applicable. Emphasis is given to those sectors and issues expected to be most affected by the agreement, or that generated the most contentious policy debate. Market access refers to provisions that govern barriers to trade such as tariffs, quotas, safeguards, and rules of origin, which define goods eligible for tariff preferences based on their regional content. CAFTA-DR replaces and enhances in a permanent agreement U.S. preferential market access extended unilaterally under the Caribbean Basin Economic Recover Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA), and the Generalized System of Preferences (GSP), which require periodic congressional reauthorization (except CBERA). Agriculture and textile/apparel goods, Central America's major exports, were the most important and difficult market access issues to resolve. Each traded good falls into one of eight tariff elimination "staging categories," which define the time period over which customs duties will be eliminated. Each country negotiated a list of its most sensitive products for which duty-free treatment is delayed. For manufactured goods, duties on 80% of U.S. exports were eliminated immediately, with the rest phased out over a period of up to 10 years. For agricultural goods, duties on over 50% of U.S. exports were eliminated immediately, with the rest phased out over a period of up to 20 years. In some cases, duty-free treatment is "back loaded" and will not begin for 7 or 12 years after the agreement takes effect. For the CAFTA-DR countries, 100% of non-textile and non-agricultural goods enter the United States duty free immediately. Safeguards are retained for many products over the period of duty phase out, but antidumping and countervailing duties were not addressed in the CAFTA-DR, leaving all U.S. and other country trade remedy laws fully enforceable, as required under Trade Promotion Authority (TPA). The CAFTA-DR has less restrictive provisions governing textile and apparel imports than those in the CBTPA. It removes all duties on textile and apparel imports that qualify under the agreement's rules of origin, retroactive to January 1, 2004, and allows for special safeguard measures during the duty phase-out period. The permanence of the provisions and the more accommodating rules of origin and administrative guidelines may generate a marginal increase in apparel imports from the region. These provisions are intended to address the decline in U.S. market share of textile and apparel imports from the region over the past five years, most of which have been displaced by Asian products, despite the enhanced preferential treatment that Congress afforded to Central American and Dominican imports under the CBTPA. Central American and Dominican apparel has been entering the United States duty free for years, if it is assembled from U.S. yarn and fabric under the so-called "yarn forward" rule. The difference from the CBTPA is that duty-free access applies to textiles and garments assembled from components made in either the CAFTA-DR countries or the United States, rather than just the United States. Exceptions to this rule include an enhanced "cumulation rule," which allows duty-free treatment for a limited quantity of woven apparel assembled from components made in Canada and Mexico, to help U.S. textile firms invested in these countries. In addition, there are exceptions for specified products (affecting less than 10% of trade), goods with limited amounts of material from third countries, and for tariff preference levels (TPLs) given to a few imports from Nicaragua and Costa Rica. Although these rules were widely supported, some textile producers registered concern that they are overly restrictive and therefore limited in their intended effect of helping the region compete (by lowering costs) in the U.S. market against Asian imports. U.S. and CAFTA-DR firms that produce for the U.S. market wanted as much flexibility as possible to use fabrics from third countries. Others feared, however, that they are too generous and that if customs procedures are not well implemented, they could harm U.S. producers by increasing opportunities for the illegal transshipment of fabrics or goods originating from outside the region, such as China. There was also considerable debate over the expansion from the CBTPA of the "short-supply" list. This is the list of goods given duty-free access if made from materials that are determined to be commercially in "short supply" in the United States. The CAFTA-DR may also increase U.S. exports of textiles, which have risen significantly under CBTPA. On balance, however, the USITC study estimated that it "will likely have a negligible impact on U.S. production or employment." Concerns raised by certain sectors of the textile and apparel industry required assurances from the Bush Administration before support would be given to the CAFTA-DR. Promises were made to: (1) change the rules of origin for textiles and apparel to require that all pocketings and linings come from the CAFTA-DR countries (rather than third party countries like China); (2) negotiate a new stricter customs enforcement agreement with Mexico before the CAFTA-DR cumulation rules take effect allowing Mexican inputs to be used in CAFTA-DR textile and apparel products; and (3) require Nicaragua to increase use of U.S. fabric to qualify as duty-free under their tariff preference levels. These assurances are not part of the formal CAFTA-DR, but have been implemented nonetheless. Domestic support programs were not addressed in the CAFTA-DR, which focused on reducing tariffs and increasing quota levels, the most costly trade-distorting policies. Average applied tariffs on agricultural goods by most CAFTA-DR countries are relatively low, ranging from 7% to 23%. Most agricultural imports face no tariff in the United States. For all countries, the pressing challenge was negotiating tariff rate quotas (TRQs—see below) for their most sensitive products. Agricultural products have the most generous tariff phase-out schedules, with up to 20 years for some products (e.g., rice and dairy). This approach acknowledges that the agricultural sectors bear most of the trade adjustment costs and that they will require time to make the transition to freer trade. All agricultural trade eventually becomes duty-free except for sugar imported by the United States, fresh potatoes and onions imported by Costa Rica, and white corn imported by the other Central American countries. These goods will continue to be subject to quotas that will increase, after a certain period, by approximately 2% each year in perpetuity, with no decrease in the size of the above-quota tariff. Over half of current U.S. farm exports to Central America became duty free upon implementation, including high quality cuts of beef, cotton, wheat, soybeans, certain fruits and vegetables, processed food products, and wine. Many other transitional provisions exist. Agricultural products are subject to tariff-rate quotas, or limits on the quantity of imports that can enter the United States before a very high tariff is applied. The phased reduction in agriculture protection also includes the transitional use of volume-triggered safeguards, or applying an additional duty temporarily on products that are being imported in quantities deemed a threat to the domestic industry. Export subsidies are eliminated except when responding to third party export subsidies. Sugar was the most controversial agricultural issue to resolve and U.S. sugar growers and processors were vehement opponents of the agreement to the end. The U.S. agreed to slight numerical increases in sugar quotas for all six countries. Sugar and sugar-containing products imported under the U.S. quota system enter the United States duty-free, but exports above the quota face prohibitive tariffs. Raw sugar receives the largest quota by volume, 28% of the total U.S. sugar quota for the world was filled by the CAFTA-DR countries in 2003, and was a major issue for this agreement. The U.S. market accounts for only 14% of the region's sugar exports, representing less than 10% of the region's sugar production. The CAFTA-DR raises the U.S. quota by an amount equal to 35% of the current quota in year one, rising to 50% by year 15, after which the quota increases each year slightly in perpetuity. This may seem large, but the USITC notes that the initial increase amounts to only 1% of U.S. production and consumption of raw sugar in 2003, and that the overall effects of the sugar provisions may be small. Two studies done by the USITC and Louisiana State University estimated that the sugar provisions could result in a decline in sugar prices of 1% (USITC) and 4.6% (LSU), with perhaps largely offsetting employment effects in the sugar producing and sugar-containing product industries. The United States may impose a sugar price mechanism to compensate Central American sugar exporters in lieu of according them duty-free treatment, but a key issue for some Members of Congress was defining precisely how this mechanism will work. Nonetheless, the sugar producing industry remained unsatisfied with these provisions. The Bush Administration responded in a letter from Secretary of Agriculture Mike Johanns to Senator Saxby Chambliss and Representative Bob Goodlatte, the respective agriculture committee chairs, assuring the industry that the CAFTA-DR would not be allowed to interfere with the operation of the sugar program as defined in the Farm Security and Rural Investment Act of 2002 (the Farm Bill). In particular, he agreed to act should additional sugar imports due to the CAFTA-DR, NAFTA, and other trade agreements cause the import trigger threshold of 1.532 million short tons per year to be exceeded and threaten the sugar program operations. The U.S. Secretary of Agriculture agreed that in such a case, he would preclude entry of additional sugar imports into the domestic sweetener market by either making direct payments to exporters or using agricultural commodities to purchase sugar to be used for nonfood use (ethanol production). This offer also proved inadequate to bring about sugar industry support for the CAFTA-DR. Increasing grain exports was another important goal for the United States. Wheat is not grown in the CAFTA-DR countries and there is already largely free trade in this commodity. Staples for the CAFTA-DR countries, such as rice and white corn, however, remain protected and there is a complicated system for phasing out TRQs on U.S. exports over a 15-20 year period. As with sugar imports to the United States, U.S. exports of corn and rice will increase slowly due to the highly restrictive TRQs and special safeguard measures. The USITC estimates that changes in the quantity of exports from the United States will be small at first and rise by perhaps 20% by the end of the TRQ phase-out period. The USITC suggests that the long-run effect may be small (1.2% of total U.S. grain exports), but notes that the "potential increase in grains exports offers significant market opportunities for U.S. white and yellow corn growers and U.S. rice growers." Despite the lengthy transition period toward freer trade under the CAFTA-DR, concerns remain over the potentially harmful effects to Central America, particularly to the small commercial and subsistence farmers, of further opening its markets to U.S. agriculture. Three recent studies, however, agree that overall, increased agricultural trade can also be one source of Central American rural development. In addition to increasing Central American agricultural exports, the majority of households are net consumers of agricultural goods, and so stand to gain from lower prices, the equivalent to an increase in family income. Because subsistence farmers' produce generally does not reach the market, they are unlikely to be affected greatly by changes in market prices. Still, for the minority of rural net producers of agricultural goods, economists also agree that adjustment policies are essential, beginning with targeted income assistance. For rural areas to benefit fully from the CAFTA-DR, there is also a critical need for increased investment in transportation and communications infrastructure, education, and more fully developed financial services. These measures would improve agricultural productivity, help transition workers toward alternative crops or non-farm employment, and integrate the rural economy more fully with the national and international economy. Without concerted effort in adjustment assistance, the poorest segments of rural Central America may remain vulnerable to the negative effects of freer trade. In 2003, the United States' stock of foreign direct investment (FDI) in the CAFTA-DR countries was $4.3 billion, which represents only 1.4% of U.S. FDI in Latin America and the Caribbean. Some 43% of the FDI in CAFTA-DR countries went to Costa Rica, followed by the Dominican Republic with 20%. The United States has advocated clear and enforceable rules for foreign investment in all trade agreements, which is largely accomplished by "standard" language requiring national and most-favored-nation (nondiscriminatory) treatment. The CAFTA-DR clarifies rules on expropriation and compensation, investor-state dispute settlement, and the expeditious free flow of payments and transfers related to investments, with certain exceptions in cases subject to legal proceedings (e.g., bankruptcy, insolvency, criminal activity). Transparent and impartial dispute settlement procedures provide recourse to investors. Two investment issues stood out. First, an investor-state provision, common in U.S. bilateral investment treaties (BITs) and used in earlier FTAs, was included. It allows investors alleging a breach in investment obligations to seek binding arbitration against the state through the dispute settlement mechanism defined in the Investment Chapter. U.S. investors have long supported the inclusion of investor-state rules to ensure that they have recourse in countries that do not adequately protect the rights of foreign investors. Since bilateral investment treaties are usually made with developing countries that have little foreign investment in the United States, such a provision was thought unlikely to be used in the United States. Circumstances changed, however, under NAFTA when Canada used investor-state provisions to raise "indirect expropriation" claims against U.S. state environmental regulations. Although none of the claims filed against the United States has prevailed, Congress instructed in TPA legislation that future trade agreements ensure "that foreign investors in the United States are not accorded greater substantive rights with respect to investment protections than United States investors." In response, Annex 10-C of the CAFTA-DR states that "except in rare circumstances, nondiscriminatory regulatory actions by a Party that are designed and applied to protect legitimate welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations." This provision and another that allow for early elimination of "frivolous" suits were intended to address congressional concerns, but there is uncertainty about how well the changes will operate. Second, the CAFTA-DR countries requested greater flexibility in the treatment of certain sovereign debt. Annex 10-A allows sovereign debt owed to the United States that has been suspended and rescheduled not to be held subject to the dispute settlement provisions in investment chapter, with the exception that it be given national and MFN treatment. Annex 10-E extends from six months to one year the amount of time required before a U.S. investor may seek arbitration related to sovereign debt with a maturity of less than one year. Both provisions are intended, in the event of a financial crisis, to keep the CAFTA-DR from interfering in any sovereign debt restructuring process, and are viewed by the U.S. Treasury as an accommodation to Central American interests. The United States is the largest services exporter in the world and services trade presented a number of hurdles given that the Central American countries have adopted few commitments of the WTO's General Agreement on Trade in Services (GATS). There were also many industry-specific barriers that existed, such as: barriers to foreign insurance companies in Guatemala; "heavy" regulation licensing of foreign professionals in Honduras; local partner requirements in some financial services in Nicaragua; and numerous services monopolies in Costa Rica (insurance and telecommunications). The CAFTA-DR provides broader market access and greater regulatory transparency for most industries including telecommunications, insurance, financial services, distribution services, computer and business technology services, tourism, and others. Banks and insurance firms have full rights to establish subsidiaries, joint ventures, and branches. Regulation of service industries is required to be transparent and applied on an equal basis and e-commerce rules are clearly defined, a critical component of delivering services. The USITC suggests that the CAFTA-DR likely will have little effect on U.S. services imports because the market is already largely open. It does anticipate opportunities for U.S. firms to expand into Central America. In particular, Costa Rica agreed to the eventual opening of its state-run telecommunications and insurance industries, where there has been strong political resistance to privatization and deregulation. Unlike the other countries, doing so constitutes a major structural adjustment for the Costa Rican economy, has implications for Costa Rican social policy, and required amending domestic laws, all of which was difficult for their legislature to support if they did not receive concrete tradeoffs in other areas, such as agriculture and textiles. Negotiators resolved these issues in two week-long discussions held in January 2004 and their detailed commitments are presented in the relevant chapters of the CAFTA-DR. Because of this continued sensitivity, however, the CAFTA-DR was delayed until after a national referendum supported moving ahead with the agreement. None of the CAFTA-DR countries is a signatory to the WTO Agreement on Government Procurement and complaints against purchasing processes vary from dissatisfaction with opaque and cumbersome procedures in Costa Rica to outright corruption in Guatemala. El Salvador, Nicaragua, and Honduras passed new government procurement laws in 2000/01, and in general, there have been improvements in all countries in dealing with project bidding, although transparency issues remain. Some analysts believe this is due in part to a lack of incentives given that many of these countries will not be able to compete in the U.S. government procurement market. The CAFTA-DR grants non-discriminatory rights to bid on contracts from Central American ministries, agencies, and departments, with the exception of "low-value contracts" and other exceptions. It also calls for procurement procedures to be transparent and fair, including clear advance notices of purchases and effective review. Specific schedules detailing exceptions and limitations were written by each country, covering such diverse issues as the sale of firearms to supplying school lunch programs. In addition, each country provided a list of subnational governments (e.g., states and municipalities) that agree to adhere to the government procurement provisions. The CAFTA-DR also makes clear that bribery is a criminal offense under the laws of all countries. In general, the provisions are supported by U.S. businesses interested in doing or expanding opportunities in the region. All Central American countries are revising, or have revised, their intellectual property rights (IPR) laws and are closing in on complying with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). That said, all countries are subject to criticism for falling short of either clarifying or enforcing penalties for noncompliance and in some cases have simply not adopted reforms that many U.S. industries (e.g., sound and video recordings, pharmaceuticals, book publishing, computer software) consider necessary to protect their intellectual property. Piracy, incomplete or inadequate legal protection, and enforcement capacity remain problems and ongoing concerns exist across the range of IPR issues of patents, trademarks, and copyrights, covering print, electronic, and other media. The IPR provisions in the CAFTA-DR go beyond those in the WTO. They provide that all businesses receive equal treatment and that the CAFTA-DR countries ratify or accede to various international IP agreements. Trademark holders benefit from a transparent online registration process and special system to resolve disputes over internet domain issues, among other improvements. Copyright provisions clarify use of digital materials (exceeding TRIPS standards) including rights over temporary copies of works on computers (music, videos, software, text), sole author rights for making their work available online, extended terms of protection for copyrighted materials, strong anti-circumvention provisions to prohibit tampering with technologies, the requirement that governments use only legitimate computer software, the prohibition of unauthorized receipt or distribution of encrypted satellite signals, and rules for liability of internet service providers for copyright infringement. Patents and trade secrets rules conform more closely with U.S. norms. End-user piracy is criminalized and all parties are required to authorize the seizure, forfeiture, and destruction of counterfeit and pirated goods. The CAFTA-DR also mandates statutory damages for abuse of copyrighted material. The CAFTA-DR goes a long way toward meeting U.S. business IPR protection needs and the USITC suggests that many industries will benefit from higher revenue if the new standards can be enforced. Even if laws are changed to conform to the CAFTA-DR commitments, however, enforcement problems will likely continue and technical assistance may be needed to help develop the necessary capabilities. To bring a patented drug to market, a drug company must demonstrate through clinical trials that the drug is safe and effective. Under U.S. patent law, the data used to establish these claims are protected from use by generic manufacturers for five years from the time the drug is introduced in a country's market. Similar language was adopted in the IPR chapter of the CAFTA-DR. This provision became controversial in November 2004 when the Guatemala legislature changed its laws, adopting World Trade Organization (WTO) language that would have limited data protection to five years from the time a drug is brought to market in the first country (e.g., the United States), rather than from the presumably later time that it might be introduced in a second country (e.g., Guatemala). The USTR argued that this change was a breach of the CAFTA-DR commitments and threatened to delay implementing legislation until the law was changed. Guatemala reversed the data protection law, to the disappointment of many who argued that the CAFTA-DR provisions could delay access to future generic drugs. Given that data protection and patent protection often run concurrently, however, it is debatable whether the introduction of future generic drugs will be further inhibited by this provision. An August 5, 2004 side agreement among all signatories further clarifies that "obligations" under Chapter 15 of the CAFTA-DR do not affect a country's ability "to take necessary measures [e.g., compulsory licensing for generic drugs] to protect public health by promoting access to medicines for all," in particular those needed to combat epidemics such as HIV/AIDS, tuberculosis, and malaria, among others. Critics, however, would have preferred that the side agreement include an explicit exception to the data protection requirement for cases where compulsory licensing under the WTO rules might be invoked. Perhaps the greatest challenge to the CAFTA-DR arose over concerns about the labor and environment chapters. It has become widely accepted that labor and environment provisions should be part of modern trade agreements. There is considerable disagreement, however, over how aggressive language in trade agreements should be in addressing these issues. From an economic perspective, labor and environment advocates in the United States argue that developing countries may have an "unfair" competitive advantage because their lower standards are the basis for their lower costs, which in turn are reflected in lower prices for goods that compete with those produced in developed countries. It follows from this argument that the difference in costs is an enticement to move U.S. investment and jobs abroad. On the other hand, economists have argued that developing countries have a comparative advantage in labor costs consistent with the free trade model and studies suggest that these cost differentials are usually not high enough to determine business location alone—productivity remains the primary decision factor. Further, many economists view trade liberalization as part of the overall development process that, in and off itself, can promote social change. Developing countries are also concerned with sovereignty issues related to specifying standards in trade agreements and the possibility that they can be misused as a disguised form of protectionism. The labor chapter proved to be the biggest point of contention in the CAFTA-DR debate, divided largely along party lines. The opening paragraph of the chapter states that all parties reaffirm their commitments under the United Nations International Labor Organization (ILO). These are defined in the ILO's 1998 Declaration on Fundamental Principles and Rights at Work as: (1) the freedom of association and the effective recognition of the right to collective bargaining; (2) the elimination of all forms of forced or compulsory labor; (3) the effective abolition of child labor; and (4) the elimination of discrimination in respect of employment and occupation. Disagreement revolved around three issues. First, whether the CAFTA-DR countries had laws that complied with ILO basic principles. Second, the ability of these countries' to enforce their laws. Third, and most importantly, capacity of the CAFTA-DR Labor Chapter to compel legal compliance and enforcement of ILO fundamental principles. The Central American countries entered the debate early when they requested the ILO to conduct a study of their labor laws. The final 2003 report is subject to interpretation and has been used to bolster both sides of the argument as to whether the CAFTA-DR countries guarantee core ILO principles. Some interpreted the report to affirm that the CAFTA-DR countries' laws comply with internationally recognized labor standards. In response, Democratic Members of the House Ways and Means Committee pointed out deficiencies in many of their laws in a letter sent to the USTR's office. It identified 20 Central American laws that fail to meet core ILO principles, all cases related to freedom of association or collective bargaining, as opposed to discrimination, compulsory labor, or child labor. In April 2005, with the assistance of the Inter-American Development Bank, the CAFTA-DR country ministers of trade and labor released a study of their countries' shortfalls in meeting and enforcing core labor principles. Although it documented that all countries had made recent changes to their labor laws, there was clear recognition for the need to harmonize some laws better with ILO principles, as well as, address enforcement of key infractions such as employment discrimination (pregnancy testing), abuses in free trade zones (application of labor laws), and the need to dedicate more resources to enforcement. The debate over the adequacy of labor laws was not resolved to the satisfaction of any party, but there was little disagreement that labor law enforcement is an ongoing problem and that unionization is not widespread. The CAFTA-DR countries have admitted in their own report that many lack the financial resources and technical expertise to enforce adequately good labor practices, a problem that will also take time and resources to overcome. The Labor Chapter in the CAFTA-DR defines certain labor standards for all member countries and the dispute settlement mechanism for arbitrating formal complaints against noncompliance. It closely follows language set out in Trade Promotion Authority (TPA) legislation on the principal negotiating objectives of the United States with respect to labor. The USTR made note of this fact and further argued that the chapter goes beyond earlier FTAs through a Labor Cooperation and Capacity Building Mechanism that will support a mutual approach to improve working conditions in CAFTA-DR countries by: (1) ensuring effective enforcement of existing labor laws; (2) working with the ILO to improve existing labor laws and enforcement; and (3) building local capacity to improve workers rights. Critics charged, however, that the CAFTA-DR labor provisions were too weak because they give different weight to the following three provisions: (1) the effective enforcement of domestic labor laws; (2) the reaffirmation of commitments to ILO basic principles; and (3) "non-derogation" from domestic standards (not weakening or reducing protections to encourage trade and investment). The first provision, failure to enforce domestic labor laws, can be formally challenged in the dispute resolution process as defined in the CAFTA-DR. Dispute resolution is not available for the other two provisions, although they are supported in principle (Articles 16.2 and 16.6). There was also concern over the differences between labor and other dispute settlement provisions. If a commercial dispute remains unsettled, the country faces the possibility of a suspension of benefits "of equivalent effect" (Article 20.16), resulting in the raising of tariffs, or payment of a monetary assessment (fine) equal to 50% of what a dispute panel determines is "of equivalent effect." This article does not apply to the disputable labor provision. The difference is that the option for failing to resolve a labor dispute is a monetary assessment paid by the country, which is capped at $15 million per year, per violation, with recourse to an equivalent dollar value of suspended benefits (higher tariffs) if the fine is not paid. The fine is paid into a fund operated by the country in question and is to be expended for "appropriate labor initiatives." U.S. labor advocates have charged that "the labor provisions of the CAFTA-DR will not protect the core rights of workers in any of the six countries participating in the agreement." Many Members of Congress concurred, believing that the "enforce your own laws" standard, as well as the limited dispute settlement provisions, would be ineffective at compelling countries to meet basic ILO standards. It was also argued that they are a step backward from the provisions allowing for the suspension of trade benefits found in U.S. unilateral preferential trade arrangements, such as the Caribbean Basin Initiative (CBI) and the Generalized System of Preferences (GSP). In these, the United States has the option to suspend trade benefits (reimpose tariffs) if a country does not comply with provisions of the agreement, including the labor section. Democrats cited a number of examples, including CAFTA-DR countries, where sanctions, or threats thereof, compelled changes in labor laws. Further, capping the assessment in a labor dispute at $15 million and having the assessment paid into a fund in the offending country was seen as a largely ineffective mechanism for compliance. Supporters of the Labor Chapter argued that the agreement encourages countries to improve their laws, making the "enforce your own laws" a meaningful standard, that the CBI option for trade sanctions is less appealing in a reciprocal free trade agreement where the United States is also subject to the discipline, and further, that trade sanctions are a "blunt" instrument, punishing all export workers whose products would come under the sanctions, potentially worsening their situation rather than improving it. It was also argued that sanctions have not been a widely used tool over the lives of the CBI and GSP programs, and to the contrary, that an annual $15 million fine per violation is a potentially significant deterrent for the CAFTA-DR countries. Finally, technical assistance, cooperation, and transparency were presented as more effective tools in the long run to bring about change in Central America. Only time will tell if the CAFTA-DR labor provisions provide support and possibly effective punitive responses to encourage deeper labor rights reforms in Central America. These provisions are similar to those found in other FTAs for which Congress passed implementing legislation, including Chile, Singapore, Morocco, and Australia (Jordan's labor provisions were different in some places). Many Members may have accepted that those countries had adequate labor laws, even if there were enforcement or other concerns. This perception was clearly lacking for the CAFTA-DR countries, despite efforts to make transparent their deficiencies and to correct some laws and enforcement problems. Hence, broader support was never reached in Congress over the adequacy of these provisions in the CAFTA-DR. Major goals included protecting and assuring strong enforcement of existing domestic environmental standards, ensuring that multilateral environmental agreements are not undermined by trade rules, promoting strong environmental initiatives to evaluate and raise environmental performance, developing a systematic program of capacity-building assistance, and assuring that environmental provisions in FTAs are subject to the same dispute resolution and enforcement mechanisms as are other aspects of the agreement. The USTR argued that congressional objectives on environmental issues have been met in the proposed CAFTA-DR agreement. It includes language requiring all countries to enforce their laws and regulations and also creates an environmental cooperation agreement with a framework for establishing a cooperation commission and a process to conduct capacity building. All parties agree to commit to establish high levels of environmental protection and to open proceedings in the administration and enforcement of laws and regulations. Advocates raised the issue of the environmental effects of trade, particularly in developing countries that may have weak laws and lax enforcement mechanisms, but the environmental provisions were not the most contentious issues in the CAFTA-DR. Many of these same advocates have conceded that trade agreements have not led to catastrophic pollution problems nor encouraged a "regulatory race to the bottom." In fact, there has also been a certain acknowledged degree of success, by having environmental issues addressed in the body of FTAs, in side agreements on environmental cooperation, and through technical assistance programs, the latter of which developing countries can use to respond to specific problems. Advocates still noted that much can be improved, such as tightening enforcement language and ensuring that the United States allocates financial resources to back up promises of technical assistance, particularly in the case of Central America, where commitment to "public accountability" is questioned in some cases. The Trade and Environment Policy Advisory Committee supported most of the environment provisions in the CAFTA-DR and particularly the enhanced public participation process negotiated by the State Department in a side agreement. The dispute settlement provisions, effectively the same rules governing labor disputes, were accepted as striking the "proper balance." The advisory committee still raised a number of specific environmental concerns, and questioned whether the CAFTA-DR would be able to meet congressional objectives on capacity building without concrete funding for the program. In response, the seven countries signed a supplemental Environmental Cooperation Agreement (ECA) on February 18, 2005. It calls for a new unit to be established in the Secretariat for Central American Integration to administer public submissions or complaints made on enforcement issues. The ECA is intended to address both short-and long-term environmental goals, including providing for a monitoring process, but does not address concerns over funding for the implementation of environmental initiatives. The dispute resolution chapter was modeled on previous FTAs, in which disagreements are intended to be resolved cooperatively via a consultative process. If this approach is not successful, the process moves to the establishment of the Free Trade Commission of cabinet-level representatives, and finally an arbitral panel. Arbitral panels are intended to broker mutually acceptable resolutions, including providing for compensation, if appropriate. If a mutually-agreed solution is not found, the complaining party may resort to a suspension of benefits of equivalent effect. This result may also be challenged, and final resolution, as well as how the suspension of benefits are to be administered are set out in guidelines. Resolving labor and environmental disputes will be handled slightly differently (see previous section). All dispute resolution procedures are defined in Chapter 20. Administrative and other technical matters (e.g., transparency issues) of trade agreement implementation were also addressed by this working group. Even before detailed discussions began on the CAFTA-DR, the Central American countries were apprehensive over the possibility of being overwhelmed by the resource and experience advantage that the United States had to negotiate and comply with liberalized trade rules. Hence, the need for trade capacity building, which may be classified into three distinct areas beyond trade negotiation capabilities. First, the ability to identify priorities, including where the major adjustment costs (losers) are expected to be and how to respond to them. Second, the ability to develop resources to implement the agreement, including institutional, financial, and analytical resources. Third, the capacity to benefit from the CAFTA-DR. The agreement created a permanent Committee on Trade Capacity Building to continue work begun in the negotiation process, and recommendations in the agreement call for one of its first priorities to be customs administration. The third category, however, is arguably the most challenging. It refers to the ability of a business to: compete in a larger market; learn how to export and use imports (as inputs) more to its advantage; tap into global finance; navigate customs and trade logistics problems; and in other ways make the transition from local producer to international player. This will be a difficult challenge for many Central American firms, particularly if barriers to world trade are reduced outside the U.S.-Central American relationship (WTO/FTAA) putting increasing pressure on marginally productive businesses. The joint-production relationship already established in textiles and garments suggests that certain firms have already developed some expertise in meeting these challenges. From the outset of negotiations, the United States advocated assisting the Central American countries. Each Central American country prepared a National Action Plan based on a review of its "trade-related" needs. Assistance is being provided by the United States government through the U.S. Trade and Development Agency, Agency for International Development, and the Department of State, among others; private groups (corporate and non-government organizations—NGOs); and five international organizations (the Inter-American Development Bank—IDB, Central American Bank for Economic Integration—CABEI, United Nations Economic Commission on Latin America and the Caribbean—ECLAC, Organization of American States—OAS, and the World Bank). The CAFTA-DR includes a Committee on Trade Capacity Building to coordinate these types of activities. U.S. inter-agency funding in support of CAFTA-DR trade capacity building peaked as the agreement came to completion, including $20 million for labor and environmental technical assistance in the FY2005 budget. Maintaining formal support for these programs, including ongoing financial commitments, is one challenge supporters of these programs emphasize. This is also true for the trade capacity building efforts in specific non-commercial areas, such as enforcing labor and environmental commitments. Appendix A. Chronology of CAFTA-DR Negotiations Appendix B. Selected Economic Indicators Appendix C. U.S. Merchandise Trade with CAFTA-DR Countries
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The United States Trade Representative (USTR) and trade ministers from Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) on August 5, 2004. Nearly one year later, it faced a contentious debate and close vote in both houses of the U.S. Congress. The Senate passed implementing legislation 54 to 45 on June 30, 2005, with the House following in kind 217 to 215 on July 28, 2005. President Bush signed the legislation into law on August 2, 2005 (P.L. 109-53, 119 Stat. 462). The United States implemented the agreement on a rolling basis as countries brought their laws and regulations into conformity with the obligations of the agreement. El Salvador was the first country to implement the agreement on March 1, 2006. Costa Rica was the last, implementing the agreement on January 1, 2009, after a lengthy procedural delay and national referendum. The CAFTA-DR is a regional agreement with all parties subject to "the same set of obligations and commitments," but with each country defining its own market access schedule with the United States. It is a reciprocal trade agreement, replacing U.S. unilateral preferential trade treatment extended to these countries under the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA), and the Generalized System of Preferences (GSP). It liberalizes trade in goods, services, government procurement, intellectual property, and investment, and addresses labor and environment issues. Most commercial and farm goods attain duty-free status immediately. Remaining trade will have tariffs phased out incrementally over five to twenty years. Duty-free treatment will be delayed longest for the most sensitive agricultural products. To address asymmetrical development and transition issues, the CAFTA-DR specifies rules for transitional safeguards, tariff rate quotas, and trade capacity building. The CAFTA-DR is not expected to have a large effect on the U.S. economy as a whole given the relatively small size of the Central American economies and the fact that most U.S. imports from the region had already been entering duty free under normal trade relations or CBI and GSP preferential arrangements. Adjustments will be slightly more difficult for some sectors, but none are expected to be severe. Supporters see it as part of a policy foundation supportive of both improved intraregional trade, as well as, long-term social, political, and economic development in an area of strategic importance to the United States. Opponents wanted better trade adjustment and capacity building policies to address the potentially negative effects on certain import-competing sectors and their workers. They also argued that the labor, intellectual property rights, and investment provisions in the CAFTA-DR needed strengthening. This report discusses negotiation issues and evolution of the CAFTA-DR agreement from the time negotiations commenced on January 27, 2003 until its implementation by the last country on January 1, 2009. It will not be updated.
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When a Senator introduces a bill or joint resolution, the measure is usually referred to committee, pursuant to provisions of Senate Rules XIV, XVII, and XXV. When the House informs the Senate that it has passed a bill or joint resolution that was introduced in the House, and the Senate receives the measure, the measure is also usually referred to a Senate committee. (Senate rules contain procedures for processing concurrent and simple resolutions (Rule XIV, paragraph 6), treaties (Rule XXX), and nominations (Rule XXXI), which are not covered in this report.) Senate Rule XIV, paragraph 2 requires that bills and resolutions have three readings before passage, and that they be read twice before being referred to committee. (The "third reading" occurs before a vote on final passage.) Although a Senator may demand (under paragraph 2) that the readings occur on three different legislative days, bills and joint resolutions may be read twice on the same day "for reference" (referral) if there is no objection (under paragraph 3). Most bills and resolutions are read twice and referred to committee on the same day that they are introduced by a Senator or received from the House. The Senate may, however, use provisions of Senate Rule XIV to bypass referral of a bill or joint resolution to a Senate committee in order to have the measure placed directly on the Senate Calendar of Business. The calendar's General Orders section lists measures eligible for Senate floor consideration. Broadly, the two purposes of preventing the referral of a bill or joint resolution to a committee and placing it directly on the calendar are (1) to facilitate the full Senate's opportunity to consider the measure; or (2) to bypass a committee's potential inaction or, to the measure's sponsor, potential hostile action. Although placing a bill or joint resolution directly on the calendar does not guarantee that the full Senate will ever consider it, the measure is available for floor consideration and certain procedural steps, such as committee reporting or discharging a committee from a bill's consideration, and procedural requirements, such as the two-day availability of a committee report, may be obviated. In this report, the terms bill ( s ) or measure ( s ) refer to bills and joint resolutions. Senate Rule XIV, paragraph 4, states: "... every bill and joint resolution introduced on leave, and every bill and joint resolution of the House of Representatives which shall have received a first and second reading without being referred to a committee, shall, if objection be made to further proceeding thereon, be placed on the Calendar ." ( Emphasis added .) Therefore, through objection, a bill or joint resolution after two readings is prevented from being referred to committee and is placed directly on the calendar. It is usually the majority leader (or another Senator in his stead), acting on his own or at the request of any other Senator, who objects to "further proceeding"—committee referral—on a measure. For example, this procedure was used to place S. 1035 directly on the calendar. On April 21, 2015, the presiding officer recognized Majority Leader McConnell for this colloquy with the chair: Mr. McCONNELL. Mr. President, I understand that there is a bill at the desk, and I ask for its first reading. The PRESIDING OFFICER. The clerk will read the bill by title for the first time. The senior assistant legislative clerk read as follows: A bill ( S. 1035 ) to extend authority relating to roving surveillance, access to business records, and individual terrorists as agents of foreign powers under the Foreign Intelligence Surveillance Act of 1978 and for other purposes. Mr. McCONNELL. I now ask for a second reading and, in order to place the bill on the calendar under the provisions of rule XIV, I object to my own request. The PRESIDING OFFICER. Objection having been heard, the bill will be read for the second time on the next legislative day. In the next edition of the Senate's Calendar of Business on April 22, this action was recorded in the section Bills and Joint Resolutions Read the First Time. The measure was pending at the desk (of the presiding officer). Since objection had been heard to the second reading, the presiding officer recognized Majority Leader McConnell the next legislative day, April 22: Mr. McCONNELL. Mr. President, I understand there is a bill at the desk due for a second reading. The PRESIDING OFFICER. The clerk will read the bill by title for the second time. The legislative clerk read as follows: A bill ( S. 1035 ) to extend authority relating to roving surveillance, access to business records, and individual terrorists as agents of foreign powers under the Foreign Intelligence Surveillance Act of 1978 and for other purposes. Mr. McCONNELL. In order to place the bill on the calendar under the provisions of rule XIV, I object to further proceedings. The PRESIDENT pro tempore. Objection having been heard, the bill will be placed on the calendar. S. 1035 had received its second reading, but there was objection to further proceeding on referral of the bill to committee. The presiding officer, under Rule XIV, ordered that the bill be placed on the Senate Calendar. In the calendar beginning April 23, S. 1035 appeared as Calendar Order No. 60 in the section General Orders, with other measures eligible for floor consideration. This same procedure is followed to have House-passed bills and joint resolutions placed directly on the Senate Calendar. Bills and joint resolutions are also sometimes placed on the calendar by unanimous consent. (For a fuller examination of the Senate's use of the Rule XIV procedure and other procedures and actions to bypass committees, and also both to bypass committees and pass legislation, see CRS Report RS22299, Bypassing Senate Committees: Rule XIV and Unanimous Consent , by Michael L. Koempel.)
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When a Senator introduces a bill or joint resolution, or a House-passed bill or joint resolution is received in the Senate from the House, the measure is often referred to committee, pursuant to provisions of Senate Rules XIV, XVII, and XXV. The Senate may, however, use provisions of Senate Rule XIV to bypass referral of a bill or joint resolution to a Senate committee, and have the measure placed directly on the Senate Calendar of Business. Although placing a bill or joint resolution directly on the calendar does not guarantee that the full Senate will ever consider it, the measure is available for floor consideration and certain procedural steps or requirements may be obviated. Such procedural steps include committee reporting or discharging a committee from a bill's consideration, and such procedural requirements include the two-day availability of a committee report. Senate rules contain procedures for processing concurrent and simple resolutions, treaties, and nominations, which are not covered in this report. A Senator may also offer a germane, relevant, or nongermane amendment to a measure pending on the Senate floor, in addition to or instead of introducing a bill or joint resolution. Amendments are also not covered in this report. This report will not be updated again in the 115th Congress unless Senate procedures change. For a fuller examination of the Senate's use of the Rule XIV procedure and other procedures and actions to bypass committees, and also both to bypass committees and pass legislation, see CRS Report RS22299, Bypassing Senate Committees: Rule XIV and Unanimous Consent, by Michael L. Koempel.
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The Economic Espionage Act (EEA) outlaws two forms of trade secret theft: theft for the benefit of a foreign entity (economic espionage) and theft for pecuniary gain (theft of trade secrets). Under either proscription, its reach extends to theft from electronic storage. Individual offenders face imprisonment for up to 15 years for economic espionage and up to 10 years for trade secret theft. Individuals also may incur fines of up to $250,000 or twice the loss or gain associated with the offense for trade secret theft. For economic espionage, they face fines of up $5 million or twice the loss or gain. Organizations are fined more severely. They can be fined up $5 million, twice the loss or gain associated with the offense, or three times the value of the stolen trade secret, for trade secret theft. For economic espionage, the fines of organizations jump to a maximum of the greater of $10 million, three times the value of the trade secret, or twice the gain or loss associated with the offense. A court may assess the same sanctions for attempt or conspiracy to commit either offense, or for aiding or abetting the completed commission of the either offense. A sentencing court must order the defendants to pay victim restitution, and the government may confiscate any property that is derived from or used to facilitate either offense. The government may seek to enjoin violations, and, by virtue of amendments in the Defend Trade Secrets Act of 2016, victims may be entitled to sue for double damages, equitable relief, and attorneys' fees. Conduct that violates the EEA's proscriptions may also violate other federal prohibitions, however. Some, like the Computer Fraud and Abuse Act, in addition to imposing criminal penalties, likewise authorize victims to sue for damages and other forms of relief under some circumstances. Elements, Attempt and Conspiracy: The trade secrets prohibition is the more complicated of the EAA's two criminal offenses. It condemns: - Whoever - with intent to convert - a trade secret - related to or including in a product or service used in or intended for use in interstate commerce or foreign commerce - to the economic benefit of anyone other than the owner thereof - intending or knowing that the offense will injure the owner of that trade secret - knowingly (a) steals…, (b) without authorization copies, … downloads, uploads, alters, destroys, … transmits, … sends, … or conveys such information; [or] receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization; or Whoever attempts or conspires to do so. Whoever : The term "whoever" encompasses both individuals and organizations. Thus, individuals and organizations may be guilty of the theft of trade secrets. Subsection 1832(b) confirms this intent by establishing a special fine for "organizations" who commit the offense. For purposes of the federal criminal code, an "organization" is any "person other than an individual." The Dictionary Act supplies examples of the type of entities that may qualify as "persons"—"the words 'person' and 'whoever' include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals." With Intent to Convert : Conversion is a common law concept which is defined as "[t]he wrongful possession or disposition of another's property as if it were one's own; an act or series of acts of willful interference, without lawful justification, with any item of property in a manner inconsistent with another's right, whereby that other person is deprived of the use and possession of the property." This "intent to steal" element, coupled with the subsequent knowledge and "intent to injure" elements, would seem to ensure that a person will not be convicted of theft for the merely inadvertent or otherwise innocent acquisition of a trade secret. Trade Secret : An EEA trade secret is any information that "(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) ... derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public." An owner for these purposes is one "in whom or in which rightful legal or equitable title to, or license in, the trade secret is reposed." Whether an owner has taken reasonable measures to ensure the secrecy of his trade information will depend upon the circumstances of the case. Such measures would ordinarily include limiting access to the information and notifying employees of its confidential nature. Inclusion within the definition of "trade secret" of the instruction that the owner take "reasonable measures" to secure the confidentiality of the information does not render the statute unconstitutionally vague as applied to a defendant whose conduct clearly falls within the statute's proscription. Construction of the "known or readily ascertainable" element of the secrecy definition is more perplexing. On its face, the EEA suggests that information is secret if it is unknown or undiscoverable by the general public, even if it might be known or discoverable within the industry in which the information is relevant. Congress, however, may have intended a more narrow interpretation of "secret," that is, the information is secret only if it is not known to or reasonably ascertainable either by the general public or within the industry in which the information has value. The EEA's definition of "trade secret" is "based largely on the definition of that term in the Uniform Trade Secrets Act." The EEA definition initially referred to information known to or readily ascertainable by the "public." The Uniform Trade Secrets Act (UTSA) definition, however, refers not to the public but to information known to or readily ascertainable by "other persons who can obtain economic value from its disclosure or use." The Defend Trade Secrets Act replaced the original definition with the UTSA language. Product in Commerce : The trade secret must have an interstate or foreign commerce nexus. More specifically, it must be one "that is related to a product or service used in or intended for use in" such commerce. Congress settled upon this phrase after an appellate court held that earlier language covered only theft of a trade secret related to a product that was, or was intended to be, sold or otherwise placed in the stream of commerce. Economic Benefit of Another : Someone other than the trade secret's owner must be the intended beneficiary of the theft or destruction. The thief may be, but need not be, the intended beneficiary. Moreover, a close reading of the statute argues for the proposition that no economic benefit need actually accrue; economic benefit need only be intended. Yet if no economic benefit is intended, there is no violation. Intent to Injure : The government must prove that the defendant intended to injure the trade secret's owner or that he knew the owner would be injured. However, it need not show actual injury. The section "does not require the government to prove malice or evil intent, but merely that the actor knew or was aware to a practical certainty that his conduct would cause some disadvantage to the rightful owner." Again, the element addresses the defendant's state of mind, not reality. Nothing in the statute's language demands that the government prove actual injury. Knowingly : The last of the section's three mens rea requirements demands that the defendant be aware that he is stealing, downloading, or receiving a stolen trade secret. There is some dispute over whether this requires the prosecution to prove that the defendant knew that he was stealing, downloading, or receiving proprietary information or that he knew that he was stealing, downloading, or receiving a trade secret . Stealing and the Like : A person may be guilty of the theft of a trade secret only if he "knowingly" steals a trade secret, replicates a trade secret, destroys or alters a trade secret, or receives a stolen trade secret. Each of the alternative means of deprivation is cast in a separate subsection. The first subsection covers not only stealing a trade secret, but also concealing it or acquiring it by fraud. Trade secrets are information and thus can be simultaneously held by an owner and a thief. As a result, the second subsection covers situations where the owner is not necessarily deprived of the information, but is denied control over access to it. It proscribes unauthorized copying, downloading, uploading, or otherwise conveying the information. It also outlaws alteration or destruction of a trade secret. The Justice Department has argued that this second means of misappropriation includes instances where a faithless employee, former employee, or cyber intruder commits the trade secret to memory and subsequently acts in manner necessary to satisfy the other elements of the offense. It makes the point with some trepidation, however: This is not to say, however, that any piece of business information that can be memorized is a trade secret. As noted, the EEA does not apply to individuals who seek to capitalize on their lawfully developed knowledge, skill, or abilities. When the actions of a former employee are unclear and evidence of theft has not been discovered, it may be advisable for a company to pursue its civil remedies and make another criminal referral if additional evidence of theft is developed. Where available, tangible evidence of theft or copying is helpful in all cases to overcome the potential problem of prosecuting the defendant's "mental recollections" and a defense that "great minds think alike." The third subsection outlaws the knowing receipt of stolen trade secret information. Conviction requires proof that a trade secret was stolen or converted in violation of one of the other subsections and that the defendant knew it. Attempt : Defendants who attempt to steal a trade secret face the same penalties as those who succeed. Attempt consists of intent to commit the offense and a substantial step toward the attainment of that goal. This would indicate that the information which the defendant seeks to steal need not be a trade secret, as long as he believes it is. Conspiracy : Defendants who conspire to steal a trade secret also face the same penalties as those who commit the substantive offense. "In order to find a defendant guilty of conspiracy, the prosecution must prove.... that the defendant possessed both the intent to agree and the intent to commit the substantive offense. In addition, the government must prove that at least one conspirator committed an overt act, that is, took an affirmative step toward achieving the conspiracy's purpose." It is no defense that circumstances, unbeknownst to conspirators, render success of the scheme unattainable, as for example when the defendants plotted to steal information that was not in fact a trade secret. Consequences : Individual offenders face imprisonment for up to 10 years and fines of up to $250,000. The court may fine an organization up to $5 million upon conviction. Both individuals and organizations face a higher maximum fine if twice the gain or loss associated with the offense exceeds the statutory maximum (i.e., $250,000/$5 million). A sentencing court must also order the defendant to pay restitution to the victims of the offense. Property derived from, or used to facilitate, commission of the offense may be subject to confiscation under either civil or criminal forfeiture procedures. The Attorney General may sue for injunctive relief, and owners for damages, equitable relief, and attorneys' fees. Finally, the offense is a RICO predicate offense and consequently a money laundering predicate offense. The EEA's economic espionage and theft of trade secret offenses share many of the same elements. There are four principal differences. The theft of a trade secret must involve the intent to benefit someone other than the owner. It must involve an intent to injure the owner. And, it must involve a trade secret "that is related to or included in a product that is produced for or placed in interstate or foreign commerce." Economic espionage, on the other hand, must involve an intent to benefit a foreign entity or at least involve the knowledge that the offense will have that result. It does not require an intent to injure the owner. And, it applies to any trade secret, notwithstanding the absence of any connection to interstate or foreign commerce. Finally, economic espionage is punished more severely. The maximum term of imprisonment is 15 years rather than 10 years, and the maximum fine for individuals is $5 million rather than $250,000. For organizations, the maximum fine is the greater of $10 million or three times the value of the trade secret rather than $5 million. As in the case of stealing trade secrets, the maximum permissible fine may be higher if twice the amount of the gain or loss associated with the offense exceeds the otherwise applicable statutory maximum. And the crime is likewise a RICO and consequently a money laundering predicate offense. Section 1831 condemns: - Whoever - intending or knowing the offense will benefit - a foreign government, a foreign instrumentality, or a foreign agent - knowingly - (a) steals … (b) without authorization copies … downloads, uploads, alters, destroys, … transmits, … sends, … conveys a trade secret; [or] (c) receives, buys, or possesses a trade secret, - knowing the same to have been stolen or appropriated, obtained, or converted without authorization; or Whoever attempts or conspires to do so. Foreign Beneficiary : A casual reader might conclude that any foreign entity would satisfy Section 1831's foreign beneficiary element. Section 1839's definition of foreign agent and foreign instrumentality, however, makes it clear that an entity can only qualify if it has a substantial connection to a foreign government. The definition of foreign instrumentality refers to foreign governmental control or domination. The description of a foreign agent leaves no doubt that the individual or entity must be the agent of a foreign government. The theft of a trade secret demands an intent to confer an economic benefit. Economic espionage is not so confined. Here, "benefit means not only economic benefit but also reputational, strategic, or tactical benefit." Moreover, unlike the theft offense, economic espionage may occur whether the defendant intends the benefit or is merely aware that it will follow as a consequence of his action. As in the case of trade secret theft, however, the benefit need not be realized; it is enough that defendant intended to confer it. Protective Orders : It would be self-defeating to disclose a victim's trade secrets in the course of the prosecution of a thief. Consequently, the EEA authorizes the trial court to issue orders to protect the confidentiality of trade secrets during the course of a prosecution and permits the government to appeal its failure to do so. The government may not appeal an order to reveal information it has already disclosed to the defendant. Nevertheless, in such instances, appellate review of a district court's disclosure order may be available through a writ of mandamus. Extraterritoriality : The Supreme Court has said on a number of occasions that "[i]t is a longstanding principle of American law 'that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.'" With this in mind, Congress specifically identified the circumstances under which it intended the economic espionage and theft of trade secrets provisions to apply overseas. Either offense may be prosecuted as long as the offender is a U.S. national or an act in furtherance of the offense is committed within this country. The legislative history indicates that these are the only circumstances under which violations abroad may be prosecuted. This may mean that foreign conspirators may not be charged unless some overt act in furtherance of the scheme occurs in the United States. It may also preclude prosecution when trial would have been possible in the absence of an express provision. For example, in the absence of the limiting provision, the courts would likely conclude that Congress intended to allow prosecution of overseas offenses of foreign nationals that have an impact within the United States. Prosecutorial Discretion : For five years after passage of the Economic Espionage Act, neither economic espionage nor trade secret violations of its provisions could be prosecuted without the approval of senior Justice Department officials. Prosecutors must still secure approval before bringing charges of economic espionage, but approval is no longer necessary for the prosecution of theft of trade secret charges. For some time, the EEA authorized the Attorney General to bring a civil action to enjoin violations of its provisions, but it did not authorize a corresponding private cause of action. The Defend Trade Secrets Act created a private cause of action. Private Cause of Action : The EEA now provides that "[a]n owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce." Not just anyone who suffers damage as the result of trade secret misappropriation; "owners" may sue. EEA, however, defines the term "owners" to include licensees. The trade secrets protected by civil suit are the same as those protected by the criminal proscriptions. The definition of the action that gives rise to liability—"misappropriation"—is taken from the Uniform Trade Secrets Act. The term encompasses acquiring, disclosing, or using a trade secret taken from its owner by scurrilous ("improper") means. Pre-trial Seizure : Perhaps EEA's most distinctive feature is its pre-trial seizure procedure. It allows an owner who alleges that his trade secret has been appropriated to apply to the court for an ex parte order seizing the purported trade secret. The procedure is replete with restrictions on its use, some reminiscent of the limitations on a temporary restraining order (TRO) in federal civil actions: inadequacy of alternatives; a threat of immediate and irreparable harm; a likelihood of success on the merits; and a favorable balance of harms. Yet, the procedure is confined to instances where a TRO is insufficient. "The ex parte seizure provision is expected to be used in instances in which a defendant is seeking to flee the country or planning to disclose the trade secret to a third party immediately or is otherwise not amendable to the enforcement of the court's orders." The party from whom the trade secret is seized is entitled to a hearing within seven days, at which the owner of the trade secret bears the burden justifying the seizure order. Anyone injured by a "wrongful or excessive" seizure may sue for the relief described in the Trademark Act; that is, for "damages for lost profits, cost of materials, loss of good will, and punitive damages in instances where the seizure was sought in bad faith, and, unless the court finds extenuating circumstances, to recover a reasonable attorney's fee," and, in the discretion of the court, prejudgment interest. Damages and Equitable Relief : Relying heavily on the UTSA, EEA empowers district courts to award an aggrieved owner equitable relief; damages; and in case of willful and malicious misappropriation, double damages and attorneys' fees. The court may also award attorneys' fees to a party who prevails against a bad faith claim of misappropriation. An action for the misappropriation must be brought within three years of when it is discovered or would have been discovered with the exercise of reasonable diligence. Section 1837 states that the chapter 90 applies to conduct occurring outside the United States if "the offender" is a U.S. national or an act in furtherance of the offense is committed within the United States. Section 1836 is found in chapter 90. It would therefore appear that Section 1836 applies to conduct occurring outside the United States if the offender is a U.S. national or an act in furtherance of the offense is committed within the United States. In the absence of a Section 1837-like statement of congressional intent, the Supreme Court has shown a great reluctance to recognize private causes of action based on conduct abroad. Whether the concerns evidenced there influence future extraterritorial application of Section 1836's civil remedies remains to be seen.
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Stealing a trade secret is a federal crime when the information relates to a product in interstate or foreign commerce, 18 U.S.C. 1832 (theft of trade secrets), or when the intended beneficiary is a foreign power, 18 U.S.C. 1831 (economic espionage). Section 1832 requires that the thief be aware that the misappropriation will injure the secret's owner to the benefit of someone else. Section 1831 requires only that the thief intend to benefit a foreign government or one of its instrumentalities. Offenders face lengthy prison terms as well as heavy fines, and they must pay restitution. Moreover, property derived from the offense or used to facilitate its commission is subject to confiscation. The sections reach violations occurring overseas, if the offender is a United States national or if an act in furtherance of the crime is committed within the United States. Depending on the circumstances, misconduct captured in the two sections may be prosecuted under other federal statutes as well. A defendant charged with stealing trade secrets is often indictable under the Computer Fraud and Abuse Act, the National Stolen Property Act, and/or the federal wire fraud statute. One indicted on economic espionage charges may often be charged with acting as an unregistered foreign agent and on occasion with disclosing classified information or under the general espionage statutes. Finally, by virtue of the Defend Trade Secrets Act (P.L. 114-153), Section 1831 and 1832 are predicate offenses for purposes of the federal racketeering and money laundering statutes. P.L. 114-153 (S. 1890) dramatically increased EEA civil enforcement options when it authorized private causes of action for the victims of trade secret misappropriation. In addition, the EEA now permits pre-trial seizure orders in some circumstances, counterbalanced with sanctions for erroneous seizures. This report is an abridged version, without the footnotes or attribution, of CRS Report R42681, Stealing Trade Secrets and Economic Espionage: An Overview of the Economic Espionage Act.
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The Patent Act of 1952, codified in Title 35 of the United States Code, defines current patent law. According to section 101, one who "invents or discovers any new and useful process, machine, manufacture, or any composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title." To be patentable, an invention must be useful, novel, and nonobvious. The requirement of usefulness, or utility, is satisfied if the invention is operable and provides a tangible benefit. To be judged novel, the invention must not be fully anticipated by a prior patent, publication, or other knowledge within the public domain. A nonobvious invention must not have been readily within the ordinary skills of a competent artisan at the time the invention was made. The invention must be fully described. Once the United States Patent and Trademark Office (USPTO) issues a patent, the owner enjoys the right to exclude others from making, using, selling, offering to sell, or importing into the United States the patented invention. Generally, the term of a patent is 20 years from the date the application was filed. In the process of obtaining a patent, the information associated with the patent is published and made available to the public. In a June 2013 decision, the Supreme Court of the United States ruled in Association for Molecular Pathology v. Myriad Genetics, Inc. , that genomic DNA was ineligible for patenting under 35 U.S.C. §101 because of the "product of nature" doctrine. Products of nature (preexisting substances found in the wild) may not be patented, per se . However, the courts have also determined that such a product of nature may be patentable if significant artificial changes are made. By purifying, isolating, or otherwise altering a naturally occurring product, an inventor may obtain a patent on the product in its altered form. Adopting the view that isolated and purified genomic DNA satisfied this exception to the "product of nature" doctrine, the USPTO issued over 50,000 patents relating at least in part to DNA. However, some experts believed that the decision to patent human genes misconstrued the "product of nature" principle. In their view, the fact that scientists have isolated a gene is a "technicality" that did not allow genes to be patented. The Supreme Court decision in Myriad reflects this latter position. The litigation commenced on May 12, 2009, when the Association for Molecular Pathology and 19 other plaintiffs, including individual physicians, patients, and researchers, filed a lawsuit against the USPTO, Myriad Genetics, Inc., and the Directors of the University of Utah Research Foundation. The plaintiffs challenged several patents owned by Myriad that claim isolated human genes known as BRCA1 and BRCA2. Certain alterations or mutations in these genes are associated with a predisposition to breast and ovarian cancers. Due to its intellectual property rights, Myriad was the sole commercial provider of genetic testing related to breast and ovarian cancer associated with the BRCA1 and BRCA2 genes. The plaintiffs asserted that Myriad's gene patent claims were invalid because, in their view, human genes are naturally occurring products that do not constitute patentable subject matter. The U.S. District Court for the Southern District of New York sided with the plaintiffs and held that Myriad's gene patent claims were invalid under 35 U.S.C. §101. Judge Sweet reasoned that Myriad's claimed isolated DNA was not "markedly different from native DNA as it exists in nature" and therefore could not be patented. Following an appeal, the Federal Circuit reversed this holding. The Court of Appeals reasoned that "isolated" DNA is not merely "purified" DNA—rather, it has been "manipulated chemically so as to produce a molecule that is markedly different from that which exists in the body." Under this reasoning, human genes consist of patentable subject matter. The Supreme Court subsequently agreed to hear the Myriad case but did not issue a ruling in the matter. Rather, on March 26, 2012, the Court vacated the judgment and remanded the matter back to the Federal Circuit with instructions to reconsider the appeal. The Federal Circuit responded by once again holding that both isolated DNA and cDNA were patent eligible. The Supreme Court then granted certiorari . Justice Thomas, writing for the Court, initially observed that Myriad had neither created nor altered the generic information encoded in the BRCA1 and BRCA2 genes. Rather, Myriad had discovered the precise location and genetic sequence of those genes. According to Justice Thomas, then, "Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention." The Supreme Court also was unimpressed that Myriad claimed DNA that had been isolated from the human genome through the severing of chemical bonds, with a non-naturally occurring molecule as a result. According to Justice Thomas, "Myriad's claims are simply not expressed in terms of chemical composition, nor do they rely in any way on the chemical changes that result from the isolation of a particular section of DNA." The Court took a more favorable view of cDNA, however. Observing that "cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived," Justice Thomas concluded that cDNA did not constitute a "product of nature" and therefore could be patented. Justice Thomas also found it important to note what the Myriad opinion did not implicate. The case involved neither an innovative method of manipulating genes while searching for the BRCA1 and BRCA2 genes, the Court explained, nor new applications of knowledge about those genes. The Court also indicated that it had not considered the patentability of DNA in which the order of the naturally occurring nucleotides has been altered. Instead, the Court "merely [held] that genes and the information they encode are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material." The opinion of Justice Thomas was joined in full by seven of his colleagues. Justice Scalia contributed a one-paragraph concurring opinion that joined the judgment of the Court and all of its opinion except those portions "going into fine details of molecular biology." Justice Scalia found himself "unable to affirm those details on my own knowledge or even my own belief." This shortcoming did not prevent him from concluding that isolated genomic DNA was identical to its natural state, however, while cDNA could be patented because it was a synthetic creation not found in nature. Shortly after the Supreme Court issued its ruling, Myriad Genetics, Inc. and other plaintiffs commenced patent infringement litigation against certain genetic testing service providers. Although the Supreme Court invalidated Myriad's claims on genomic DNA, Myriad asserted claims toward other genetic technologies. These claims recite in part, among other subject matter, a "method for detecting a germline alteration in a BRCA1 gene," an "isolated DNA coding for a BRCA1 polypeptide," a "method for screening germline of a human subject for an alteration of a BRCA1 gene," and a "pair of single-stranded DNA primers." This litigation may provide further guidance as to the patentability of gene-related inventions in the wake of the Supreme Court's decision. The Myriad holding is expected to make it difficult for inventors to protect early, gene-related discoveries through the patent system. In particular, how the courts will apply the decision to other biologic products, including antisense DNA, microRNA, nucleic acids, proteins, and stem cells remains to be seen. However, the Supreme Court appears to approve of patent claims drawn to chemical modifications of naturally occurring substances, particularly if that modification endows the substance with a new property. For example, even slightly altered genes would appear to comprise patentable subject matter. As the USPTO explained in a memorandum released hours after the Myriad case issued: As of today, naturally occurring nucleic acids are not patent eligible merely because they have been isolated. Examiners should now reject product claims drawn solely to naturally occurring nucleic acids or fragments thereof, whether isolated or not, as being ineligible subject matter under 35 U.S.C. §101. Claims clearly limited to non-naturally-occurring nucleic acids, such as a cDNA or a nucleic acid in which the order of the naturally occurring nucleotides has been altered (e.g., a man-made variant sequence), remain eligible. Other claims, including method claims, that involve naturally occurring nucleic acids may give rise to eligibility issues and should be examined under the existing guidance ... Firms that employ cDNA to develop novel therapeutic proteins stand to benefit from the Myriad case. Still, one wonders if the Court neglected to recall its earlier holding in Mayo v. Prometheus that that conventional or obvious pre-solution activity does not transform an unpatentable law of nature into a patent-eligible application of such law. cDNA is derived from DNA and is identical to DNA except that the non-coding regions have been removed—a choice dictated by natural laws and not the inventor. Further, the production of cDNA is reportedly well-understood and routine. Arguably, then, no scientific distinction pertinent to patent eligibility exists between genomic DNA and cDNA. Under Myriad , however, DNA is not patentable subject matter but cDNA may be patented. Gene patents have been subject to a longstanding debate. Although the Supreme Court declared that genomic DNA may not be patented, it held that cDNA fulfills the requirements of 35 U.S.C. §101. In addition, the USPTO has issued other sorts of gene-related inventions, including those relating to genetic screening methods, polypeptides, DNA primers, and other technologies. As a result, the debate on gene patents potentially remains active. Some of its main contours are outlined below. An often held belief is that gene patents permit outsiders ownership of another person's genetic makeup, often without their knowledge or consent. This concern led to complaints that patients no longer control their own bodies and doctors are being constrained from testing for various diseases. Professor Lori Andrews argues that patents hinder access to testing procedures because "gene-patent holders can control any use of 'their' gene; they can prevent a doctor from testing a patient's blood for a specific genetic mutation and can stop anyone from doing research to improve a genetic test or to develop a gene therapy based on that gene." This perceived constraint on research and testing options is an issue to opponents of gene patents. According to Dr. Debra Leonard, patents on "specific genetic information limits the medical use of the information and impedes or prevents widespread research on the disease, the traditional pathway by which medical knowledge is advanced and shared." However, other experts disagree. As noted by Dr. Jorge Goldstein and Attorney Elina Golod, the courts have consistently "taken the position that a person does not own any tissues or cells once they are outside the person's body." Attorneys Lee Bendekgey and Dr. Diana Hamlet-Cox found no evidence of patients unable to utilize existing genetic tests because of patents. Instead, they maintain, it is a financial issue associated with the cost of health care and/or an issue of profits for the doctor or clinical geneticist wishing to administer tests patented by other inventors. Similarly, Professor Iain Cockburn found "there is little quantitative evidence thus far of a negative impact of patents on scientific research activity.... " From his perspective, the disclosure obligations of the patent system may better serve the objective of encouraging the diffusion of knowledge and raising social returns than the chief legal alternative, trade secret protection. Actual experience and cited studies suggest that companies which do not control the results of their investments—either through ownership of patent title, exclusive license, or pricing decisions—tend to be less likely to engage in related R&D. Patents can provide an economic incentive for companies to pursue further development and commercialization. Studies indicate that research funding accounts for approximately one-quarter of the costs associated with bringing a new product to market. According to The Economist , "A dollar's worth of academic invention or discover requires upwards of $10,000 of private capital to bring [it] to market." Patent ownership is seen as a way to encourage the additional, and often substantial investment necessary for new goods and services, particularly in the case of small business. In an academic setting, the possession of title to inventions is expected to provide motivation for the university to license the technology to the private sector for commercialization in anticipation of royalty payments. While various analyses indicate that the value of patents differs across industries and between firms of different maturation levels within a sector, the pharmaceutical industry perceives patents as critical to protecting innovation. Several studies over the years have demonstrated the important role patents play in the pharmaceutical sector. Of the 18 major manufacturing industries analyzed by Richard Levin and his colleagues, only drug companies rated product patents the most effective means of ensuring that firms can capture the profits associated with their innovations. Later research by Professor Wesley Cohen et.al demonstrated that patents were considered the most effective method to protect inventions in the drug industry, particularly when biotechnology is included. A recent paper by several professors at the Berkeley School of Law, University of California, found that there were "substantial differences between the health-related sectors (biotechnology and medical devices), in which patents are more commonly used and considered important, and the software and Internet fields, in which patents are reported to be less useful." These studies reinforce earlier work by the late Professor Edwin Mansfield that indicated 65% of pharmaceutical inventions would not have been brought to market without patent protection in contrast to the 8% of innovations made in other industries. Patents may be particularly important in the pharmaceutical sector because of the relative ease of replicating the finished product. Imitation costs vary among industries. For example, while it is expensive, complicated, and time consuming to duplicate an airplane, it is relatively simple to chemically analyze a pill and reproduce it. The degree to which industry perceives patents as effective has been characterized as "positively correlated with the increase in duplication costs and time associated with patents." Other commentators note that patents are particularly important in this sector because of the relative ease of replicating the finished product. Costs associated with imitating a product "are extremely low relative to the innovator's costs for discovering and developing a new compound." Early research in this area by Mansfield indicated that, in certain industries, patents significantly raise the costs incurred by nonpatent holders wishing to use the idea or invent around the patent—an estimated 40% in the pharmaceutical sector, 30% for major new chemical products, and 25% for typical chemical goods—and are thus viewed as significant. However, in other industries, patents have much smaller impact on the costs associated with imitation (e.g., in the 7%-15% range for electronics), and may be considered less successful in protecting resource investments. Opponents of gene patents argue that they restrain additional research because "there are no alternatives to a patented gene in diagnosis, treatment, and research," and owners require licensing fees. However, despite what some experts claim to be a negative result of financial considerations in the biomedical research community, others maintain that, at most, gene patents "prevent the doctors and clinical geneticists from performing these tests for profit, or in a way that competes with the patent holder, without reimbursement to the inventors of those tests." Some analysts assert that certain patents, particularly those on research tools in biotechnology, hinder the innovation process. Professors Rebecca Eisenberg and Richard Nelson state that ownership of research tools may "impose significant transaction costs" that result in delayed innovation and possible future litigation. They argue that patents also can stand in the way of research by others: Broad claims on early discoveries that are fundamental to emerging fields of knowledge are particularly worrisome in light of the great value, demonstrated time and again in the history of science and technology, of having many independent minds at work trying to advance a field. Public science has flourished by permitting scientists to challenge and build upon the work of rivals. Professor Arti Rai argues that "the most important research tools are fundamental research platforms that open up new and uncharted areas of investigation" that need further development by researchers in the field. While acknowledging that patent protection on research tools has stimulated private investment in biotechnology and the development of new products and processes, Eisenberg writes that: Patents on research tools threaten to restrict access to discoveries that, according to the firm beliefs of scientists trained in the tradition of open science, are likely to have the greatest social value if they are widely disseminated to researchers who are taking different approaches to different problems. Other commentators dispute these assertions. F. Scott Kieff, then a member of the visiting faculty at Northwestern University School of Law, maintains that there was no such "norm" regarding open scientific access as opposed to intellectual property protection in the basic biological science community. He notes that "experience shows that patents on inputs generally do not prevent the production of outputs" and that the availability of intellectual property protection has expanded the resources available in the biotechnology community and led to its success. Bendekgey and Hamlet-Cox agree that there is no evidence that gene patents have caused a decrease in research as a whole in the biomedical arena or in gene therapies. A study by Professors John Walsh, Ashish Arora, and Wesley Cohen found little evidence that work has been curtailed due to intellectual property issues associated with research tools. Scientists are able to continue research by "licensing, inventing around patents, going offshore, the development and use of public databases and research tools, court challenges, and simply using the technology without a license (i.e., infringement)." According to the authors, private sector owners of patents permitted such infringement in academia (with the exception of those associated with diagnostic tests in clinical trials) "partly because it can increase the value of the patented technology." A later analysis by Professors Walsh, Cohen, and Charlene Cho concluded that patents do not have a "substantial" impact upon basic biomedical research and that "none of [their] random sample of academics reported stopping a research project due to another's patent on a research input, and only about 1% of the random sample of academics reported experiencing a delay or modification in their research due to patents." However, obtaining "tangible" research inputs (e.g., actual materials) appear to be more difficult because of competition, cost, and time issues. Congress has exhibited a strong and ongoing interest in facilitating the development of new, innovative pharmaceuticals for the marketplace while reducing the cost of drugs to consumers. To date, the U.S. system of research, development, and commercialization has had a clear impact on the pharmaceutical and biotechnology industries. Policies pertaining to funding for research and development (R&D), intellectual property protection, and cooperative ventures have played an important role in the economic success of these sectors. A critical component of many of these federal efforts concerns patents. Patent ownership can provide an economic incentive for companies to take the results of research and make the often substantial investment necessary to bring new goods and services to the marketplace. The grant of a patent provides the inventor with a mechanism to capture the returns to his invention through exclusive rights on its practice for a limited time. In the pharmaceutical industry, patents are perceived as particularly important to innovation due, in part, to the ease of duplicating the invention. Now with the decision in Myriad , it remains to be seen what the effect may be on research and development in this area and on innovation in the health care arena.
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In the past, the U.S. courts upheld gene patents that met the criteria of patentability defined by the Patent Act. However, the practice of awarding patents on genes came under scrutiny by some scientists, legal scholars, politicians, and other experts. In June 2013, the Supreme Court ruled in Association for Molecular Pathology v. Myriad Genetics, Inc. that genomic DNA was ineligible for patenting under 35 U.S.C. §101 due to the "product of nature" doctrine. However, the Court adopted the view that cDNA could be patented. The Myriad holding attempts to provide inventors and firms with incentives to conduct R&D while recognizing that patent proprietors might obtain too much control over medical practice and future research.
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Congress has demonstrated an ongoing interest in many different aspects of the three-year civil war in Syria. The humanitarian situation, in particular, has garnered significant bipartisan attention. Members have proposed and enacted legislation addressing the issue and have held hearings on the U.S. and international humanitarian response to the conflict. Although not discussed in this report, the use of chemical weapons in Syria on August 21, 2013, triggered an intense debate over possible U.S. military intervention. This debate created temporary momentum focused on the dire humanitarian situation within Syrian where humanitarian organizations remain severely constrained by the conflict, fighting, and restrictions imposed by the Syrian government. Humanitarian assistance has traditionally been one of the least controversial types of foreign aid, and in the Syria context, it has so far been one avenue in which the United States has provided support to Syrian civilians absent a political solution. The United States remains the largest humanitarian donor. As of mid-June 2014, it is providing roughly 27% of the funding for the humanitarian response in calendar year (CY) 2014. In CY2012-CY2013, the United States provided an average of 22% of the funding for the crisis. U.S. humanitarian policy is guided by concerns about access and protection within Syria; the large refugee flows out of the country that strain the resources of neighboring countries (and could negatively impact the overall stability of the region); and an already escalating and protracted humanitarian emergency. Along with the international community, the United States provides humanitarian assistance to civilians affected by the conflict both inside and outside Syria. Such assistance includes medical care and medical supplies (including immunization programs), food, water, shelter, and other non-food items such as blankets and clothing. It also supports programs focused on psycho-social rehabilitation of refugees and the prevention of gender-based violence. Since the conflict began in March 2011 in Syria, reportedly an unknown number of civilians have been wounded and tens of thousands of lives lost. Some observers estimate the death toll figures to be as many as 100,000 to 150,000, and others say it is likely much higher. In January 2014, according to press reports, the United Nations stopped updating the death toll figures from the Syria conflict, stating that it could no longer verify the sources of information that led to the last count of 100,000 (July 2013). It is estimated that more than 2% of the pre-conflict Syrian population of 21.4 million has been killed, maimed, or wounded over the course of the conflict. In addition to the use of chemical weapons, there are repeated allegations of serious human rights and international humanitarian law violations on all sides of the conflict. Observers claim that hundreds of detainees and political prisoners have died under torture. The U.N. Independent International Commission of Inquiry on the Syrian Arab Republic pointed to the "reckless manner in which parties to the conflict conduct hostilities" as a main cause of the civilian casualties and displacement. The International Committee of the Red Cross (ICRC) has repeatedly urged all sides to fully comply with international humanitarian law. The ICRC currently has no access to detainees. The United States and many other countries have increasingly recognized the human rights crisis, which not only exacerbates the humanitarian situation, but raises the prospect that atrocities reaching the level of crimes against humanity and war crimes by armed groups may have been committed, including the use of chemical weapons that killed (by some reports) as many as 1,400 civilians on August 21, 2013. On January 17, 2014, U.N. High Commissioner for Human Rights Navi Pillay condemned the obstruction of food and medical deliveries to those living in the Yarmouk Palestinian refugee camp, emphasizing that starving civilians as a method of combat was prohibited under international law. Other reports of mass executions of detainees on the one hand and killing of civilians on the other have also generated condemnation. Outside Syria, humanitarian workers have observed a sharp rise in gender-based crimes, including rape and sexual violence, as well as exploitation and discrimination in refugee camps and informal settlements. The Independent International Commission of Inquiry on the Syrian Arab Republic was established on August 22, 2011, by the Human Rights Council. Its mandate is to investigate all alleged violations of international human rights law since March 2011 in the Syrian Arab Republic. The commission was also tasked with (1) establishing the facts and circumstances of such violations and (2) of the crimes perpetrated and, where possible, to identify those responsible with a view of ensuring that perpetrators of violations, including those that may constitute crimes against humanity, are held accountable. Recently, Pillay called for Syria to be referred to the International Criminal Court (ICC). On May 22, 2014, China and Russia blocked the French draft resolution referring Syria to the ICC. All other Council members voted in favor of the referral. The short- to medium-term outlook for the resolution of the conflict in Syria and impact on its neighbors is not positive. The United States and other third parties face a number of difficult policy choices with limited potential to decisively shape the overall outcome. These issues are addressed in other CRS reports. As the international community deliberates over what action it can or should take on the crisis, a massive humanitarian operation continues in parts of Syria and in neighboring countries. On October 2, 2013, the U.N. Security Council issued a Presidential Statement that urged Syrian authorities "to facilitate the expansion of humanitarian relief operations and lift bureaucratic impediments and other obstacles in Syria." Although non-binding, the statement indicated that the Council members recognized the deterioration of the humanitarian situation and the need to address particular elements, including access. As of mid-June 2014, over 3.5 million people were estimated to be living in hard-to-reach areas of Syria, including at least 242,000 people living in areas besieged by either the Government of Syria or opposition forces. Moreover, reports of intentional policies of starvation in areas under siege by the government, attacks against civilians and indiscriminant use of heavy weapons, and a weak health infrastructure that is often under deliberate attack illustrate the dire conditions under which civilians are trying to survive and aid agencies must operate. For many months, Valerie Amos, U.N. Under Secretary General for Humanitarian Affairs and Emergency Relief Coordinator, U.N. Office for the Coordination of Humanitarian Assistance (UNOCHA), has publicly called for all parties to end the violence, allow access for aid organizations, and "respect their obligations under international human rights and humanitarian law." For example, on December 31, 2013, Amos condemned the attacks against civilians in Aleppo and raised concerns about the government's indiscriminant use of heavy weapons. In a January 17, 2014, note to Council members, she acknowledged incremental progress in some situations, but emphasized the intense needs of civilians in besieged areas. On June 4, she issued a press release, focused on lack of access and violations of international humanitarian and human rights law. The "Geneva II" talks in Switzerland, which include some members of the Syrian opposition, representatives of the Syrian government, and other government leaders, were launched on January 22, 2014. The first round came to an end on January 31. Many experts and observers hoped that a lasting agreement would have been reached on "humanitarian pauses" to allow access and relief to thousands of civilians blockaded in towns and cities in Syria. On February 6, 2014, a representative of the U.N. Secretary-General "welcomed the reports that the Syrian parties have agreed to a humanitarian pause to allow civilians out of, and aid into, Old Homs City." The United Nations and its humanitarian partners prepositioned food and medical supplies on the outskirts of the besieged city with staff on standby to assist as a temporary ceasefire allowed some access, delivery of aid, and evacuations of civilians. A second round of the Geneva II talks took place in Switzerland between February 10-15, but ended with little progress in efforts to end the civil war. The parties reportedly agreed to an agenda for a third round of talks. After nearly two years, and amid continued lack of progress on a peaceful resolution to the conflict, on May 13, 2014, Secretary-General Ban Ki-moon announced that he "regretfully accepted" the resignation of Lakhdar Brahimi, the Joint United Nations-League of Arab States Special Representative on the crisis. He left his post effective May 31. Further recognizing the need for increased humanitarian access, on February 22, 2014, the U.N. Security Council unanimously adopted Resolution 2139 (2014), which demanded that "all parties, in particular the Syrian authorities, promptly allow rapid, safe and unhindered humanitarian access for U.N. humanitarian agencies and their implementing partners, including across conflict lines and across borders." The five-page resolution is comprehensive in its statement about the humanitarian situation, specifically addressing the impact on civilians in Syria and the region, and the efforts of host countries, the United Nations, and humanitarian actors to respond to the crisis. It also condemned the violations of human rights and international humanitarian law; demanded the end to all forms of violence, the cessation of attacks against civilians, and indiscriminate use of weapons; and called for the implementation of the aforementioned October 2, 2013 statement by the President of the Security Council. In addition, it called on parties to lift the sieges of populated areas and allow the delivery of food and medicine. Citing the Syrian authorities in particular, the Council urged all parties "to take all appropriate steps to facilitate the efforts of the United Nations, specialized agencies, and all humanitarian actors engaged in humanitarian relief activities, to provide immediate humanitarian assistance to the affected people in Syria." The resolution touched on medical neutrality, protection of civilians, detention and torture, and security of aid workers. It demanded an end to impunity for violations of international humanitarian law, and condemned the rise of Al-Qaeda- affiliated terrorist attacks. The Council requested that the Secretary-General submit a report to it every 30 days on the implementation of the resolution and expresses "its intent to take further steps in the case of non-compliance." On February 25, 2014, the U.N. General Assembly held an informal briefing on the humanitarian situation in Syria, at which the Secretary-General delivered remarks. Other senior officials also spoke at the meeting. On April 30, U.N. Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator Valerie Amos briefed the U.N. Security Council regarding the lack of progress in implementation of UNSC Resolution 2139. Amos is expected to brief Council members again on humanitarian access later in June. Reportedly, the Security Council is considering a resolution to authorize cross-border aid deliveries into Syria regardless of the approval of the Syrian Government. The humanitarian situation in Syria and in neighboring countries is dire. As conditions inside Syria continue to deteriorate, UNOCHA estimates that of an overall population of just fewer than 21.4 million, nearly 50% (9.3 million people) are in need of humanitarian assistance, including between 6.5 million displaced inside Syria. The number of Syrians that have been displaced as refugees, primarily to countries in the immediate surrounding region, is estimated to be 2.8 million. Intense fighting and violence, population displacement, lack of basic public services, and economic collapse drive the humanitarian crisis. In recent months, cities and towns in Syria under siege by the government or opposition forces have added a layer of desperation for the more than 242,000 civilians that United Nations officials estimate are trapped and without access to humanitarian assistance. The conflict has brought out social, political, and sectarian tensions among Syrians in general amid concerns for minority groups in particular. The destruction of housing and infrastructure (hospitals, schools) combined with economic collapse has affected most Syrians. Food, water, sanitation, medical assistance, shelter, and essential non-food items are critically needed, particularly in areas that have seen intense fighting. In addition, other critical health concerns, such as the outbreak of polio, have highlighted the consequences of war and challenges faced by a vulnerable population. The number of Internally Displaced Persons (IDPs)—estimated to be 6.5 million—is very fluid. Many Syrians, some of whom have been displaced multiple times, leave their homes to escape violence and then return when conflict in their area decreases. It is not clear how many IDPs are affected by repeat displacements, nor if, or how often, they are included in IDP counts. Many IDPs stay in unofficial shelters, unfinished buildings, makeshift accommodations, and unofficial camps. IDPs are predominantly women, children, and the elderly. While humanitarian needs are immense and continue to escalate, access and security in Syria present huge challenges in the humanitarian response, particularly for NGOs. Syria also hosts refugees from elsewhere, and these populations have been vulnerable to the conflict. Of the estimated 530,000 Palestinian refugees living in Syria, approximately 420,000 require humanitarian assistance, of which 235,000—nearly half of the original number of Palestinian refugees hosted by Syria—have been internally displaced. In addition, Palestinian refugees have approached the U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) in Lebanon and a much smaller number have registered with UNRWA in Jordan. There have been reports of some Palestinian refugees finding their way to Gaza, Egypt, and Turkey, and in smaller numbers to Malaysia, Thailand, and Indonesia. Reportedly, Palestinian refugees in Syria are disproportionally and increasingly vulnerable. Many are living in areas that have seen intense fighting; they have nowhere to go within Syria and external flight options are limited. A case in point is the Yarmouk refugee camp near Damascus. From a pre-conflict population of about 160,000, there are approximately 18,000 Palestinians (and possibly non-Palestinian civilians) in the camp. Yarmouk has been under siege and little to no humanitarian access has been possible for months, despite UNRWA's calls for continuous, uninterrupted access. On January 30, 2014, a U.N. convoy entered Yarmouk and distributed food parcels, the first major distribution since July 2013. Distributions of aid have taken place since then. Syria also hosts approximately 68,000 registered refugees who originate mainly from Iraq, Afghanistan, Somalia, and Sudan. Other vulnerable populations include third country nationals and vulnerable migrants. At this point it is not known how many of the refugee and vulnerable populations have been displaced. Moreover, these numbers do not account for populations who may have been living in Syria, but were not registered as refugees. For example, it is thought that 1 million or more Iraqis fled to Syria from Iraq between 2003 and 2006; current estimates suggest this number is now approximately 500,000, of which about 10% are registered with UNHCR. The threat of a fragmented Syria and difficult challenges for neighboring countries hosting refugees have created a fragile security and political environment. As of mid-June 2014, an estimated 2.8 million Syrians have been forced to flee the violence and conflict with 97% seeking refuge in countries in the immediate surrounding region, primarily Lebanon, Jordan, Turkey, Iraq, Egypt, and in other parts of North Africa. The number of registered refugees (or those awaiting registration) continues to increase. In early April, UNHCR reported that the number of Syrian refugees in Lebanon had exceeded 1 million, making it the "highest per-capita concentration of refugees worldwide" as the number of Syrian refugees in the country rose to nearly a quarter of the overall population. Many observers are predicting a further spike in the number of displaced persons. Experts recognize that this number is likely much higher, as some Syrians have not registered, presumably from fear or other reasons, and have chosen instead to blend in with the local population, living in rented accommodations and makeshift shelters, particularly in towns and cities. The added economic, energy, and natural resource pressures of large Syrian refugee populations weigh heavily on neighboring countries, particularly in Lebanon, Jordan, and Turkey. Palestinian refugees from Syria also complicate the underlying political dynamics of Lebanon and Jordan, where large Palestinian refugee populations already reside. The governments of countries hosting refugees have concerns about the potential political implications of allowing displaced populations to remain, especially for a protracted period of time. One of the biggest challenges is shelter. The types of assistance and shelter options available to refugees vary in the countries that are hosting them. In Turkey, Jordan, and Iraq, there are 24 refugee camps and new camps are under construction. In camps, assistance is provided by host governments and the international community, and there are concerns about overcrowding and the risk of disease. However, the U.N. Office for the Coordination of Humanitarian Assistance (UNOCHA) estimates that the majority of Syrian refugees (more than 80%) are living outside camps in mostly urban settings. The impact on many host communities has become overwhelming. Overcrowded schools, inadequate hospital services, impacts on resources such as water—all contribute to the burden for neighboring countries. Refugees living outside of camps face high rental rates, overcrowding, and competition for space in addition to other living expenses and limited, if any, work opportunities. Urgent priorities include protecting vulnerable refugees from violence and meeting their basic needs. Changes in season only compound the challenges these populations face. Moreover, urban refugees are often invisible and difficult to identify and assist. Jordan, Lebanon, and Turkey host the vast majority of the displaced populations outside Syria. (See Figure 3 .) The United States and the international community have recognized the contribution of those countries hosting refugees and supported their efforts, while encouraging them to keep their borders open to those fleeing conflict in Syria. At different times during the conflict, the number of refugees crossing into neighboring countries has decreased at some border points because refugee-hosting countries have taken steps to restrict the flow, causing those fleeing Syria to be stranded inside its border areas. The Obama Administration has consistently supported providing humanitarian assistance to all civilians affected by the conflict in Syria. It is working closely with neighboring countries, other governments, the United Nations, and humanitarian partners in its response to the crisis. Congress has also demonstrated sustained interest and bipartisan support for a robust U.S. humanitarian response, although Members may be divided over other dimensions of U.S. policy. U.S. humanitarian priorities in Syria include providing as much humanitarian assistance as possible through partners and multilateral mechanisms; supporting protection activities for vulnerable populations; helping to develop a strong multilateral response to support countries hosting refugees; encouraging donor pledges and contributions; and building capacity within Syria and among its neighbors for immediate assistance and contingency planning for what has become a protracted crisis. The key U.S. agencies and offices providing humanitarian assistance include the U.S. Agency for International Development (USAID), Bureau for Democracy, Conflict, and Humanitarian Assistance (DCHA) through the Office of Foreign Disaster Assistance (OFDA) and Food for Peace (FFP), and the State Department's Bureau of Population, Refugees, and Migration (PRM). There is functional or programmatic overlap between USAID's offices and PRM in the humanitarian response, and they coordinate with each other in supporting implementing partners. In general, PRM provides funds for multilateral actors, such as the U.N. High Commissioner for Refugees (UNHCR), while USAID focuses more on bilateral arrangements with NGOs. With regard to displaced populations, in many contexts including Syria, USAID takes the lead on IDPs, while PRM focuses on the needs of refugees and other persons of concern. Overall, 75% of U.S. government funding for Syria supports multilateral initiatives through the two U.N. appeals, and 25% supports NGOs directly. PRM is not providing funding to NGO partners working inside Syria. USAID funding for the humanitarian response, however, is split between multilateral and NGO programs. The breadth and scale of the crisis inside Syria, with 9.3 million people in need of humanitarian assistance, requires using multiple resources and aid delivery options. Through its OFDA and FFP offices, USAID currently has 28 partners, including NGOs and U.N. entities, although the names of the former have not been disclosed for security reasons. USAID's criteria for determining priority partners and sectors for humanitarian assistance inside Syria include analysis of on-the-ground assessments; assistance gaps (includes an analysis of what other donors are already contributing); and a determination of which humanitarian responders are best placed to respond to humanitarian needs in terms of capacity, technical expertise, and access to populations. The safety and security of staff working for humanitarian organizations funded by the U.S. government is a primary concern. The names of NGO implementing partners are considered sensitive information, and obtaining many details is not possible. OFDA and its implementers have taken steps to manage the significant risks associated with working in Syria by putting into place a variety of internal controls based on best practices for operating in highly insecure environments. Beginning in FY2012, through June 4, 2014, the United States has allocated more than $2 billion for humanitarian activities both inside Syria and in neighboring countries. The U.S. contribution has been allocated in response to U.N. humanitarian appeals, as well as supporting other projects using existing funding from global humanitarian accounts and some reprogrammed funding. See Table A-1 for a selected list of implementing partners receiving U.S. funding in FY2014. U.S. assistance is distributed based on need throughout all 14 governorates of Syria. The United States is working through a number of channels to provide this assistance, including U.N. entities, non-governmental organizations (NGOs), community-based partners, and the Syrian Opposition Coalition's Assistance Coordination Unit. In addition, the United States works with host countries in the region that support the influx of Syrian refugees. The distribution of its humanitarian assistance is listed in the tables below. The Obama Administration has not elaborated on how it plans to meet future Syria-related needs for the remainder of FY2014. The Administration could continue to draw down global humanitarian accounts, such as MRA or IDA, and if necessary request a supplemental appropriation to replenish them, or use Emergency Refugee and Migration Assistance (ERMA) funds. Possible options could also include reprogramming funds from the Overseas Contingency Operations (OCO) account. The Administration's FY2015 budget request seeks $1.1 billion in humanitarian assistance for Syria and the region. Details of this request include (1) $635 million from the International Disaster Assistance (IDA) Overseas Contingency Operations (OCO) account, of which $335 million would be administered by USAID's Office of Foreign Disaster Assistance (OFDA) and $300 million would be administered by USAID's FFP for emergency assistance, and (2) $465 million from the Migration and Refugee Assistance (MRA) OCO account. The sharp increase in needs of Syrians affected by the conflict may lead Congress to consider future funding requests from the Administration, including a potential supplemental request, if the situation worsens or persists. It remains to be seen how needs related to the Syria crisis are to be balanced with other humanitarian priorities worldwide, particularly if a major disaster or crisis occurs. At points during the conflict, Members of Congress have demonstrated an interest in the labeling or "branding" of U.S. humanitarian aid delivered to Syria so that recipients are aware of its American origins. This issue is complicated in the Syria context. Very little U.S. assistance is currently being branded. The U.S. government is trying to balance the desire to maintain visibility as a contributor of humanitarian assistance with concerns for the security of aid recipients and implementing partners who could become possible targets of attacks. Finding appropriate ways for the United States to leverage its political objectives without politicizing humanitarian aid remains a significant challenge. There has been some debate about whether the United States is receiving adequate political benefit from its humanitarian assistance efforts. Anecdotal evidence from field reports and implementing partners suggests that many Syrians who may be receiving U.S. assistance remain unaware of its origins, or assume it is from a foreign government other than the United States. In response, some Members of Congress and observers have argued that the United States should begin to more aggressively brand U.S. aid to enhance local perceptions that the people of the United States stand in solidarity with Syrians. Humanitarian groups argue that objectives such as winning hearts and minds potentially compromise the neutrality of humanitarian assistance in general. In the context of Syria, experts contend that if a U.S.-funded clinic were to be targeted for its U.S. affiliation, it could jeopardize much broader humanitarian efforts there. Moreover, it is unclear whether raising awareness of U.S. humanitarian assistance would do much to change perceptions, as Syrians who support the opposition want weapons and other kinds of military help. The Administration is reportedly looking into ways of branding U.S aid that do not jeopardize the safety of those on the ground. International efforts to address the humanitarian situation in Syria range from global U.N. appeals to on-the-ground food aid to communities and assistance in camps and settlements. The following sections describe these and other activities in more detail. International humanitarian agencies, including NGOs, and governments continue to work in Syria and in countries in the region to provide and coordinate assistance to the civilian populations. UNOCHA leads the humanitarian effort within Syria and has established relief sectors—or "clusters"—where possible. UNHCR leads efforts to provide assistance to Syrian refugees in neighboring countries, including non-food items such as shelter, clothing, fuel, cash assistance, and other essential items, as well as assistance to host communities that are supporting refugees. A key challenge facing international organizations and NGOs operating in Syria is access, which remains severely constrained by violence and insecurity and conflict, restrictions imposed by the Syrian government on the operations of humanitarian organizations, and obstruction by all sides to the conflict. Other contributing factors are lack of transportation and limited availability of fuel. The Syrian regime significantly restricts the ability of humanitarian organizations to operate by imposing bureaucratic and administrative obstacles, such as visa restrictions for U.N. staff, international organizations, and NGOs, and limiting the number of humanitarian partnerships. While the Syrian government has permitted some aid deliveries across conflict lines ("cross-line") from Damascus to opposition-held areas using interagency humanitarian convoys, numerous checkpoints are in place en route. Cross-border access to deliver humanitarian assistance from neighboring countries to opposition areas requires the agreement and cooperation of the Syrian authorities. A number of independent aid agencies are reportedly using one of these two systems for aid delivery into Syria, either through official channels in Damascus or through cross-border mechanisms, such as trucking aid through Jordan and Turkey. Experts recognize that providing humanitarian assistance within Syria may help to stem the tide of refugees seeking assistance across borders. In May 2014, the London 11 Core Group of the Friends of Syria announced plans to "step up efforts to deliver humanitarian aid across borders and across lines irrespective of the consent of the regime." In Syria, the United Nations and its partners have identified activities in different sectors that reflect the key priorities. Relief sectors include food security; community services and protection; health; food; water and sanitation; and shelter and non-food items. (For examples of humanitarian activities, see Appendix B .) The landscape of access and aid delivery is complicated and constantly changing. The role of international NGOs is also difficult to grasp, in part because of the situation in which they are trying to operate and in part because of a reluctance to disclose information that might jeopardize the safety of the aid workers or recipients they are trying to help. Although little information is available about national organizations operating in country, the Syrian Arab Red Crescent (SARC) is a key Syrian implementing partner with more than 10,000 volunteers. The International Committee of the Red Cross (ICRC), while maintaining its independence as a separate international organization, works with the SARC throughout the country. A number of other organizations are also working on the humanitarian response, some also in partnership with SARC. These include 18 international NGOs that have been authorized by the government of Syria to work as well as 11 U.N. agencies and the International Organization for Migration (IOM). In addition, a handful of other international NGOs have agreements with relevant Syrian ministries. In addition, the government of Syria has authorized some national NGOs to provide humanitarian assistance in partnership with the United Nations. U.N. agencies have set up or are in the process of setting up hubs in several locations throughout the country. Levels of access differ among various aid organizations. Generally, U.N. entities have access to populations requiring assistance (especially the 3.5 million in besieged and hard-to-reach areas) that NGOs do not. In addition to access, U.N. entities have the capacity and technical expertise to conduct large-scale operations with consistent standards, such as vaccination campaigns and food delivery that individual NGOs, which operate on a much more limited scale, do not. The U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) is also actively responding to the needs of Palestinian refugees affected by the conflict in Syria and those who have fled to other areas within UNRWA's mandate, particularly Jordan and Lebanon. For examples of humanitarian partners working in Syria and neighboring countries, see Appendix C . Donor funding is usually provided in response to a crisis in the form of financial contributions or relief supplies. The Consolidated Appeal Process (CAP), now renamed the Strategic Response Plan (SRP), administered through UNOCHA, brings aid organizations together to coordinate a response to major humanitarian crises and disasters and appeal for funds through a collaborative plan. Funding provided for the Syria humanitarian crisis is in part through two separate U.N. appeals: the Syrian Humanitarian Assistance Response Plan (SHARP) and the Regional Refugee Response Plan (RRP). Contributions to the crisis have also been made outside of the U.N. appeals process. The SHARP and RRP appeals have been revised several times as the Syria crisis has evolved and humanitarian needs have increased. The December 18, 2012, version of the appeals was the fourth revision and covered the period January to June 2013. The fifth revision of the appeals, covering all of 2013, was launched on June 7, 2013. The sixth revision of the appeals, was launched on December 16, 2013.Together the latest SHARP and RRP appeals total $6.5 billion, making it the largest appeal for a single humanitarian emergency in the history of the United Nations. As of mid-June 2014, taken together the appeals are 29% funded. See Appendix D for a list of the top 25 country donors to the Syria crisis in 2012-2014. The Syria Humanitarian Assistance Response Plan (SHARP), which includes U.N. entities and humanitarian partners, is a U.N. appeal seeking nearly $2.3 billion for projects inside Syria from January 1 to December 31, 2014. The plan addresses the needs of Syrians affected by conflict inside Syria. Its priorities include providing relief supplies such as food, healthcare, and water to the most vulnerable; assisting people who have fled their homes and the communities hosting them; and supporting reconstruction of critical infrastructure, including hospitals. The latest revision outlines strategic objectives and builds on findings from sectoral assessments conducted during 2013. A second U.N. appeal seeks more than $4.2 billion for a Regional Refugee Response Plan (RRP) to cover the protection and assistance needs of up to 3.4 million Syrian refugees in the region and covers the period from January 1 to December 31, 2014. The current plan brings together the coordinated efforts of international and national organizations with UNHCR continuing to lead the overall response. The main priorities for the RRP include protection, life-saving assistance, access to basic services, durable solutions (such as resettlement), and community outreach to refugees residing in urban areas and support to host communities. Additional bilateral and other contributions and pledges are also made outside of the U.N. appeals through direct bilateral assistance to governments, international organizations, and NGOs. Some analysts claim that a lack of transparency about these contributions makes it difficult to know what is being funded, where aid may be duplicated, and whether it is being distributed equitably among groups of different ethnic, religious, or political affiliations. In addition, UNOCHA draws on several smaller humanitarian funding sources as follows: UNOCHA established the Emergency Response Fund (ERF) for Syria in mid-2012 to support the humanitarian response for the Syria crisis. In CY2012-2013, ERF provided support to local NGOs working in conflict areas in Syria that were difficult to reach. It also provided funding for projects in Jordan, Lebanon, and Iraq and continues to do so in CY2014. As an international, multilateral funding mechanism, the Central Emergency Response Fund (CERF) aims to focus on early intervention, timely response, and increased capacity and support to underfunded crises. CERF was launched as part of the U.N. reform process in 2006 to strengthen the U.N.'s capacity to respond more efficiently, effectively, and consistently to natural disasters and humanitarian emergencies. It is managed by the Emergency Relief Coordinator and head of UNOCHA. In CY2012-2013, CERF provided funds to a number of appealing agencies in Jordan, Lebanon, and Syria and continues to do so in CY2014. On January 30, 2013, donors pledged $1.5 billion in humanitarian aid at the International Humanitarian Pledging Conference for Syria, hosted by Kuwait and chaired by U.N. Secretary-General Ban Ki-moon. A portion of the pledges made are helping to fund the SHARP and RRP (U.N. appeals) mentioned above for the humanitarian response in Syria and neighboring countries. Since then, donors have made other pledges. With the slow pace of funding of these appeals, concerns remain about whether many of the pledges will result in actual contributions. On September 16, 2013, Sweden hosted a donor conference, organized by UNOCHA, between donors and U.N. representatives to discuss coordination of the humanitarian operation in Syria and its neighboring countries. The forum offered the opportunity to share information and to discuss how to manage the challenges of supplying humanitarian assistance to those affected by the crisis. On January 15, 2014, Kuwait hosted a second donors conference for Syria, which was chaired by U.N. Secretary General Ban Ki-moon. Donors pledged more than $2 billion in humanitarian aid. See Appendix E for a list of pledges not converted to commitments as of mid-June 2014. As Congress considers funding and legislation addressing the humanitarian situation in Syria, Members may want to take a number of challenges and policy issues into account: Impeded international humanitarian response . Despite the provision of substantial humanitarian assistance, insecurity within Syria and lack of cooperation by the Syrian government has severely hampered efforts by governments, U.N. entities, and humanitarian partners to access affected areas to provide humanitarian assistance to populations in need. Funding Shortfalls. Although the United Nations and governments, including the United States, have worked with both traditional and non-traditional donors to generate and increase contributions, the two U.N. appeals remain underfunded. Willingness and cooperation of neighboring countries . So far, Jordan, Lebanon, and Turkey have received the vast majority of refugees from Syria. The United States and the international community have recognized the contribution of neighboring countries and supported their efforts while simultaneously encouraging them to keep their borders open to those fleeing the conflict. Nevertheless, in the short term, the increasing numbers of refugees strain the infrastructure and capacity of these countries, and in the long term, they create concerns that the situation could become protracted with limited ongoing international support and attention. Ongoing capacity by the international community to keep pace with humanitarian developments . The urgent humanitarian needs coupled with the speed at which the situation is changing have many experts concerned that the international response capacity could be overwhelmed if the current pace and scope of conflict and displacement continues. Amid these factors, Congress may also need to weigh the following: Balancing priorities . Finding the resources to sustain U.S. aid pledges may be difficult in light of domestic budget constraints. When humanitarian emergencies like the Syria situation require immediate emergency relief, the Administration may fund pledges by depleting most global humanitarian accounts. In order to respond to future humanitarian crises, however, these resources would need to be replenished. If not replenished, U.S. capacity to respond to other emergencies could be diminished. Burdensharing . Both Congress and the Administration have encouraged other countries to provide humanitarian assistance for the Syria situation and to turn pledges into actual commitments. It is not always evident whether figures listing donor amounts represent pledges of support or more specific obligations. Pledges made by governments do not always result in actual contributions, as demonstrated by the donor conferences in Kuwait. It also cannot be assumed that the funds committed to relief actually represent new contributions, since the money may have been previously allocated elsewhere. Moreover, it is not readily apparent how the actual costs of a humanitarian emergency might be shared among international donors. Comparing U.S. assistance and international aid can also be difficult because of the often dramatically different forms the assistance takes (relief items versus cash, for instance). More broadly, political considerations play a role in the way humanitarian assistance is given and to whom. While the images of human suffering only reinforce the need to "do something," humanitarian assistance carries some weight as an instrument of "neutral" intervention and is the most flexible policy tool that can be quickly brought to bear in a crisis. Sometimes humanitarian assistance is expanded beyond its immediate function to avert a crisis, to provide support to allies, and to maintain a presence in the region. How it is used and whether it becomes more of a strategic, policy tool depends upon the situation, what other governments are doing, and the degree to which the United States has further interest in the region. Providing humanitarian assistance also raises questions about implications for future action. On the one hand, if the United States decides to reduce its humanitarian support to Syria, would this diminish U.S. standing among its allies or affect its interests in other ways? On the other hand, since the President has a great deal of flexibility over U.S. involvement, once commitment to a humanitarian effort is made, does this make the long-term U.S. participation in reconstruction and political solutions more likely? Regardless, the level and sources of U.S. humanitarian assistance will inevitably have an important impact not only on the Syrian relief operation itself, but on broader U.S. foreign policy goals. Appendix A. Distribution of U.S. Funds, CY2012-2014 Appendix B. Selected Humanitarian Projects Funded by All Donors in Syria and the Region Appendix C. Selected Humanitarian Partners Serving the Syria Arab Republic Civil Unrest, CY2014 Appendix D. U.S. and International Humanitarian Country Donors to the Syria Crisis, CY2012-2014 Appendix E. 2013 Pledges Not Converted to Commitments or Contributions as of June 18, 2014 Appendix F. Sources for Further Information United States Agency for International Development (USAID) Syria country page: http://www.usaid.gov/crisis/syria No Lost Generation: http://www.usaid.gov/crisis/syria/children U.S. Department of State Syria country page: http://www.state.gov/p/nea/ci/sy/ Bureau of Population, Refugees, and Migration (PRM): http://www.state.gov/j/prm/ Central Intelligence Agency (CIA) The World Factbook on Syria: https://www.cia.gov/library/publications/the-world-factbook/geos/sy.html United Nations —Selected Sources UN News Center: http://www.un.org/apps/news/infocusRel.asp?infocusID=146&Body=Syria&Body1= United Nations Inter-Agency Information Sharing Portal: http://data.unhcr.org/syrianrefugees/regional.php Relief Web link: http://reliefweb.int/country/syr
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The ongoing conflict in Syria has created one of the most pressing humanitarian crises in the world. More than three years later, as of mid-June 2014, an estimated 9.3 million people inside Syria, nearly half the population, have been affected by the conflict, with nearly 6.5 million displaced. In addition, 2.8 million Syrians are displaced as refugees, with 97% fleeing to countries in the immediate surrounding region, including Turkey, Lebanon, Jordan, Iraq, Egypt, and other parts of North Africa. The situation is fluid and continues to worsen, while humanitarian needs are immense and increase daily. While internationally supervised disarmament of chemical weapons in Syria is proceeding, albeit with some difficulty, U.S. and international diplomatic efforts to negotiate a political end to the fighting in Syria opened on January 22, 2014, in Montreux, Switzerland. The "Geneva II" talks included some members of the Syrian opposition, representatives of the Syrian government, and other government leaders. The first round of talks came to an end on January 31 and resumed February 10-15, but ended with little progress in efforts to end the civil war. The parties reportedly agreed to an agenda for a third round of talks. Many experts and observers hoped that a lasting agreement would have been reached on "humanitarian pauses" to allow access and relief to thousands of civilians blockaded in towns and cities in Syria. On February 22, the U.N. Security Council unanimously adopted Resolution 2139 (2014) to increase humanitarian access and aid delivery in Syria. On May 13, 2014, Secretary-General Ban Ki-moon announced that Lakhdar Brahimi, the Joint United Nations-League of Arab States Special Representative on the crisis, would resign his post, which became effective on May 31. U.S. Assistance and Priorities The United States is the largest donor of humanitarian assistance and is part of the massive, international humanitarian operation in parts of Syria and in neighboring countries. Beginning in FY2012, through June 4, 2014, the United States has allocated more than $2 billion to meet humanitarian needs using existing funding from global humanitarian accounts and some reprogrammed funding. U.S. humanitarian policy is guided by concerns about humanitarian access and protection within Syria; the large refugee flows out of the country that strain the resources of neighboring countries (and could negatively impact the overall stability of the region); and a protracted and escalating humanitarian emergency. The Administration's FY2015 budget request seeks $1.1 billion in humanitarian assistance for Syria and the region. International Response The international humanitarian response is massive and complex and struggles to keep pace with urgent developments that have escalated well beyond anticipated needs and continue to do so. Access within Syria is severely constrained by violence and restrictions imposed by the Syrian government on the operations of humanitarian organizations. In mid-December 2013, the United Nations launched two appeals—taken together its largest appeal in history—requesting $6.5 billion in contributions to meet the ongoing humanitarian needs in Syria and the region. Ongoing Humanitarian Challenges of the Syria Crisis and U.S. Policy As U.S. policy makers and the international community deliberate over what, if any, actions they can or should take on the Syria crisis, possible humanitarian policy issues for Congress include the immediate need for access within Syria by humanitarian organizations, which has been severely constrained by violence and restrictions imposed by the Syrian government; examining U.S. assistance and priorities in an ongoing humanitarian response; balancing the Syria response with domestic priorities and other humanitarian concerns worldwide; ensuring the ongoing willingness and cooperation of Syria's neighbors, which are receiving the vast majority of refugees from Syria, to keep borders open and to host refugees fleeing Syria; finding ways to alleviate the strain on civilians and those responding to the crisis as the situation worsens and becomes more protracted, including the support of initiatives, such as emergency development assistance, for communities within neighboring countries that are hosting refugees; and encouraging the participation of other countries to provide support through humanitarian admission, resettlement, facilitated visa procedures, and protection for those seeking asylum. The United States has a critical voice regarding humanitarian access in Syria, the pace of humanitarian developments and contingency planning, support to neighboring countries that are hosting refugees, and burdensharing among donors. This report examines the ongoing humanitarian crisis in Syria and the U.S. and international response and will be updated as events warrant. For background and information on Syria, see CRS Report RL33487, Armed Conflict in Syria: Overview and U.S. Response, by [author name scrubbed] (coordinator), [author name scrubbed] and [author name scrubbed], and CRS Report R43201, Possible U.S. Intervention in Syria: Issues for Congress, coordinated by [author name scrubbed] and [author name scrubbed]. See also CRS Report R42848, Syria's Chemical Weapons: Issues for Congress, coordinated by [author name scrubbed]. This report does not address the humanitarian situation in Iraq as a result of the recent wave of violence that began on June 10, 2014. For more information, see CRS Report RS21968, Iraq: Politics, Governance, and Human Rights, by [author name scrubbed].
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On January 4, 2011, the GPRA Modernization Act of 2010 (GPRAMA) became law. The acronym "GPRA" in the act's short title refers to the Government Performance and Results Act of 1993 (GPRA 1993), a law that GPRAMA substantially modified. When GPRA 1993 was enacted, it was regarded as a watershed for the federal government. For the first time, Congress established requirements in statute for most agencies to set goals, measure performance, and report the information to Congress for potential use. Agencies submitted this information in three major products: multi-year strategic plans, annual plans, and annual reports. The law also required agencies to consult with Congress and non-federal stakeholders when developing some of these plans and goals. As a thread running through these requirements, the authors of GPRA 1993 said the law especially was intended to address the needs of Congress in its policy making, oversight, and budgeting work, and the needs of agency program managers. After a four-year phase-in period for GPRA 1993 and 13 years of the law's full implementation, GPRAMA makes substantial changes. Among other things, GPRAMA continues the three agency-level products from GPRA 1993, but with changes; establishes new products and processes that focus on goal-setting and performance measurement in policy areas that cut across agencies; brings attention to using goals and measures during policy implementation; increases reporting on the Internet; and requires individuals to be responsible for some goals and management tasks. In making these changes, GPRAMA aligns the timing of many products to coincide with presidential terms and budget proposals. The law also includes more central roles for the Office of Management and Budget (OMB), an entity that often seeks to advance the President's policy preferences. GPRAMA also contains more specific requirements for consultations with Congress. By design, many of GPRAMA's products are required to be submitted to Congress for scrutiny and potential use. The law also provides opportunities for Congress and non-federal stakeholders to influence how agencies and OMB set goals and assess performance. This report provides an overview of GPRAMA's products and processes. In addition, the report highlights potential issues for Congress. To provide context, the report first identifies potential congressional roles that relate to performance. Furthermore, because GPRAMA inserts an extensive vocabulary into law and practice, the report also includes a list of acronyms ( Appendix A ) and glossary ( Appendix B ). The roles that Congress may take regarding government performance are pervasive and difficult to overstate. In exercising its constitutional powers, Congress may by law establish agencies, their missions and goals, processes for how they operate, their priorities, and their resource levels. Congress also may influence the actions of agencies and OMB through non-statutory means, conduct oversight, and study policy problems. In any of these activities, Congress may cooperate or compete with the President to influence how agencies implement public policies. Like GPRA 1993, GPRAMA provides for goal-setting, measurement, and evaluation. These activities may not always be pursued in a neutral way, however. The choice of a policy goal or a trade-off among goals may be contested. It could be argued, therefore, that goals are inherently political in nature. Similarly, the definition of "success" that is to be used when assessing a program's performance also may be contested. In these situations, two tools of policy analysis often are used to help inform assessments of performance: program evaluation and performance measurement. Program evaluations use one or more methods to assess how, and the extent to which, programs or policies achieve intended objectives or cause unintended consequences (see box at right). By contrast, performance measurement is narrower in scope. It refers to periodic measurement of data that are related to programs. Used in isolation, performance measures do not necessarily reflect how well a program is working, because measurements may be driven by so-called "external factors" that are separate from the program, such as a natural disaster or downturn in the economy. In response, measurement and evaluation may be used together to help inform policy making. Policy making also may be informed by a variety of other analyses and considerations, such as forecasting, logic, risk assessment, and values. In this context, Congress may assume at least two roles. First, when Congress looks at a specific program or policy area, Congress may use performance information to help inform its thinking, oversight, and policy making. For example, an interest group or the President may cite goals, evaluations, and measures when justifying a proposal to Congress. Congress and other consumers of performance information may face challenges in these situations—such as when scrutinizing whether information has been presented without bias or is relevant to a policy problem. A large volume of incoming information also may strain time and staff resources. Challenges like these highlight another potential role. In this second role, Congress may establish federal policies and processes that relate to how the government's goal-setting, planning, and evaluation are to be conducted. Congress's passage of GPRA 1993 and GPRAMA are examples of this role. In addition, Congress may require agencies to involve non-federal stakeholders in processes like goal-setting or direct agencies to act transparently. In these ways, stakeholders may help Congress to identify performance-related issues that merit closer attention. Policies and processes like these typically are intended to generate useful information for multiple audiences—including Congress, agencies, the President, and the public—and, thereby, to help inform policy making, oversight, and faithful and effective implementation of laws. This CRS report focuses primarily on the first role, regarding the information and opportunities that GPRAMA may generate. Nevertheless, Congress might also assume the second role if it were assessing GPRAMA's design and implementation or considering changes to the law. GPRAMA substantially modified and added to GPRA 1993's framework of products and processes. In making these changes, GPRAMA's design drew from multiple sources. These included the views of the law's authors, the Barack Obama Administration's approach to government performance, the George W. Bush Administration's approach to government performance, the work during the 111 th Congress of a Senate Budget Committee task force, and Government Accountability Office (GAO) views. Looking ahead, these influences and the federal government's experience with GPRA 1993 may provide insights into current issues of GPRAMA's design, implementation, and prospects. This CRS report, however, focuses more immediately on GPRAMA's statutory requirements and the information and opportunities that the law may generate for Congress. In that light, the following subsections discuss GPRAMA's major provisions in four categories: agency-level products and processes that GPRAMA continues from GPRA 1993, albeit with significant changes; new agency-level products and processes; new products and processes that are executive branch-wide in scope; and institutional changes. After reviewing these provisions, subsequent sections of this report discuss how the changes fit together, some of their potential implications, and potential issues for Congress. GPRAMA retains the three agency-level products that GPRA 1993 created. However, the law provides the products with new statutory names, inserts additional requirements, and makes several changes to their schedules and processes for being developed. Agency Strategic Plan (ASP; formerly Strategic Plan). GPRAMA requires an agency to post a four-year Agency Strategic Plan on its public website. Contents. Some provisions from GPRA 1993 remain unchanged. Like GPRA 1993, GPRAMA requires an Agency Strategic Plan to identify "general goals and objectives" for the major functions and operations of the agency and to describe the evaluations used in establishing goals and objectives. GPRAMA also adds new requirements. Among other things, an agency must describe how it is working with other agencies to achieve certain goals. Timing requirements . GPRAMA newly aligns the process of developing and updating an Agency Strategic Plan to coincide with presidential terms and budget proposals. An ASP must cover four fiscal years and must be updated every four years. An agency is required to submit the revised plan just after the first year of a President's term, by the first Monday in February—the same deadline as the President's annual budget proposal. In the transition from GPRA 1993, GPRAMA requires agencies to adjust the Strategic Plans that they developed under GPRA 1993 to conform to GPRAMA's requirements by the deadline for the President's FY2013 budget proposal, in February 2012. Thereafter, agencies are required to submit revised ASPs just after the first year of each presidential term (e.g., February 2014). Agency consultations with Congress and non-federal stakeholders. Like GPRA 1993, GPRAMA requires agencies to involve Congress and stakeholders in the development of Agency Strategic Plans. However, GPRAMA provides more specific requirements for how agencies are required to consult with Congress. When developing or adjusting an ASP, an agency is required to consult "periodically" with Congress, including majority and minority views from the "appropriate" authorizing, appropriations, and oversight committees. Agencies also are required to consult with "appropriate" committees of Congress every two years, regardless of whether an ASP is updated. When developing or adjusting an ASP, an agency also is required to solicit and consider the views and suggestions of stakeholders. Agency Performance Plan (APP; formerly Annual Performance Plan). GPRAMA requires an agency annually to post an Agency Performance Plan on its public website. The plan accompanies the agency's budget proposal, as submitted by the President or the agency. The APP is required to cover each "program activity" (portion of a budget account; see Appendix B ), as presented in the Appendix volume of the President's budget proposal to Congress. Contents. Like GPRA 1993, GPRAMA requires an Agency Performance Plan to establish one or more "performance goals." An APP is required to establish performance indicators to be used in measuring or assessing progress toward these performance goals. Indicators may be of many types, including efficiency, outputs, and outcomes. Under GPRAMA, the APP has new requirements, as well. For example, the product must describe how an agency plans to address major management challenges. In addition, the APP must identify "low-priority program activities" and provide an "evidence-based justification" for the low-priority designation. The product also is required to identify agency officials, called "goal leaders," who are responsible for the achievement of each performance goal. Time coverage. GPRAMA continues the GPRA 1993 requirement for the Agency Performance Plan to cover the forthcoming fiscal year, to coincide with the agency's budget request. Newly, however, the law also requires the APP to cover the current year in which the plan is submitted. Consequently, the APP becomes a two-year goal-setting product, in which the plan covers the forthcoming year and also updates goals and other information for the current year that were included in the previous year's APP. Agency Performance Update (APU; formerly Program Performance Report). GPRAMA requires that an "update on agency performance" be made available each year on the agency's public website. Contents. Continuing from GPRA 1993, GPRAMA requires the Agency Performance Update to provide performance indicators from the relevant Agency Performance Plan and compare performance goals with actual results. If a past performance goal was not met, an agency's APU is required to explain why and to describe plans for achieving the goal or explain if the goal is infeasible. Under GPRAMA, the APU also is newly required to provide data of significant value more frequently than annually if this can be done at a "reasonable" level of administrative burden. Timing requirements. The authors of GPRAMA probably intended for the Agency Performance Update to be made available no later than 150 days after the end of the fiscal year. In practice, agencies probably will comply with the APU's requirements sooner than the 150-day deadline. Depending on how an agency wishes to comply with current law and OMB direction, the APU may be completed (1) in November, several weeks after the end of a fiscal year, or (2) in February of the next calendar year, accompanying the agency's budget request and Agency Performance Plan. At the agency level, GPRAMA adds new requirements for goal-setting, implementation reviews, and plans and reports. Agency priority goals (APGs). Every two years, GPRAMA requires the heads of certain executive agencies—the so-called CFO Act agencies plus any additional agencies designated by OMB—to identify a small subset of the performance goals from their Agency Performance Plans. These goals are to be identified as "agency priority goals" (APGs). Agencies are required to identify an agency official, called a goal leader, who is responsible for achieving each APG. Process , timing, and role of OMB. GPRAMA requires agency priority goals to be identified beginning with each agency's FY2013 Agency Performance Plan. Apart from this requirement, GPRAMA establishes a potentially central role for OMB in structuring the APG process. The law provides that OMB determines the total number of agency priority goals and the number of goals to be developed by each agency. The law also appears to allow OMB to choose APGs and to determine the schedule for identifying them. Determining priorities. GPRAMA requires these goals to "reflect the highest priorities of the agency," as determined by the head of the agency and informed by two sources: OMB-developed "federal government priority goals" (see next section, under " New Executive Branch-Wide Products and Processes ") and an agency's consultations regarding its Agency Strategic Plan. However, the law does not require agencies or OMB to consult with Congress or stakeholders when they identify agency priority goals. Quarterly reviews for agency priority goals. During each fiscal year, GPRAMA requires an agency head and deputy head to conduct a "quarterly priority progress review." The quarterly review is required to focus on progress toward achieving each agency priority goal. GPRAMA's provisions appear to be modeled on the Obama Administration's "high-priority performance goal" (HPPG) initiative, where reviews were conducted as in-person meetings. Timing requirements . The reviews were required to begin for the third quarter of FY2011 based on HPPGs from the President's FY2011 budget proposal. After agencies made available their FY2013 Agency Performance Plans, GPRAMA required the reviews to be based on agency priority goals. Transparency. GPRAMA does not require the reviews themselves to be transparent to Congress or the public. Some information about APGs is required to be included on an OMB-developed website (see next section, under " New Executive Branch-Wide Products and Processes "). "Unmet goal" reports and plans. GPRAMA requires OMB to annually determine whether an agency meets the performance goals in its Agency Performance Plan, or whether any goals are "unmet." Using these determinations, agencies and OMB are required to generate several kinds of reports and plans to address unmet goals. Under GPRAMA, agency priority goals are subject to these requirements, because they are performance goals that are required to be included in an agency's APP. Lists of plans and reports produced for Congress. GPRAMA requires an agency to annually list all plans and reports it produces for Congress that are required by statute or directed in congressional reports. From this list, the agency is required to identify a minimum percentage of the products as "outdated" or "duplicative." GPRAMA provides that the minimum percentage is to be determined annually by OMB but must be at least 10% in the first year of GPRAMA's implementation. The agency is required to submit this second list to OMB. Next, GPRAMA requires the agency to consult with congressional committees that receive the documents to determine whether the products are no longer useful to them and could be eliminated or consolidated. At the executive branch-wide level, GPRAMA adds new requirements for goal-setting, plans, implementation reviews, and reports. Federal government priority goals (FGPGs). OMB is required to work with agencies to develop long-term "federal government priority goals" (FGPGs). Contents. Federal government priority goals are required to be developed in two categories: (1) outcome-oriented goals in a limited number of policy areas that cut across agency boundaries, and (2) goals for management improvements across the federal government. In the second category, goals may relate to improvements in financial management, human capital management, information technology management, procurement and acquisition management, and real property management. Timing requirements. GPRAMA aligns the process of developing federal government priority goals to coincide with the deadline for submitting the President's budget proposal just after the first year of his or her term. The goals are required to be updated or revised every four years according to this schedule. In the transition from GPRA 1993, GPRAMA requires interim FGPGs to be submitted with the President's FY2013 budget proposal. OMB consultations with Congress. When OMB develops or adjusts FGPGs, GPRAMA requires OMB to consult "periodically" with the majorities and minorities of several specific committees (see Appendix B ) and any other "appropriate" committees. OMB also is required to consult at least once every two years with "appropriate committees," presumably about FGPGs. Federal Government Performance Plan (FGPP). GPRAMA requires OMB to coordinate with agencies to develop an annual Federal Government Performance Plan (FGPP). OMB is required to submit the plan to Congress with the President's budget proposals for FY2013 and each subsequent year. Contents. Among other things, the Federal Government Performance Plan is required to establish one or more "federal government performance goals" for each federal government priority goal. The plan also is required to identify a "lead Government official" to be responsible for coordinating efforts to achieve each federal government priority goal. Time c overage. Like the Agency Performance Plan, the FGPP is a two-year plan that covers the forthcoming year and the year in which the plan is submitted. Quarterly reviews for FGPGs. During each fiscal year, GPRAMA requires OMB to conduct a "quarterly priority progress review" of the progress toward achieving each federal government priority goal. Timing requirements. The quarterly reviews are required to begin for the quarter ending June 30, 2012 (i.e., third quarter of FY2012). Transparency. The law does not require the reviews themselves to be transparent to Congress or the public. Some information about federal government priority goals is required to be included on an OMB-developed website (see next bullet, below). OMB performance website. GPRAMA requires OMB to establish a single, performance-related website by October 1, 2012. The website is required to be accessible to Congress and the public in a searchable, machine-readable format. With respect to content, GPRAMA requires the website to make available information about the two kinds of "priority" goals that GPRAMA establishes—agency priority goals and federal government priority goals—including how both kinds of priority goals incorporate views and suggestions obtained through congressional consultations; all information required for the Federal Government Performance Plan, posted concurrently with submission of the President's budget proposal; agency-level Agency Strategic Plans, Agency Performance Plans, and Agency Performance Updates; and detailed information about each "program" identified by agencies, including in each case an explanation of how the agency defines the term "program." GPRAMA requires the OMB performance website to be updated quarterly. It remains to be seen, however, which categories of data on the website will be updated on that schedule. GPRAMA does not require the website to provide transparency into the quarterly reviews that OMB and agencies conduct for the two kinds of priority goals. Therefore, information from the reviews may or may not be posted online. Presidential list of plans and reports for Congress. GPRAMA requires the President's budget proposal to include an executive branch-wide list of certain plans and reports that agencies produce for Congress. Contents. The President's list is required to include products "that agencies identified for elimination or consolidation because the plans and reports are determined outdated or duplicative of other required plans and reports." GPRAMA further says OMB may concurrently submit draft legislation to eliminate or consolidate these products. Process. As noted earlier, each agency is separately required to identify an OMB-determined percentage of reports and plans as outdated or duplicative, send this list to OMB, and consult with congressional recipients about which products could be eliminated or consolidated. The agency-level requirement does not specify that agencies go beyond identifying reports and plans as outdated or duplicative to also identify them for elimination or consolidation. If agencies operate according to the sequence in the separate requirement, the President's list may not reflect agencies' consultations about whether any of the products are considered by recipients to be outdated or duplicative. GPRAMA's provisions that relate to products and processes are accompanied by several institutional changes that involve officials and organizations. GPRAMA provides that the officials and organizations have specific duties in relation to many of the products and processes. Chief Operating Officers (COOs). GPRAMA establishes an additional title for the deputy head or equivalent position of each agency: Chief Operating Officer (COO). GPRAMA says the agency's COO is "responsible for improving the management and performance of the agency" and specifies several corresponding functions. These include responsibility for assisting the agency head in implementing GPRAMA, conducting quarterly reviews for agency priority goals, and overseeing efforts to improve mission-support functions (e.g., procurement). Performance Improvement Officers (PIOs). GPRAMA requires each agency head to designate a senior executive as Performance Improvement Officer (PIO). Qualification requirements and reporting relationship. An agency's Performance Improvement Officer may be a career civil servant or a political appointee. GPRAMA does not identify specific qualification requirements. A PIO is required to report directly to the agency Chief Operating Officer. Duties. The primary duties of a Performance Improvement Officer under GPRAMA are to advise and assist the head and deputy head of an agency in areas like goal-setting, planning, and performance measurement. A PIO also is required to assist with quarterly reviews of progress toward APGs and the "development and use ... of performance measures in personnel performance appraisals." GPRAMA does not explicitly provide for transparency outside the executive branch into the activities and agendas of individual PIOs. Performance Improvement Council (PIC). GPRAMA establishes in law a Performance Improvement Council (PIC). Membership. The Performance Improvement Council's membership includes OMB's Deputy Director for Management (DDM) as chairperson, Performance Improvement Officers from the 24 CFO Act agencies, and other PIOs and individuals as determined by OMB's DDM. Duties. The Performance Improvement Council's primary duties include assisting OMB with topics related to GPRAMA and serving at the direction of OMB's Deputy Director for Management, who determines the council's agenda and directs its work. The PIC also is tasked with developing related recommendations for the Director of OMB or the President, as specified by the DDM, and working to resolve crosscutting performance issues. GPRAMA does not explicitly provide for transparency outside the executive branch into the PIC's activities and agenda. OMB-directed staff of agency personnel for the Performance Improvement Council. GPRAMA requires each of the 24 CFO Act agencies, plus any other agencies with Performance Improvement Officers who serve as members of the Performance Improvement Council, to provide up to two "personnel authorizations" to serve at the direction of OMB's Deputy Director for Management upon his or her request. If the reference to "personnel authorizations" were interpreted as requiring an agency to provide detailees, OMB could use this authority to direct 48 or more agency staff in support of the PIC's duties and the President's performance-related agenda. Officials responsible for certain goals and topics. As noted earlier, GPRAMA requires individual officials to be identified as responsible for certain topics. A consolidated listing of these topics and officials follows: Agency-level performance goals . An Agency Performance Plan is required to identify the agency officials, called goal leaders, who are responsible for the achievement of each performance goal. Agency priority goals . Agencies and the OMB performance website are required to identify an agency official, also called a goal leader, who is responsible for achieving each agency priority goal. Federal government priority goals . The Federal Government Performance Plan and the OMB performance website are required to identify a lead government official to be responsible for coordinating efforts to achieve each federal government priority goal. Resolution of major management challenges . An Agency Performance Plan is required to identify the agency official who is responsible for resolving major management challenges that the agency faces. Improvement strategies for unmet goals . When OMB determines that an agency has not met one or more performance goals from its Agency Performance Plan for one year, the agency is required to designate a "senior official" to oversee "performance improvement strategies" for each goal. GPRAMA provides for many products and processes that will be presented to Congress. Each may be viewed in isolation. Several patterns emerge, however, when they are viewed together. Figure 1 provides a timeline for GPRAMA's implementation. On the left side, the figure lists some of GPRAMA's requirements for products and processes. Items that are associated with GPRAMA appear as rectangles with light grey background and black print. For reference, the figure also includes the statutory requirement for the President's budget proposal (black background, white print), because GPRAMA aligns the schedules of several products to coincide with the President's budget proposal. At the bottom, timelines show fiscal and calendar years. Moving from left to right, when the figure shows a vertical line that intersects with a product or process, GPRAMA requires the product or process to be submitted or initiated by that time. Figure 1 illustrates several of GPRAMA's changes from prior practice and some patterns from GPRAMA's requirements. As noted earlier, three products associated with GPRA 1993 have new names, modified contents, and different years of coverage. For example, Agency Performance Plans are required to cover two fiscal years instead of only one. The figure shows these revised requirements for successive APPs. The figure also shows how Agency Strategic Plans are required to be adjusted with the FY2013 President's budget proposal and then submitted on a regular, four-year schedule beginning with the FY2015 President's budget proposal. Separately, GPRAMA required agencies to commence with quarterly reviews of previously established high-priority performance goals based on performance during the third quarter of FY2011. GPRAMA requires agency priority goals to be included in FY2013 Agency Performance Plans and subject to quarterly reviews thereafter. Subsequently, the schedule for establishing and revising agency priority goals may be determined by OMB. Consequently, the schedule for release of new or revised APGs may vary over time and differ among Presidents. With respect to deadlines, GPRAMA aligns the timing for many of its products with submission of the President's budget proposal, as shown by the vertical lines. Initially, the law requires the President, OMB, and agencies to produce several products to accompany the President's FY2013 budget proposal. However, GPRAMA provides that a one-year transition from GPRA 1993 take place. Consequently, the law characterizes some of these goals and plans as "interim" or "adjusted." After the FY2013 transition, full implementation begins with the President's budget proposals for FY2014 and FY2015. The FY2015 submission will occur just after the first year of the presidential term that begins in January 2013. The products that are due in February 2014 also illustrate how GPRAMA aligns Agency Strategic Plans and federal government priority goals with presidential terms. By design, many of GPRAMA's products are required to be submitted to Congress as potential inputs for its work. The law directs, for example, that an Agency Performance Plan shall provide detailed information to Congress about the agency's goals, operations, and results. In considering the representations that these products make, Congress may examine each product in isolation. However, additional perspective may be gained by viewing how the contents of the products and processes relate each other. Figure 2 illustrates some of these interrelationships. In the figure, several products and processes are illustrated by graphics that contain small subsets of GPRAMA's detailed requirements. Agency-level products and processes are shown in the bottom row, and executive branch-wide products and processes are shown in the top row. Notably, while GPRA 1993 focused on agency-level products and processes, GPRAMA added several items at the executive branch-wide level. Moving from left to right across columns, Figure 2 shows how GPRAMA's products and processes reflect four-year goal-setting at both the executive branch-wide level and the agency level (second column), annual submission of two-year goal-setting (third column), quarterly reviews of priority goals (fourth column), and inclusion of information on the OMB website (fifth column). The OMB website is required to provide both agency-level and executive branch-wide information. The figure illustrates how GPRAMA requires some of the contents of products and processes to relate to each other. For example, GPRAMA requires OMB to establish federal government priority goals. Inside the small graphic for FGPGs (upper left), Figure 2 circles a hypothetical federal government priority goal for a crosscutting policy area, labeled as "FGPG 2." This might be a goal related to food safety, for example, where multiple agencies and programs work to promote a safe national food supply. The figure then uses arrows to trace how other products and processes at the executive branch-wide and agency levels are required to relate to that goal. Moving to the right, the Federal Government Performance Plan is required to have one or more performance goals for each FGPG. Continuing to toward the right, OMB is required to conduct a review of progress with the federal government priority goal's lead official each quarter. Finally, OMB is required to post the most recent quarterly results that were achieved for FGPG 2. At the agency level, Figure 2 illustrates that each Agency Strategic Plan (graphic at lower left) is required to describe how any of the agency's general goals or objectives may contribute to federal government priority goals. In turn, an Agency Performance Plan is required to describe how the agency's own performance goals, such as the circled "Performance Goal 2," contribute to the agency's general goals in the Agency Strategic Plan. The APP also is required to describe how agency-level performance goals contribute to the executive branch-level federal government performance goals in the Federal Government Performance Plan. If an agency has a performance goal that also is designated as an agency priority goal (e.g., "APG 2"), GPRAMA requires the agency to review quarterly progress with the relevant goal leader. Finally, the law requires OMB and agencies to post online the most recent quarterly results for each agency priority goal. The ways in which OMB and agencies present information to Congress in these products and processes may vary over time. GPRAMA establishes minimum expectations in law, however. Depending on how GPRAMA's changes are implemented, the law may have significant implications. To highlight a few, GPRAMA brings additional attention to policy implementation and oversight in several ways. For example, GPRA 1993 focused on annual plans that were used to support the President's budget proposal. These plans were not required to be revised to reflect congressional action. By contrast, GPRAMA adds a requirement that effectively requires the Agency Performance Plans to be updated to reflect this policy making. In quarterly reviews, the law may bring focus to achieving goals during policy implementation, and the performance-related website may facilitate congressional oversight. GPRAMA's requirements for individual officials to be responsible for various management- and performance-related tasks also may provide a convenient means for Congress to interact with agencies about discrete topics. GPRAMA continues with GPRA 1993's emphasis on goal-setting and performance measurement, with little explicit emphasis on producing or presenting program evaluations. Under GPRA 1993, this sometimes could leave unclear how well programs themselves were performing, why, and what might be done in response. For example, achievement or non-achievement of a goal might be driven by "external" factors other than the program, and measurement of goal achievement may reveal little information that is actionable for an agency, Congress, or the President. At the same time, GPRAMA also brings more attention to goal-setting and performance in areas that cut across federal programs and agencies. As shown in Figure 2 , the law established a new set of executive branch-wide products and processes. In addition, nearly 20 provisions in GPRAMA relate to the concept of crosscutting policy areas, where multiple agencies, programs, regulations, delivery partners, and other policy tools may "contribute" to the accomplishment of a goal or desired outcome. Several provisions require assessments of whether activities that cut across these boundaries are contributing toward achievement of the same goal. GPRAMA does not specify how such assessments are to be made or presented to Congress. Nevertheless, agencies and OMB might use program evaluations or "logic modeling" (see Appendix B ) to portray and demonstrate these relationships. In several ways, GPRAMA establishes more specific requirements for agency and OMB interactions with Congress. For example, agency consultations with Congress about Agency Strategic Plans are required to include both majority and minority views from authorizing, appropriations, and oversight committees. In this context, another GPRAMA provision requires consultations with "appropriate" committees to occur every two years. Similarly, when OMB coordinates development of long-term federal government priority goals, GPRAMA requires OMB to consult "periodically" with the majorities and minorities of several specific committees. To provide some accountability with regard to consultations, GPRAMA requires reporting in Agency Strategic Plans and on the OMB website regarding how (or whether) congressional views and suggestions were incorporated into certain kinds of goals. At the same time, it remains to be seen if GPRAMA could have any implications for the working relationships and the power relationships among Congress, agencies, OMB, the President, and the public. To illustrate, the OMB website has stated that [t]he core mission of OMB is to serve the President of the United States in implementing his vision across the Executive Branch.... As the implementation and enforcement arm of Presidential policy government-wide, OMB carries out its mission through five critical processes that are essential to the President's ability to plan and implement his priorities across the Executive Branch. GPRAMA gives OMB specific statutory authorities that it could attempt to use to influence several products, processes, and institutions. In any of these situations, if a GPRAMA product or process were perceived as reflecting primarily the President's policy preferences or assessing performance in a way that does not reflect underlying statute or congressional intent, some observers might view the product or process as less credible or useful. Similarly, GPRAMA aligns or re-aligns numerous products and processes according to presidential terms and budget proposals. As a consequence, it arguably remains to be seen whether GPRAMA's authorities could be used to alter the responsiveness of agencies to Congress and congressional intent. For example, in spite of more specific consultation requirements, it might become more difficult for Congress to influence agencies' goal-setting in Agency Strategic Plans. Under GPRAMA, all agencies probably will submit draft ASPs to OMB for clearance at the same time, in the first year of a new President's term. This is a time when the President traditionally attempts to influence agencies to adopt and implement his or her policy agenda. As a consequence, OMB's ability to influence or direct the choices of agencies and the information that they present may be enhanced in comparison with GPRA 1993. GPRAMA's more specific requirements for congressional consultations about ASPs and priority goals, along with transparency from the OMB performance website, also could affect working and power relationships. For example, it remains to be seen whether congressional consultations might mitigate any of the possibilities discussed above, create enhanced opportunities for Congress to influence the choices of agencies, or foster congressional-executive collaboration and compromise. With these and other potential implications in mind, the bullets below highlight more specific issues for Congress that might arise during implementation of GPRAMA. Each bullet also includes questions that might be considered. Congressional consultations and defining "success." GPRAMA requires agencies and OMB to consult with Congress regarding Agency Strategic Plans, federal government priority goals, and agency submissions of plans and reports to Congress. Committees also might consider asserting broader prerogatives to interact with or direct agencies. In these contexts, have meaningful consultations occurred with relevant committees and Members? Did the consultations occur during formulation of the plans, goals, and proposals, or only after the fact? Are agencies being responsive to committees of jurisdiction? Do committees and Members agree with the way in which agencies or OMB are defining what constitutes a "program," as this is required to be portrayed on the OMB performance website by October 2012? How might committees and Members engage on these topics effectively? Do goals and objectives reflect current law and congressional intent? Does Congress agree with the designation of certain goals as being priority goals? Are plans and goals well formulated and coordinated? Agency and OMB representations about performance. By design, GPRAMA requires many products to be submitted to Congress to inform its policy deliberations. If the products are to be considered useful to Congress and the public, one input to perceptions of usefulness may be whether the products are perceived as making credible, unbiased representations about how well agencies and programs are performing. How credible are these representations? For a program or agency, is "success" being defined appropriately? Are credible and appropriate methods of policy analysis, measurement, and evaluation being used? What resources and tools might Congress draw upon, including from its support agencies and the public, to scrutinize any "evidence" that is presented? What are the policy implications of available evidence and analyses? Oversight, transparency, and public participation. Congress oftentimes relies on transparency and public participation to help it conduct oversight of policy development and implementation within agencies and OMB. Oversight findings may generate interest in subsequent lawmaking or other legislative activity. What have been the recent activities of Performance Improvement Officers and the Performance Improvement Council? Are they functioning effectively? What is happening during quarterly reviews? Are agencies and OMB focusing on learning and improvement in addition to goal achievement? Is the OMB performance website providing the required information? If a goal is removed from the website, or if a goal's target is revised, will the website retain any record of the previous goal or target? Might it be worthwhile to communicate informally with a goal leader or other official who is responsible for a topic under GPRAMA, or more formally invite the official to testify at a hearing? Are non-federal stakeholders being consulted by agencies in the development of Agency Strategic Plans? What are stakeholders' views about agencies' goals? Are OMB and agencies consulting effectively with Congress about the potential elimination of requirements to submit plans and reports to Congress? Is GPRAMA being implemented in a way that helps agency program managers and front-line staff without creating perverse incentives for organizations and individuals? Crosscutting policy areas. Congress and observers have expressed interest in policy areas that cut across agency and programmatic boundaries. In these areas, more than one agency or program may collaborate and contribute toward desired policy outcomes or, conversely, duplicate effort. For example, GPRAMA requires OMB to include information on its performance website about each agency program and how the program contributes to one or more of the agency's goals. GAO is separately required to report annually on programs, agencies, and initiatives with "duplicative goals and activities." Most of GAO's March 2011 findings cited "potential" fragmentation, overlap, or duplication, and GAO oftentimes recommended further analysis or enhanced coordination. Are agencies and OMB using their scarce analytical resources effectively to coordinate efforts and identify and exploit potential efficiencies? Are agencies and OMB using appropriate tools to conduct these analyses, potentially including evaluations and logic modeling? Are there implications for coordination across congressional committees? GPRAMA 's design and implementation. Compared to the four-year phase-in period for GPRA 1993, the phase-in period for GPRAMA before full implementation is fairly short. Answers to specific questions posed above about the implementation of GPRAMA may raise broader questions about how well the law is designed and how well it is being implemented by OMB or specific agencies. In that light, how well is GPRAMA serving Congress's needs? How well is it serving the needs of agency personnel, the President, and the public? Are agencies and OMB adequately complying with the act? Are agencies and OMB using the act in way that promotes improvement and learning in addition to accountability? Do agencies have the necessary capacity—including staff, skills, technology, and funding—to implement the law's numerous and detailed requirements? In response to any of these topics, and if a problem were perceived, what options might be considered to enhance the law's design or implementation? Appendix A. Acronyms This table lists acronyms that are used in this CRS report. For some entries, text that is located inside parentheses indicates when an acronym is associated with implementation of GPRAMA, GPRA 1993, another law, or a presidential initiative. For acronyms associated with a particular President, the table indicates the relevant administration. In practice, some terms and corresponding acronyms have been used that do not mirror the precise language from underlying statutes. In Appendix B , a glossary provides more information about these cases. Appendix B. Glossary of Terms Government processes oftentimes involve specialized terms. The federal budget process, for example, has evolved to a level of complexity where participants in the process often perceive a need for glossaries and guides. GPRAMA similarly establishes an elaborate framework of products and processes that focus on government performance. In doing so, the law uses terms that are interrelated and sometimes technical in nature. Notably, the designs and legislative histories of GPRA 1993 and GPRAMA indicate Congress's intention for Congress itself, along with agencies, the President, non-federal stakeholders, and the broader public, to be consumers of the laws' products and to actively participate in the laws' processes for managing performance of the government. To assist with navigating through GPRAMA's varied products and processes, this glossary provides capsule summaries and statutory citations for related terms. In each entry, when a term is included that also is listed elsewhere in the glossary, the term is written in italics the first time it is used.
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On January 4, 2011, the GPRA Modernization Act of 2010 (GPRAMA) became law. The acronym "GPRA" in the act's short title refers to the Government Performance and Results Act of 1993 (GPRA 1993), a law that GPRAMA substantially modified. When GPRA 1993 was enacted, it was regarded as a watershed for the federal government. For the first time, Congress established statutory requirements for most agencies to set goals, measure performance, and submit related plans and reports (hereafter, "products") to Congress for its potential use. After a four-year phase-in period for GPRA 1993 and 13 years of the law's full implementation, GPRAMA makes substantial changes. Among other things, GPRAMA continues three agency-level products from GPRA 1993, but with changes; establishes new products and processes that focus on goal-setting and performance measurement in policy areas that cut across agencies; brings attention to using goals and measures during policy implementation; increases reporting on the Internet; and requires individuals to be responsible for some goals and management tasks. In making these changes, GPRAMA aligns the timing of many products to coincide with presidential terms and budget proposals. The law also includes more central roles for the Office of Management and Budget (OMB), an entity that often seeks to advance the President's policy preferences. GPRAMA also contains more specific requirements for consultations with Congress. By design, many of GPRAMA's products are required to be submitted to Congress for scrutiny and potential use. The law also provides opportunities for Congress and non-federal stakeholders to influence how agencies and OMB set goals and assess performance. This report provides an overview of GPRAMA's products and processes. In addition, the report highlights potential issues for Congress. Related questions that Congress might consider include the following: Are agencies' and OMB's consultations with Congress working well? Are agencies and OMB defining goals and assessing performance in ways that reflect underlying statutes and congressional intent? Are the representations that agencies and OMB make about government performance perceived by Congress, federal personnel, and the public as credible and useful? What are the implications of evidence that is presented? Are agencies and OMB implementing GPRAMA with desired levels of transparency and public participation? Are agencies, OMB, and Congress focusing effectively on crosscutting policy areas to better coordinate efforts and reduce any unnecessary duplication? Are agencies and OMB implementing GPRAMA in a responsive, effective manner? Is GPRAMA working well? If not, what might be done? This report will be updated as events warrant.
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The Department of Defense (DOD) created the Defense Advanced Research Projects Agency (DARPA) in 1958. Originally called the Advanced Research Projects Agency, DARPA was established partly in response to the launch of the first Sputnik satellite by the former Soviet Union and partly in rec ognition of the need to invest resources toward promising concepts requiring a longer timeframe for development. In 1972, "defense" was added to the agency's name to emphasize its mission of making "pivotal investments in breakthrough technologies for national security." This report provides an overview of DARPA, including the agency's organizational structure, characteristics (i.e., the "DARPA model"), and strategic priorities. The report also describes funding trends at DARPA and discusses select issues for possible congressional consideration, including the appropriate level of funding for the agency, technology transfer, and the potential role of DARPA in maintaining the technological superiority of the U.S. military. According to DARPA, the agency is focused on research and development (R&D) that is intended to achieve transformative change rather than incremental advances. "Transformative" R&D—a term often used interchangeably with revolutionary or "high-risk, high-reward" R&D—is defined by the National Science Board as research driven by ideas that have the potential to radically change our understanding of an important existing scientific or engineering concept or leading to the creation of a new paradigm or field of science or engineering. Such research is also characterized by its challenge to current understanding or its pathway to new frontiers. Since its establishment, DARPA-funded research has made important scientific and technological contributions in computer science, telecommunications, and material sciences, among other areas. Specifically, DARPA investments have resulted in a number of significant breakthroughs in military technology, including precision guided munitions, stealth technology, unmanned aerial vehicles, and infrared night vision technology. DARPA-sponsored R&D has also led to the development of notable commercial products and technologies such as the internet, global positioning system (GPS), automated voice recognition, and personal electronics. The nature of the high-risk, high-reward approach to funding taken by DARPA also results in a number of failed or less successful projects. For example, in the 1970s DARPA supported research into paranormal phenomena and the possibility of using telepathy and psychokinesis to conduct remote espionage. The agency also supported the development of a "mechanical elephant" for transportation in the jungles of Vietnam that former DARPA Director Rechtin termed a "damn fool" project and terminated before it could come under scrutiny by Congress. In 2003, the Total Information Awareness (TIA) program did attract congressional attention. The goal of the Total Information Awareness program was to "revolutionize the ability of the United States to detect, classify and identify foreign terrorists—and decipher their plans" by creating a large database of information that could be "mined" using new tools and techniques to identify actionable intelligence. Some Members of Congress, the American Civil Liberties Union, and others criticized the program as an abuse of government authorities and an infringement on the privacy of Americans. In Section 111 of the appropriations bill for FY2003 ( P.L. 108-7 ) Congress limited the use of funds for the TIA program and expressed the sense of Congress that the program "should not be used to develop technologies for use in conducting intelligence activities or law enforcement activities against United States persons without appropriate consultation with Congress or without clear adherence to principles to protect civil liberties and privacy." There has been at least one more recent DARPA program that failed to meet expectations. In 2011, the Falcon Hypersonic Technology Vehicle 2 exploded 9 minutes into a 30-minute planned test flight when large portions of the vehicle's outer shell peeled away. The program ended in 2011. These less successful and sometimes high-profile failures highlight DARPA's willingness to invest in high-risk, high-reward R&D. Despite such setbacks, the agency is frequently cited as a model for innovation that other agencies, outside groups, and Congress have sought to replicate across the federal government. For example, both the Intelligence Advanced Research Projects Activity (IARPA) within the Office of the Director of National Intelligence and the Advanced Research Projects Agency–Energy (ARPA-E) within the Department of Energy were modeled after DARPA with a focus on high-risk, high-reward research in their respective areas. The "DARPA model" is discussed in more detail later. DARPA is an independent R&D agency of the U.S. Department of Defense. Over the course of DOD's history, leadership for research, engineering, and technology development has existed at various levels within the Office of the Secretary of Defense, including an Assistant Secretary of Defense for Research and Engineering and a Director of Defense for Research and Engineering. Currently, the Director of DARPA reports through the Deputy Under Secretary of Defense for Research and Engineering to the Under Secretary of Defense for Research and Engineering (USD R&E). In general, DARPA's role and position within DOD has allowed the agency to have close ties to senior DOD officials, helping the agency maintain its independence and focus on transformative R&D. DARPA has more than 200 government employees, including almost 100 program managers who oversee the agency's annual budget of roughly $3 billion. DARPA does not directly perform research or operate any research laboratories, but rather executes its R&D programs mainly through contracts with industry, universities, nonprofit organizations, and federal R&D laboratories. DARPA is a relatively flat organization consisting of the Director's Office; six technical program offices; the Adaptive Execution Office; the Aerospace Projects Office; the Strategic Resources Office; and the Mission Services Office. DARPA's six technical program offices are the Biological Technologies Office , responsible for the development and use of biotechnology for technological advantage, including neurotechnology, human-machine interface, human performance, infectious disease, and synthetic biology R&D programs. Defense Sciences Office , focused on mathematics and modeling, the physical sciences, human-machine systems, and social systems. Information Innovation Office , responsible for basic and applied research in cyber, analytics, and human-machine interfaces. Microsystems Technology Office , focused on R&D on the electromagnetic spectrum, information microsystems, and the security and reliability of microelectronics. Strategic Technology Office , responsible for developing technologies that enable fighting as a network (i.e., the use of multiple platforms, weapons, sensors, and systems simultaneously) to improve military effectiveness, cost, and adaptability, including battle management, command and control, and electronic warfare. Tactical Technology Office , focused on developing and demonstrating new platforms in ground, maritime (surface and undersea), air, and space systems, including advanced autonomous and unmanned platforms. DARPA's other offices are the Adaptive Execution Office , responsible for accelerating the transition of DARPA technologies to the private sector and the military services, including through technology demonstrations and field trials. Aerospace Projects Office , a special projects office created in 2015, focused on the development of advanced aircraft technologies to ensure air dominance in future contested environments. Strategic Resources Office and the Mission Services Office , responsible for agency support activities, including human resources services and business enterprise and operations support. The "DARPA model" is often cited by Congress and others when discussing how to improve the ability of the federal government to spur innovation through its R&D investments. DARPA officials contend that its organizational structure allows the agency to operate in a fashion that is unique within DOD, as well as the entire federal government. Specifically, DARPA officials assert that the agency's relatively small size and flat structure enable flexibility and allow the agency to avoid internal processes and rules that slow action in other federal agencies. Additionally, in his 2007 testimony before the House Committee on Science and Technology, Dr. Richard Van Atta, a defense policy analyst, stated, "a crucial element of what has made DARPA a special, unique institution is its ability to re-invent itself, to adapt, and to avoid becoming wedded to the last problem it tried to solve." DARPA attributes its long history of successful innovation to four factors: (1) trust and autonomy; (2) limited tenure and the urgency it promotes; (3) a sense of mission; and (4) risk-taking and tolerance for failure. These factors generally manifest themselves through the agency's approach to its program managers. Some assert that the key to DARPA's success "lies with its program managers." The level of trust and autonomy provided to DARPA program managers is unique across the federal government. DARPA expects its program managers to play a key role in the technical direction of each project. Specifically, unlike most program managers in federal R&D agencies, DARPA program managers are charged with creating new programs and projects and quickly funding innovative ideas. Although DARPA program managers can use peer review to help them evaluate the merit of an R&D proposal, they are not required to do so and are in effect responsible for the selection, and, if necessary, the termination of a project. This is in contrast to program managers at the National Science Foundation who, in general, inherit existing programs, are required to use peer review panels to determine the quality of a proposal, and select projects based primarily on the rankings provided by the review panel. Another key feature of DARPA's approach to program management is that program managers are hired for a limited tenure, generally three to five years. DARPA believes that the continued influx of new program managers infuses the agency with new ideas and personnel who have a passion for turning those ideas into reality as quickly as possible. DARPA estimates that 25% of its program mangers turn over annually. According to the agency, "in most organizations that would be considered a problem; at DARPA, it is intentional and invigorating. A short tenure means that people come to the agency to get something done, not build a career." However, some contend that the high turnover rate of program managers can result in duplicative efforts due to a lack of institutional memory. Concerns have also been raised that the recruitment process used by DARPA—existing or previous program managers identify new program managers—might contribute to a gender imbalance (DARPA program managers are typically men) and the selection of individuals from the same network of researchers, which could lead to a stagnation of new ideas and perspectives. Limited tenure and urgency is also reflected in how DARPA funds its projects. In general, DARPA funds an idea or project just long enough to determine its feasibility, typically three to five years. If a program manager believes a new idea is not working out, the program manager can terminate the project quickly and funds can be redirected to a new project or an existing project with more potential. Specifically, DARPA projects are evaluated on the basis of milestones established by program managers in advance of the start of the program; progress toward these milestones is used to evaluate whether continued funding is merited. DARPA asserts its mission "to prevent and create technological surprise" is an important factor in reinforcing and driving the innovative culture of the agency. Specifically, DARPA contends The importance and ambition of the mission help fuel the drive toward innovation. People are inspired and energized by the effort to do something that affects the well-being and even the survival of their fellow citizen. DARPA's approach to risk is also unusual and is a well characterized element of the agency's success. DARPA asserts that its program managers often reject projects for not being sufficiently ambitious and views failure as the cost of supporting potentially transformative or revolutionary R&D. To mitigate the costs of failed projects, DARPA funds projects for a limited time and is willing to reallocate funds from underperforming projects. DARPA's culture of risk-taking and tolerance for failure are among the most cited attributes some in Congress and others seek to replicate in other federal agencies supporting R&D. Some experts have noted additional factors as important contributors to the DARPA model and its success. These factors include multigenerational technology thrusts (i.e., support for a suite of technologies and ideas in a given area over an extended period of time); connection to the larger innovation ecosystem; the agency's ties to leadership at DOD; and its role as an initial market creator or first adopter. Congress has provided DARPA with additional authorities that many believe are key contributors to the agency's record of successful innovation and essential to the DARPA model. These include flexibility in the hiring of personnel and the mechanisms it can use for acquiring goods and services and providing financial assistance. For example, in response to a question on the authorities Congress needed to grant DARPA to maintain a culture of innovation, former DARPA Director Dr. Arati Prabhakar stated The tools that this committee has already helped us with I think are critically essential—number one, bringing in people from all different parts of the technical community. Not just those who already live in the DOD [Science and Technology] world, but people who come with backgrounds in commercial companies or having done startups or people out of universities—those different perspectives are very helpful. Our ability to contract with entities that aren't normally in the business of doing business with the Federal Government through other transactions authority that is another way that allows us to reach farther in terms of technology and ... get access to some of these bleeding edge technologies. In 1998, Congress established an experimental program for hiring scientific and technical personnel at DARPA ( P.L. 105-261 ). Specifically, the program granted DARPA the authority to directly hire experts in science and engineering from outside the federal government for limited term appointments (up to six years). It also exempted the agency from complying with traditional civilian personnel requirements, thereby allowing DARPA to streamline its hiring process and increase the level of compensation it could offer scientists and engineers. Many in Congress viewed this flexibility in hiring as improving DARPA's ability to recruit and retain eminent scientific and technical experts. Congress routinely extended the duration of the experimental personnel program between 1998 and 2015. Congress made the hiring authority permanent in the National Defense Authorization Act for Fiscal Year 2017 ( P.L. 114-328 ). In 1989, Congress granted DARPA "other transactions (OT) authority." There is no statutory or regulatory definition of "other transaction." An OT is an acquisition mechanism that does not fit into any of the traditional mechanisms used by the federal government for acquiring goods or services—contracts, grants, or cooperative agreements. OTs do not have to comply with the government's procurement regulations. Only those agencies that have been provided OT authority may engage in other transactions. Generally, the reason for creating OT authority is that the government needs to obtain leading edge R&D or prototypes from commercial sources that are unwilling or unable to navigate the government's procurement regulations. OT authority is generally viewed as giving federal agencies additional flexibility to develop agreements tailored to the needs of the project and its participants. In 1991, Congress made DARPA's OT authority permanent and extended it to DOD broadly. In 1993, Congress provided DARPA with authority to use OTs for prototypes; this authority was subsequently extended to the entire department in 1996 and made permanent in the National Defense Authorization Act for Fiscal Year 2016 ( P.L. 114-92 ). DARPA's R&D efforts are generally long-term in character and often in areas where the national security or defense need is initially unclear. As such, DARPA-supported research does not generally produce immediate, tangible results. In his 2017 testimony before Congress, Dr. Steven Walker, who was then Acting Director of DARPA, described the agency's role as in large part to change what's possible—to do the fundamental research, the proof of principle, and the early stages of technology development that take impossible ideas to the point of implausible, but surprisingly possible. No other agency within the Defense Department has the mission of working on projects with such a high possibility of failure—or such a high possibility of producing truly revolutionary new capabilities. When DARPA was established in 1958 it was created as an independent R&D agency explicitly separate from the R&D organizations of the military services. This construct has allowed DARPA to support R&D and technology efforts that are not tied to formal military requirements or to the specific roles or missions of the military services. Instead DARPA's role in the DOD R&D enterprise has been to cut across the traditional jurisdictions of the military services and to explore new and unconventional concepts that have the possibility of leading to revolutionary advances in the technological capabilities of the military—potentially revising the traditional roles and missions of the military services. Overall, DARPA takes a portfolio approach to its R&D investments and program activities (i.e., it addresses a wide range of technical opportunities and national security challenges simultaneously). However, the agency's program managers play a major role in selecting the R&D supported by the agency. This "bottom-up" approach is deemed effective by DARPA because its program managers, who are university faculty, entrepreneurs, and industry leaders, are seen as the individuals closest to the technical challenges and potential solutions and opportunities in a given field. DARPA considers this connection to the R&D and entrepreneurial community critical to driving innovation and risk-taking within the agency's activities. Additionally, DARPA often holds conferences, sponsors workshops, and supports travel by its program managers and its leadership to ensure the agency is fully informed of current and cutting-edge technologies and research. Ideas or R&D areas addressed through the agency's programs also come from the "top-down," including from DARPA leadership and from the military services who articulate the needs and challenges of the warfighter to the agency. Ultimately, DARPA leadership is responsible for setting agency-wide priorities and ensuring a balanced investment portfolio. In 2015, DARPA released a document outlining the agency's current areas of focus. Specifically, as described by DARPA, the agency is focusing its investments in four main areas: Rethink Complex Military Systems : To help enable faster development and integration of breakthrough military capabilities in today's rapidly shifting landscape, DARPA is working to make weapons systems more modular and easily upgraded and improved; assure superiority in the air, maritime, ground, space and cyber domains; improve position, navigation and timing (PNT) without depending on the satellite-based Global Positioning System; and augment defenses against terrorism. Master the Information Explosion : DARPA is developing novel approaches to deriving insights from massive datasets, with powerful big-data tools. The Agency is also developing technologies to ensure that the data and systems with which critical decisions are made are trustworthy, such as automated cyber defense capabilities and methods to create fundamentally more secure systems. And DARPA is addressing the growing need to ensure privacy at various levels of need without losing the national security value that comes from appropriate access to networked data. Harness Biology as Technology : To leverage recent breakthroughs in neuroscience, immunology, genetics and related fields, DARPA in 2014 created its Biological Technologies Office, which has enabled a new level of momentum for the Agency's portfolio of innovative, bio-based programs. DARPA's work in this area includes programs to accelerate progress in synthetic biology, outpace the spread of infectious diseases and master new neurotechnologies. Expand the Technological Frontier : DARPA's core work has always involved overcoming seemingly insurmountable physics and engineering barriers and, once showing those daunting problems to be tractable after all, applying new capabilities made possible by these breakthroughs directly to national security needs. Maintaining momentum in this essential specialty, DARPA is working to achieve new capabilities by applying deep mathematics; inventing new chemistries, processes and materials; and harnessing quantum physics. Additionally, on May 3, 2017, in testimony before the Senate Appropriations Committee, Dr. Steven Walker, then-Acting DARPA Director, discussed a few overarching research areas—artificial intelligence, autonomous systems, and human-machine interfaces—which are "increasingly relevant to many DARPA programs and that give a strong hint about where the future of technology is going." In 2015, as part of the National Defense Authorization Act for Fiscal Year 2016 ( P.L. 114-92 ), Congress repealed a provision requiring DARPA to prepare and submit a biennial strategic plan to Congress describing the agency's long-term strategic goals; the research programs developed in support of those goals; the agency's technology transition strategy; the policies governing the agency's management, organization, and personnel; and the connection between DARPA's activities and the missions of the military services. DARPA funding is appropriated through the Defense-wide Research, Development, Test, and Evaluation (RDT&E) account, which generally falls under Title IV of the annual defense appropriations act. The 2019 Defense-wide RDT&E account includes 17 other DOD organizations. Program elements within the account provide support for particular RDT&E activities within each DOD R&D organization, including DARPA. The program elements also describe DOD's R&D funding by the character of work to be performed (e.g., basic research). The character of work consists of a budget activity code (6.1 through 6.7) and a description (see Table 1 ). Nearly all of DARPA's funding falls under the categories of basic research (6.1), applied research (6.2), and advanced technology development (6.3). Funding for the 6.1 to 6.3 program elements is referred to by DOD as the science and technology (S&T) budget. DOD's S&T budget is often singled out by analysts and others for additional scrutiny, as it is viewed as an investment in the foundational knowledge needed to develop future military systems. DARPA's remaining funding falls within the 6.6 budget activity code for management support, which includes personnel salaries and benefits as well as costs associated with travel, supplies, equipment, and office space. As stated previously, DARPA does not directly perform R&D, but supports R&D through contracts with various R&D performers which include universities and industry. As illustrated by Figure 1 , DARPA primarily supports R&D performed by industry. Specifically, in FY2017 nearly 70% ($2.1 billion) of DARPA's R&D was performed by industry; universities and colleges performed 15% ($461.8 million) of DARPA's R&D, followed by intramural R&D performers (e.g., federal laboratories) at 7% ($223.3 million), other nonprofits (4%; $119.2 million), Federally Funded Research and Development Centers (FFRDCs) (3%; $98.8 million), and foreign entities (1%; $28.8 million). Figure 2 and Figure 3 show DARPA funding trends from FY1996 to FY2019 by character of work (i.e., basic research, applied research, advanced technology development, and management support) in current and constant FY2017 dollars (adjusted for inflation), respectively. In current dollars, overall funding for DARPA has increased by 51% from $2.27 billion in FY1996 to $3.4 billion in FY2019, a compound annual growth rate (CAGR) of 1.7% ( Figure 2 ). In FY2017 constant dollars, DARPA funding has decreased by less than 1%, from $3.35 billion in FY1996 to $3.32 billion in FY2019. While fluctuating over time the overall trend line for DARPA funding has remained relatively steady in constant dollars ( Figure 3 ). Specifically, funding for the agency decreased by 23% between FY1996 and FY2000 in constant dollars, but then increased by 42% to its highest level in FY2005. Since FY2005, DARPA funding has declined by 10% ( Figure 3 ). The proportion of DARPA funding supporting basic research has increased steadily over time ( Figure 4 ). In FY2019, basic research accounts for 14% of DARPA funding, up from 3% in FY1996. However, the proportion of DARPA funding supporting basic research in FY2019 represents a 10% decline when compared to the proportion of DARPA funding supporting basic research in FY2018. The proportion of DARPA funding supporting applied research has fluctuated over time, averaging 42% between FY1996 and FY2019 with a high of 52% in FY2001 and a low of 33% in FY1996 ( Figure 4 ). In FY2019, the proportion of DARPA funding supporting applied research is 42%. The proportion of DARPA funding supporting advanced technology development has also fluctuated over time, averaging 45% between FY1996 and FY2019 with a high of 60% in FY1996 and a low of 40% in FY2001. In FY2019, the proportion of DARPA funding supporting advanced technology development is 43%. The proportion of DARPA funding for management support has remained relatively steady, peaking at 8% in FY2010. In FY2019, the proportion of DARPA funding for management support is 2%, its lowest level since FY1996. DARPA's goal is to ensure the U.S. military is "the initiator and not the victim of technological surprises." As such DARPA's R&D investments are often examined as a surrogate for high-risk, high-reward R&D within DOD (i.e., R&D focused on revolutionary advances rather than incremental advances). Figure 5 and Figure 6 depict DARPA funding as a share of DOD RDT&E funding (6.1 to 6.7 budget activity codes) and Defense S&T funding (6.1 to 6.3) over time. Between FY1996 and FY2019, DARPA's share of DOD RDT&E funding has declined from 6.4% in FY1996 to 3.6% in FY2019 ( Figure 5 ). After a decline between FY1996 and FY2000—from 30.1% to 22.2%—DARPA's share of Defense S&T funding has remained relatively steady between 22% and 25% from FY2000 to FY2017 ( Figure 6 ). In FY2019, DARPA's share of Defense S&T funding is 21.5%, up from its lowest level in FY2018 of 20.6%. The following sections describe potential issues for congressional consideration, including the level of funding DARPA should receive, the agency's technology transfer activities, the role DARPA can or should play under the DOD Under Secretary for Research and Engineering and in DOD's efforts to maintain technological superiority, and how DARPA incorporates ethical, legal, and societal considerations into the research it supports. Support for high-risk, high-reward research is considered by some as essential to maintaining the economic competitiveness of the United States. In the context of national security, high-risk, high-reward R&D could lead to the development of technologies that advance or maintain the technological superiority of the U.S. military. In this report, CRS examined DARPA funding as a surrogate for the level of support for high-risk, high-reward, disruptive, or revolutionary R&D conducted within DOD. A 2007 report by the National Academy of Sciences recommended that federal research agencies allocate 8% of an agency's budget toward high-risk, high-reward research that the National Academy stated "suffers in today's increasingly risk-averse environment." As shown in Figure 5 , DARPA's share of DOD RDT&E funding has been below 7% since FY1996. Between FY1996 and FY2019 DARPA's share of DOD RDT&E funding averaged 4.3% and in FY2019 it is 3.6% of the agency's RDT&E funding. It is unclear the extent to which R&D investments by other DOD research organizations could be characterized as high-risk, high-reward, bringing DOD closer to the 8% spending level for high-risk, high-reward research recommended by the National Academy. Regardless, DARPA's share of DOD RDT&E funding has been on a downward trend since FY1996. A 2017 report examining the best practices of innovative companies by the U.S. Government Accountability Office (GAO) found that innovative companies invest about 80% of their R&D spending on research that is designed to make incremental improvements to their products and 20% of their R&D budget on research in support of disruptive or high-risk, high-reward R&D. Additionally, GAO found that this disruptive R&D is typically conducted by a corporate research organization that is independent from the company's business units. According to GAO, DARPA resembles a corporate research organization in that it is independent from the military services and supports research that is generally not tied to existing weapons systems or specific military department requirements. As shown in Figure 6 , DARPA's share of Defense S&T funding has remained relatively steady at between 22% and 25% from FY2000 to FY2019 and is comparable to the percentage of R&D devoted to disruptive projects at leading innovative companies. As shown by the above analyses, the answer to the question "what is the appropriate level of funding for DARPA?" is dependent on the frame one uses when examining the data. In using DARPA's share of the overall DOD RDT&E budget one may determine that DARPA funding should increase; however, in using DARPA's share of the Defense S&T budget one may conclude that current DARPA funding levels are sufficient. Additionally, it is dependent on the goals and objectives of Congress. For example, Congress and others have expressed concern that the United States is at risk of losing its technological advantage and have called for increased innovation within DOD to address the narrowing of the United States' advantage over its adversaries. If Congress believes that DARPA should play a larger role in ensuring the technological superiority of the U.S. military then it may consider increased funding for the agency. The transition of technologies—often referred to as technology transfer—from R&D supported by DARPA to acquisition programs within the military services or other end users is a challenge long recognized by Congress. For example, a 2014 committee report from the U.S. Senate Committee on Armed Services stated the committee is concerned that some technology projects may be successfully completed, but fail to transition into acquisition programs of record or directly into operational use. This may be because of administrative, funding, cultural, and/or programmatic barriers that make it difficult to bridge the gap from science and technology programs to acquisition programs, as well to the expected users of the technology. Barriers to technology transfer include DARPA's goal of creating disruptive or revolutionary technologies. Such technologies, often by design, challenge the status quo and can meet resistance from the military services. For example, according to GAO, the Air Force was initially resistant to investments in stealth technologies for aircraft. Risk aversion and resistance within the military services often can only be overcome with sufficient maturation and demonstration of the technologies prior to transition. However, DARPA's funding only supports budget activities from 6.1 to 6.3—basic research, applied research, and advanced technology development—and not the further levels of technology maturation in 6.4 and 6.5—advanced component development and prototypes and system development and demonstration—which could be used to overcome a military service's resistance. In a 2017 report comparing the best practices and management of science and technology programs at leading companies to DOD, GAO noted that companies recognize the difficulty associated with transitioning disruptive technologies and fund their disruptive technology projects through demonstration to help obtain a customer. Recent prototyping initiatives such as the Air Force Experimentation Initiative or the Army Technology Maturation Initiative within DOD may help to overcome the gap in technology maturation funding between DARPA and the department's acquisition programs. Other barriers to technology transfer also exist, including the development of technologies that do not fall clearly within the mission of a particular service and the lack of a clear "customer." Case studies by GAO and others, however, do indicate that DARPA has succeeded in transitioning some of its technologies to the military services and the private sector. According to GAO, the four factors that contribute to a successful technology transition are military or commercial demand for the technology; linkage to a research area where DARPA has had a sustained interest; active collaboration with the potential transition partner; and achievement of clearly defined technical goals. As noted by GAO and others, technology transfer is not a primary emphasis of DARPA. GAO has found that inconsistencies in the reporting and collection of technology transfer information by the agency make it difficult to reliably report on the overall success of DARPA's transition efforts. GAO first stated its concern regarding the lack of documentation for DARPA's technology transfer activities in 1974. More recently, GAO has concluded that DARPA leadership "foregoes opportunities to assess, and thus potentially improve, technology transition strategies" and that technology transition responsibilities fall to individual program managers that GAO believes are not sufficiently trained to achieve successful outcomes. Congress may examine the effectiveness of DARPA's Adaptive Execution Office which is responsible for reviewing and implementing the agency's technology transition strategies, including assisting individual program managers. Over the last several years, some Members of Congress, think tanks, and others have expressed concern that the U.S. military is losing its technical superiority due, in part, to the proliferation of technologies outside the defense sector and the inability of DOD to effectively incorporate and exploit commercial innovations. To address this concern, Congress established an Under Secretary of Defense for Research and Engineering (USD R&E) in 2016 that "would take risks, press the technology envelope, test and experiment, and have the latitude to fail, as appropriate." In describing the role of the Under Secretary, the Senate Committee on Armed Services stated the USD(R&E) will be a unifying force to focus the efforts of the defense laboratories, as well as agencies with critical innovation missions, such as the Defense Advanced Research Projects Agency, the Defense Threat Reduction Agency, and the Missile Defense Agency on achieving and maintaining U.S. defense technological dominance. How the USD R&E will "focus the efforts" of DARPA is unclear and an area that Congress may consider defining. In determining the appropriate role of DARPA in DOD's efforts to maintain technological superiority, it may be useful to examine some of the roles DARPA has played in its past. According to the Institute for Defense Analyses (IDA), DARPA has at various times through its history been the focus for large-scale, nationally important technology application areas; principal supporter of major areas of basic research and generic technologies with both military and commercial potential; developer of specific, large-scale system concepts and prototypes; supporter of highly experimental and extremely advanced concepts for weapons, systems, and capabilities; developer of operational systems and capabilities for direct application to existing military conflicts; funder of research to improve the capabilities of industry to produce defense-related technologies; and supporter of fundamental knowledge needed to better understand a phenomena related to a potential defense application. It may be appropriate to have DARPA pursue some or all of these roles simultaneously, with varying degrees of emphasis. However, IDA has stated that, historically, "DARPA efforts had their greatest success when there was a clearly defined sense of mission and direction in the agency and DOD." On December 18, 2017, the Trump Administration released the National Security Strategy, which stated that "the United States will prioritize emerging technologies critical to economic growth and security, such as data science, encryption, autonomous technologies, gene editing, new materials, nanotechnology, advanced computing technologies, and artificial intelligence." Currently, it is unclear how DOD will implement this strategic vision across its R&D organizations, including DARPA. Some of the questions posed by IDA in its 1991 report on the future of DARPA still hold today and may be considered by the USD R&E, DARPA, and Congress, including the following: What military needs and threats should DARPA's work be focused on? What technologies have the potential to make the largest impact in the future? How should DARPA interact with the commercial sector and civilian technologies? How does DARPA determine the scale and scope of its investment in a given area? How does DARPA appropriately balance investment risk and the pursuit of ambitious, potentially high-payoff programs? A 2003 report by IDA stated that "DARPA's success depends not only on strong support from OSD [Office of the Secretary of Defense], but also on clear guidance from it on strategic needs." For more information on the USD R&E see CRS In Focus IF10834, Defense Primer: Under Secretary of Defense for Research and Engineering , by Marcy E. Gallo and Moshe Schwartz. Developments in R&D and technology can raise ethical, legal, and societal (ELS) concerns. For example, some groups have expressed concern about the impact artificial intelligence and neurotechnologies could have on privacy, consent, and an individual's identity and agency (i.e., a person's bodily and mental integrity and their ability to choose their own actions). The application of these technologies in a military context has the potential to further elevate ELS concerns. For example, how would a neurotechnology that enhances a soldier's senses, stamina, or dexterity affect the ability of an individual to integrate into civilian life upon completion of their service? In 2013, DARPA initiated a number of neurotechnology programs as part of the Obama Administration's Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative, including R&D on implantable brain-computer interfaces that could restore neural and behavioral function or improve training and performance. The Presidential Commission for the Study of Bioethical Issues recommended that institutions supporting neuroscience research integrate ethical considerations early on and explicitly throughout a research endeavor. DARPA addressed the integration of ethical considerations into its work by requiring neuroscience research program managers to engage an independent Ethical, Legal, and Social Implications panel at the inception of an R&D project. DARPA is also planning to host a national ethics workshop. However, some critics assert that DARPA does not adequately examine the moral and ethical implications of the research it supports. See the box below, "DARPA's Insect Allies Program: Some Scientists and Lawyers Express Concern," for an illustrative example. According to a 2014 report by the National Academy of Sciences (NAS) knowledge regarding ethical, legal, and societal issues associated with R&D for technology intended for military purposes is not nearly as well developed as that for the sciences (especially the life sciences) in the civilian sector more generally. In its 2014 report the NAS recommended the development and deployment of five specific processes to ensure the consideration of ELS issues in an agency's R&D portfolio. These include (1) initial screening of proposed R&D projects, (2) review of proposals that raise ELS concerns, (3) monitoring of R&D projects for the emergence of ELS issues and making midcourse corrections when necessary, (4) engaging with various segments of the pubic as needed, and (5) periodically reviewing the ELS-related processes in an agency. According to DARPA officials, the agency has implemented a strategy—informed by the 2014 NAS report—for addressing ELS concerns early on (during the program formulation stage) and throughout the lifespan of a program. Additionally, according to DARPA, the Director conducted a review of the agency's ELS strategy and its implementation in partnership with the Biological Technologies Office and three external ELS experts in the summer of 2017. DARPA asserts that the implementation of the strategy has been effective, based in part on the "positive feedback" the agency has received from the ELS community. Congress may consider conducting oversight on the processes and mechanisms used by DARPA to integrate ethical, legal, and societal considerations into its R&D portfolio.
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The Defense Advanced Research Projects Agency (DARPA), established in 1958, is an agency within the Department of Defense (DOD) responsible for catalyzing the development of technologies that maintain and advance the capabilities and technical superiority of the U.S. military. DARPA-funded research has made important science and technology contributions that have led to the development of both military and commercial technologies, such as precision guided missiles, stealth, the internet, and personal electronics. DARPA has a culture of risk-taking and tolerance for failure that has led experts, some Members of Congress, and others to view DARPA as a model for innovation both inside and outside of the federal government. The "DARPA model" is characterized by a flat organization that empowers its tenure-limited program managers with trust, autonomy, and the ability to take risks on innovative ideas. Congress has aided DARPA's efforts by granting the agency certain flexible acquisition and personnel hiring authorities, which have allowed DARPA to engage with people and entities that may have otherwise been reluctant to interact and do business with DOD. DARPA funding has remained relatively steady over time. In FY2017 constant dollars, DARPA funding has decreased by less than 1% from $3.35 billion in FY1996 ($2.27 billion in current dollars) to $3.32 billion in FY2019 ($3.4 billion in current dollars). Nearly all of DARPA's funding falls under the categories of basic research, applied research, and advanced technology development. Funding under these categories is referred to by DOD as the science and technology (S&T) budget. DOD's S&T budget is often singled out by analysts and others for additional scrutiny, as it is viewed as an investment in the foundational knowledge needed to develop future military systems. DARPA's share of Defense S&T funding has remained relatively steady at between 22% and 25% from FY2000 to FY2019. In FY2019, basic research accounts for 14% of DARPA funding, up from 3% in FY1996. However, the proportion of DARPA funding supporting basic research in FY2019 represents a 10% decline when compared to the proportion of DARPA funding supporting basic research in FY2018. Between FY1996 and FY2019, DARPA's share of DOD research, development, testing, and evaluation funding has declined from 6.4% in FY1996 to 3.6% in FY2019. Some Members of Congress, think tanks, and other experts have expressed concern that the U.S. military is losing its technological advantage and have called for increased innovation within DOD to address the perceived decline in U.S. technical dominance. In this context, Congress may consider several related issues, including the appropriate level of funding for DARPA; the effectiveness of the agency in transitioning technologies to the military services and the commercial sector; the role to be played by DARPA in any efforts by the Under Secretary of Defense for Research and Engineering to increase innovation at DOD; and the mechanism by which DARPA integrates ethical, legal, and social considerations into its research and development projects.
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The William Wilberforce Trafficking Victims Protection Reauthorization Act of 2007 ( H.R. 3887 ), passed by the House on December 4, 2007, continues and reenforces the anti-trafficking efforts that began with Trafficking Victims Protection Act of 2000. That legislation sought to protect women and children, the most common victims of both international and domestic trafficking, with a series of diplomatic, immigration, and law enforcement initiatives. H.R. 3887 follows in its path. This report is limited to the bill's law enforcement initiatives or more precisely its proposals to amend federal criminal law. Neither the 2000 legislation nor H.R. 3887 write on a complete blank slate. Federal criminal law has long condemned both involuntary servitude as well as interstate and foreign transportation of individuals for illicit sexual purposes. The involuntary servitude offenses, now found in chapter 77 of Title 18 of the United States Code, date from the nineteenth century. The transportation-for-sexual-purposes offenses, now housed in chapter 117 of that title, originated in the Mann Act in the early twentieth century. As did its predecessors, H.R. 3387 works in the area where the two overlap. Representative Lantos introduced H.R. 3887 on October 17, 2007, for himself and several other Members. The House Committee on Foreign Affairs reported an amended version of the bill on November 6, 2007. A further revised version passed under suspension of the rules on December 4, 2007. When the bill reached the Senate its criminal law proposals included newly assigned sex trafficking offenses, a sex tourism offense, a coerced services offense, obstruction of justice offenses, an importation of prostitutes offense, a false statement offense, and provisions for civil liability, victim assistance, forfeiture, extraterritorial jurisdiction, Justice Department reorganization, and a model state statute. Section 221, among other things, offers two new sex trafficking offenses. One, aggravated sex trafficking (proposed 18 U.S.C. 2429), would replace 18 U.S.C. 1591, but without the requirement that the defendant charged with persuasion, enticement, transportation, etc. of a child must be shown to have known that the child was underage. The other, sex trafficking (proposed 18 U.S.C. 2430), expands federal jurisdiction to reach persuasion, inducement, or enticement to engage in unlawful prostitution when it occurs in or affects interstate or foreign commerce, without regard to the age of the beguiled or the absence of coercion, fraud, or force. Proposed 18 U.S.C. 2429 would condemn: (a) Whoever knowingly– (1) in or affecting interstate or foreign commerce, or within the special maritime and territorial jurisdiction of the United States, recruits, entices, harbors, transports, provides, or obtains by any means a person; or (2) benefits, financially or by receiving anything of value, from participation in a venture which has engaged in an act described in violation of paragraph (1), knowing that force, fraud, or coercion will be used to cause the person to engage in a commercial sex act, or, in the case of the person has not attained the age of 18 years, that the person will be caused to engage in a commercial sex act, shall be punished as provided in subsection (b). (b) The punishment for an offense under this section is– (1) if the offense was effected by force, fraud, or coercion or if the person recruited, enticed, harbored, transported, provided, or obtained had not attained the age of 14 years at the time of such offense, by a fine under this title and imprisonment for any term of years not less than 15 or for life, or both; or (2) if the offense was not so effected, and the person recruited, enticed, harbored, transported, provided, or obtained had attained the age of 14 years but had not attained the age of 18 years at the time of such offense, by a fine under this title and imprisonment for not less than 10 years or for life. The proposal is essentially the same as 18 U.S.C. 1591, but for knowledge of the minority of a juvenile victim upon which Section 1591 insists. The proposal contains the same definitions of "commercial sex act," "coercion," and "venture" as its predecessor. However, it does contain technical amendments relating to a corresponding civil cause of action and mandatory restitution, made necessary by the transfer of the section from the chapter on involuntary servitude 18 U.S.C. ch. 77 to the Mann Act (18 U.S.C. ch. 117). Proposed 18 U.S.C. 2430 would represent an expansion of federal authority to punish sex trafficking if the offense occurs in or affected interstate or foreign commerce. It features a more expansive jurisdictional base than 18 U.S.C. 1591, and thus bears some resemblance to 18 U.S.C. 2422. Today, three federal statutory provisions outlaw inducing another to commit an act of prostitution: 18 U.S.C. 1591, 2422(a), 2422(b). They differ most notably in their jurisdictional elements. Subsection 2422(a) proscribes knowingly persuading, inducing, or enticing another individual of any age to engage in prostitution or other criminal sexual activity – when the persuasion, inducement or the like occurs within any U.S. territory or possession or when the individual is persuaded, induced, etc. to travel in interstate or foreign commerce to so engage. Subsection 2422(b) proscribes knowingly persuading, inducing, enticing, or coercing a child under 18 years of age to engage in prostitution or some other criminal sexual activity – when the persuasion, inducement or the like occurs within the special maritime or territorial jurisdiction of the U.S. or when the mails or some medium of interstate or foreign commerce are used to persuade, induce, etc. Section 1591 proscribes knowingly recruiting, enticing, harboring, transporting, providing or obtaining by any means another individual to engage in a commercial sex act with the knowledge that the individual is a child under the age of 18 or that force, fraud or coercion will be used to cause them to engage in the sex act – when the recruitment, enticement, etc. occurs within the special maritime and territorial of the U.S. or when in occurs in or affecting interstate or foreign commerce. Proposed Section 2430 would provide that: Whoever, knowingly, in or affecting interstate or foreign commerce, within the special maritime and territorial jurisdiction of the United States, or in any territory or possession of the United States, persuades, induces, or entices any individual to engage in prostitution for which any person can be charged with an offense, or attempts to do so, shall be fined under this title or imprisoned not more than 10 years, or both. The proposed section would match the jurisdiction reach of Section 1591 and its proposed replacement Section 2429 (in or affecting interstate or foreign commerce, etc.), but unlike those sections, Section 2430 would cover attempted violations. It would also cover persuasion, inducement or enticement to commit consensual acts of prostitution involving only adults (i.e., unlike Section 1591 and proposed Section 2429, it would not require that the offense involve either a child under the age of 18 or the use of fraud, force, or coercion as a means of persuasion, inducement or enticement). Some of the apparent expansion, however, would merely duplicate the proscriptions of subsections 2422(a) and (b). Both proposed Section 2430 and subsection 2422(a) would cover persuasion, inducement or enticement of another individual regardless of age to engage in unlawful prostitution or attempts to do so. Subsection 2422(a), however, requires persuasion, inducement, enticement or coercion to travel in interstate or foreign commerce. Proposed Section 2430, on the other hand, does not mention coercion and permits prosecution when the persuasion, inducement or enticement occurs in or affects interstate or foreign commerce. Subsection 2422(b) features a jurisdictional element somewhere between the two (i.e., persuasion, inducement, enticement, or coercion, transmitted using the mail or some facility of interstate or foreign commerce), but it only applies when a child under 18 years of age is so persuaded, induced , enticed, or coerced or when there is an attempt to do so. As a consequence, proposed Section 2430 would prohibit persuasion, inducement or enticement of an adult to engage in a commercial sex act when it would affect interstate commerce. Such conduct is only a federal crime now if actual interstate or foreign travel is involved. The expansion could be significant, since in other contexts the courts have often held that the prosecution need show no more than a de minimis impact on interstate or foreign commerce to satisfy the "affects commerce" standard. Subsection 221(b) proposes amendments to 18 U.S.C. 1592 (seizure of another's passport and immigration documents trafficking purposes) that also would duplicate and enlarge without repeal or amendment the coverage of 18 U.S.C. 1589 (forced labor). In its current form, Section 1592 proscribes the knowing destruction, concealment, or possession of another person's passport or similar documentation, either (1) in the course of a trafficking offense, or (2) with the intent to commit a trafficking offense, or (3) to unlawfully restrict the travel of a trafficking victim. Section 1589 prohibits providing or obtaining labor or services through physical violence, the threat of physical violence, or abuse or threatened abuse of the law. The proposed amendment to Section 1592 recasts its components in three areas. First, it streamlines the document-seizure prohibition: Whoever knowingly, with intent to obtain or maintain the labor or services of a person or to obtain or maintain a person for use in a commercial sex act (as defined in section 2429)– (1) destroys, conceals, removes, confiscates, or possesses any actual or purported passport or other immigration document, or any other actual or purported government identification document, of another person to prevent or restrict or to attempt to prevent or restrict, without authority, the person's ability to move or travel; [or] ... shall be fined under this title or imprisonment nor more than 5 years, or both. Second, like Section 1589, it outlaws obtaining labor or services through an abuse of authority or legal process. Unlike Section 1589 which only applies to forced labor, it outlaws such abuse when used to obtain either labor or commercial sex acts: Whoever knowingly, with intent to obtain or maintain the labor or services of a person or to obtain or maintain a person for use in a commercial sex act (as defined in section 2429) – * * * (2) acts or fails to act, or threatens to do so, under color of official right; (3) blackmails another person; or ... shall be fined under this title or imprisonment nor more than 5 years, or both. Third, like Section 1589, it outlaws obtaining labor or services using a threat of harm. Unlike Section 1589, it specifies financial harm rather than physical harm, and it reaches threats to secure either labor or commercial sex acts: Whoever knowingly, with intent to obtain or maintain the labor or services of a person or to obtain or maintain a person for use in a commercial sex act (as defined in section 2429) – * * * (4) causes or exploits financial harm or a fear of financial harm on the part of that person shall be fined under this title or imprisonment nor more than 5 years, or both. Subsection 221(g) would create a new federal offense, arranging sex tourism, proposed 18 U.S.C. 2431. The new section would outlaw knowingly (and for profit) arranging, inducing, or procuring an individual's travel in foreign commerce in order to permit the individual to engage in a commercial sex act, or attempting to so arrange, induce or procure, proposed 18 U.S.C. 2431(a). Violations would be punishable by imprisonment for not more than 10 years, but not more than 30 years if the commercial sex act involved a child under the age of 18, proposed 18 U.S.C. 2432(a), (b). Under existing law, it is a federal crime for an American to travel in foreign commerce for the purpose of engaging in a commercial sex act with a child, 18 U.S.C. 2423(b), (f). It is also a federal crime to arrange, induce, procure, or facilitate such travel if done for profit, 18 U.S.C. 2423(d). Both offenses are punishable by imprisonment for not more than 30 years, 18 U.S.C. 2423(b),(d). It is not a federal crime for an American to travel in foreign commerce for the purpose of engaging in a commercial sex act with an adult. And it is not a federal crime for an American to attempt to travel in foreign commerce for the purpose of engaging in a commercial sex act with a child. Subsection 221(g) would replicate existing law except to the extent that it would prohibit (1) arranging, inducing or procuring – for profit – the foreign travel of an American to engage in a commercial sex act even though the underlying travel for such purpose is not itself a federal crime, (2) attempting to arrange, induce, or procure for profit such travel, or (3) attempting to arrange, induce, or procure – for profit – the foreign travel of an American to engage in a commercial sex act with a child. Criminalizing an attempt to induce others to engage in innocent conduct (e.g., foreign travel for the purpose of engaging in a lawful commercial sex act with an adult) even when done for profit, may raise First Amendment implications. Subsection 221(h) would call upon the Sentencing Commission to consider any appropriate adjustments in the Sentencing Guidelines to reflect the creation of the offenses established in subsections 221(f)(sex trafficking) and 221(g)(sex tourism). Subsection 221(e) would amend the federal witness tampering and retaliation provisions of 18 U.S.C. 1512 and 1513 to prohibit the use of physical force, threats, corrupt persuasion, or deception to prevent another from disclosing information concerning a federal employment-related visa, labor or employment law, relating to aliens, or retaliating against another for his having done so, or attempting to so tamper or retaliate. By operation of the existing penalty restructure in Sections 1512 and 1513, offenders would face imprisonment for not more than 20 years for the use or attempted use of physical force to tamper and not more than 10 years in all other instances, 18 U.S.C. 1512(a)(3)(B), (b), 1513(b). Under existing law, it is a federal crime punishable by imprisonment for not more than 20 years to obstruct enforcement of the peonage prohibition, 18 U.S.C. 1581. The general federal witness tampering statute, among other things, proscribes the use of physical force, threats, intimidation or corrupt persuasion in order to prevent a witness from informing federal law enforcement officials of information relating to the commission of a federal crime, 18 U.S.C. 1512(a)(2)(C), (b)(3). The witness retaliation statute, among other things, proscribes retaliating against a witness for providing information relating to the commission of a federal crime to federal law enforcement officials, 18 U.S.C. 1513(b)(2). Unlike the proposed amendment, 1512 and 1513 do not outlaw obstruction or retaliation relating to the investigation of noncriminal alien employment violations. Subparagraph 202(g)(6)(D) of Section 202 would establish a cause of action including reasonable attorneys' fees for the victims of the proposed obstruction of justice offenses to be proscribed in 18 U.S.C. 1512(A)(2)(D), 1512(b)(4), or 1513(B)(3). Federal law calls for the confiscation of property derived from, or used to facilitate the commission of, a substantial number of federal crimes. Confiscation comes in two forms: criminal forfeiture and civil forfeiture. Both are triggered by the commission of an underlying offense. Civil forfeiture involves a civil procedure in which the property is treated as the offender and under which confiscation is ordered if the government establishes the required statutory nexus between the property and the confiscation-trigger offense. Confiscation does not require the conviction of the property owner or anyone else. Subsection 1594(c) calls for the civil forfeiture of property used to facilitate or derived from a violation of the peonage, trafficking chapter, 18 U.S.C. 1581-1595. Criminal forfeiture occurs as a consequence of the property owner's conviction for the confiscation-trigger offense and results only in his interest in the property. Subsection 1594(b) calls for the criminal forfeiture of the facilitating and derivative property of a defendant convicted of an offense proscribed in the peonage and trafficking chapter, 18 U.S.C. 1581-1595. As a general rule, the proceeds from confiscated property are deposited in the Department of Justice Asset Forfeiture Fund or the Treasury Department Forfeiture Fund and set aside for law enforcement purposes. Some statutes permit the Attorney General or the Secretary of the Treasury to grant petitions for remission or restoration of confiscated property or the proceeds from the sale of confiscated property. Relief in civil forfeiture cases is ordinarily confined to property owners innocent of any involvement in the confiscation-trigger offense, although Justice Department regulations authorize petitions by innocent victims with no present ownership interest in the forfeited property. Relief in criminal forfeiture cases is also available where the claimant has an innocent property interest independent of, and superior to, that of the convicted defendant. Subsection 221(c) would amend 1594 to require the Attorney General to return to victims property seized or confiscated under the involuntary servitude and trafficking chapter, 18 U.S.C. 1581-1595. It would amend 18 U.S.C. 1594 further to permit the Attorney General to return property confiscated under other laws to trafficking victims. The proposal would further amend 18 U.S.C. 1593 in a manner that may contemplate a sort of share-in-the enterprise concept. It seems to envision not the return of the proceeds from commercial sex acts to the specific exploited victims who earned them, but a sharing among the exploited sex workers of the confiscated proceeds of the enterprise. As a general rule, restoration or remission is only possible where the claimant has or had a legally recognized interest in the confiscated property and where the claimant played no part in the offense which gave rise to the forfeiture. The proposed amendments appear designed to overcome the second limitation; they permit victims to recover notwithstanding their participation in the confiscation-triggering offense. The courts, however, may find in the use of the terms "restoration and remission" an intent to continue in place the ownership requirement. Under the proposals, exploited victims might be thought entitled to no more than the return of property that can be shown to once have been theirs. It seems possible that rather than permitting victims to recover property confiscated from them because of violations of the peonage and trafficking laws, drafters intended to require or permit victim restitution to be paid out of forfeited assets of their oppressors. The proposed amendments might prove inadequate for that purpose. Subsection 221(d) would enlarge the civil cause of action available to victims of violations of the involuntary servitude and trafficking provisions, 18 U.S.C. 1581-1595. It would also provide an explicit 10-year statute of limitations within which such suits would have to be filed, proposed 18 U.S.C. 1595(c). Under existing law, victims have a cause of action for violations of 18 U.S.C. 1589 (forced labor), 1590 (peonage-related trafficking), 1591(sex trafficking of children or by force, fraud or coercion), 18 U.S.C. 1595. Subsection 221(d) would amend Section 1595 to include other offenses in chapter 77, i.e., peonage (18 U.S.C. 1581) enticement into slavery (18 U.S.C. 1583) sale into involuntary servitude (18 U.S.C. 1584) unlawful compelled service (proposed 18 U.S.C. 1592) Existing law supplies no explicit statute of limitations for a cause of action under Section 1595. The statute of limitations for the criminal prosecution of most of the offenses under chapter 77 is 10 years, 18 U.S.C. 3298. The statute of limitations of the civil cause of action established for various federal sex offenses under 18 U.S.C. 2255 is six years, 18 U.S.C. 2255(b). Where Congress has failed to provide a statute of limitations for a federal cause of action, the courts will resort to the most analogous state or federal civil statute of limitations. Paragraph 214(b)(1) of Section 214 would amend the Victims of Crime Act of 1984 (42 U.S.C. 10601 et seq.) by adding a new Section 1404F (42 U.S.C. 10603f). The Crime Victims Fund finances victim compensation and assistance grants using the fines imposed for violation of federal criminal law, 18 U.S.C. 10601(b), although Congress has capped the amount annually available from the fund. The new section would trump any coverage limitations based on the characteristics of the victim of the crime to be compensated or assisted. It would define "victim," "crime victim" and "victim of crime" for purposes of the federal crime victims compensation and assistance grants and related activities to include individuals "exploited or otherwise victimized" by a violation of 8 U.S.C. 1328 (importation of an alien for prostitution or other immoral purposes) or of any of the prohibitions in 18 U.S.C. ch. 117 (transportation of illegal sexual purposes including proposed and enlarged 18 U.S.C. 2430) or comparable offenses under state law – without any expressed regard for the victim's age, gender, consent, culpability, or participation in commercial sexual activity. Section 222 would establish extraterritorial jurisdiction over various peonage and trafficking offenses when the offender or the victim is an American or when the offender is in the United States, proposed 18 U.S.C. 1596. The offenses involved are: 18 U.S.C. 1581 (peonage) 18 U.S.C. 1583 (enticement into slavery) 18 U.S.C. 1584 (sale into involuntary servitude) 18 U.S.C. 1589 (force labor) 18 U.S.C. 1590 (human trafficking) 18 U.S.C. 2429 (aggravated sex trafficking) Criminal jurisdiction is usually territorial. The law of the place determines what is criminal and how crimes may be punished. There are some circumstances, however, under which extraterritorial jurisdiction exists. In the case of federal law, there are some circumstances under which federal crimes committed overseas may be prosecuted in federal court. In large measure, those circumstances are either found in statute or presumed from the context of the statute, if consistent with related principles of international law. For example, when a statute proscribes the theft of federal property, it is presumed that Congress intends the prohibition to apply regardless of where the property may be stolen. The courts have generally considered overseas application of federal criminal law consistent with international law when either the offender or the victim is American. Extraterritorial jurisdiction may also be considered consistent with international law when the overseas conduct has an impact within the United States, or when the criminal prohibition is enacted to implement a treaty or similar international obligation or with respect to a crime that is contrary to the law of nations, i.e., that is abhorrent under the laws of all countries. Section 222 provides a statement of extraterritorial jurisdiction in some instances when it seems likely that federal courts would assume it even in the absence of such an explicit provision. For instance, Section 222 (proposed 18 U.S.C. 1596) would permit prosecution of an overseas violation of proposed 18 U.S.C. 2429 (aggravated sex trafficking) when the victim is an American or when the offender is an American or when the offender is later found or brought to the United States. However, the elements of proposed Section 2429 limit the circumstances under which the offense can be committed overseas, because it outlaws misconduct only when committed within the special maritime or territorial jurisdiction of the United States or in or affecting the interstate or foreign commerce of the United States. Offenses committed in or affecting interstate commerce or within the special maritime and territorial jurisdiction of the United States are by definition not committed overseas. Offenses committed in or affect the foreign commerce of the United States may occur overseas, but international law principles have been said to recognize extraterritorial application when a crime has an impact in this country. On the other hand, the application of proposed Section 1596 might prove more problematic when the only contact with the United States or its nationals or interests is the fact the offender is found or has been brought to the United States. Federal prosecution under 18 U.S.C. 1589 (forced labor) might be problematic, for example, when the misconduct occurs entirely within another country and neither the offender nor any of the victims of the offense are Americans. Subsection 223(a) would streamline Section 278 of the Immigration and Nationality Act (8 U.S.C. 1328) with little change in substance. Under the proposed amendment, Section 278 would provide: (a) Generally – Whoever, for the purpose of prostitution or for any other sexual activity for which any person can be changed with a criminal offense – (1) knowingly imports or attempts to import any alien; or (2) knowing or in reckless disregard of the fact that an individual is an alien who lacks lawful authority to come to, enter, or reside in the United States, knowingly holds, keeps, maintains, supports, employs, or harbors the individual in any place in the United States, including any building or any means or transportation, attempts to do so, shall be fined under title 18, United States Code, or imprisoned not more than 10 years, or both. (b) Special Evidentiary Rule – In all prosecutions under this section, the testimony of a husband or wife shall be admissible and competent evidence against each other. The proposal would omit the venue language now found in the section that permits prosecution in any district into which the alien is imported. The existing provision duplicates the otherwise available venue options under which prosecution is possible in any district through or into which an imported person moves. Subsection 234(a) renames the Justice Department's Child Exploitation and Obscenity Section and expands the responsibilities of the Innocence Lost Task Forces to include sex trafficking (proposed 18 U.S.C. 2430) offenses involving sexually exploited adults. The Section would become known as the Sexual Exploitation and Obscenity Section. The Child Exploitation and Obscenity Section now prosecutes offenses involving federal obscenity, child pornography, interstate trafficking for sexual purposes, international sexual child abuse, and international parental kidnapping. In 2003, the Section together with the Federal Bureau of Investigation (FBI) and the National Center for Missing & Exploited Children started an Innocence Lost Initiative in 2003. The proposed amendment would greatly expand the Section's jurisdiction, given the accompanying expansion of federal jurisdiction occasioned by proposed Section 2430 which would outlaw trafficking in commercial sexual activity occurring in or affecting interstate or foreign commerce regardless of age or willingness of the individual trafficked. The creation of divisions and sections within the Department of Justice, their jurisdictional assignments, and other matters of internal organization within the Department are ordinarily matters internal to the Department. However, Congress may address, and in the past has addressed, such matters in statute. Subsection 202(g) would require those who recruit foreign workers to disclose various specifics regarding the circumstances and conditions of employment to recruits. Paragraph 202(g)(3) would proscribe knowingly making a material false or misleading statement in such disclosures and would declare that, "The disclosure required by this section is a document concerning the proper administration of a matter within the jurisdiction of a department or agency of the United States for the purposes of Section 1519 of title 18, United States Code." Section 1519 of Title 18, United States Code, proscribes the knowing falsification of records with the intent to impede, obstruct, or influence the proper administration of any matter within the jurisdiction of any department or agency of the United States. Violations are punishable by imprisonment for not more than 20 years. In the absence of a reference to Section 1519, the proposed offense would instead be subject to the general false statement statute, 18 U.S.C. 1001, which makes violations punishable by imprisonment by not more than 8 years if the offense relates to an offense under 18 U.S.C. 1591 (sex trafficking of children or by force, fraud or coercion); or 18 U.S.C. ch. 109A (sexual abuse), ch. 110 (sexual exploitation of children), or ch. 117 (transportation for illegal sexual activities). The Justice Department drafted a Model State Anti-Trafficking Criminal Statute in 2004. The Model includes suggested language of state criminal laws relating to trafficking in persons, involuntary servitude, sexual servitude of a minor and trafficking in persons for forced labor or services. A number of states have adopted comparable statutes. Section 224 would direct the Attorney General to provide a similar model reflecting the misconduct proscribed in 18 U.S.C. chs. 77 (involuntary servitude) and 117 (Mann Act) as those chapters would be amended by H.R. 3887 . It would also instruct the Attorney General to post the model on the Department's website, distribute it to the states, assist the states in its implementation, and report annually to House and Senate Judiciary Committees and the House Foreign Affairs Committee as well as the Senate Foreign Relations Committee on the results of such efforts.
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The criminal law proposals found in H.R. 3887 as it passed the House include newly assigned sex trafficking offenses, a sex tourism offense, a coerced services offense, obstruction of justice offenses, an importation of prostitutes offense, a false statement offense, and provisions for civil liability, victim assistance, forfeiture, extraterritorial jurisdiction, Justice Department reorganization, and a model state statute. H.R. 3887's new sex trafficking offense would expand federal jurisdiction to reach persuasion, inducement, or enticement to engage in unlawful prostitution when it occurs in or affects interstate or foreign commerce, even in the absence of a child victim or of coercion, fraud, or force. Its amended version of 18 U.S.C. 1592 (seizure of documents in aid of trafficking) would outlaw the use of financial coercion to gain control of an individual's labor or sexual services. Its new sex tourism offense would cover arranging or attempt to arrange sex tours even when the underlying travel is not itself a federal crime. The bill also prohibits various obstructions of justice and false statements committed in connection with the employment of foreign workers. Procedurally, H.R. 3887 would enlarge the civil cause of action available to victims of violations of the involuntary servitude and trafficking provisions under an explicit 10-year statute of limitations. It would expand the availability of Crime Victim Fund programs for the benefit of the victims of sex trafficking. It would rename the Justice Department's Child Exploitation and Obscenity Section and expand the responsibilities of the Innocence Lost Task Forces to include sex trafficking offenses involving sexually exploited adults. This report is available in an abridged version – stripped of its footnotes, and most of its citations to authority as CRS Report RS22789, William Wilberforce Trafficking Victims Protection Reauthorization Act of 2007 (H.R. 3887 as Passed by the House): Criminal Provisions in Short, by [author name scrubbed].
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The Family First Prevention Services Act of 2016 would amend the child welfare programs included in Title IV-B and Title IV-E of the Social Security Act. The bill would authorize states to receive federal support under the Title IV-E foster care and permanency program for services and programs provided to children and their families that are intended to prevent the need for children to enter foster care, by allowing them to remain safely at home with parents, or with kin. At the same time, the bill would restrict the ability of states to claim support for children in foster care who are placed in group settings rather than in foster family homes. Additionally, the bill would extend funding authority for the child and family services programs authorized in Title IV-B of the Social Security Act and it would revise the purposes of, including eligibility for, the Chafee Foster Care Independence Program (CFCIP) to make them more consistent with the goal of helping all youth who experience foster care at an older age make a successful transition to adulthood. Programs authorized in Title IV-B and Title IV-E of the Social Security Act are administered by the Children's Bureau, which is an agency within the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF), Administration on Children, Youth, and Families (ACYF). This report begins with a brief overview of the Title IV-B and Title IV-E programs that would be amended by the Family First Prevention Services Act, follows with a short summary of the bill, and its CBO cost estimate, and then provides a section-by-section description of its provisions. Under Title IV-E of the Social Security Act, states, territories, and tribes with a federally approved Title IV-E plan are entitled to open-ended federal support for a part of the cost of providing assistance to each eligible child in foster care, as well as eligible children who leave foster care for new permanent homes (via adoption and, at state option, kinship guardianship), including program administration and training costs on behalf of those eligible children. The federal share of Title IV-E program costs varies by type of cost, and for the cost of assistance payments, by state, but is never lower than 50% of program expenditures and may not be more than 83% in any case. Children may only be eligible for Title IV-E foster care assistance if they are removed from a low-income home of a parent or relative and are then placed in a licensed foster family home or child care institution. As part of ensuring a child's Title IV-E eligibility, states must make "reasonable efforts" to prevent a child from entering foster care. However, states are prohibited from using any Title IV-E program funds to provide services, including "counseling or treatment" intended to "ameliorate or remedy personal problems, behaviors, or home conditions." All 50 states, the District of Columbia, Puerto Rico, and seven tribes have an HHS-approved Title IV-E plan and may thus claim federal support under the Title IV-E program. Funding for the Title IV-E program is permanently authorized. For FY2016, the federal cost of the Title IV-E foster care and permanency program was expected to be $7.6 billion, including $4.8 billion for foster care and $2.8 billion for adoption and guardianship. , Under Title IV-B of the Social Security Act, states, territories, and tribes with approved plans receive federal funds (distributed by formula) to provide services intended to ensure children's safety and well-being, strengthen and preserve families (including biological, adoptive, and kin families), enable children in foster care to be safely reunited with their parents, and promote and support adoption. There are no federal eligibility criteria for receipt of services under the two Title IV-B programs (Stephanie Tubbs Jones Child Welfare Services and Promoting Safe and Stable Families or PSSF). Funding is provided on both a capped mandatory and a discretionary basis. The federal share of a state's program costs is 75%—meaning a state must spend $1 in non-federal funds for every $3 in federal funds it receives. However, federal dollars available under Title IV-B are capped at no more than the state's total allotment of appropriated funds. All 50 states, the District of Columbia, Puerto Rico, and four additional territories, as well as many tribes, receive Title IV-B funding. For FY2016, Congress provided $668 million under all Title IV-B funding authorities. Out of that total funding amount, $575 million was provided via formula grants to states, territories, and tribes for child and family services and $93 million was provided for other specified programs, grants, or activities, including the Court Improvement Program ($30 million); Regional Partnership Grants (to improve outcomes for children affected by parental substance abuse) ($19 million); Monthly Caseworker Visit grants ($19 million); and research, technical assistance, demonstration, and evaluation activities (including funding reserved out of the PSSF appropriation and under separate funding authorization provided in Section 426 of the Social Security Act). The Chafee Foster Care Independence Program (CFCIP) is authorized under Section 477 of the Social Security Act. States, territories, and tribes with approved plans receive CFCIP funds (distributed by formula) to provide services intended to help children who are expected to age out of foster care, those who aged out of foster care, and those who left foster care for adoption or guardianship at age 16 or older to make a successful transition to adulthood. Separately, formula funds are authorized for states, territories, and tribes to provide Education and Training Vouchers (ETVs) for CFCIP-eligible youth. ETVs are intended to cover the cost of attending institutions of higher education (e.g., colleges, universities, and job training programs). Funding is authorized on a capped entitlement basis for CFCIP and on a discretionary basis for ETVs. The funding share of program costs is 80%—meaning a state must spend $1 in non-federal funds for every $4 in federal funds it receives. However, federal dollars available under the program (for general services and for ETVs) are capped at no more than the state's total allotment of appropriated funds. All 50 states, the District of Columbia, Puerto Rico, and a small number of tribes receive CFCIP and ETV funds. In FY2016, Congress provided $183 million in federal funding for these programs, including $140 million for CFCIP and $43 million for ETVs. The Family First Prevention Services Act ( H.R. 5456 ) was introduced in the House on June 13, 2016, by Representative Vern Buchanan with Representative Sander Levin and 11 other original co-sponsors. On June 15, 2016, the House Ways and Means Committee agreed, by unanimous voice vote, to report the bill (Chairman Brady's Amendment in the Nature of a Substitute) favorably to the full House. (The chairman's amendment includes a one-time, $8 million appropriation to support competitive grants related to recruitment and retention of foster parents but was otherwise substantively the same as the introduced bill.) On June 16, 2016, Senator Hatch, with Senators Wyden, Grassley, and Bennet, introduced the Senate companion ( S. 3065 ) to the Family First Prevention Services Act, as ordered reported by the House Ways and Means Committee. On June 21, 2016, the full House considered and passed H.R. 5456 under suspension of the rules and via voice vote. Some Members who spoke on the House floor in support of passage of H.R. 5456 cited the strong support the bill received from a diverse group of stakeholders. The bill has been widely praised by a diverse group of more than 50 national, state, and local organizations and agencies, including child welfare advocacy groups and agencies representing public child welfare administrators; substance abuse treatment and prevention administrators and providers; pediatricians; social workers; biological parents, kin caregivers, and foster and adoptive parents; and courts and judges, among others. The bill would authorize new open-ended Title IV-E support for evidence-based mental health and substance abuse prevention and treatment services, and in-home parent skill-based programs, which would permit children to remain safely at home with their parents, or with kin. States would have the option to use Title IV-E funds (beginning with FY2020) to provide these foster care prevention activities, for up to 12 months, to any child determined at imminent risk of entering foster care, any pregnant or parenting youth in foster care, and to the parents or kin caregivers of those children. Separately, as of FY2017, the bill would newly permit states to use Title IV-E funding to support evidence-based kinship navigator programs and to provide foster care maintenance payments (for up to 12 months) on behalf of a foster child who is placed with his or her parent in a licensed family-based residential treatment facility that offers substance abuse treatment with parenting training. Unlike activities currently authorized under the Title IV-E foster care component, no income test would be applied to determine eligibility for any of these newly authorized uses of Title IV-E funding. At the same time, the bill would restrict (as of FY2020) the availability of Title IV-E foster care maintenance payments for children placed in settings other than foster family homes, when that placement is not done to meet clinical or other treatment or service needs. With limited exceptions, federal Title IV-E foster care maintenance payment support for children placed in non-foster family home settings would be available for a maximum of two weeks, unless the child was placed in a "qualified residential treatment program" and a subsequent assessment and court review found this the most appropriate placement to meet the child's needs. Further, the bill would amend the Chafee Foster Care Independence Program to permit states that provide support to youth in foster care to age 21 to provide Chafee services up to age 23 (instead of current law age 21). It would also permit otherwise eligible youth to access post-secondary education and training vouchers up to age 26 (but for no more than a total of five years). The purposes of the Chafee program would be amended to place a new focus on serving youth who have experienced foster care at age 14 or older and to further reinforce and support the program's focus on supporting youth in making a successful transition to adulthood. Finally, the Family First Prevention Services Act would also extend funding authority for the Title IV-B Promoting Safe and Stable Families (PSSF) and Stephanie Tubbs Jones Child Welfare Services programs. Further, it would extend authority for Regional Partnership Grants to address the needs of children and families, where children are in, or at risk of, foster care due to parental substance abuse; extend authority for the Court Improvement Program, including extending its current funding level; and extend eligibility of states to earn Adoption and Legal Guardianship Incentive Payments for increasing the rate at which children who would otherwise need to remain in foster care are placed with new permanent families via adoption or legal guardianship. Other related changes to Title IV-E and Title IV-B, including a two-and-a-half-year delay in full expansion of federal support for Title IV-E adoption assistance, would also be made. CBO estimates that H.R. 5456 would reduce federal direct spending by $66 million over the next 10 fiscal years, FY2017-FY2026. Although certain changes in the bill are expected to increase direct spending, especially related to expanding uses of Title IV-E program funding, CBO estimates those costs would be more than fully offset by other changes that would reduce spending under that same program. Specifically, CBO estimates that the total 10-year increase in direct federal spending for the Title IV-E program would be $1.574 billion (FY2017-FY2026). This amount includes $1.330 billion for Title IV-E foster care prevention services and programs, $126 million for Title IV-E support of kinship navigator programs, $10 million for provision of technical assistance related to those Title IV-E activities, $100 million to maintain (for five fiscal years) funding for the Title IV-E Court Improvement Program at the level provided in each of the last five years, and $8 million that would be newly appropriated, under Title IV-B, for competitive grants to states and tribes related to retention and recruitment of foster parents. At the same time, CBO estimates the bill would limit direct federal spending under the Title IV-E program across those same 10 years (FY2017-FY2026) by $1.640 billion. Reductions in Title IV-E spending are expected by CBO based on the limits the bill would impose on federal Title IV-E foster care maintenance payments for certain children placed in non-foster family settings (-$910 million) and an associated $10 million reduction in Medicaid spending. Further, the bill would delay full phaseout of an income test for Title IV-E adoption assistance eligibility, and this slowed expansion in eligibility for this federal assistance is projected to reduce federal Title IV-E spending for adoption assistance (-$720 million). The remainder of this report provides a section-by-section discussion of H.R. 5456 / S. 3065 . The purpose of the title is to enable states to use federal funds available under Title IV-B and Title IV-E of the Social Security Act to enhance their support to children and families and prevent foster care placements. The bill would amend the Title IV-E foster care and permanency program to give states and tribes the option to receive open-ended federal support for a part of the cost of providing services and programs that enable children to remain safely at home, or with a kin care provider. (States and tribes would not be required to use Title IV-E for these purposes but could choose to do so.) Prevention activities that would be eligible for Title IV-E support are mental health and substance abuse prevention and treatment services provided by qualified clinicians, and in-home parent skill-based programs (including parenting skills training, parent education, and individual and family counseling). Title IV-E prevention services and programs could be made available for a period of no more than 12 months to any child determined to be at imminent risk of entering (or re-entering) foster care, any pregnant or parenting youth in foster care, and the parents and/or kin caregivers of such children and youth. No income test would apply. Mental health and substance abuse prevention and treatment services and in-home parent skill-based programs would be eligible for Title IV-E support only if they are offered in a trauma-informed manner; specified in the child's written "prevention plan" (before they are provided to, or on behalf of, the child); and meet the definition of a "promising," "supported," or "well-supported" practice given in the bill. The amount and rigor of research necessary to meet the definition for each of these categories varies; however, to be included in any of these categories, one or more reliable study must have found that the practice is superior to an appropriate comparison practice in achieving improved child and parent outcomes on matters such as child safety and well-being, mental health, and substance abuse. Additionally, a state opting to provide these services under its Title IV-E plan would need to include a prevention component in its HHS-approved Title IV-E plan. Among other things, the prevention component would need to specify how the state will monitor and oversee the safety of children who receive Title IV-E prevention services or programs, including through periodic risk assessments for each child receiving them; describe the services and programs the state intends to provide and whether they are promising, supported, or well-supported; describe the outcomes the state intends to achieve; discuss how the state will evaluate its provision of each prevention service or program offered; describe how it will continuously monitor its provision of these prevention services and programs and use the information learned to refine and improve its practices; and describe how child welfare workers will be trained and supported to effectively carry out Title IV-E prevention services and supports. Further, the prevention component would need to be updated and resubmitted to HHS for approval every five years. The state would also need to assure that it would collect and report to HHS certain data on each child for whom, or on whose behalf, prevention services or programs are provided, and any information necessary to ensure the state meets the required maintenance of effort (MOE) spending level. Title IV-E support for prevention services and programs that are promising, supported, or well-supported would be available beginning with the first day of FY2020 (October 1, 2019). For each of FY2020-FY2025, this federal support would equal 50% of the total cost to the state of providing Title IV-E prevention services and programs. Beginning with FY2026 (October 1, 2025), the federal share of the total cost of providing Title IV-E prevention services and programs would be set at the state's Federal Medical Assistance Percentage or FMAP. A state's FMAP—sometimes referred to as its "Medicaid matching rate"—is annually recalculated by HHS and may vary from 50% to 83% (with states that have lower per capita income receiving higher federal support and vice versa). There would be no income test associated with claiming federal support for providing these services to children or their parents or kin caregivers. However, in every fiscal year (beginning with FY2020), no less than one-half (50%) of a state's Title IV-E prevention services and programs spending must be for well-supported practices in order for the spending to be eligible for federal reimbursement. Finally, federal support for program administration and training related to providing these Title IV-E prevention services and programs, including program development and data collection and report costs, would be available at 50%. A state taking the Title IV-E prevention services and program option would be required to continue spending—outside of the Title IV-E program—no less on "foster care prevention services, and activities" than it had spent for those services and activities in FY2014. This FY2014 spending level would be the state's required maintenance of effort (MOE) and it could not use any of this MOE spending to access federal support to provide Title IV-E prevention services and programs. To establish a state's MOE spending level, HHS would be required to determine which activities provided under the Title IV-B child welfare services program, the Temporary Assistance for Needy Families (TANF) block grant, the Social Services Block Grant (SSBG), and other state programs are "foster care prevention services and activities." A state's MOE spending level would include federal, state, and local dollars spent for those foster care prevention services and activities under those programs. Tribes with an approved Title IV-E plan may elect to provide prevention and services programs on generally the same basis as states with an approved Title IV-E plan. HHS would be required to specify the Title IV-E requirements and prevention performance measures applicable to a given tribe, which to the "greatest extent practicable" must be consistent with requirements and performance measures applicable to states and must permit provision of services and programs adapted to the context and culture of the tribal communities served. No later than October 1, 2018, HHS would be required to issue (and update as needed) guidance to states that includes a "pre-approved" list of services and programs that meet the promising, supported, and well-supported practices criteria of the Title IV-E prevention services and programs component. Further, HHS would be required to offer technical assistance to states on implementing services and programs meeting the promising, supported, and well-supported practices criteria and must ensure establishment of a public clearinghouse to evaluate existing research and provide information on those practices and their outcomes. It may also carry out, or support, research, evaluation, and data collection to assess the extent to which Title IV-E prevention services and programs reduce the likelihood of foster care placement, increase use of kinship care, and improve child well-being, and would be required to provide periodic reports to the House Ways and Means and Senate Finance committees on the provision of Title IV-E prevention services and programs. The bill would annually appropriate $1 million to enable HHS to carry out these duties (beginning with FY2016). Beginning with FY2021, HHS would be required to establish prevention performance measures (based on median state performance) concerning the cost of Title IV-E prevention services and programs and the percentage of children who, although found at risk of foster care entry, did not enter care during the 12-month period in which they received or were eligible for Title IV-E prevention services and programs (and for 12 months afterward). Under current federal policy a child must be removed from the home of a parent (or relative), and after removal cannot be living with the parent (or relative), in order to be eligible for a Title IV-E foster care maintenance payment. The bill would permit Title IV-E foster care maintenance payment support, for up to 12 months, for a child in foster care who is placed with a parent in a licensed residential family-based treatment facility. To be eligible for these Title IV-E payments, the child's placement with a parent in the treatment facility must be recommended in the child's foster care case plan and the facility must incorporate trauma-informed parent education, parenting skills training, and counseling as part of its substance abuse treatment. No income test would apply for receipt of these time-limited Title IV-E foster care maintenance payments and the federal level of support for the payments would be the same as any other Title IV-E foster care maintenance payment (based on state's FMAP, which may range from 50% to 83%). Kinship navigator programs support relative and kin caregivers by helping them access resources and supports necessary to meet the needs of the children they are raising and to meet their own needs as caregivers. The bill would permit Title IV-E support for kinship navigator programs provided HHS determines that the program is operated in accordance with promising, supported, or well-supported practices (as would be defined in law for Title IV-E prevention programs), among other requirements. A state could claim this Title IV-E support for a kinship navigator program without regard to whether the children on whose behalf the service was offered were living with kin in foster care or outside of foster care, and there would be no income test. The federal level of support for these services would be 50% of the state's total cost. The bill would rename and redefine time-limited family reunification services , which is one of four categories of services that states must support under the Title IV-B Promoting Safe and Stable Families (PSSF) program. Under current law, these services are provided to enable the child to be safely and quickly reunited and may only be offered to the child and parent if the child has entered foster care within the past 15 months. The renamed service category, family reunification services , would define these services as available to a child in foster care and his/her parents without regard to the child's length of stay in care. The bill would additionally permit spending under this service category for post-reunification services, but only for the first 15 months after the child returns home. No later than October 1, 2026, the bill would require a state, territory, or tribe operating a Title IV-E program to include use of an electronic interstate case processing system as part of the currently required Title IV-E procedures to allow timely placement of children across state lines. The bill would additionally require HHS to reserve a total of $5 million in FY2017 discretionary funding for the Title IV-B Promoting Safe and Stable Families Program (which would remain available for five years, FY2017-FY2021) to allow HHS to make grants to states, including tribes and territories, that successfully apply. The funds would need to be used to help grantees connect with an interstate electronic case-processing system and to enable them to achieve safe and appropriate interstate placements for children in less time and at less cost. The bill would require HHS to report to Congress (within one year of the last grant awarded for this purpose) on the progress made by states in achieving those purposes. Finally, HHS, in consultation with states and the Secretariat for the Interstate Compact on the Placement of Children (ICPC), must assess how the electronic interstate case-processing system may be used to improve a Title IV-E agency's ability to quickly comply with required background checks for prospective foster and adoptive parents and guardians, including completing checks of child abuse and neglect registries, and connect with federal and state law enforcement agencies and judicial agencies to better protect missing or trafficked children and to simplify Title IV-E-agency reporting to federal agencies of missing and trafficked children that come to its attention (required as of September 29, 2016). The bill would require HHS to continue to award funds under the competitive grant program known as "regional partnership grants" (RPGs) for five years (FY2017-FY2021). RPGs have been authorized since FY2006 and provide funds to public and/or private agencies that establish collaborative partnerships for services and supports that improve the safety, permanency, and well-being of children who, because of parental substance abuse, are in, or at risk of, placement in foster care. The bill would suggest or encourage use of RPGs to address needs of children and families affected by heroin and opioid substance use disorders, to help implement effective Title IV-E prevention services, and to focus on improved outcomes for families, including children and their parents. The bill would further require that in addition to the state child welfare agency, every funded partnership must include the state agency that administers the federal substance abuse prevention and treatment block grant, and, if the partnership intends to serve children placed in out-of-home care, the court (or administrative office of the court) that handles child abuse and neglect proceedings in the region. (Partnerships led by a tribe or tribal entity may include tribal court entities in place of other judicial representatives in the collaboration and, as with current law, would be permitted, but not required, to include the state child welfare agency.) Grants would continue to be made for no more than five years (with the possibility of a two-year extension for a total of seven years). However, the bill would stipulate that grant funding must be dispersed in two phases: planning (no more than two years total) and implementation. Further, it would provide that an annual award of federal RPG funds to a grantee may not be more than $1 million nor less than $250,000 (except that a grantee could not receive more than $250,000 across its total planning phase). The bill would revise RPG application requirements to ensure that the regional partnerships intend to focus on improving the well-being of families as a whole (parents and children) and to facilitate implementation of evidence-based prevention services under Title IV-E. Applicants would also be required to describe how they intend to sustain the work of the partnership after the end of RPG funding, including through use of Title IV-E prevention services, and the bill would permit HHS to require applicants to provide other information, as needed, to determine that activities are planned and implemented consistent with evidence-based practices. Additionally, the bill would maintain the ability of RPGs to use funds for long-term substance abuse disorder treatment and would stipulate that this may include medication-assisted treatment and in-home treatment and recovery. After reviewing current performance indicators and lessons learned from prior rounds of RPG awards and after consulting with relevant agencies and stakeholders, the HHS Secretary would be required to establish a set of core performance indicators (related to child safety, parental recovery and parenting capacity, and family well-being) to assess grantee performance. Additionally, regional partnership grantees would be required to provide semi-annual reports to HHS that include information on the services and activities carried out with the funding, including the number of children, adults, and families served, progress made toward meeting program goals, and other information as determined necessary by HHS, including data on performance indicators included in a grantee's evaluation. States must have licensing standards for foster family homes and have broad authority to set those standards so long as they are consistent with standards recommended by relevant national organizations. The bill would require HHS to identify reputable model standards for licensing foster family homes not later than October 1, 2017. No later than April 1, 2018, states would be required to submit information to HHS on whether their own licensing standards are fully consistent with the model standards identified by HHS, and, if not, why this inconsistency is appropriate for the state. States currently have the authority to waive non-safety licensing standards, on a case-by-case basis, to allow a child to live with his/her relatives. States may define which of their standards are considered unrelated to safety (e.g., specific size of child's bedroom). No later than April 1, 2018, each state would also be required to submit information to HHS on whether it uses this authority to waive non-safety standards for relative foster family caregivers. If a state does not use this authority it would be required to give the reasons why this is the case. If the state does use this waiver authority, it would need to indicate which standards are most often waived and whether the state has developed a process or has provided tools to assist caseworkers in using this waiver authority. It would further need to describe how caseworkers are trained in using this waiver authority, including any steps taken to improve the training on the waiver process. Under the Title IV-B Stephanie Tubbs Jones Child Welfare Services program, the bill would require each state child welfare agency to document the steps it has taken to gather complete and accurate information (from all relevant entities and agencies) on child maltreatment deaths it is required to report to HHS; and to develop and implement a comprehensive statewide plan to prevent these fatalities. Along with the child welfare agency, the statewide plan to prevent child maltreatment fatalities would need to involve public health and law enforcement agencies, the courts, and other relevant public and private agency partners. The bill would rename the heading of Title IV-E as "Federal Payments for Foster Care, Prevention, and Permanency" to reflect the authorization of support (under current law) for both adoption and kinship guardianship assistance and the authorization of support (included in this bill) for prevention services and programs. The bill would include prevention services and programs as a purpose for which Title IV-E funds are authorized to be appropriated. In general the amendments made in Title I would be effective on the first day of FY2017 (October 1, 2016), except that amendments making technical changes to the title and purposes as well as the amendments regarding licensing standards for foster family homes would be effective on the date of enactment. However, any state (including the District of Columbia and Puerto Rico) for whom HHS determines legislation must be enacted to allow compliance with a new or revised Title IV-B or Title IV-E requirement (other than to appropriate funding) would not need to be in compliance with that requirement(s) until the first day of the first calendar quarter that begins after the end of the first state legislative session occurring after enactment of the bill. Further, any tribe or tribal entity that HHS determines requires time to take actions necessary to meet the new and revised requirements must be granted additional time by HHS to meet those requirements. Title IV-E foster care maintenance payments for a foster child who is not placed in a foster family home would only be available (for more than two weeks) if the child met all other Title IV-E eligibility criteria and was placed in a "qualified residential treatment program" (provided additional requirements are met); setting specializing in providing prenatal, postpartum, or parenting supports for youth; supervised independent living setting (provided the child was at least 18 years of age); or licensed residential family-based treatment center (provided the child was placed with the parent and had not been in this setting for more than 12 months). For an otherwise Title IV-E eligible child placed in a qualified residential treatment center, Title IV-E foster care maintenance payments would remain available only if an assessment was completed within 30 days of the child's placement in that setting and the assessment found that placement was appropriate. Title IV-E foster care maintenance payments would remain available to an otherwise eligible child for the time it takes to transition a child from a qualified residential treatment program to a different placement, or for 30 days, whichever is shorter. This includes placement setting transitions that must occur if an assessment finds that the program is not an appropriate placement for the child, or a court disapproves of the placement, or the child is found ready to move to a family setting. For purposes of Title IV-E eligibility, the bill would define a foster family home as the home of an individual who is licensed as a foster parent, and who is residing with, and providing 24-hour substitute care for, not more than six children placed in foster care in the individual's licensed home. A state would be permitted to place more than six children in a foster family home to allow any of the following: siblings to remain together; a parenting youth in foster care to remain with his or her child; a family with special training or skills to provide care to a child who has a severe disability; or a child with an established meaningful relationship to remain with the family. The bill would re organize and restate the current law definition of child care institution without substantive change. A child care institution is defined, generally, as an institution that provides foster care and meets the licensing or approval standards for such institutions established by the state (or tribe where it is located) . However, if a child in foster care is at least 18 years of age, he or she may be placed in a supervised independent living setting that meets standards established by the HHS Secretary (and does not have to meet state licensing rules) . Additionally, a child care institution may be a private or public institution, but if it is a public institution, it may not house more than 25 children. Finally, the term child care institution must never include detention facilities, forestry camps, training schools, or any facility operated primarily for the detention of children determined to be delinquent. For purposes of the Title IV-E program, a qualified residential treatment program means a program that meets all of the following requirements: has a trauma-informed treatment model designed to address the clinical or other needs of children with serious emotional or behavioral disorders or disturbances; is able to implement the specific treatment identified as necessary for a child placed there; has registered or licensed nursing and other licensed clinical staff who are onsite during business hours, available 24/7, and provide care within the scope of their practice (as defined by state law); facilitates outreach to the child's family members (including siblings) and appropriate participation and integration of family members in the child's treatment program; provides post-discharge planning and family-based supports for at least six months after a child's discharge from the treatment center; documents each of these outreach and treatment program activities, including how sibling connections are maintained, and maintains contact information of any known biological family and fictive kin of the child; and is licensed (in accordance with state standards for child care institutions that provide foster care) and accredited by one of three independent and not-for-profit accrediting organizations specified in the bill (or any other independent, not-for-profit accrediting organization approved by the HHS Secretary). The Court Improvement Program (CIP) authorizes grants to the highest court in each state (including the District of Columbia and Puerto Rico) to assess and make improvements to how they handle child abuse and neglect proceedings. As a condition of eligibility for CIP funds, the bill would require a highest state court to provide training for judges, attorneys, and other relevant legal personnel on federal child welfare policies and payment limitations regarding placement of foster children in settings that are not foster family homes. The bill would require a Title IV-E agency (including the public child welfare agency in the 50 states, the District of Columbia, Puerto Rico, and any tribe with an approved Title IV-E plan) to certify that the limitation on access to Title IV-E maintenance payments for children in foster care who are placed in settings other than foster family homes will not lead the state to enact or advance policies or procedures that result in a significant increase in the state's juvenile justice system. Not later than December 31, 2023, the bill would require the U.S. Government Accountability Office (GAO) to report to Congress on the effect, if any, of limiting availability of Title IV-E for children not in a foster family home, including whether a lack of funded congregate care placements under the child welfare system contributes to placing children in juvenile justice settings. States must provide certain case review and planning procedures for children in foster care, including status reviews for children (typically every 6 months) and permanency hearings (required every 12 months). For children placed in a qualified residential treatment program, these procedures would also need to include the following: Within 30 days of placement in the program, an assessment of the child's strengths and needs to determine the appropriate, least restrictive placement setting for the child. The assessment must by conducted by a "qualified individual" using an evidence-based, validated functional assessment tool and must determine short- and long-term mental and behavioral health goals for the child. (If the assessment determines the child should not be placed in a family home, the qualified individual would be required to write down the reasons why this is found—a shortage or lack of foster family homes may not be given as a reason—and why the qualified residential treatment program is the most effective and appropriate placement setting for the child.) Establishment of a family and permanency team for the child, which must be composed of relatives, fictive kin, and other individuals important to the child (such as teachers, clergy, mental health providers); the team must be included in the assessment activities and included in the child's treatment plan to the extent possible and appropriate. Within 60 days of placement in the program, approval or disapproval of the placement by a court or co urt-appointed entity . (The court must consider the assessment previously conducted and must separately determine whether the child's needs can be met in a foster family home or would be best met in a qualified residential treatment program.) The bill would further require that at each foster care status review and permanency hearing held for a child placed in a qualified residential treatment program, the state child welfare agency must (1) provide evidence that ongoing assessment of the child's needs and strengths shows that the qualified residential treatment program continues to be the most appropriate placement setting; (2) document the specific treatment or service needs that the qualified residential treatment program will provide the child, and the length of time the child is expected to need this treatment or service; and (3) document its efforts to prepare the child to move to a family setting. Additionally, for any child placed in a qualified residential treatment program for 12 consecutive, or 18 non-consecutive months (or if the child is 12 years of age or younger, 6 months consecutive or non-consecutive), the state agency must submit this same information, along with the signed approval of the placement by the head of the state child welfare agency, to the HHS Secretary. Under the Title IV-B Child Welfare Services program, the state must develop a health oversight plan to meet the needs of children in foster care. The bill would require states to include in this plan the procedures the state has established to ensure children are not inappropriately placed in a non-family setting, due to an inappropriate diagnosis of mental illness, behavioral disorders, medically fragile conditions, or developmental disabilities. HHS would be required to analyze state compliance with this requirement, identify best practices, and submit a report on this work to Congress no later than January 1, 2019. The bill would revise current law requirements concerning state-level data that HHS must annually report to Congress (beginning with data provided for FY2016) on the types of non-family settings in which children in foster care are placed, as well as certain characteristics of foster children placed in those settings and the services they receive. The bill would list more types of non-foster family home settings for which specific information must be included in the report and would additionally request information on the gender and race/ethnicity of children placed in these settings, as well as information on whether the non-foster family home is the first placement setting for the child or, if not, the number and type of previous placement settings. In general, provisions limiting federal Title IV-E support based on a child's foster care placement setting, including related definitions, procedures, and requirements, would be effective on the first day of FY2020 (October 1, 2019) while other provisions included in Title II would be effective on the first day of FY2017 (October 1, 2016). Additionally, for those provisions effective on October 1, 2016 (FY2017), if HHS determines that a state needs to enact legislation (other than appropriations) to bring its Title IV-E or Title IV-B plans into compliance with a requirement(s), the state would be permitted to have additional time to do so. Specifically, the state would have until the first day of the first calendar quarter that occurs after the close of the first regular state legislative session that begins after the enactment of this act. The bill would redefine family support services , which is one of four categories of services that states must support under the Title IV-B Promoting Safe and Stable Families program, to clarify that they may include community-based services designed to support and retain foster families so they can provide quality family-based settings for children in foster care. The bill would appropriate $8 million in FY2018 for the HHS Secretary to make competitive grants to states or tribes to increase their capacity to place children in foster care in high-quality family settings. Grants would be focused on states or tribes with the highest percentage of children in foster care living in nonfamily settings. Funding appropriated in FY2018 would remain available for five years (through FY2022). Discretionary funding authority for the Title IV-B Child Welfare Services program is set to expire on September 30, 2016. The bill would extend annual discretionary funding authority for the program for five years (each of FY2017-FY2021) at the current annual authorization level of "not more than $325 million." (For FY2016 Congress appropriated $269 million for the Title IV-B Child Welfare Services Program.) Both the mandatory and discretionary funding authorities for this program are set to expire on September 30, 2016. The bill would extend both funding authorities for five years (FY2017-FY2021) and at the same annual levels authorized for FY2016. Mandatory funding authority would be set at $345 million per fiscal year and discretionary funding authority would be $200 million per fiscal year. (For FY2016, total funding for the Title IV-B Promoting Safe and Stable Families Program was $381 million. This includes $345 million in capped mandatory funds [appropriation reduced by sequestration to $321 million] plus $60 million in funding appropriated for the program on a discretionary basis.) The bill would continue for five years (FY2017-FY2021) the current law requirement that, out of the mandatory funding provided for the Title IV-B Promoting Safe and Stable Families program, HHS must annually reserve $20 million to support Monthly Caseworker Visit grants, and a separate $20 million to make grants to regional partnerships (to improve outcomes for children affected by parental substance abuse). Under current law, HHS is required to annually (no year limit) reserve a part of the mandatory funding and a part of any discretionary funding provided for the Title IV-B Promoting Safe and Stable Families Program to make Court Improvement Program (CIP) grants. CIP funding is distributed by formula to the highest court in each eligible state, including the 50 states, the District of Columbia, and Puerto Rico (and on a competitive basis to a handful of tribes). The bill would extend the entitlement of each highest court in an eligible state to an allotment of this CIP program funding for five years (FY2017-FY2021). It would also extend for five years (FY2017-FY2021) the stipulation that the federal share of CIP costs must be no more than 75% (meaning a court receiving funds must provide $1 in non-federal CIP funding for every $3 it receives in federal CIP funds). The bill would permit a state to use funding under the Chafee Foster Care Independence Program for former foster care recipients up to the age of 23, but only if the state has taken the option to extend Title IV-E foster care assistance to youth who remain in foster care up to 21 years of age or HHS determines the state uses non-IV-E dollars to provide comparable supports to youth up to age 21. The bill would rewrite a number of purpose areas given for the Chafee Foster Care Independence Program to adjust their focus from children who "are likely to remain in foster care until their 18 th birthday" (as currently determined by the state) to those who "experience foster care at age 14 or older." Children who experience foster care at age 14 or older would be eligible for most services and supports that are currently available to children likely to remain in foster care until age 18, including services and supports related to completing high school, obtaining post-secondary education, learning about and preparing for employment, preventative health and substance abuse prevention activities, and life skills training. Under the bill they would also be eligible for services related to opportunities to practice daily living skills (such as driving instruction and financial literacy training); achieving meaningful connections with caring adults; positive youth development; and experimental learning that reflects what their peers living in intact families experience. Children "likely to remain in foster care until age 18" would continue to be eligible for services to ensure they have regular and ongoing opportunities to engage in age and developmentally appropriate activities. Services and supports to former foster care recipients who are age 18 to 21 (or 23 if state extends IV-E or comparable foster care assistance to this age) remain unchanged and include financial, housing, counseling, employment, education, and other appropriate services. Children who have left foster care at age 16 or older for kinship guardianship or adoption are eligible for these services generally. The bill would permit HHS to redistribute any CFCIP or related Education and Training Voucher (ETV) funds that were awarded to a state or tribe but not expended within the two-year timeframe during which the funds must be spent. (Under current law funds, any such unexpended funds revert to the federal Treasury.) The bill would permit HHS to distribute these unexpended funds among states and tribes requesting additional payments based on the share of children in foster care in the given state or tribe among all states and tribes seeking the additional funding. Chafee Education and Training Vouchers (ETVs) are available to youth otherwise eligible for CFCIP services to meet the cost of post-secondary education and training programs. The bill would extend the age at which these youth may be eligible to receive a voucher up to a youth's 26 th birthday. However, no youth would be able to receive a voucher for more than five years (consecutive or non-consecutive), and a youth would need to be participating in the voucher program and satisfactorily enrolled in a post-secondary education or training program to be able to continue receiving a voucher until age 26. Consistent with the current focus of the program and the changes that it would make, the bill would rename the program as the John H. Chafee Foster Care Program for Successful Transition to Adulthood. Current law requires a state to certify it will provide training for foster and adoptive parents, group home workers, and case managers to help them understand and address issues confronting youth preparing for independent living. The bill would strike the reference to "independent living" and would instead require that the training focus on youth development to help these same caregivers and child welfare workers understand and address issues confronting youth preparing to make both the transition to adulthood and a permanent connection with a caring adult. No later than October 1, 2017, the bill would require HHS to submit a report to the House Ways and Means and Senate Finance Committees that, among other things, (1) describes factors related to entry into foster care and experience in care for 17-year-olds compared to those same experiences for children who left care before age 17; (2) provides an analysis of any association between the type and number of placement settings and overall time spent in foster care with outcomes at ages 19 and 21; (3) offers benchmarks for determining poor outcomes for youth who remain in, or have exited care, along with the plans of the executive branch to use those benchmarks in evaluating child welfare agency services to youth transitioning from foster care; and (4) examines whether youth granted federal foster care support beyond their 18 th birthday have better outcomes at ages 19 and 21 than youth who age out of care without this support. The report would need to be based on information reported by states via the National Youth in Transition Database (NYTD) or any other databases in which states report relevant outcome measures regarding children in foster care, those who have aged out of foster care, and those who have left foster care for adoption or guardianship. Some federal programs (e.g., Medicaid, federal financial aid) may require proof of a youth's former status as a child in foster care as part of determining program eligibility. The bill would require states to provide youth aging out of foster care official documentation necessary to prove the child was in foster care. (Specifically, this documentation would need to be provided to any youth in foster care for at least 6 months who is being formally discharged from foster care because of reaching his or her 18 th birthday, or later birthday, up to 21 st , if the state elects to provide Title IV-E foster care assistance to that age.) Adoption and Legal Guardianship Incentive Payments are paid to states that increase the rate at which children who cannot return home are placed in permanent families via adoption or legal guardianship. The bill would extend for five fiscal years the authority of states to earn these incentive payments, and, to make these payments to states, would extend annual discretionary funding authority at the current law level of $43 million for each of five fiscal years (FY2017-FY2021). Further, the bill would permit funds appropriated under this authority to remain available until expended, but not later than FY2021. The bill would revise current provisions related to development of a rule related to data exchange standards to be used by agencies operating Title IV-B programs. It would require HHS, in consultation with an interagency work group established by the Office of Management and Budget (OMB) and considering state government perspectives, to develop regulations concerning the categories of information that state child welfare agencies must be able to exchange with another state agency, as well as federal reporting and data exchange required under applicable federal laws. HHS would need to issue a proposed rule no later than two years (24 months) after enactment of this bill that identifies federally required data exchanges and specifies state implementation options. The bill would clarify that a state must describe in its Title IV-B Child Welfare Services plan what it is doing to address the developmental needs of all vulnerable children under age 5 who receive benefits or services under the Title IV-B programs (Child Welfare Services and Promoting Safe and Stable Families) or the Title IV-E foster care and permanency program. (A previous interpretation of the law limited this requirement to children under age 5 who were in foster care.) The bill would delay an expansion of eligibility for Title IV-E adoption assistance that was enacted as part of the Fostering Connections to Success and Increasing Adoptions Act of 2008. Under current law, any child determined by a state to have "special needs" and whose adoption assistance agreement is finalized after the child has attained four years of age may be eligible for Title IV-E adoption assistance without application of an income test. (For purposes of the Title IV-E program, "special needs" generally refers to factors or conditions identified by a state, such as race/ethnicity; physical or mental disability; or age or behavioral issues that make it unlikely that a child will be adopted without assistance.) The delay would affect children with special needs who are less than four years of age when their adoption assistance agreement is finalized. Specifically, those special needs children who are between two and four years of age at the time their adoption assistance agreement is finalized would be eligible for Title IV-E adoption assistance without meeting an income test as of April 1, 2019 (instead of current law October 1, 2016 ); a child with special needs whose adoption assistance agreement was entered into at any age (including those under two years of age) would be eligible for Title IV-E adoption assistance, without an income test, as of April 1, 2020 (instead of current law October 1, 2017). The GAO study would need to look at whether states are complying with the requirement that they spend, for child welfare purposes, an amount equal to the amount of savings (if any) resulting from phasing out the income eligibility requirements for federal adoption assistance and the requirement that not less than 30% of any such savings be used for post-adoption or post-guardianship services and services to support and sustain positive outcomes, and permanency, for children who might otherwise enter foster care. The GAO would be required to submit its findings, including any recommendations to ensure compliance with the law, to the House Ways and Means and Senate Finance Committees.
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The Family First Prevention Services Act of 2016 (H.R. 5456 and S. 3065) would amend the child welfare programs authorized in the Social Security Act to allow states to receive open-ended federal support under Title IV-E for time-limited services and programs that are intended to prevent the need for children to enter foster care by allowing children to remain safely at home with parents, or with kin. This change would respond to long-standing concern by state administrators, child welfare advocates, and some policymakers that federal child welfare support is largely available only after a child is placed in foster care and that little resources are provided to strengthen and stabilize families to prevent children's removal to foster care. At the same time, the bill would restrict the ability of states to claim support for children in foster care who are placed in group settings rather than in foster family homes. With limited exceptions, this change would restrict Title IV-E foster care maintenance payment support for children in foster care to those otherwise eligible children placed in foster family homes or those placed in a "qualified residential treatment program" that offers a "treatment model" designed to address the clinical or other needs of children with emotional or behavioral disorders. In its 2015 report on use of "congregate care" in child welfare, the federal Children's Bureau concluded that while there is an "appropriate role for congregate care placements in the continuum of foster care settings" a child's placement in such a setting "should be based on the specialized behavioral and mental health needs or clinical disabilities of children." Additionally, the bill would extend funding authority for the child and family services programs authorized in Title IV-B of the Social Security Act and it would revise the purposes of, and eligibility for, the Chafee Foster Care Independence Program (CFCIP) to make them more consistent with the goal of helping all youth who experience foster care at an older age make a successful transition to adulthood. H.R. 5456 was introduced on June 13, 2016, and was ordered reported by the House Ways and Means Committee (unanimous voice vote) on June 15, 2016 (with amendment). A companion to the bill was introduced in the Senate (S. 3065) on June 16, 2016. On June 21, 2016, the full House passed H.R. 5456 (by voice vote), as it had been reported by the House Ways and Means Committee. The bill has been widely praised by a diverse group of national, state, and local organizations and stakeholders, including child welfare advocacy groups and agencies representing public child welfare administrators; substance abuse treatment and prevention administrators and providers; pediatricians; social workers; biological parents, kin caregivers, and foster and adoptive parents; and courts and judges, among others. The Congressional Budget Office (CBO) estimates that the bill will decrease direct federal spending by $66 million across the next 10 fiscal years, FY2017-FY2026. Although certain changes in the bill are expected to increase direct spending, especially related to expanding uses of Title IV-E program funding for prevention services and programs, CBO estimates those costs would be more than fully offset by other changes that would reduce spending under that same program. Programs authorized in Title IV-B and Title IV-E of the Social Security Act are administered by the Children's Bureau, which is an agency within the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF), Administration on Children, Youth, and Families (ACYF).
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Well before the People's Republic of China (China) resumed sovereignty over Hong Kong on July 1, 1997—an event frequently referred to as the "Handover"—Congress demonstrated its concern about the prospects for democracy in the former British colony. The Hong Kong Policy Act of 1992 ( P.L. 102-383 ) states, "Support for democratization is a fundamental principle of United States foreign policy. As such, it naturally applies to United States policy toward Hong Kong. This will remain equally true after June 30, 1997." Section 301 of the U.S.-Hong Kong Policy Act required an annual report from the State Department to Congress on the status of Hong Kong, which was to include a description of "the development of democratic institutions in Hong Kong." Section 202 gave the President the authority to suspend Hong Kong's separate treatment from China if he determines that China is not fulfilling "the terms, obligations, and expectations expressed in the Joint Declaration with respect to Hong Kong." The 111 th Congress continued past congressional interest in Hong Kong's quest for democracy. On March 11, 2009, the Omnibus Appropriations Act of 2009 ( P.L. 111-8 ) appropriated not less than $17 million for "the promotion of democracy in the People's Republic of China, Hong Kong, and Taiwan …" In addition, China's stance on Hong Kong's democratization may also signal its intentions regarding political reforms on the Mainland and its preferred path to reunification with Taiwan. China's formulation of the "one country, two systems" policy in 1981 not only formed the legal basis for Hong Kong's Handover, it also provided China's framework for future relations with Taiwan. Given Taiwan's recent advances in democracy, it is uncertain if the "one country, two systems" model remains viable, especially if China appears reluctant to allow significant political change in Hong Kong. Under the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China, the city's quasi-constitution, the "ultimate aim" is the selection of Hong Kong's Chief Executive and the members of its Legislative Council (Legco) by "universal suffrage." However, the Basic Law also stipulates that the selection of the Chief Executive and the Legco members is to be done "in the light of the actual situation in the Hong Kong Special Administrative Region and in accordance with the principle of gradual and orderly progress." In addition, the Basic Law requires that any change in Hong Kong's election process be approved by both the Chief Executive and two-thirds of the Legco members. Over the last 12 years, the issue of democratic reforms has been one of the preeminent political concerns in Hong Kong. Efforts by the Hong Kong government to modify Hong Kong's election system have been stymied by local opposition or intervention by the Chinese government. Proposed changes for Hong Kong's elections of 2007 and 2008 were rejected by Hong Kong's Legislative Council (Legco) in 2005. Formal consideration of possible democratic reforms for the 2012 elections was terminated in December 2007 when China's Standing Committee of the National People's Congress (NPCSC) issued a decision precluding universal suffrage, but allowing for some limited reforms for the 2012 elections. Since then, there has been an active and vibrant debate over if and when Hong Kong will establish a fully democratic election system. On June 24 and 25, 2010, Hong Kong made the first significant changes in its election system since the 1997 Handover. Legco passed a motion on June 24 that expanded the size of the selection committee for the Chief Executive from 800 to 1,200 members starting with the 2012 election. The following day, Legco passed a second motion that increased its size from 60 to 70 members—35 elected by geographical districts and 35 selected by so-called "functional constituencies." These two motions—which only days before looked destined to be defeated—were passed because of a last-minute agreement between Hong Kong's pro-universal suffrage Democratic Party and representatives of China's central government. To some, the passage of the two motions is the first step in Hong Kong's gradual progress towards universal suffrage. To others, the brokered last-minute agreement may prove to be a setback for Hong Kong's democratic development, as it has caused a rift among the pan-democratic coalition and major infighting among the Democratic Party. More may be known about the implications of the passage of the two motions when Legco considers implementing ordinances for the election reforms. From 1842 to 1997, Hong Kong was a British Crown Colony, ruled by a Governor appointed by the Queen of England. In 1843, the British Parliament passed legislation establishing a Legislative Council (Legco) in Hong Kong—appointed by the Governor—to advise the Governor and his administration. Over time, Legco's powers were expanded, giving the body an effective veto over the decisions of the Governor. In addition, the appointed Legco was transformed into a semi-democratic institution. Despite these changes, for over 150 years, Hong Kong's political system mainly consisted of a more powerful Governor and a less powerful Legco. In 1985, Legco had its first "elected" members, including 12 selected by "functional constituencies"—professional or special interest groups considered important for the economic and social well-being of Hong Kong. Ten years later, Hong Kong's last Legco under British rule was selected under political reforms proposed by Governor Chris Patten. The final British Legco consisted of 60 members—20 elected by regional plebiscites, 10 selected by a special Election Committee, and 30 selected by 29 functional constituencies. Other important aspects of Patten's reforms were the abolishment of "corporate" votes in the functional constituencies and the expansion of the functional constituencies so that most adults in Hong Kong could vote in one of the functional constituencies. While many hailed Patten's reforms as a belated effort to implement democratic reforms in Hong Kong, the Chinese government viewed the Governor's actions as a violation of the Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People's Republic of China on the Question of Hong Kong (the Joint Declaration), the official document governing the transfer of Hong Kong. Although the Joint Declaration made provision for the separate legislative power in Hong Kong, it also stipulated that the "laws currently in force in Hong Kong will remain basically unchanged." The Chinese government maintained that Patten's Legco reforms were inconsistent with this provision of the Joint Declaration. China subsequently reversed Patten's reforms by abolishing the 1995 Legco and seating the Provisional Legislative Council after the Handover. A political movement for democracy in Hong Kong arose even before the end of British rule. A few of Hong Kong's political parties—most notably, the Democratic Party and the Frontier Party—began advocating the election of the Chief Executive and Legco by universal suffrage as soon as possible. Other Hong Kong political parties—in particular, the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) and the Liberal Party—supported a more gradual and cautious approach to election reforms. The Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China was passed by the National People's Congress on April 4, 1990, establishing the new government structure for Hong Kong under Chinese sovereignty. Much like under British rule, the Basic Law created an executive-led government, headed by a Chief Executive, as well as a representative legislature called the Legislative Council (Legco). The first Chief Executive chosen after the Handover was to be selected by an Election Committee consisting of 800 people, chosen by the Chinese government, and equally divided among four "sectors" of Hong Kong society. The first post-Handover Legco was to consist of 60 members, some elected based on geographical districts and some selected by functional constituencies. Articles 45 and 68 of the Basic Law state that the "ultimate aim" is the selection of Hong Kong's Chief Executive and the members of Legco by "universal suffrage." The processes of reforming the selection process for the Chief Executive and Legco are specified in Annex I and II of the Basic Law. Both annexes precluded changes in the election process until after 2007. To amend the selection process for the Chief Executive, Annex I stipulates that the proposal must be endorsed by two-thirds of Legco, consented to by the Chief Executive, and approved by the NPCSC. To amend the selection process for Legco, Annex II requires the proposal must be endorsed by two-thirds of Legco, consented to by the Chief Executive, and "reported to" the NPCSC. As a result, both the Chief Executive and Legco in office must approve changes in Hong Kong's election laws, including the transition to universal suffrage. Following the Handover, democratic reforms emerged as one of the main political issues in Hong Kong. The "pan-democracy" parties and other organizations (such as Basic Law Article 45 Concern Group) continually pressured the first Chief Executive, Tung Chee-hwa, and the Hong Kong government to take steps to advance democracy in Hong Kong. On March 10, 2005, Tung submitted his resignation in part because of public dissatisfaction with his failure to support universal suffrage in Hong Kong. Tung was succeeded by his Chief Secretary for Administration, Donald Tsang Yam-kuen. The new Chief Executive quickly found himself immersed in the democracy controversy, especially following his submission in 2005 of proposed reforms for the 2007 Chief Executive election and the 2008 Legco elections. Under Tsang's proposal, the size of the Election Committee would have increased from 800 to 1,600 people, and the number of seats in Legco would have increased from 60 to 70, with the 10 new seats equally divided between geographical and functional constituencies. There was apparent widespread opposition to the proposal, as indicated by the large turnout at a December 4, 2005, rally for democracy in Hong Kong. Among the main objections to the proposal were the inclusion of non-elected District Council members on the Election Committee, the expansion of the number of functional constituency seats in Legco, and the lack of a roadmap to universal suffrage. On December 21, 2005, Tsang's proposal failed to obtain the necessary two-thirds vote in Legco when 24 "pro-democracy" members voted against the measure. The failure to amend the election process in 2005 meant that the 2007 Chief Executive election and the 2008 Legco election would take place under the existing system. The focus of Hong Kong's democratic movement shifted to the concurrent Chief Executive and Legco elections scheduled for 2012. Chief Executive Tsang initiated a process of public consultation on the subject of "constitutional development," that involved the formation of the Commission on Strategic Development to study the issue of universal suffrage in Hong Kong. The pro-democracy forces advocated the selection of the Chief Executive and all members of Legco by universal suffrage in the 2012 elections, while others favored more modest, incremental election reforms. In July 2007, the Commission completed its work and the Hong Kong government released the "Green Paper on Constitutional Development." A heated debate about election reforms brewed in Hong Kong until December 29, 2007. In response to a report from Chief Executive Tsang, the Standing Committee of the National People's Congress (NPCSC) released its "Decision on Issues Relating to the Methods of Selecting the Chief Executive of the Hong Kong Special Administrative Region and for Forming the Legislative Council of the Hong Kong Special Administrative Region in the Year 2012 and on Issues Relating to Universal Suffrage." In its decision, the NPCSC ruled out the direct election of Hong Kong's Chief Executive and Legco by universal suffrage in the elections of 2012. However, the decision also stated that the Chief Executive may be directly elected by universal suffrage in 2017, provided certain conditions were met. The NPCSC also decided that all members of the Legco may be elected by universal suffrage after the direct election of Chief Executive has taken place, effectively setting 2020 as the first possible year for fully democratic Legco elections. However, the NPCSC's decision also indicated that it was possible to make changes in election procedures before 2017, subject to certain constraints. While the Chief Executive would still be selected by the Election Committee, it was possible to alter the size, constitution, and regulations governing the conduct of the Election Committee. Also, while the 50-50 split between the geographical and functional constituency seats in Legco could not be altered, the number of seats in Legco could be changed and the nature of the functional constituencies could be amended or revised. A final important element of the decision was its specification of the process whereby changes in Hong Kong's election system were to be made. The NPCSC decision laid out a multi-step process that began with the Chief Executive presenting a report to the NPCSC on the need to amend the current process and ended with the Chief Executive presenting the approved amendments to the NPCSC for its approval or its records. Legco elections were held in Hong Kong on September 7, 2008, with the future of democratic reforms one of the key issues of the campaign. A pan-democratic coalition—consisting of the newly formed Civic Party, the perennial Democratic Party, the Hong Kong Confederation of Trade Unions, the League of Social Democrats (LSD), and a few other smaller political parties—campaigned in support of a quick transition to universal suffrage in Hong Kong. The "pro-Beijing" parties—the DAB, the Liberal Party, and the Hong Kong Federation of Trade Unions—advocated a more gradual transition towards democracy. The outcome of the 2008 Legco election produced a few surprises (see Table 1 ). First, one of Hong Kong's longest-standing political parties—the pro-business Liberal Party—faired poorly, losing all three of its geographical constituency seats. Second, the DAB did well, gaining three seats. Third, despite the supposed public concern about democratic reforms, the pan-democratic parties lost two seats, but still retained enough seats in Legco—23 seats—to veto proposed election reforms. No sooner than the 2008 Legco was sworn into office, its pan-democrat members began lobbying Chief Executive Tsang and the Hong Kong government to submit a proposal for Hong Kong's transition to full democracy. While the League of Social Democrats continued to push for universal suffrage in the 2012 elections, other pan-democrats shifted their attention to the possible 2012 election reforms and a possible roadmap to universal suffrage in 2017 and 2020. For their part, the pro-Beijing Legco members generally accepted the terms of the NPCSC decision, and focused their comments on the possible changes to be made in the 2012 elections. Although the NPCSC's decision effectively ended the discussion about universal suffrage before 2017, it left open the possibility of modest election reforms in 2012. Based on the contents of the decision, Chief Executive Tsang initiated a period of study and public consultation on possible amendments to Hong Kong's election process for the 2012 elections, with the Commission on Strategic Development once again responsible for the process. However, the work of the Commission has been fraught with problems. During his campaign before the May 2007 Chief Executive election, Tsang had promised that, if elected, by the end of his term he would provide a proposal that would "focus on the final resolution, not a midterm resolution, for universal suffrage." To many, this campaign pledge indicated that his next election reform proposal would not only include changes for the 2012 elections, but would also specify when and how Hong Kong would make the transition to universal suffrage. On October 15, 2008, Tsang stated in his annual policy address that "In the first half of 2009, we will consult the public on the methods for electing the Chief Executive and for forming the Legislative Council in 2012." According to his critics, Tsang has broken both of these promises. On January 15, 2009, Chief Executive Tsang announced that the public consultation on the 2012 elections would have to be delayed until the fourth quarter of the year due to a "once in a lifetime economic crisis." Tsang affirmed that "Postponing the consultation to the fourth quarter this year does not mean canceling it," and that the postponement still left ample time to make and implement amendments to Hong Kong's election process before the 2012 elections. In the meantime, the Commission would continue its work on election reform. On November 18, 2009, the Hong Kong government released its Consultation Document regarding the 2012 elections. The purpose of the Consultation Document was to identify for the public the key issues to be considered when proposing amendments for Hong Kong's 2012 elections and narrowing the list of possible amendments to propose to Legco after the public consultation is completed in February 2010. Regarding the Chief Executive election process, the document identified five key issues: (1) the number of members in the Election Committee; (2) the composition of the Election Committee; (3) the electorate base of the Election Committee; (4) the nomination process for Chief Executive candidates; and (5) the political affiliation of the Chief Executive. Regarding the Legco election process, there are only three key issues identified: (1) the number of seats in Legco; (2) the electorate base of the functional constituencies; and (3) restrictions on the number of seats that can be held by people who are not of Chinese nationality or who have the right of abode in foreign countries. In addition to identifying various alternatives associated with these eight key issues, the consultation document indicated the view of the Hong Kong government at this time on each of these issues. Table 2 lists the Hong Kong government's recommendations. Most of the key issues and the Hong Kong government's views are self-explanatory, except for those involving the "electorate base" of the Election Committee and the functional constituencies. Under the current system, the registered "voters" for some of the functional constituency seats in Legco are corporations and other legal entities, not people. In addition, when selecting representatives to the Election Committee, some of the "voters" are corporations. Critics of this system see this as an anti-democratic provision that violates the goal of election by universal suffrage. It had been suggested that the voting rights be transferred to the specific directors or executives of the corporations or entities in question. The release of the Consultation Document was viewed by some as Tsang breaking his campaign promise to provide a "final resolution" for universal suffrage. While the document contains analysis and recommendations on possible reforms for the 2012 elections (see Table 2 below), it purposely avoids presenting a roadmap or blueprint for Hong Kong's eventual election of the Chief Executive and Legco by universal suffrage. According to the Consultation Document, "… in accordance with the NPCSC decision, the HKSAR can only propose amendments to the two electoral methods for 2012." The document asserts that reforms for the 2017 election can only be dealt with after the elections of 2012 and by implication, after Tsang leaves office. After the release of the Consultation Document, the LSD organized the resignation of five supportive Legco members to force a Legco by-election as a de facto referendum on universal suffrage. Three of the LSD members (Albert Chan Wai-yip, Leung Kwok-hung, and Raymond Wong Yuk-man) and two members of the Civic Party (Tanya Chan and Alan Leong Kah-kit) resigned from Legco on January 21, 2010. The Democratic Party voted against participation on December 13, 2009. The DAB, the Liberal Party and the other pro-Beijing parties did not support the LSD initiative, but also decided not to run candidates in the by-election. The Legco by-election was held on May 16, 2010. All five of the incumbents won by an overwhelming margin over their opponents, but the turnout rate was comparatively low—17.2%—about one-third of the turnout for the previous by-election in 2007. The LSD and its supporters considered the by-election a success, highlighting that nearly 580,000 people had voted. Opponents pointed to the low turnout rate as an indication that the by-election was a waste of time and government revenues. The consultation document provided strong indications of what would probably be included in Chief Executive Tsang's proposed motions to Legco for election reforms. On June 7, 2010, Stephen Lam, Secretary for Constitutional and Mainland Affairs, submitted two motions to Legco. The first would amend Annex I of the Basic Law to expand the Election Committee to select the Chief Executive in 2012 to 1,200 people, and would require that a person receive not less than 150 votes from the members of the Election Committee to be nominated. The second motion would amend Annex II of the Basic Law to enlarge Legco to 70 members in the 2012 elections, with five new functional constituency seats and five new geographical constituency seats. Details on how to select the additional Election Committee members and how to allocate the additional Legco seats would be determined in local ordinances passed after the motions were approved. It is assumed that the proposed ordinances would closely follow the recommendations in the Consultation Document. In general, beyond these changes, the 2012 elections would be conducted much like the elections of 2007 and 2008—if the two motions and the subsequent ordinances are approved by Legco. Chief Executive Tsang set the date for Legco's vote on the two motions for June 23, 2010. A two-thirds vote of the 60 Legco members was required to pass the motions. It was reported that all 23 of the pro-democracy members of Legco pledged to vote against the motions, unless significant changes are made in election reforms recommended in the Consultative Document. If the 23 members had remained true to their pledge, they would have had sufficient votes to veto the two motions. The Hong Kong government launched in April 2010 its HK$9 million ($1.2 million) "Act Now" campaign to raise public support for the election reforms. Chief Executive Tsang and Civic Party member Audrey Eu Yuet-mee held a live, televised debate on the proposed election reforms on June 17, 2010. Although the motions initially looked destined to fail, the Democratic Party created the possibility for a compromise when it indicated it might support the motions if certain changes were made. These included maintaining the current nomination threshold for candidates for Chief Executive; promises from the Chinese government that the functional constituencies would be abolished by 2020; and the proposed five new functional constituency seats be chosen by popular vote, not by the elected members of the District Councils. Secret negotiations between representatives of the Chinese government and the Democratic Party reportedly began in February 2010, but took on a more serious tone after the May by-elections. According to some observers, the relatively low turnout for the by-elections convinced the Chinese government that a compromise may be possible. Chinese officials working in its Liaison Office in Hong Kong managed most of the negotiations with the Democratic Party. On June 7, 2010, NPCSC Deputy Secretary Qiao Xiaoyang gave a speech that partially addressed the Democratic Party's proposals, and reasserted China's commitment to universal suffrage in Hong Kong. Two weeks before Legco was supposed to take up the motions, Democratic Party Chairman Albert Ho Chun-yan stated that if China would allow the new functional constituency seats to be chosen by popular vote, the party's Legco members might back the motions. In the end, an agreement was reached under which the nomination threshold was left unchanged—one-eighth of the members of the Election Committee, and the five new functional constituency seats would be chosen by a popular vote in which people who cannot otherwise vote in a functional constituency can vote. The last-minute agreement between the Chinese government and the Democratic Party had immediate ripple effects on Hong Kong politics. First, it split the pan-democratic coalition, as the Civic Party, the LSD, and others rebuked the Democratic Party for accepting the deal. Second, two of the founding members of the Democratic Party—Andrew Cheng Kar-foo and Martin Lee Chu-ming—also opposed the agreement. Cheng has resigned from the party in protest, and Lee and a number of other members are considering leaving the party. Third, Chief Executive Tsang's apparent lack of involvement in the negotiations has raised questions about his effectiveness as a political leader and raised concerns about China's direct involvement in Hong Kong's political system. On June 24, 2010, Legco voted on the first motion concerning the selection of the Chief Executive. After an extended debate, the motion passed by a vote of 46 yeas and 13 nays. Voting against the motion were the five Civic Party members, the three LSD members, Andrew Cheng Kar-foo, and several other traditional pan-democratic coalition supporters. The following day, Legco voted on the second motion. This time the vote was 46 yeas and 12 nays. LSD member Leung Kwok-hung (commonly known as "Long Hair") was removed from the chamber prior to the vote for his vocal protests. The two motions passed in June 2010 established the general principles for the selection of the Chief Executive and the expansion of Legco for the 2012 elections. The specifics on how the general principles are to be implemented requires the passage of legislation to amend Hong Kong's current election laws. On December 10, 2010, Chief Executive Tsang submitted two bills – one to amend the ordinance and regulations governing the selection of the Chief Executive, and another to amend the ordinances and regulations governing the election of the Legco members. The submitted bill regarding the selection of the Chief Executive amends one ordinances, two regulations, and one order. Its main provisions are: The allocation the 400 additional EC members equally among the four EC sectors currently specified in Chief Executive Election Ordinance (Cap. 569); The 100 new EC members for the fourth sector will consist of the 10 new Legco members, 10 members of the Chinese People's Political Consultative Conference, 5 members from the Heung Yee Kuk, and 75 elected District Council members; The expansion of the eligible voters in the Chinese medicine subsector to include registered Chinese medicine practitioners; and The raising of the nomination threshold to 150 EC members, consistent with the past requirement of obtaining the support of one-eighth of the EC members. The submitted bill regarding the expansion of Legco to 70 members amends one ordinance and three regulations. Its main provisions are: The addition of five geographical constituency seats in Legco to be allocated among the five current districts so that no district has fewer than five seats or more than nine seats; The redesignation of the current District Council functional constituency as the "District Council (first) functional constituency," and the creation of a new functional constituency to be known as "District Council (second) functional constituency"; The allocation of the five new functional constituency seats to the "District Council (second) functional constituency"; The eligible voters for the five "District Council (second) functional constituency" seats will consist of all persons who are registered as electors for geographical constituencies, but are not registered as electors for any of the other functional constituencies; The restriction of nominees to District Council (first) and District Council (second) functional constituency seats to elected members of the District Councils; The restriction of nominators for (called "subscribers" in Hong Kong) District Council (first) and District Council (second) functional constituency seats to elected members of the District Councils; The requirement that nominees for the District Council (second) functional constituency seats be nominated by at least 15 elected District Council members; and The limitation of campaign expenses for the District Council (second) functional constituency to HK$6 million (approximately US$770,000). Prior to the release of the proposed legislation, Anson Chan Fang On-sang—ex-Legco member ex-Chief Secretary for Administration, and convenor of the Citizens' Commission on Constitutional Development (CCCD)—expressed the "deep concerns" the CCCD had regarding the proposed changes in Hong Kong's election laws. Regarding the amendments for the selection of the Chief Executive, Chan criticized the proposal for not restructuring the composition of the Election Committee to make it more representative of the political and economic situation in Hong Kong. She explicitly cited the perceived overrepresentation of agricultural and fisheries sub-sector and the underrepresentation of the import and export and financial services subsectors. Chan also stated that the proposal should have replaced corporate voting with individual voting. Regarding the amendments for the election of Legco members, Chan took issue with the election of the five new functional constituency seats by a territory-wide constituency. In her words, the proposal would "create two classes of geographically elected Legco members, with these 'super' District Councilors theoretically able to claim that they represent millions of electors compared to the smaller electorates in the five regional geographic constituencies." To the CCCD, such a disparity was undesirable. Chan's other major concern about the proposal was the setting the threshold for District Council functional constituency seat nomination at 15; the CCCD consider 10 a more reasonable number. Chan's criticisms of the proposed legislation were echoed in an article by Robert Keatley, published in the January 2011 issue of the Hong Kong Journal . Keatley states that "pro-democracy parties" in Hong Kong would have preferred more diversity in the additional 400 members of the Election Commission. He also points to the disparities in the size of the electorates for the functional constituencies and the creation of "super-legislators." During a press conference announcing the pending submission of the two bills, Secretary for Constitutional and Mainland Affairs Stephen Lam Sui-lung was asked about the decision to have candidates for the five new functional constituency seats run in a single election rather than divided them into five smaller districts. Secretary Lam stated that the Hong Kong government thought the proposed arrangement would be a fair arrangement to enable Hong Kong people to choose political parties, large and small, as well as independent candidates to represent them. Another important factor will be how the Chinese government responds to the proposed legislation. Some analysts have speculated that the Chinese government may question the creation of "super-legislators" who can claim greater public support than the Chief Executive. It is possible that, if the "pro-democratic parties" successfully modify the legislation to eliminate the "super-legislators," the Chinese government may support the changes. By contrast, most analysts surmise that the Chinese government supports the proposed process for expanding the Election Committee. The key issue that is left unaddressed by 2010 election reforms is how the transition to universal suffrage will occur—if at all—in the elections of 2017 and 2020. Given that Hong Kong is an executive-led government, the 2017 Chief Executive election may be more crucial, especially given that the transition to universal suffrage for Legco elections is conditional upon the achievement of universal suffrage in the Chief Executive election. However, since Legco has the ability to block proposed policy changes by the Chief Executive, reforms of Legco elections in 2012 and 2016 are also important. The path from nomination and selection of the Chief Executive by the Election Committee to the election of the Chief Executive by a popular plebiscite appears to be less problematic. The current speculation is that the Election Committee will be transformed into a purely nominating body, which will fulfill a condition specified in Article 45 of the Basic Law. Once the nominees have been selected, the public will then elect the Chief Executive, subject to the approval of the NPCSC. It is generally thought that the transformation of the Election Committee into a nominating committee will provide the Chinese government with enough insurance that the elected Chief Executive will be approved by the NPCSC, thereby avoiding an embarrassing and unpleasant situation. The main potential source of political struggle over the election of the Chief Executive by universal suffrage will be the size and constituency of the members of the nominating committee. In general, the pan-democrats would prefer a larger committee consisting of more elected members with a lower nomination requirement. By contrast, the Chinese government and its sympathizers in Hong Kong support a smaller nominating committee that is largely based on the Election Committee and a higher nomination requirement. Where the balance of these two forces lies is difficult to determine at this time. The path for the transformation of Legco into a body in which all members are elected by universal suffrage is more difficult to see, especially given the 2010 reforms. One of the fundamental dilemmas of Hong Kong's democratization process is the condition that any changes must be approved by two-thirds of the Legco members. At present, that means at least 10 of the functional constituency members must vote in favor of the proposed reforms; in the future it will require at least 12. However, both of the most commonly discussed scenarios for a fully democratic Legco imply a loss of power for the existing functional constituency members of Legco or voters in their electoral base. There are two leading scenarios by which Legco can be transformed into a body elected by universal suffrage. The first scenario involves the elimination of the functional constituencies, transforming Legco into a body with members elected only by geographical districts. The second scenario retains functional constituency seats, but either redefines their electoral base or increases the number of functional constituencies so that every voter in Hong Kong can vote in at least one functional constituency. There is skepticism that enough functional constituency members of the current Legco, or the members to be elected in 2012 and 2016, will be willing to eliminate their seats as of 2020. Similarly, it is unclear if enough members of Legco will support the second scenario, given the implicit dilution of their power. The release of the Consultation Document, the Legco by-election and the submission of the motions to Legco have reactivated consideration of democratic reforms in Hong Kong. Although the contents of these documents and the Hong Kong government's recommendations may not please everyone, they have clarified what Chief Executive Tsang sees as the next step towards universal suffrage in Hong Kong. If Congress should determine it wishes to respond to Hong Kong's election reforms, one option is to indicate directly to the Hong Kong and Chinese governments its concerns and preferences. This could be done by various means, ranging from the passage of resolutions, to the convening of hearings, to submitting comments to the Constitutional and Mainland Affairs Bureau of the Hong Kong government. Alternatively, Congress could inquire of the Obama Administration what actions it was taking with regarding to Hong Kong's 2012 elections, particularly if and how any of the $17 million appropriated for "the promotion of democracy in the People's Republic of China, Hong Kong, and Taiwan" are being used on activities related to the 2012 elections. Finally, in light of the NPCSC's December 2007 decision and subsequent developments in Hong Kong, Congress could request a report from the White House or an appropriate government agency on the status of Hong Kong's autonomy and its progress towards democracy. Appendix A. Motion on Election of Chief Executive Draft Motion to be Put by the HKSAR Government to the Legislative Council Concerning the Amendment to the Method for the Selection of the Chief Executive of the Hong Kong Special Administrative Region Pursuant to Article 7 of Annex I to the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China, the Interpretation by the Standing Committee of the National People's Congress of Article 7 of Annex I and Article III of Annex II to the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China of 6 April 2004, and the Decision of the Standing Committee of the National People's Congress on Issues relating to the Methods for Selecting the Chief Executive of the Hong Kong Special Administrative Region and for Forming the Legislative Council of the Hong Kong Special Administrative Region in the year 2012 and on Issues relating to Universal Suffrage of 29 December 2007, the "(Draft) Amendment to Annex I to the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China Concerning the Method for the Selection of the Chief Executive of the Hong Kong Special Administrative Region" appended to this Motion is hereby endorsed by this Council by a two-thirds majority of all Members. (Draft) Amendment to Annex I to the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China Concerning the Method for the Selection of the Chief Executive of the Hong Kong Special Administrative Region 1. The Election Committee to elect the fourth term Chief Executive in 2012 shall be composed of 1200 members from the following sectors: Industrial, commercial and financial sectors—300 The professions—300 Labour, social services, religious and other sectors—300 Members of the Legislative Council, Hong Kong deputies to the National People's Congress, representatives of members of the District Councils, representatives of Hong Kong members of the National Committee of the Chinese People's Political Consultative Conference, and representatives of the Heung Yee Kuk—300 The term of office of the Election Committee shall be five years. 2. Candidates for the office of Chief Executive may be nominated jointly by not less than 150 members of the Election Committee. Each member may nominate only one candidate. Appendix B. Motion on Legislative Council Reform Draft Motion to be Put by the HKSAR Government to the Legislative Council Concerning the Amendment to the Method for the Formation of the Legislative Council of the Hong Kong Special Administrative Region and its Voting Procedures Pursuant to Article III of Annex II to the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China, the Interpretation by the Standing Committee of the National People's Congress of Article 7 of Annex I and Article III of Annex II to the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China of 6 April 2004, and the Decision of the Standing Committee of the National People's Congress on Issues relating to the Methods for Selecting the Chief Executive of the Hong Kong Special Administrative Region and for Forming the Legislative Council of the Hong Kong Special Administrative Region in the year 2012 and on Issues relating to Universal Suffrage of 29 December 2007, the "(Draft) Amendment to Annex II to the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China Concerning the Method for the Formation of the Legislative Council of the Hong Kong Special Administrative Region and its Voting Procedures" appended to this Motion is hereby endorsed by this Council by a two-thirds majority of all Members. (Draft) Amendment to Annex II to the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China Concerning the Method for the Formation of the Legislative Council of the Hong Kong Special Administrative Region and its Voting Procedures 1. The fifth term Legislative Council in the year 2012 shall be composed of 70 members, and the composition shall be as follows: Members returned by functional constituencies—35 Members returned by geographical constituencies through direct elections—35
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Support for the democratization of Hong Kong has been an element of U.S. foreign policy for over 17 years. The Hong Kong Policy Act of 1992 (P.L. 102-383) states, "Support for democratization is a fundamental principle of United States foreign policy. As such, it naturally applies to United States policy toward Hong Kong. This will remain equally true after June 30, 1997" (the date of Hong Kong's reversion to China). The Omnibus Appropriations Act of 2009 (P.L. 111-8) provides at least $17 million for "the promotion of democracy in the People's Republic of China, Hong Kong, and Taiwan …" The democratization of Hong Kong is also enshrined in the Basic Law, Hong Kong's quasi-constitution that was passed by China's National People's Congress (NPC) prior to China's resumption of sovereignty over the ex-British colony on July 1, 1997. The Basic Law stipulates that the "ultimate aim" is the selection of Hong Kong's Chief Executive and the members of its Legislative Council (Legco) by "universal suffrage." However, it does not designate a specific date by which this goal is to be achieved. On November 18, 2009, Hong Kong Chief Executive Donald Tsang Yam-kuen released the long-awaited "consultation document" on possible reforms for the city's elections to be held in 2012. The document was immediately met by sharp criticism from representatives of Hong Kong's "pro-democracy" parties. Five Legco members resigned on January 21, 2010, as a form of protest, forcing a by-election on May 16, 2010. The five incumbents were re-elected. On June 7, 2010, Chief Executive Tsang submitted two motions to Legco increasing the size of the Election Committee (EC) for Chief Executive to 1,200 members and adding 10 new seats to Legco—five elected by geographical districts and five elected by "functional constituencies." Initially, the pan-democratic Legco members announced they would vote against the motions. However, a last-minute agreement between the pro-universal suffrage Democratic Party and the Chinese government led to a split among the pan-democrats, a coalition of parties that support a more rapid transition to universal suffrage. Legco passed both motions—one on June 24; the second on June 25—the first significant changes in Hong Kong's political system since the Handover on July 1, 1997. To implement the election changes, Legco will need to pass enabling ordinances detailing how to carry out the election reforms. On December 10, 2010, Chief Executive Tsang submitted two bills to amend Hong Kong's election laws. The bill governing the election of the Chief Executive specifies how the additional EC members are to be allocated and sets the nomination threshold at 150 EC members. The bill governing the 10 new Legco seats will allow the Electoral Affairs Commission to determine how to allocate the five geographical seats (based on population projections) and establishes a "District Council (second) functional constituency" to elect the other five new Legco members. Under the new law, every Hong Kong voter will be able to vote for at least one functional constituency member of Legco. The 2012 election reforms are important to Hong Kong's democratization for two reasons. First, they are an indication of the Hong Kong government's willingness to press for democratic reforms. Second, the Chief Executive and Legco selected in 2012 will have the power to implement universal suffrage for the Chief Executive election in 2017 and the Legco election in 2020, if they so choose. This report will be updated as circumstances warrant.
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Along with the United States, Germany is widely considered one of Israel's closest allies. Germany's commitment to Israel's sovereignty and security has historically been the strongest influence on its policy in the Middle East and a key factor in its cooperation with the United States in the region. However, debate surrounding Israel's August 2006 request for German ground troop participation in a United Nations (U.N.) mission on the Israeli-Lebanese border, increasing German advocacy for a more proactive European Union (EU) role in the Middle East, and shifting perceptions of Israel in the German public have brought attention to what many consider a changing role for Germany. Indeed, the October 2006 deployment of a German naval contingent off the Lebanese coast marks the first time German troops have been stationed so close to Israeli soil, and German leaders have announced their intention to work toward reviving European and international engagement in the Israeli-Palestinian peace process during Germany's EU presidency in the first half of 2007. Given Germany's long-standing support of Israel and close ties to the United States, Israeli and Bush administration officials have generally welcomed the idea of increased German engagement in the Middle East. For some analysts, Germany's leading role in the EU and consistent commitment both to Israel and U.S. involvement in the peace process suggest that Germany will become an ever-more important partner for Israel and the United States. On the other hand, the presence of German troops in Lebanon, growing public opposition to Israeli policies and Germany's commitment to a common European approach prompt others to emphasize an increasing potential for divergence between German policy on the one hand and Israeli and U.S. policies on the other. The Federal Republic of Germany (West Germany) and Israel established formal diplomatic relations in May 1965. However, German policy towards Israel during the preceding 13 years, beginning with the Luxembourg Reparations Agreement of 1952, set the tone for what continues to be widely considered a special relationship. After taking office in 1949, West Germany's first Chancellor, Konrad Adenauer, pursued a foreign policy rooted in the belief that the legitimacy of the young German state depended largely on its willingness to atone for atrocities perpetrated by the National Socialist (Nazi) regime of Adolf Hitler. Accordingly, his policies were motivated by a perceived moral obligation to support the Jewish state. The cornerstone, enshrined in the Luxembourg Agreement, was a long-term commitment to provide unprecedented financial reparations to the state of Israel and restitution and compensation to individual victims of Nazi persecution. In the Luxembourg Agreement, West Germany agreed to pay 3 billion Deutschmark ($715 million) to the state of Israel and 4.5 million DM ($110 million) to Jewish organizations represented by the Conference on Jewish Material Claims Against Germany (Claims Conference), which were helping resettle Jews outside of Israel. Germany subsequently enacted legislation mandating direct compensation to individual victims of Nazi crimes. The German government continues to make payments to individuals, mostly by way of pension contributions, and estimates that some 40%, or over 25 billion Euros (approximately $32.5 billion), of German reparations and compensation have gone to the state of Israel or individuals living in Israel. In 1992, two years after German unification, the government expanded its compensation laws to include individuals previously denied compensation by the former German Democratic Republic (East Germany). According to historians, while the United States supported the idea of German reparations, American officials were unwilling to impose additional financial burdens on the young German state so soon after World War II and urged Israel to negotiate directly with Germany. Indeed, reparations to Israel were neither required by the international community nor wholeheartedly endorsed by the German and Israeli people. Most agree that German support for Israel arose largely due to the individual efforts of Adenauer and Israeli Prime Minister David Ben-Gurion. Beginning in 1957, the two leaders enhanced relations by establishing military ties, avoiding considerable domestic and international opposition by keeping arms shipments secret. In 1964, German newspaper reports exposed arms shipments to Israel, setting off crises both within and between Germany, Israel and the Arab world. Ultimately, West Germany suspended the shipments. However, both to make up for this loss and to address increasing public and political pressure, Adenauer offered to establish formal diplomatic relations with Israel in March 1965. Until this point, he had resisted renewing an initial 1952 offer of diplomatic ties, fearing retaliation from the Arab world. The decades following the 1965 establishment of diplomatic relations were marked largely by a German desire to be seen as a neutral actor in the Middle East, providing balanced, rather than special support to Israel. Simultaneously, and away from the public eye, successive German leaders sought to fulfill a greater moral commitment to Israel, as had been initiated in Adenauer's policies. Publicly, however, leaders tended to speak increasingly of German neutrality and, beginning in the 1970s, avoided pressure to take sides in conflicts involving Israel by advocating common European Economic Community (EEC) positions. Although Germany opposed a 1956 U.S.-supported U.N. initiative to impose sanctions on Israel following the Suez crisis, Germany did not openly support Israel in the 1967 war and resisted calls to come to Israel's aid during the early stages of the 1973 Yom-Kippur War, at least publicly claiming neutrality in the conflict. After the ensuing Arab oil embargo, German policy increasingly reflected its dependence on Arab states, both as a destination for German exports and, more importantly, as the source of 85% of German oil. Nonetheless, Germany appears to have successfully maintained its strong relations with Israel by providing substantial economic assistance, continuing to nurture defense and intelligence cooperation and by working to soften or even oppose EEC positions. After having claimed neutrality during the Yom-Kippur War, it was revealed that Germany had been allowing the United States to use its Bremerhaven port to resupply Israel. Although Germany supported a 1973 EEC resolution urging Israel to retreat to pre-1967 borders, in the late 1970s, it abstained from U.N. votes on the right of Palestinian self-defense and on granting observer status to the Palestinian Liberation Organization (PLO). In 1980, though West Germany signed the EEC's Venice Declaration endorsing Palestinian self-determination, German officials are reported to have successfully blocked initiatives to include direct reference to the PLO. While the Venice Declaration and other EEC positions were certainly viewed as less favorable toward Israel than previous German policy, Germany maintained Israeli trust as a strong ally within Europe. German reparations and compensation for crimes committed during the Holocaust and long-standing defense and scientific cooperation continue to represent the cornerstone of a robust German-Israeli bilateral relationship. However, as memory of the Holocaust fades and public criticism of Israeli policies increases, the countries have focused on expanding cultural and broader societal exchanges. With bilateral trade worth 3.7 billion Euros (approximately $4.8 billion), Germany is Israel's second largest trading partner after the United States. However, given the comparatively small size of the Israeli market relative to Germany's main export markets, most agree that economic considerations do not play a decisive role in German policy towards Israel. Though it is increasing, German direct investment in Israel also is not considered particularly significant. In fact, former Israeli Ambassador to Germany Avi Primor has identified increased German investment as an area of primary importance for the future of German-Israeli relations and some analysts suggest that security concerns regarding the Israeli-Palestinian conflict represent the primary obstacle to greater investment. Conversely, Israeli investment in Germany is reportedly rising, with more than 40 Israeli companies based in Germany as of 2005. In 2005, business associations from both countries established the German-Israeli Business Council to stimulate business relations. Germany has also been a strong advocate of preferential trade agreements between Israel and the EU. Cooperation between German and Israeli scientists began as early as 1961—four years before the establishment of diplomatic relations—and has grown into a pillar of bilateral relations. According to the German government, Germany, after the United States, is the second largest sponsor of scientific research in Israel, and German scientists represent the largest group of foreign scientists working in Israel. The primary vehicle for German-Israeli scientific cooperation is the Minerva Foundation, which receives annual funding from the German government and supports projects administered by Israel's Weizmann Institute. Particularly as memory of the Holocaust fades among younger generations of Germans and Israelis, leaders on both sides have emphasized the need for strong people-to-people exchanges and Holocaust education. There are currently over 100 "sisterships" between German and Israeli towns, and up to 10,000 youth and volunteers from both countries participate in exchange programs each year. Cultural exchange between the two countries has been historically slow to develop, but has grown substantially over the past decade. This includes efforts to promote the German language in Israel and agreements to jointly promote Holocaust education. Over 100,000 Jews now live in Germany and are reported to make up the world's most rapidly growing Jewish population. The vast majority of these Jews have come from the former Soviet Union since 1990. Historical accounts reveal that robust, but highly secretive military and intelligence cooperation between Germany and Israel resumed in the late 1960s, not long after the West German government suspended covert arms shipments in 1964. The select group of German officials overseeing the arms trade considered secrecy vital both to avoid scrutiny under a law banning German arms exports to areas of potential conflict, and perhaps more importantly, to avert negative consequences in relations with the Arab world. Despite these risks, successive German leaders have remained committed to far-reaching defense cooperation with Israel and Israel continues to be a top recipient of German military technology. The extent and precise value of arms shipments to and from Germany through the mid-1990's remains unclear, yet analysts assert that German arms played a considerable role in Israeli military victories in 1967, 1973 and 1982. In response to Iraqi scud missile attacks on Israel during the Gulf War of 1990-1991, the German army provided Israel with arms and substantial financial assistance. In 1999 and 2000, in perhaps the most high-profile German arms shipments to Israel since German unification, Germany financed 50% of the costs for three "Dolphin-class" submarines designed specifically for the Israeli navy. In August 2006, the German government committed to deliver and finance one-third of the costs, approximately 1 billion Euros ($1.3 billion), for two more submarines by 2010. Those opposed to the most recent agreement, primarily members of the Green and Left political parties, cite widespread concern that Israel plans to reconfigure the submarines to enable them to launch nuclear missiles. Proponents repeatedly invoke a German obligation to defend the existence of the state of Israel. Israelis have generally welcomed the continuing defense cooperation with Germany. In August 2006, the Jerusalem Post reacted to the latest submarine agreement by writing, "While their grandparents' generation perpetrated the Holocaust, and the previous generation paid for the Holocaust with reparations to its victims, the current generation is helping prevent a second Holocaust by providing the [Israel Defense Forces] with some of the most important defensive weapons systems in its arsenal. As far as corrective steps go, that's a huge one." Germany and Israel's respective intelligence agencies, the Bundesnachrichtendienst (BND) and Mossad, enjoy a history of extensive and often secretive cooperation dating back to the 1960s, when they began facilitating the arms trade between the two countries. Counter-terrorism cooperation began in the wake of the terrorist attack at the 1972 Munich Olympics and has reportedly increased since September 11, 2001. In 2002, in what was viewed by many as a response to pressure from Israeli officials, the German government banned the Al-Aqsa charity, an organization long accused by the Israelis of fund-raising for the Palestinian terrorist organization Hamas. While many Israelis considered the German government's response overdue, most indicate that the action was emblematic of the close cooperation between Israeli and German authorities. It appears that despite continued Israeli concerns regarding perceived constraints imposed on counter-terror operations by German law, cooperation between the countries remains strong. Israeli leaders consistently praise their country's relations with Germany, welcoming German advocacy on Israel's behalf within the EU and internationally, and the extensive bilateral contacts that have developed since the 1950s. Yet, some prominent Israelis and members of Germany's Jewish community express concern that the historical basis for the strong relationship could be weakening, particularly as collective memory of the Holocaust recedes. Such concerns focus on a rise in neo-Nazi activity, anti-Israel and pro-Palestinian sentiment among the German public and general trends against U.S. policy, unilateralism and military action. An October 2006 study reported a 20% increase in crimes committed by neo-Nazis in Germany since 2005. Such crimes had grown by about 10% the previous year. The increase coincides with a political gain for the neo-Nazi National Democratic Party (NPD), which won seats in the state parliament of the eastern state of Mecklenburg West Pomerania in September 2006 elections and has held seats in Saxony's state legislature since 2004. While most observers believe the NPD will be voted out of the Saxon legislature in the next elections, the apparent rise of neo-Nazi movements in German society and political life has elicited criticism and statements of concern from the President of the Central Council of Jews in Germany and Israel's ambassador to Germany. Asked by an Israeli journalist to address concerns regarding anti-Semitic trends, Chancellor Angela Merkel responded, "sometimes people are not sufficiently aware of anti-Semitic tendencies. Therefore, we intend to treat education and training as a very important component." The German government funds a range of tolerance-education programs, many of which focus specifically on anti-Semitism and Holocaust remembrance, including some in collaboration with Israeli organizations, and continues to provide 24-hour police protection at synagogues and other Jewish institutions. In addition, the government devotes significant resources to investigating xenophobic and anti-Semitic crimes and prosecuting their perpetrators. These crimes often receive broad media attention and public condemnation from the political establishment. In recent years, increasing public and political opposition to Israeli policies in the Middle East has illuminated a long-standing tension in German society between Germany's special commitment to the state of Israel and German criticism of the policies of Israeli governments. German and Israeli leaders and representatives of Germany's Jewish community consistently state that such criticism is a natural part of any healthy bilateral relationship. However, in reaction to alleged media bias and strong opposition from German politicians to Israeli bombings during Israel's July 2006 war with Hezbollah, the leader of the German Jewish Council alleged an "absolutely hostile attitude towards Jews and Israel," in Germany. In a survey taken shortly after the end of the conflict, 75% of Germans indicated they considered the Israeli action to be "disproportionate." This compared to 63% of British who indicated the action was "inappropriate and disproportionate" and 50% of Americans who reported Israeli action as "justified." Until the 1993 Oslo Peace Accords and the subsequent creation of the Palestinian Authority (PA), Germany was one of Europe's most cautious supporters of Palestinian self-determination. However, since the Israeli government and PLO afforded one another mutual recognition in1993, Germany has become both a strong advocate for a two-state solution to the Israeli-Palestinian conflict and one of the PA's largest donors. Germany was the first country to open a representative office in the Palestinian territories. It consistently seeks a common EU approach to the region and is a strong supporter of EU participation in the so-called Quartet (the EU, Russia, the U.N. and the United States). Since 1993, Germany and the EU have faced varying degrees of Israeli pressure to take stronger measures to ensure that European funding to the Palestinians is not used to finance terrorist operations. On the other hand, Israeli officials have also expressed their support of German and European aid to the Palestinian people and in specific instances, have even requested German aid. Successive German governments have prioritized support for Israel as a cornerstone of German policy in the Middle East. During the Cold War, Germany tended to express this support quietly, favoring covert financial and military support over vocal political backing. However, since unification and during a period of European integration and unprecedented EU expansion, Germany has emerged as an increasingly proactive advocate for greater EU engagement in the Middle East. German leaders have become vocal supporters of a two-state solution to the Israeli-Palestinian conflict. Former Foreign Minister Joschka Fischer's 2002 push to revitalize the peace process is considered by many to have been both a significant first step towards the 2003 "Performance-based Roadmap to a Permanent Two-State Solution to the Israeli-Palestinian Conflict" (Road Map) and a turning point in Germany's role in the region. While some Israelis are skeptical of increased EU influence, most appear to continue to view Germany as a strong and reliable partner within a union of countries generally considered less sympathetic to Israel, and have welcomed a more proactive German role in driving EU policy. For its part, Germany seeks to carry out its support of Israel within the overarching framework of the EU's Common Foreign and Security Policy (CFSP). Despite periods of increased tension between Germany and Israel, leaders on both sides continue to characterize the relationship as an essential component of their foreign policy. In the past decade, Germany has extended political support to Israel largely through its advocacy within the EU. In 2002, despite having temporarily suspended arms shipments to Israel in response to Israeli actions during the Al-Aqsa Intifadah , Germany is reported to have successfully blocked proposals for EU sanctions against Israel. In 2004, although Germany ultimately endorsed the EU's official opposition to Israel's security fence in the West Bank, German Interior Minister Otto Schily and other prominent officials openly supported Israel's decision. During Israel's July 2006 conflict with Hezbollah in Lebanon, Germany and the United Kingdom were the only two EU member states officially opposed to an immediate cease-fire. And, in November 2006, Germany is reported to have joined the Czech Republic and the United Kingdom in blocking public EU condemnation of Israel's military operation in the Gaza Strip. While distinguishing itself as a strong supporter of Israel within the EU, Germany appears to have maintained the trust of Palestinians and other groups in the region traditionally opposed to Israeli objectives. After a Tel Aviv nightclub bombing in 2001, Foreign Minister Fischer is reported to have shuttled between PLO leader Yasser Arafat and Israeli Prime Minister Ariel Sharon, successfully eliciting restraint from Sharon and condemnation of the bombing from Arafat. Analysts also cite the success of German negotiators in facilitating highly delicate prisoner exchanges between the Israeli government and Hezbollah in 1996 and 2004 as evidence of the trust Germany enjoys from both Hezbollah and the Israelis. More recently, a German negotiator is reportedly mediating between Israel and Hezbollah for the release of two Israeli soldiers kidnaped in July 2006. Chancellor Angela Merkel and Foreign Minister Frank Walter Steinmeier took office in November 2005 promising continuity in a German Middle East policy based on a commitment to protect Israel's right to exist; support for a two-state solution to the Israeli-Palestinian conflict; a commitment to a European framework for peace; and a belief that U.S. engagement in the region is essential. Since the historic deployment of German troops to the Lebanese coast in October 2006, Merkel and Steinmeier have increased their calls for revived U.S. and Quartet engagement in the Israeli-Palestinian peace process, joining other European leaders in asserting that the conflict lies at the root of many of the other challenges in the Middle East. Germany has been active in international negotiations aimed at curbing Iran's nuclear ambitions and, despite continuing to rule out a German troop deployment to Iraq, some German leaders have indicated a willingness to increase German support for Iraqi reconstruction efforts and initiatives to train Iraqi security forces. While Israeli and U.S. officials appear to welcome increased German engagement in the region, both Israel and the United States have expressed disapproval of German efforts to engage Syria in the Arab-Israeli peace process, and have reacted skeptically to German-supported proposals to link the resolution of other major disputes in the region to the Israeli-Palestinian peace process. At Israel's and Lebanon's request, in September 2006 the German Parliament authorized a German naval deployment of up to 2,400 soldiers as part of the expanded United Nations Interim Force in Lebanon (UNIFIL). Germany now leads a contingent tasked with monitoring the Lebanese coast to prevent weapons smuggling to Hezbollah forces in Lebanon. The decision to deploy troops so close to Israel—unprecedented in German history—followed several months of widespread debate, which illuminated both the continuing sensitivity surrounding German policy towards Israel and growing German interests in the region. Ultimately, German participation in UNIFIL has increased domestic pressure on Merkel to push for a political solution to the broader Arab-Israeli conflict. At the outset of discussions regarding European contributions to UNIFIL, Merkel and other leading German politicians all but ruled out a military role for Germany, highlighting strong discomfort with the idea of German soldiers being in a position to confront Israeli troops. However, a direct request for ground troops from Israeli Prime Minster Ehud Olmert compelled Germany to reconsider its stance and was a key factor in the decision to deploy the naval contingent. Although Germany ruled out sending ground troops, members of both governing political parties, and particularly the Social Democrats (SPD), expressed a surprising willingness to consider the option, largely because it had been requested by Israel. In the end, opposition from the right wing of Merkel's Christian Democratic Union and from its sister party, the Christian Social Union, reportedly prevented further consideration of more robust German engagement. Nonetheless, Olmert's request broadened debate within the German political spectrum over Germany's future role in the region. In her justification to parliament for the mission, Merkel highlighted its "historic dimension," stating that, "it was impossible to overstate the significance of how much Germany is now trusted," by Israel and others in the region. Since Germany's naval deployment in October 2006, the actions of Israeli Air Force jets flying over German vessels have heightened diplomatic tension between the countries, eliciting official German complaints and Israeli apologies on at least two occasions, and heightening a widespread belief that a weak U.N. mandate is rendering the UNIFIL mission ineffective. While Israeli leaders have officially apologized for a lack of communication during fly-overs, Israel has complained that conditions requiring German officials to secure approval from Lebanese authorities before boarding suspicious ships or entering territory within six miles of the Lebanese coast severely limit Germany's ability to track potential arms shipments. On the other hand, many Germans have taken the actions as evidence of Israel's lack of respect and even disdain for the European military presence. Chancellor Merkel has announced her intention to revive Quartet efforts to advance the Israeli-Palestinian peace process while Germany acts as the EU's representative to the Quartet during its EU presidency in the first half of 2007. However, both she and Foreign Minister Steinmeier emphasize the necessity of U.S. engagement and leadership to any successful peace initiative. Observers and German officials expect Germany to exhaust much of its diplomatic capital in the first half of 2007 seeking to gain increased U.S. engagement and the backing of European countries that tend to be less sympathetic toward Israel than Germany and the United States. Since Hamas's victory in January 2006 Palestinian legislative elections, Germany has remained steadfast in its public commitment to the conditions for relations with Hamas outlined by the Quartet. However, German officials have also supported Palestinian President Mahmoud Abbas's efforts to form a national unity government with Hamas, and some American commentators worry that Europeans may be more willing than the United States to work with such a government. Merkel and Steinmeier have demonstrated a desire to broaden the peace process to include more neighboring states with a stake in the outcome. On several occasions, Steinmeier has voiced an interest in expanding the Quartet to include Egypt or other Arab states. Arguing that any sustainable agreement must involve Syria, Steinmeier met with President Bashar Asad in Damascus in December 2006. Steinmeier says he urged Asad to cease support for Hezbollah fighters in Lebanon and use his leverage over Hamas to pressure its officials to cooperate in the peace process. Despite reports that Merkel was opposed to Steinmeier's Syria visit, a possibility made more likely by the fact that the two represent different political parties, she subsequently defended the decision, citing the need to demonstrate a readiness for dialogue with all stake-holders in the region. Israeli Prime Minister Ehud Olmert has pledged support for the Road Map and Germany's role in realizing it, even welcoming the efforts of moderate Arab states to move the process forward. However, he openly criticized Steinmeier for traveling to Damascus and is skeptical of a German-supported proposal to discuss the Israeli-Palestinian conflict as part of a broader international conference on Iraq. The Bush Administration, which accuses Syria of supporting terrorist organizations and of involvement in the 2005 killing of former Lebanese Prime Minister Rafik Hariri, has consistently opposed dialogue with Syria. As a member of the so-called EU-3 (France, Germany and the United Kingdom), Germany has been a proponent of EU and multilateral efforts to prevent Iran from developing nuclear weapons and was an architect of December 2006 U.N. Security Council Resolution 1737 imposing sanctions on Iran for its refusal to comply with previous Security Council decisions regarding its nuclear program. German officials speak forcefully on the importance of curbing Iranian nuclear ambitions and, despite strong opposition from business associations, Merkel and Steinmeier have indicated a willingness to consider more stringent economic sanctions in the case of continued Iranian obstinance. On the other hand, Germany has demonstrated a commitment to international unity, suggesting that it may be more willing to accept compromises in exchange for U.N. Security Council unanimity rather than take unilateral measures in the face of Chinese or Russian opposition. Indeed, some German officials who favor more stringent sanctions assert that such measures will be ineffective without Russian and Chinese support. Merkel has been unequivocal in her opposition to a military response to the crisis. Israel views Iran as its most formidable enemy and an existential threat. While it has welcomed international efforts to curb the Iranian nuclear program, Israeli officials have called on the international community to take more assertive steps. Prime Minister Olmert has specifically urged a stronger German stance, citing Germany's moral obligation to confront Iran and concern regarding German government support of companies with significant business interests in Iran. German-Iranian trade in 2005 was valued at close to $6 billion, making Germany Iran's second largest European trading partner after Italy. During a December 2006 visit to Berlin, Olmert reportedly pressured Merkel to cease government loan guarantees to companies doing business in Iran. Taking a similar approach, the United States Treasury Department has urged Germany to stem what it claims is the illicit exploitation of German and other European banking systems by Iranian companies involved in financing terrorist activities. Since opposing the U.S. decision to invade Iraq in 2003, Germany has ruled out sending troops to Iraq and has limited its efforts to promote stability in the country to training Iraqi police and military forces in the United Arab Emirates and providing financial assistance for civilian reconstruction and debt relief within the framework of the Paris Club. While continuing to rule out a German troop deployment, German leaders, particularly within Merkel's Christian Democratic Union, indicate a growing willingness to increase German support of stabilization and reconstruction efforts, though concrete proposals have yet to be put forth. Both Merkel and Steinmeier have endorsed the U.S. Iraq Study Group report, and have expressed support for an international conference on Iraq that would include discussion of other disputes in the region, including the Israeli-Palestinian conflict. Merkel has said a "comprehensive diplomatic initiative" as envisioned in the Iraq Study Group report could make an important contribution to stabilizing the Middle East as a whole. In a December 2006 meeting, Secretary of State Condoleezza Rice reportedly reacted skeptically to Steinmeier's proposal for German assistance for such an initiative. Israeli Prime Minister Olmert has opposed the idea of including the Israeli-Palestinian conflict on the agenda of a broader international conference, saying, "the best way to advance our relations with the Arabs is by means of bilateral negotiations." The United States and Germany share several national security interests and policy priorities in the Middle East. Germany's commitment to Israel's sovereignty and security remains the strongest influence on its policy and a key factor in its cooperation with the United States. As noted above, the two countries are widely considered Israel's closest allies and both share a commitment to a two-state solution to the Israeli-Palestinian conflict and to preventing Iran from developing nuclear weapons. Moreover, both the U.S. and Germany consider terrorism, radical Islamic fundamentalism, and the proliferation of weapons of mass destruction, particularly to Iran, the primary threats to national security. At times, however, Germany tends to favor different policy approaches to realizing these objectives. In the Middle East, Germany's emphasis on diplomatic engagement and dialogue over military measures and isolation suggests a greater willingness to engage traditional adversaries of the United States and Israel such as Syria and Iran in search of diplomatic solutions. Merkel's call for a comprehensive diplomatic initiative indicates a desire to link discussion of the Israeli-Palestinian and Israel-Lebanon conflicts to discussion of security in Iraq, to which both Israel and key figures in the Bush administration have reacted skeptically. The presence of German troops off the Lebanese coast and increasing criticism regarding the strength of their mandate are fueling German calls to offer Syria concessions within the framework of a broader dialogue. Proponents of such an approach argue that cooperation with Syria is essential to achieving stability in Lebanon and cooperation from Hamas, and can only be achieved through constructive dialogue. Although Merkel has joined European leaders in advocating dialogue with Syria and Iran and increased EU engagement in the Israeli-Palestinian conflict, Germany and most EU member states remain dedicated to securing robust U.S. engagement in any peace proposal. Numerous analysts assert that Germany is unlikely to assume a leadership role in the peace process without strong U.S. backing. However, calls for EU-led initiatives from Spain, France and Italy indicate ongoing European frustration with perceived U.S. inattention to the peace process. This leads many analysts to predict that Germany will be hard-pressed to forge European and transatlantic consensus during its EU-presidency, let alone lead a revived Quartet initiative. Accordingly, German diplomats are careful to dampen expectations of Germany's ability to drive the peace process. Merkel has shown no signs of deviating from Germany's traditional support for Israel and, if anything, has displayed a tendency to be less critical of Israeli policies than her predecessor Gerhard Schröder. Nonetheless, growing criticism within the German media and Germany's political classes, and high public disapproval of Israeli action during its July 2006 incursion into Lebanon, suggest a growing willingness to challenge Israeli policies. Furthermore, the presence of German troops in the region has significantly raised Germany's interest in seeing a peaceful resolution to Israeli-Arab conflicts. These factors and Germany's commitment to a stronger EU foreign policy are taken by some as indications of increasing potential for divergence between German policy on the one hand and U.S. and Israeli policies on the other. On the other hand, German officials and politicians consistently assert that Germany's commitment to Israel and a common transatlantic approach to the Arab-Israeli peace process will continue to remain the paramount drivers of German policy in the region. Indeed, a historical perspective on Germany's relationship with Israel indicates that German leaders have consistently chosen to support Israel—whether militarily, financially or politically—despite periods of public, political or even international opposition. This support, however, has often been carried out secretively. In fact, historical accounts suggest that German success in maintaining relatively positive relations on both sides of the Arab-Israeli conflict has depended largely on its ability to avoid a high-profile leadership role in the region. Aspects of Germany's relations with Israel intersect with congressional concerns, especially with respect to policy issues in the Middle East. Recent relevant examples include congressional perspectives on Hezbollah and international assistance to the Palestinians. Members of Congress have repeatedly called on the European Union to classify Hezbollah as a terrorist organization. In March 2005, both the House and Senate passed resolutions ( H.Res. 101 and S.Res. 82 ) urging the EU to add Hezbollah to its list of terrorist organizations. In July 2006, as fighting between Hezbollah and Israel escalated, 200 Members of the House signed a letter to EU High Representative for Common Foreign and Security Policy Javier Solana reiterating their request. The EU has not designated Hezbollah as a terrorist organization because some member states view it as playing an important social and economic role in Lebanon or as a legitimate political entity represented in the Lebanese parliament and cabinet. EU and German officials indicate that such a designation is unlikely as long as EU member states are negotiating with the Lebanese government as part of the UNIFIL force currently maintaining a cease-fire in southern Lebanon. Unlike some EU member states, such as the United Kingdom, which has placed Hezbollah on its terrorist list, Germany does not maintain an independent national list of terrorist organizations, choosing instead to adopt the common EU list. Composition of the EU list is agreed on unanimously and deliberations remain secret. Although most observers assert that the French government has been the strongest European opponent to classifying Hezbollah as a terrorist organization, German officials indicate that they would likely support such a designation. Members of Congress also remain concerned about EU aid to the Palestinians. Congress has enacted a series of measures to restrict U.S. funding for the Palestinian Authority. As noted previously, Germany has been one of the largest donors to the PA, and has provided direct assistance to the Palestinian people through the EU's Temporary International Mechanism (TIM) since July 2006. After Hamas's victory in parliamentary elections in January 2006, Chancellor Merkel was one of the first European leaders to back Quartet conditions for the provision of EU aid and negotiations with Hamas. Nonetheless, some observers have voiced concern that Germany and other European states may be more willing than the United States to show flexibility in their commitment to these requirements, particularly in exchange for Hamas cooperation in a potential national unity government or in peace talks. In response to such allegations, German officials consistently cite a steadfast German commitment to the Quartet principles.
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Most observers agree that moral considerations surrounding the Holocaust continue to compel German leaders to make support for Israel a policy priority. Since 1949, successive German governments have placed this support at the forefront of their Middle East policy and today, Germany, along with the United States, is widely considered one of Israel's closest allies. Germany ranks as Israel's second largest trading partner and long-standing defense and scientific cooperation, people-to-people exchanges and cultural ties between the two countries continue to grow. On the other hand, public criticism of Israel in Germany, and particularly of its policies with regard to the Israeli-Palestinian conflict, appears to be on the rise. Since the mid-1990s, German policy toward Israel has become progressively influenced by Germany's commitment to a two-state solution to the Israeli-Palestinian conflict. Germany has been one of the single largest contributors to the Palestinian Authority (PA) and an increasingly vocal advocate for European Union (EU) engagement in the Middle East. Germany's September 2006 decision to send a naval contingent to the Lebanese coast as part of an expanded United Nations mission after Israel's July 2006 war with Hezbollah is considered to have significantly raised German interest in a resolution to the Israeli-Palestinian conflict and sparked widespread debate within Germany regarding the evolution of the German-Israeli relationship and Germany's role in the region. Stating that the Israeli-Palestinian conflict lies at the root of other challenges in the Middle East, German Chancellor Angela Merkel has announced her intention to revive international engagement in the peace process while Germany holds the EU's rotating presidency during the first half of 2007. Given Germany's long-standing support of Israel and close ties to the United States, Israeli and Bush Administration officials have generally welcomed the idea of increased German engagement in the region. For their part, German officials and politicians assert that their commitment to Israel and active U.S. involvement in the Israeli-Palestinian peace process remain the paramount drivers of German policy in the Middle East. However, most experts indicate that Germany will be hard-pressed to overcome both U.S. inattention stemming from a perceived preoccupation with Iraq, and diminished support for Israel and the United States among other EU member states, to forge a revived transatlantic approach to the peace process. Furthermore, the presence of German troops in Lebanon, growing public opposition to Israeli policies and Germany's commitment to a European approach lead others to highlight a growing potential for divergence between German policy on the one hand and Israeli and U.S. policies on the other. This report will be updated as events warrant. For related information, see CRS Report RL31956, European Views and Policies Toward the Middle East, by [author name scrubbed]; CRS Report RL33476, Israel: Background and Relations with the United States, by [author name scrubbed]; and CRS Report RL33530, Israeli-Arab Negotiations: Background, Conflicts, and U.S. Policy, by [author name scrubbed].
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T he House and Senate are scheduled to convene in joint session on January 6, 2017, for the purpose of opening the 2016 presidential election electoral votes submitted by state government officials, certifying their validity, counting them, and declaring the official result of the election for President and Vice President. This report describes the steps which precede the joint session and the procedures set in the Constitution and statute by which the House and Senate jointly certify the results of the electoral vote. It also discusses the procedures set in law governing challenges to the validity of an electoral vote, and makes reference to the procedures followed during the joint session in 2005 by which the election of George W. Bush was certified. Much of what follows in this report is based on the United States Constitution (particularly Article II, Section 1, and Amendment 12), and on a federal law enacted in 1887 (the Electoral Count Act of 1887) and amended in 1948, now codified in Title 3 of the United States Code . Reference is also made to congressional precedent and practice. Early congressional precedents on the counting of electoral votes, which may be found in Hinds' and Cannon's Precedents of the House of Representatives , are sometimes inconsistent with each other and with more recent practice. This record, coupled with disputes over the electoral count in 1877, provided the impetus for codifying procedure in the 1887 law. Precedents which pre-date the 1887 act may be primarily of historical significance, particularly to the extent that they are inconsistent with express provisions of the 1887 act, as amended. Due to the absence of specific and persuasive authority on some issues, and in the interest of brevity, this report attempts to at least identify and present some of the possible issues and questions that have been raised, even when not necessarily resolving them by reference to authoritative source material or decisions. The topics presented are arranged in the approximate order of their occurrence. The United States Constitution provides that each state "shall appoint" electors for President and Vice President in the manner directed by its state legislature (Article II, Section 1, clause 2), on the day which may be determined by Congress (Article II, Section 1, clause 3). Congress has determined in federal law that the "electors of President and Vice President shall be appointed, in each State" on Election Day, that is, the "Tuesday next after the first Monday in November" every fourth year (on November 8, 2016) (3 U.S.C. §1). Congress has, since 1887, sought to place the responsibility for resolving election contests and challenges to presidential elections in a state upon the state itself. Federal law provides that if a state, under its established statutory procedure, has made a "final determination of any controversy or contest" relative to the presidential election in the state, and if that determination is completed under this procedure at least six days before the electors are to meet to vote, such determination is to be considered "conclusive" as to which electors were appointed on election day (3 U.S.C. §5). As explained below, the electors vote on December 19, 2016, so the last day for making a final determination is December 13, 2016. The governor of each state is required by federal law "as soon as practicable" after the "final ascertainment" of the appointment of the electors, or "as soon as practicable" after the "final determination of any controversy or contest" concerning such election under its statutory procedure for election contests, to send to the Archivist of the United States by registered mail and under state seal, "a certificate of such ascertainment of the electors appointed," including the names and numbers of votes for each person for whose appointment as elector any votes were given (3 U.S.C. §6). On or before December 19, 2016, the governor of each state is required to deliver to the electors of the state six duplicate-originals of the certificate sent to the Archivist of the United States under state seal (3 U.S.C. §6). The electors of each state meet at the place designated by that state, on the first Monday after the second Wednesday in December (December 19, 2016), to cast their votes for President and Vice President of the United States (United States Constitution, Amendment 12; 3 U.S.C. §§7,8). After the electors have voted in each state, they make and sign six certificates of their votes containing two distinct lists, one being the votes for President and the other the votes for Vice President. The law instructs the electors to attach to these lists a certificate furnished to them by the governor; to seal those certificates and to certify on them that these are all of the votes for President and Vice President; and then to send one certificate to the President of the Senate, and two certificates to the secretary of state of their state (one to be held subject to the order of the President of the Senate). On the day after their meeting (December 20, 2016), the electors are to forward by registered mail two of the certificates to the Archivist of the United States (one to be held subject to the order of the President of the Senate), and one to the federal judge in the district where the electors have assembled (3 U.S.C. §§9,10,11). If no certificates of votes or lists have been received by the President of the Senate or the Archivist from electors by the fourth Wednesday in December (December 28, 2016), then the President of the Senate (or the Archivist if the President of the Senate is not available) is directed by law to request the state's secretary of state to immediately forward the certificates and lists lodged with the secretary of state, and to send a special messenger to the local federal district judge to transmit the lists that are to be lodged with that judge (3 U.S.C. §§12,13). At the first meeting of Congress, set for January 3, 2017, the Archivist of the United States is required to transmit to the two houses every certificate received from the governors of the states (3 U.S.C. §6). The date for counting the electoral votes is fixed by law as January 6 following each presidential election (3 U.S.C. §15), unless the date is changed by law. For example, when January 6, 2013, was to fall on a Sunday, the date was changed to January 4, 2013, when the President signed H.J.Res. 122 on December 28, 2012. The electoral votes are counted at a joint session of the Senate and the House of Representatives, meeting in the House chamber. (The United States Code refers to the event as a joint meeting; it also has been characterized in the Congressional Record as a joint convention.) The joint session convenes at 1:00 p.m. on that day. The President of the Senate is the presiding officer (3 U.S.C. §15). The President pro tempore of the Senate has presided in the absence of the President of the Senate. Under 3 U.S.C. §15, the President of the Senate opens and presents the certificates of the electoral votes of the states and the District of Columbia in alphabetical order. (As discussed above, under 3 U.S.C. §§9-10, the electors in each state, having voted, are to sign, seal, and certify the certificates. Under §11 of the same title, they are to mail one such certificate to the President of the Senate and mail two others to the Archivist of the United States.) The certificate, or an equivalent document, from each state and the District of Columbia then is to be read by tellers previously appointed from among the membership of the House and Senate. Before the joint session convenes, each chamber appoints two of its Members to be the tellers (the appointments are made by the presiding officers of the respective chambers, based on recommendations made to them by the leaders of the two major parties). The appointed tellers are often members of the House Administration and Senate Rules and Administration Committees, the panels in each chamber having jurisdiction over matters relating to the election of the President and Vice President. In 2013, the House tellers were Members who would serve as chair and ranking member of the House Administration Committee that Congress. The Senate tellers were the chair and ranking member of the Senate Rules and Administration Committee. After the votes of each state and the District of Columbia have been read, the tellers record and count them. When this process has been completed, the presiding officer announces whether any candidates have received the required majority votes for President and Vice President. If so, that "announcement shall be deemed a sufficient declaration of the persons, if any, elected President and Vice President of the United States" (3 U.S.C. §15). The joint session may agree to expedite this process when no controversy is anticipated. In the 1997 joint meeting, for example, the Vice President announced: "Under well-established precedents, unless a motion shall be made in any case, the reading of the formal portions of the certificates will be dispensed with. After ascertainment has been had that the certificates are authentic and correct in form, the tellers will count and make a list of the votes cast by the electors of the several States." The Vice President proceeded to open the certificates in alphabetical order and passed to the tellers the certificates showing the votes of the electors in each state and the District of Columbia. In each case, the tellers then read, counted, and announced the result for each state and the District of Columbia. According to the Congressional Record , the joint session consumed precisely 24 minutes. A similar process was followed in 2013, when, according to the Congressional Record , the joint session consumed 23 minutes. The 12 th Amendment requires the winning candidate to receive "a majority of the whole number of Electors appointed." That number normally becomes the same as a majority of the number of electoral votes counted by the tellers. One exception that has been identified occurred in 1873 when the Vice President announced that President Ulysses S. Grant had received "a majority of the whole number of electoral votes," even though he also indicated that not all of those electoral votes had been counted. In that case, the two houses, under procedures similar to those described below, had decided not to count the electoral votes from Arkansas and Louisiana. Nonetheless, the number of electoral votes allocated to Arkansas and Louisiana evidently were included in "the whole number of electoral votes" for purposes of determining whether President Grant had received the majority required for election. It should be noted that President Grant was victorious by whichever standard was used. He received 286 electoral votes out of the 352 electoral votes counted, or out of the potential 364 electoral votes (if the contested votes from Arkansas and Louisiana were included in the whole number). In 1865, by contrast, only two of the three Nevada electors cast their electoral votes. In the joint session, only two Nevada votes were counted and included in the "whole number of electoral votes." Similar instances of votes "not given" by electors not being included in the "whole number" of electors reported, thus reducing the so-called denominator and the "majority" needed to elect, occurred in 1809, 1813, and 1817. We are not aware of instances in which this issue has become a source of contention or was determinative of which candidate was elected. If electoral votes from a state or the District of Columbia were not available to be counted during the joint session (and if the question were raised in a timely fashion), the joint session might be called upon to address the effect of this situation on what number of votes would constitute the "majority of the whole number of Electors appointed." Title 3 of the U.S. Code includes provisions governing the conduct of the joint session. Section 16 of Title 3 is intended to ensure that the joint session conducts and completes its business expeditiously. As discussed below, §18 prohibits debate as well as the offering and consideration of almost all questions. Section 16 provides that the joint session is to continue until the count is completed and the result announced, and limits recesses if the process of counting the votes and announcing the results becomes time-consuming. The seating of Senators, Representatives, and officials (the Clerk of the House, the Secretary of the Senate, the Members designated as tellers, and other administrative officers of the House and Senate) is also governed by §16. Under §18, the President of the Senate is to preserve order. This authority may be interpreted as encompassing the authority to decide questions of order, but the statute is not explicit on this point. Nevertheless, on several occasions during the joint session of January 6, 2001, Vice President Albert A. Gore, Jr., presiding over the joint session, ruled on the admissibility of objections to the receipt of electoral votes from the state of Florida, and also advised House and Senate Members that debate was not permitted and that a unanimous consent request for debate on the issue could not be entertained. He further stated that even incidental parliamentary motions, including those that only affect the actions of the House, needed the written endorsement of at least one Representative and one Senator in order to be valid. Vice President Gore also declined to entertain a point of order that no quorum was present because the point of order had not been endorsed by one Member from each chamber. The statute provides that no question is to be "put by the presiding officer except to either House on a motion to withdraw." (The statute provides for the Senate to withdraw automatically under circumstances discussed below. The statute, however, makes no other explicit reference to a motion to withdraw.) Provisions in 3 U.S.C. §15 include a procedure for making and acting on objections to the counting of one or more of the electoral votes from a state or the District of Columbia. 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. The objection "shall state clearly and concisely, and without argument, the ground thereof.... " During the joint session of January 6, 2001, the presiding officer intervened on several occasions to halt attempts to make speeches under the guise of offering an objection. When an objection, properly made in writing and endorsed by at least one Senator and one Representative, is received, each house is to meet and consider it separately. The statute states that "[n]o votes or papers from any other State shall be acted upon until the objections previously made to the votes or papers from any State shall have been finally disposed of." However, in 1873, before enactment of the law now in force, the joint session agreed, without objection and for reasons of convenience, to entertain objections with regard to two or more states before the houses met separately on any of them. The joint session does not act on any objections that are made. Instead, the joint session is suspended while each house meets separately to debate the objection and vote whether, based on the objection, to count the vote or votes in question. Both houses must vote separately to agree to the objection. Otherwise, the objection fails and the vote or votes are counted. (3 U.S.C. §15, provides that "the two Houses concurrently may reject the vote or votes.... ") These procedures have been invoked twice since enactment of the 1887 law. The first was an instance of what has been called the "faithless elector" problem. In 1969, a Representative (James O'Hara of Michigan) and a Senator (Edmund S. Muskie of Maine) objected in writing to counting the vote of an elector from North Carolina who had been expected to cast his vote for Richard Nixon and Spiro Agnew, but who instead cast his vote for George Wallace and Curtis LeMay. Both chambers met and voted separately to reject the objection, so when the joint session resumed, the challenged electoral vote was counted as cast. In that instance, the elector whose vote was challenged was from a state that did not by law "bind" its electors to vote only for the candidates to whom they were pledged. The instance of a "faithless" elector from a state that does, in fact, bind the elector by law to vote for the candidate to whom listed or pledged has not yet been expressly addressed by Congress or the courts. The second instance was related to reported voting irregularities in Ohio. In 2005, a Representative (Stephanie Tubbs Jones of Ohio) and a Senator (Barbara Boxer of California) objected in writing to the Ohio electoral votes. The chambers withdrew from the joint session to consider the objection, and the House and Senate each rejected the objection. When the House and Senate resumed the joint session, the electoral votes were counted as cast. 3 U.S.C. §17 lays out procedures for each house to follow in debating and voting on an objection. These procedures limit debate on the objection to not more than two hours, during which each Member may speak only once, and for not more than five minutes. Then "it shall be the duty of the presiding officer of each House to put the main question without further debate." Under this provision, the presiding officer in each house held in 1969 that a motion to table the objection was not in order. In the House, the Speaker announced both in 1969 and 2005 that he would attempt to recognize supporters of the objection and opponents in an alternating fashion for the duration of the two-hour period. In one instance in 1969, the Speaker inquired whether a Member supported or opposed the challenge before he agreed to recognize him to speak. Members can yield to each other during debate as they can during five-minute debate in the Committee of the Whole, and many chose to do so in 2005. The Speaker also entertained unanimous consent requests to insert material in the Congressional Record. In 1969 the Senate agreed, by unanimous consent, to a different way in which the time for debate was to be controlled and allocated, granting one hour each to the majority and minority leaders and authorizing them to yield not more than five minutes to any Senator seeking recognition to speak. The five-minute debate prescribed in the statute was followed in 2005, however, and the Presiding Officer entertained requests to insert statements into the Congressional Record. The general grounds for an objection to the counting of an electoral vote or votes would appear from the federal statute and from historical sources to be that such vote was not "regularly given" by an elector, and/or that the elector was not "lawfully certified" according to state statutory procedures. The statutory provision first provides in the negative that "no electoral vote ... regularly given by electors whose appointment has been lawfully certified ... from which but one return has been received shall be rejected" (3 U.S.C. §15), and then reiterates for clarity that both houses concurrently may reject a vote when not "so regularly given" by electors "so certified" (3 U.S.C. §15). It should be noted that the word "lawfully" was expressly inserted by the House in the Senate legislation (S. 9, 49 th Congress) before the word "certified." Such addition arguably provides an indication that Congress thought it might, as grounds for an objection, question and look into the lawfulness of the certification under state law. The objection that votes were not "regularly given" may, in practice, subsume the objection that the elector was not "lawfully certified," for a vote given by one not "lawfully certified" may arguably be other than "regularly given." Nevertheless, the two objections are not necessarily the same. In the case of the so-called "faithless elector" in 1969, described above, the elector was apparently "lawfully certified" by the state, but the objection raised was that the vote was not "regularly given" by such elector. In the above-described 2005 case, the objection was also based on the grounds that the electoral votes "were not, under all of the known circumstances, regularly given." Influenced by its historical experience prior to 1887, Congress was particularly concerned in the statute of 1887 with the case of two lists of electors and votes being presented to Congress from the same state. Three different contingencies appear to be provided for in the statute for two lists being presented. In the first instance, two lists would be proffered, but the assumption presented in the law is that only one list would be from electors who were determined to be appointed pursuant to the state election contest statute (as provided for in 3 U.S.C. §5), and that in such case, only those electors should be counted. In the second case, when two lists were proffered as being from two different state authorities who arguably made determinations provided for under 3 U.S.C. §5 (a state statutory election contest determined at least six days prior to December 18, the winner of the state presidential election), the question of which state authority is "the lawful tribunal of such State" to make the decision (and thus the acceptance of those electors' votes) shall be decided only upon the concurrent agreement of both houses "supported by the decision of such State so authorized by its law.... " In the third instance, if there is no determination by a state authority of the question of which slate was lawfully appointed, then the two chambers must agree concurrently to accept the votes of one set of electors; but the two chambers may also concurrently agree not to accept the votes of electors from that state. When the two houses disagree, then the statute states that the votes of the electors whose appointment was certified by the governor of the state shall be counted. It is not precisely clear whether this provision for resolving cases in which the House and Senate vote differently applies only to the last two situations (that is, when either two determinations have allegedly been made under state contest law and procedure, or no such determination has been made); or, instead, also when only one such determination is present. Although this section of the statute is not free from doubt, its structure and its relationship to §5 (and to give effect to §5) seem to indicate that when there is only one determination by the state made in a timely fashion under the state's election contest law and procedures (even when there are two or more lists or slates of electors presented before Congress), then Congress shall accept that state determination (3 U.S.C. §15) as "conclusive" (3 U.S.C. §5). By this interpretation, the language providing that if the House and Senate split, the question shall be decided in favor of the choice certified by the governor, may not have been intended to be applicable to cases covered by the first clause in the statute in which only one slate or group has been determined, in a timely fashion, to be the electors through the state's procedures for election contests and controversies. Hinds' Precedents of the House of Representatives suggests that when a state has settled the matter "in accordance with a law of that state six days before the time for the meeting of electors," then a controversy over the appointment of electors in that state "shall not be a cause of question in the counting of the electoral vote by Congress." It should be noted that Hinds' cites no precedent or ruling, but merely paraphrases the statute, and it seems likely that this issue of the lawfulness of the determination and certification by a state could be raised and dealt with in the joint session. Precedent subsequent to the statute's original enactment in 1887 has been sparse. There appears only to have been one example, in 1961, when the governor of the state of Hawaii first certified the electors of Vice President Richard M. Nixon as having been appointed, and then, due to a subsequent recount which determined that Senator John F. Kennedy had won the Hawaii vote, certified Senator Kennedy as the winner. Both slates of electors had met on the prescribed day in December, cast their votes for President and Vice President, and transmitted them according to the federal statute. This was the case even though the recount was apparently not completed until a later date, that is, not until December 28. The presiding officer, that is, the President of the Senate, Vice President Nixon, suggested "without the intent of establishing a precedent" that the latter and more recent certification of Senator Kennedy be accepted so as "not to delay the further count of electoral votes." This was agreed to by unanimous consent. The timetable for the certification, transmission, review, and approval of the electoral votes was established by Congress to avoid a repetition of the extraordinary delay incident to the electoral vote controversy surrounding the 1876 presidential election. In the event that no candidate has received a majority of the electoral vote for President, the election is ultimately to be decided by the House of Representatives in which the names of the three candidates receiving the most electoral votes for President are considered by the House, with each state having one vote. In the event that no candidate receives a majority of the electoral votes for Vice President, the names of the two candidates receiving the highest number of electoral votes for that post are submitted to the Senate, which elects the Vice President by majority vote of the Senators. The development and current practices for election of the President and Vice President by Congress specified in the Constitution and law are discussed in detail in CRS Report RL32695, Election of the President and Vice President by Congress: Contingent Election , by [author name scrubbed].
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The Constitution and federal law establish a detailed timetable following the presidential election during which time the members of the electoral college convene in the 50 state capitals and in the District of Columbia, cast their votes for President and Vice President, and submit their votes through state officials to both houses of Congress. The electoral votes are scheduled to be opened before a joint session of Congress on January 6, 2017. Federal law specifies the procedures which are to be followed at this session and provides procedures for challenges to the validity of an electoral vote. This report describes the steps in the process and precedents set in prior presidential elections governing the actions of the House and Senate in certifying the electoral vote and in responding to challenges of the validity of one or more electoral votes from one or more states. This report has been revised, and will be updated on a periodic basis to provide the dates for the relevant joint session of Congress, and to reflect any new, relevant precedents or practices.
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The recent increase in the number of unaccompanied alien children (UACs) apprehended at the border between Mexico and the United States has raised questions about the role that gang-related violence in Central America may play in determining eligibility for refugee status and asylum. Gang activity is wide-spread in El Salvador, Guatemala, and Honduras, and attempts by these governments to control such activity have been seen as ineffective, at best, or as violating the civil rights of persons perceived as gang members or associates, at worst. The Office of the United Nations High Commissioner for Refugees (UNHCR) repeatedly noted this gang-related violence in its 2014 report, Children on the Run: Unaccompanied Children Leaving Central America and Mexico and the Need for International Protection . Subsequently, in discussing the "surge" in the number of UACs arriving at the U.S.-Mexican border in FY2014, the UNHRC reiterated that 58% of these children cite "violence" in their home countries as "at least one key reason" for leaving. Refugee status and asylum are two forms of discretionary relief that could enable UACs to enter or remain in the United States, and the Immigration and Nationality Act (INA) relies upon the same definition in determining eligibility for both. In both cases, to be eligible, aliens must prove that they have experienced past persecution, or have a well-founded fear of future persecution, on account of race, religion, nationality, political opinion, or membership in a particular social group. However, refugee status may only be granted to aliens outside the United States, while asylum may only be granted to aliens arriving at a port of entry or the U.S. border, or within the United States. Applicants for refugee status are also barred from appealing denials of their applications, while applicants for asylum are not. Thus, an equivalent to the extensive body of case law construing and applying the INA's definition of refugee in the context of asylum is lacking in the context of refugee status. Instead, the meaning of refugee for purposes of refugee status is typically construed in light of asylum cases, and asylum is the focus of this report. The report provides an overview of the basis for asylum in U.S. law. It also discusses how key elements of the INA's definition of refugee have been construed and applied in gang-related asylum cases. The report briefly notes, in relevant places, related forms of relief from removal, such as withholding of removal under Section 241 of the INA or the Convention against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment, but does not provide a comprehensive treatment of these topics. It is also important to note that many potentially relevant decisions—namely, those by asylum officers within U.S. Citizenship and Immigration Services (USCIS) and immigration judges within the Executive Office for Immigration Review (EOIR) at the Department of Justice (DOJ)—are not published. There are reasons to believe that USCIS and EOIR may be more receptive to gang-related asylum claims than the decisions by the Board of Immigration Appeals (BIA) and the federal courts of appeals discussed here. However, USCIS and immigration judge decisions are not publicly available in the same way that published BIA decisions and federal court decisions are. The INA's current protections for refugees and asylees are grounded in the 1951 Convention Relating to the Status of Refugees and the 1967 Protocol Relating to the Status of Refugees. The Convention generally defined a refugee as any person who [a]s a result of events occurring before 1 January 1951 and owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group, or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country, although persons who had "committed a crime against peace, a war crime, or a crime against humanity" were expressly excluded from this definition. Most notably, the Convention barred nations which are parties to it from returning refugees to their home country (or another country) where they feared persecution. It also obligated these nations to grant refugees freedom of religion and movement, the right to work and public education, and access to identity papers and travel documents, among other things. Conversely, it required refugees to respect the laws and regulations of their country of asylum. The United States was involved in drafting the Convention, but did not sign on as a party to it. However, it did sign on as a party to the Protocol, which amended the Convention by removing the temporal restrictions (i.e., "events occurring before 1 January 1951") from its definition of refugee . The Refugee Act of 1980 ( P.L. 96-212 ) is widely recognized as having been enacted to bring U.S. domestic law into conformity with the United States' commitments under the Protocol. Among other things, the Refugee Act amended Section 101(a)(42) of the INA to define refugee in largely the same terms used by the Convention and Protocol: The term "refugee" means ... any person who is outside any country of such person's nationality or, in the case of a person having no nationality, is outside any country in which such person last habitually resided, and who is unable or unwilling to return to, and is unable or unwilling to avail himself or herself of the protection of, that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. The Refugee Act also added the current Sections 207, 208, and 209 to the INA, which, respectively, address refugee admissions, the granting of asylum, and the adjustment of refugees' and asylees' status to that of lawfully permanent resident aliens (LPRs). In addition, the Refugee Act amended then-Section 243 of the INA to generally bar the return of aliens to countries where the "alien's life or freedom would be threatened ... on account of race, religion, nationality, membership in a particular social group, or political opinion." Subsequently relocated to Section 241 of the INA, this prohibition forms the basis for what is referred to as withholding of removal . Withholding of removal under Section 241 of the INA represents the U.S.'s primary obligation under the Convention and Protocol. That is, as a party to the Protocol, the United States is barred from removing aliens, including aliens arriving at the U.S. border, to a county where he or she would be persecuted. The United States is not required, by the Protocol or otherwise, to admit refugees to the United States, grant asylum to persons in the United States, or permit refugees or asylees to adjust to LPR status or obtain citizenship. To the contrary, the INA expressly notes that the granting of asylum is discretionary, and courts have upheld its denial even when an alien fulfills the requirements of the statutory definition of refugee . It is also important to note that, even though the United States signed on as a party to the Protocol, and the INA's definition of refugee generally corresponds to that in the Convention and Protocol, it is U.S. domestic law—not international law—that governs U.S. obligations as to individual aliens. Relatedly, the same terms (e.g., persecution , particular social group ) may be construed differently when used in the Convention and Protocol than when used in the INA. Aliens seeking asylum in the United States have the burden of establishing, by a preponderance of the evidence, that they are "refugees" under the INA's definition of this term. This means showing that they (1) have suffered persecution, or (2) have a well-founded fear of persecution (3) on account of (4) a protected ground (i.e., race, religion, nationality, political opinion, or membership in a particular social group). However, the meaning of certain of these terms—such as persecution and particular social group —is not established by Convention or Protocol, or by the INA and its implementing regulations. Instead, their meaning has been determined by the Board of Immigration Appeals (BIA)—the highest administrative tribunal for interpreting and applying immigration law—through case-by-case adjudication, with the federal courts generally deferring to the BIA's interpretation so long as it is based on a "permissible construction" of the INA. In other cases, such as with the meaning of well-founded fear , the executive branch has interpreted particular language within the INA's definition of refugee through the promulgation of regulations. These regulatory interpretations are also afforded deference by the courts insofar as they are based on "permissible" constructions of the statutory language. In yet other cases, Congress has enacted legislation that affects how particular terms within the refugee definition are construed. Perhaps the most notable example of this is the REAL ID Act of 2005 ( P.L. 109-13 ), which amended the INA to require that a protected ground (e.g., race, religion, nationality) "was or will be at least one central reason" for the persecution. The application of the INA's definition of refugee to aliens seeking asylum in the United States due, in whole or in part, to gang-related violence is, thus, complicated because it involves consideration of an extensive body of statutes, regulations, and administrative and judicial decisions. In addition, the federal courts of appeals can sometimes have differing opinions on whether particular interpretations advanced by the BIA are "permissible" and, thus, entitled to deference. Such differences of opinion can result in aliens' applications for asylum faring differently depending upon the territorial jurisdiction in which they are made (e.g., some courts are willing to consider former gang members as a particular social group, while others are not). "Persecution"—or a well-founded fear thereof, discussed below (see "Well-Founded Fear" )—underlies international and domestic protections for refugees and asylees. However, neither the Convention and Protocol nor the INA defines persecution . Instead, what have been described as the "working parameters of this term" for purposes of U.S. law were established by the BIA in its 1983 decision in Matter of Laipenieks . There, the BIA characterized persecution as [t]he infliction of suffering or harm, under government sanction, upon persons who differ in a way regarded as offensive (e.g., race, religion, political opinion, etc.), in a manner condemned by civilized governments. The harm or suffering need not be physical, but may take other forms, such as the deliberate imposition of severe economic disadvantage or the deprivation of liberty, food, housing, employment or other essentials of life. Subsequent decisions built upon this formulation by distinguishing harm that rises to the level of persecution (i.e., harm inflicted "in a manner condemned by civilized governments") from harm that does not, and by clarifying when the actions of private persons can be said to be "under government sanction." In distinguishing between persecution and other types of harm, the BIA and the courts have contrasted the "extreme" or "serious" nature of the harm that constitutes persecution with harassment, discrimination, and other "lesser" harms that do not rise to the level of persecution. For example, in its 2013 decision in Martinez-Beltrand v. Attorney General , the U.S. Court of Appeals for the Third Circuit upheld the denial of asylum to an alien who claimed to have been persecuted by gang members in Honduras on the grounds that the alien had suffered "harassment" that "did not rise to the level of persecution." The alien alleged that she had been persecuted in the past by gang members coming to the funeral home her family operated, and asking her to give them money and join the gang. Thereafter, gang members allegedly called the funeral home periodically, asking for money. However, the Third Circuit likened these harms to "minor assaults that do not require medical care" or "unfulfilled threats," both of which are generally seen as insufficient to show persecution. It also viewed the gang's actions as "attempt[s] to extort money" and, thus, "ordinary criminal activity" of the sort that "does not rise to the level of persecution necessary to establish eligibility for asylum." The U.S. Court of Appeals for the Tenth Circuit relied upon similar logic in its 2013 decision in Cosenza-Cruz v. Holder , where the extortion attempts and threats experienced by two brothers in Guatemala were seen as ordinary criminal activity, not persecution. The Tenth Circuit also emphasized that the alien petitioners were not "targeted" or singled out for harm on a protected ground, a factor that some courts, in particular, note in their discussions of persecution. However, the link between the harm suffered and any protected grounds is arguably better considered in conjunction with the "nexus" requirement in the refugee definition (see "On Account of" ), and USCIS has explicitly instructed asylum officers to "separate the analysis of motivation from the evaluation of whether the harm is persecution, in order to make the basis of their decision as clear as possible." The harm suffered or feared must also have "some connection to governmental action or inaction." In cases where the government is not directly responsible for the harm, this means showing that the government knowingly tolerates the harm inflicted by private parties, or is unwilling or unable to control the actions of these parties. If such toleration, or unwillingness or inability to control, is found, the BIA and the federal courts may recognize harm arising to the level of persecution. However, the BIA and the courts are sometimes reluctant to find an inability or unwillingness to control the actions of private persons based solely on the fact that the government's efforts have been ineffective. For example, in its 2005 decision in Romero-Rodriguez v. U.S. Attorney General , the U.S. Court of Appeals for the Eleventh Circuit upheld the denial of asylum to two brothers who fled alleged gang recruitment in Honduras. In so doing, the court relied, in part, on the immigration judge's finding that the "Honduran government was attempting to control the lawlessness that exists in that country." The U.S. Court of Appeals for the Seventh Circuit relied upon similar logic in its 2004 decision in Lleshanaku v. Ashcroft . There, the court upheld the denial of asylum to a woman who claimed to have been trailed and threatened by gang members in Albania on the grounds that she alleged "criminal racketeering [of a type] that almost all governments have trouble controlling, as opposed to the type of government conduct on which most grants of asylum are based." Both elements within the standard construction of persecution —i.e., the seriousness of the harm and government action or inaction—can be difficult to show in gang-related cases, as the foregoing examples illustrate. Indeed, as one court noted, the very pervasiveness of gang activity within a society can make a finding of persecution less likely, insofar as gang actions can be characterized as "widespread violence" or "ordinary criminal activity." A showing of past persecution gives rise to a rebuttable presumption that the alien has a well-founded fear of future persecution. Otherwise, absent a showing of past persecution, the alien must show that he or she has a "well-founded fear" of future persecution in order to be eligible for asylum in the United States. Federal regulations further provide that applicants for asylum have a well-founded fear of persecution if (A) [t]he applicant has a fear of persecution in his or her country of nationality or, if stateless, in his or her country of last habitual residence, on account of race, religion, nationality, membership in a particular social group, or political opinion; (B) [t]here is a reasonable possibility of suffering such persecution if he or she were to return to that country; and (C) [h]e or she is unable or unwilling to return to, or avail himself or herself of the protection of, that country because of such fear. As these regulations suggest, the test for whether aliens have a well-founded fear of persecution is partly subjective in that it focuses upon whether the alien actually "has a fear of persecution." The subjective element is satisfied if the applicant's fear of persecution is genuine. A genuine fear of persecution must be the applicant's "primary motive" in seeking asylum, but it need not be the only motive. On the other hand, the test for a well-founded fear of persecution is also objective in that there must be a "reasonable possibility" that the alien would suffer persecution if returned to his or her home country. The regulations do not define what is meant by a reasonable possibility of persecution. However, the Supreme Court helped establish the meaning of this term with its 1987 decision in INS v. Cardoza-Fonseca , which found that "[o]ne can ... have a well-founded fear of an event happening when there is less than a 50% chance of the occurrence taking place." Following the Cardoza-Fonseca decision, the BIA emphasized that determinations as to whether a fear is well-founded ultimately rest not on the statistical probability of persecution occurring, but on whether a reasonable person in the alien's position would fear persecution. Federal courts have generally deferred to the BIA on the meaning of reasonable possibility , with some courts opining that a reasonable possibility of persecution can exist where there is as little as a one-in-ten chance of the feared harm occurring. A well-founded fear of persecution has been found to be lacking in some gang-related asylum cases, often in cases where past harms are not viewed as persecution. The genuineness of the alien's fear is often not in doubt. However, such fear can be seen as unreasonable in light of the circumstances. The refugee definition's proviso that the persecution be "on account of" a protected ground has been construed to require that there be a "nexus" between the harm that the alien has incurred or fears and the alien's race, religion, nationality, political opinion, or membership in a particular social group. To establish the requisite nexus, the alien must provide some evidence (direct or circumstantial) that the persecutor is motivated to persecute the victim because the victim possesses—or is believed to possess—the protected characteristic. The alien need not prove the actual, exact reason for the persecution. Rather, he or she need only establish facts on which a reasonable person would fear that the danger "arises on account of ... race, religion, nationality, membership in a particular social group, or political opinion." However, as a result of amendments made to Section 208 of the INA by the REAL ID Act of 2005 ( P.L. 109-13 ), the alien must also show his or her race, religion, nationality, political opinion, or membership in a particular social group "was or will be at least one central reason" for his or her persecution. A central reason has been construed to mean a reason that is more than "incidental, tangential, superficial, or subordinate to another reason for harm." A central reason need not be the only reason, or even a "primary" reason, though. So-called "mixed motive" claims—where the persecutor is motivated by the alien's possession of a protected characteristic as well as other factors (e.g., greed, revenge)—are still possible post-REAL ID Act. Lack of the requisite nexus between the alleged persecution and a protected ground is another reason that gang-related asylum claims may fail. For example, in its 2011 decision in Bueso-Avila v. Holder , the Seventh Circuit upheld the executive branch's denial of asylum to an alien who claimed to have been persecuted by gangs in Honduras because of his Evangelical Christian religion. The Seventh Circuit did so, in part, because it viewed the executive branch's conclusion that the gang was either unaware of or unconcerned about the alien's religious beliefs as "legitimate" in light of "all the evidence" presented by the alien. The U.S. Court of Appeals for the First Circuit relied upon similar logic in its 2012 decision in Carreanza-Vargas v. Holder . There, in upholding the executive branch's denial of asylum to alien who claimed to fear persecution by gangs in El Salvador based on his membership in the particular social group of "former police and army members who fear harm by gangs," the First Circuit noted that the evidence supported the conclusion that the gangs were motivated by economic gain, not the alien's membership in any particular social group. As these examples suggest, conventional understandings of gangs' motives can shape the outcomes in these cases, with courts upholding denials of asylum where the evidence can be seen as demonstrating "typical" gang activities (e.g., robbery, extortion, recruitment of new members). The refugee definition encompasses five so-called protected grounds: race, religion, nationality, political opinion, and membership in a particular social group. Gang-related asylum claims have been made on various grounds, including religion and political opinion. The most common ground, however, has arguably been membership in a particular social group, a construct which has been described as "an especially contested and problematic area in asylum law." Particular social group is the ground upon which all asylum claims not based on race, religion, nationality, or political opinion must be made. However, the executive branch and the federal courts have been reluctant to treat "particular social group" as a "catch-all," permitting anyone who experiences harm anywhere in the world to obtain refugee status or asylum in the United States. This reluctance would appear to underlie, in part, the evolution in the executive branch's construction of the term particular social group between 1985 and the present, a development which some commentators have suggested underlies the failure of many gang-based asylum claims. Because there is no statutory or regulatory definition of particular social group , the BIA has established the meaning of this term through case-by-case adjudication, beginning with its 1985 decision in Matter of Acosta . The alien in Acosta claimed to fear persecution in El Salvador because he co-founded and actively participated in a cooperative organization of taxi drivers—known as COTAXI—that refused to participate in work stoppages allegedly requested by anti-government guerillas. However, the immigration judge denied the alien asylum because he found the alien's testimony insufficient to prove the alleged harm. The BIA affirmed this denial on other grounds, including on the grounds that the particular social group proposed by the alien—"COTAXI drivers and persons engaged in the transportation industry of El Salvador"—was not cognizable under the INA. The BIA reached this conclusion by resorting to the doctrine of eiusdem generis in construing the meaning of the words "particular social group." In keeping with the doctrine's holding that "general words used in an enumeration with specific words should be construed in a manner consistent with the specific words," the BIA considered "particular social group" in conjunction with "race," "religion," "nationality," and "political opinion," and noted that each of the other grounds "describes persecution aimed at an immutable characteristic: a characteristic that either is beyond the power of an individual to change or is so fundamental to individual identity or conscience that it ought not be required to be changed." Thus, it concluded, "particular social group" is to be construed as describing a "group of persons all of whom share a common, immutable characteristic." According to the BIA, this characteristic can be "innate," such as "sex, color, or kinship ties," or based on "shared past experiences," such as former military leadership or land ownership. However, it cannot be based on something that is "not immutable," and the BIA viewed driving a taxi or refusing to participate in work stoppages as not immutable. The federal courts generally deferred to the BIA's construction of particular social group in Acosta , finding that it constituted a "reasonable" and "permissible" interpretation of an ambiguous statutory term. Similarly, the UNHCR incorporated Acosta 's construction of this term into its own definition of particular social group , suggesting that it viewed the BIA's interpretation as consistent with the Convention and Protocol. Despite this deference, the BIA revisited and reformulated the meaning of particular social group in its 2006 decision in Matter of C-A- . There, the BIA rejected aliens' challenge to the denial of their asylum application after finding that "noncriminal informants"—specifically, informants against the Cali drug cartel in Columbia—do not constitute a particular social group for purposes of the INA. In so finding, the BIA retained Acosta 's requirement that members of a particular social group share a common, immutable characteristic, but emphasized the further requirement that the group be "recognizable" as such (i.e., possess "social visibility"). The BIA did so, in part, because it viewed the specific social groups based on innate characteristics, recognized pursuant to previous applications of the standard articulated in Acosta , as "generally easily recognizable and understood by others to constitute social groups." In contrast, it viewed the proposed social group of noncriminal informants as different because the very nature of the conduct at issue is such that it is generally out of the public view. In the normal course of events, an informant against the Cali cartel intends to remain unknown and undiscovered. Recognizability or visibility is limited to those informants who are discovered because they appear as witnesses or otherwise come to the attention of cartel members. The BIA also noted that the proposed grouping of noncriminal informants was "too loosely defined to meet the requirement of particularity," since it could include persons who "passed along information concerning any of the numerous guerrilla factions or narco-trafficking cartels currently active in Colombia to the Government or to a competing faction or cartel." Two years later, in its 2008 decision in Matter of S-E-G- , the BIA applied the social visibility and particularity requirements to three siblings who had fled alleged persecution by the MS-13 gang in El Salvador. There, in affirming the immigration judge's denial of asylum, the BIA found that the siblings' proposed group of "Salvadoran youth who have been subjected to recruitment efforts by MS-13 and who have rejected or resisted membership based on their own personal, moral, and religious opposition to the gang's values and activities" lacked both social visibility and particularity. As to social visibility, the BIA emphasized that the purported group was not recognized as a discrete class of persons by Salvadoran society. Similarly, as to particularity, the BIA noted that the group lacked well-defined boundaries, such that it could be readily determined who fell within, or outside of, the group. Further, the BIA noted that the youths' attempt to limit their proposed group by claiming it was comprised of male children who "lack stable families and meaningful adult protection" and "who are from middle and low income classes" relied upon "amorphous" characteristics, as "people's ideas of what those terms mean can vary." The BIA's decisions in Matter of C-A- and Matter of S-E-G- prompted a somewhat different response than its earlier decision in Matter of Acosta . While most federal courts of appeals deferred to the BIA's revised interpretation of particular social group , two did not. First, the Seventh Circuit rejected the "social visibility" requirement in its 2009 decision in Gatimi v. Holder , in part, on the grounds that it was inconsistent with the BIA's prior decisions, and the BIA did not articulate a principled reason for the change. The Seventh Circuit also indicated that it viewed the BIA's discussion of social visibility as referring to literal or ocular visibility, an interpretation that has elsewhere been suggested to constitute an impermissible construction of the INA. Subsequently, the Third Circuit relied on similar reasoning as to social visibility—and also rejected the particularity requirement—in its 2011 decision in Valdiviezo-Galdamez v. Attorney General . The Third Circuit did so, in part, because it viewed particularity as "little more than a reworked definition" of the "discredited requirement of 'social visability.'" The UNHCR also objected to the BIA's construction of particular social group in Matter of C-A- and its application to gang-related asylum claims in Matter of S-E-G -. Among other things, the UNHCR filed an amicus brief with the BIA in Matter of Thomas in 2007, calling for the BIA to eliminate the "social visibility" and "particularity" requirements and return to the "common, immutable characteristic" standard of Acosta . The UNHCR also petitioned Attorney General Holder in 2009 to certify Matter of S-E-G- to himself for review. In both cases, the UNHCR asserted that the executive branch's construction of particular social group was inconsistent with UNHCR guidance and U.S. obligations under international law. Subsequently, the BIA revisited and reformulated the construction of particular social group once more in its 2014 decisions in Matter of W-G-R- and Matter of M-E-V-G- . In these two decisions, issued on the same day, the BIA retained the requirements that particular social groups possess common, immutable characteristics and particularity, but renamed the former "social visibility" requirement as "social distinction." In so doing, the BIA emphasized that it viewed social distinction as referr[ing] to recognition by society, taking as its basis the plain language of the Act—in this case, the word 'social.' To be socially distinct, a group need not be seen by society; it must instead be perceived as a group by society. Members of the group may be visibly recognizable, but society can also consider persons to be a group without being able to identify the members by sight. The BIA also emphasized that it viewed the requirement of social distinction as consistent with prior BIA precedents recognizing "young tribal women who are opposed to female genital mutilation," "homosexuals in Cuba," and "former national police members," among others, as particular social groups. Further, while acknowledging that its approach differs from UNHCR guidelines, the BIA noted that its approach is similar to that adopted by the European Union, which "also declines to follow the ... definition set forth by the UNHCR." It remains to be seen whether federal courts of appeals will defer to the BIA's "social visibility" requirement in determining what constitutes a particular social group for purposes of refugee status and asylum. However, the evolution in the construction of the term particular social group arguably helps explain the limited success of gang-related asylum claims to date. Especially since the BIA's decision in Matter of C-A- , these claims have generally failed, in part, because the various social groups articulated by individual aliens are seen as lacking social visibility and/or particularity. Some commentators have suggested that the BIA's recent shift from "social visibility" to "social distinction" could potentially make it more difficult for aliens to obtain asylum by requiring that aliens produce sociological studies or other evidence demonstrating that the alien's home society recognizes the group as distinct. On the other hand, given the deference that the courts have generally afforded to the executive branch's construction of particular social group , this term and/or social distinction could conceivably be reinterpreted by the executive branch in the future to make it easier for aliens to obtain asylum on account of membership in a particular social group. While the particular social groups proposed in individual cases vary somewhat in their specific formulations, they can generally be seen as involving one of four broad categories: (1) persons resistant to gang recruitment; (2) former gang members; (3) witnesses and informants against gangs; and (4) the family members of persons in the foregoing groups. Most courts have not considered these proposed groupings as constituting particular social groups for purposes of granting asylum, although groups involving former gang members, witnesses or informants against the gangs, and family members may be cognizable as particular social groups in certain jurisdictions. In a number of cases, courts have upheld the denial of asylum to aliens based on their purported membership in particular social groups made up of persons who are targeted for or resist gang recruitment, generally because the courts view the proposed group as lacking both social visibility (now, distinction) and/or particularity. For example, in its 2012 decision in Mayorga-Vidal v. Holder , the First Circuit upheld the denial of asylum to an alien who claimed to fear persecution due to his membership in the group of "young Salvadoran men who have resisted gang recruitment and whose parents are unavailable to protect them." The First Circuit did so, in part, because it found no evidence in the record suggesting that Salvadoran society viewed the purported group as a "discrete class of persons." It also deferred to the BIA's view that the proposed grouping of "youths who resist gang recruitment" was "too subjective and open-ended" to meet the particularity requirement since it represented a "large, diffuse portion of society." It gave similar deference to the BIA's view that "lack of parental protection" failed the "particularity" requirement, as there are no "objective criteria" to define what it means to lack parental protection. The U.S. Court of Appeals for the Tenth Circuit relied upon similar logic in upholding the denial of asylum based on membership in the proposed social group of "El Salvadoran women between the ages of 12 and 25 who have resisted gang recruitment" in its 2012 decision in Rivera-Barrientos v. Holder . There, the court opined that the proposed group could potentially be seen as possessing particularity, as the meaning of each of its terms is unambiguous. However, it found that the group lacked social visibility (now social distinction) since there was no evidence that "women between the ages of 12 and 25 who have resisted gang recruitment are perceived to be a social group by Salvadoran society." These and other cases suggest that obtaining asylum based on membership in a group of persons targeted for, or resistant to, gang recruitment may be complicated by pervasiveness of gang violence in certain societies. Because the gangs are generally seen as targeting everyone who seems a likely candidate for membership, regardless of their personal attributes or associations, it can be hard to show that persons who have been targeted for or refused gang recruitment are seen as a discrete group by society. It can also be hard to show that clear boundaries demarcate persons who have been targeted for or refused gang recruitment, particularly since the BIA and the federal courts have generally taken the view that a particular social group cannot be defined "circularly" by the fact that its members have been targeted for persecution. Granting asylum to aliens based on their membership in groups made up of former gang members is more complicated in that several federal courts of appeals have evidenced at least some willingness to view former gang members as a particular social group, while others have suggested that granting asylum to those who belong to organizations that have perpetrated acts of violence or other crimes in their home countries is contrary to the humanitarian purposes of asylum. For example, in its 2010 decision in Urbina-Mejia v. Holder , the Sixth Circuit found that being a member of a gang is a characteristic that is "impossible to change, except perhaps by rejoining the group." The Seventh Circuit relied upon similar logic in its 2009 decision in Benitez Ramos v. Holder , finding that "[a] gang is a group, and being a former member of a group is a characteristic impossible to change." However, neither decision took into account the social visibility (now, distinction) and particularity of the group in reaching this conclusion, and other tribunals have taken the opposite view. The Ninth Circuit, for example, has found that former gang members are categorically excluded from consideration as a particular social group on the grounds that recognizing former members of "violent criminal gangs" would "undermine the legislative purpose of the INA." The First Circuit has similarly quoted, with apparent approval, the BIA's view that "[t]reating affiliation with a criminal organization as ... membership in a social group is inconsistent with the principles underlying the bars to asylum and withholding of removal based on criminal behavior," discussed below ( " Bars to Asylum "). Whether a claim to asylum based on former gang membership succeeds may thus depend, in large part, upon the jurisdiction in which it is made. The BIA's decision in 2014 in Matter of W-G-R- could potentially also complicate matters. The alien in that case alleged membership in a particular social group made up of "former members of the Mara 18 gang in El Salvador who have renounced their gang membership." In upholding the immigration judge's denial of asylum to the alien, the BIA left open the possibility of successful gang-related claims. However, it suggested that, even when former membership is an immutable characteristic that defines a particular social group, the group will "often need to be further defined with respect to the duration or strength of the members' active participation in the activity and the recency of their active participation if it is to qualify as a particular social group." It also emphasized that showing that a group of former gang members is socially distinct will require documentation about the treatment or status of former gang members in society, not just documentation about gangs, gang violence, and treatment of current gang members. Witnesses and informants against gangs have also been recognized as comprising a particular social group in some cases, the most notable of which is arguably the decision by the en banc Ninth Circuit in 2013 in Henriquiz-Rivas v. Holder . There, a majority of the Ninth Circuit reversed a BIA decision denying asylum to an alien who claimed to fear persecution on account of her membership in a group made up of "person[s] who testified in a criminal trial against members of a gang" in El Salvador. The majority did so because it viewed the BIA's decision as inconsistent with Matter of C-A- , wherein the BIA had contrasted the lack of social visibility of noncriminal informants with the social visibility of "those who testify against cartel members." The majority also suggested that the perception of the persecutor may matter more in determining the cognizability of particular social groups than that of society generally, since those who are persecuted are persecuted "precisely because the persecutor recognizes the object of his persecution." This view—which is not shared by all other tribunals —would seem to have informed the majority's approach insofar as gangs may well perceive persons who testify against them as a "group" even if the rest of society does not. However, as Judge Kozinski's dissent in Henriquiz-Rivas illustrates, not all courts would necessarily adopt the view that witnesses against the gangs make up a particular social group. Judge Kozinski's concerns centered upon the majority's reading of Matter of C-A- and, particularly, whether the BIA, in fact, found that witnesses are a cognizable social group in Matter of C-A- , or whether its statement contrasting witnesses with informants is best viewed as a nonbinding dictum . He also noted that defining a particular social group based on its visibility to the persecutors runs the risk of defining the group circularly, based on the fact that its members have been subjected to harm. Other cases involving groups of witnesses or informants have failed on nexus grounds, because the persecutors are seen as motivated not by the alien's membership in a particular social group, but by personal retribution (see "On Account of" ). Groups based on families were among the first social groups recognized by the BIA, and family has since been described as a "prototypical example" of a particular social group. In keeping with this view, some courts have been willing to consider the families of persons in some way affected by gang violence as a cognizable social group for purposes of asylum. Other courts have been more skeptical. Whether the group members share a common, immutable characteristic (i.e., family membership), and whether the group is defined with particularity, have generally not been at issue. The requirement of social visibility (now social distinction), in contrast, has posed greater difficulties, since the family group must be one that is recognized as a discrete group. Such recognition from the alien's society at large can be hard to come by unless the family in question is particularly famous or otherwise well known, although it could potentially be more easily shown when the focus is upon the perceptions of the alleged persecutor. A perceived lack of a "nexus" between the feared persecution and the alien's belonging to a particular family could also pose issues. The INA also articulates certain bars to asylum, expressly prohibiting the executive branch from granting asylum to aliens who ordered, incited, assisted, or otherwise participated in the persecution of any person on account of race, religion, nationality, political opinion, or membership in a particular social group. Also barred are aliens who may otherwise meet the requirements of the refugee definition, but (1) having been convicted of a "particularly serious crime," constitute a danger to the U.S. community; (2) committed a "serious nonpolitical crime" outside the United States prior to arriving here; (3) are reasonably believed to be a danger to U.S. security; (4) are inadmissible or deportable on certain terrorist grounds; or (5) were firmly resettled in another country prior to coming to the United States. The INA further provides that aliens who have been convicted of "aggravated felonies"—which the INA defines to mean certain specified crimes (e.g., murder, rape, sexual abuse of a minor), as well as "crimes of violence" for which the term of imprisonment is at least one year —are considered to have been convicted of particularly serious crimes. These bars can present potentially significant issues for former gang members, as to whom there could be "serious reasons" to believe they have committed "serious nonpolitical crimes" outside the United States. Those who are not former gang members are generally less likely to be affected by such bars.
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The recent increase in the number of unaccompanied alien children (UACs) apprehended at the border between Mexico and the United States has raised questions about the role that gang-related violence in Central America may play in determining whether such children are eligible for refugee status and asylum. Only aliens who are "refugees," as that term is defined by the Immigration and Nationality Act (INA), qualify for potential refugee status or asylum (two forms of discretionary relief that could enable UACs to enter or remain in the United States). The INA's definition, in turn, generally encompasses individuals outside their home country who are unable or unwilling to return to that country because of "persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion." However, key terms within this definition—including persecution and particular social group—are not defined by statute or regulation. Instead, they have been construed by the Board of Immigration Appeals (BIA), the highest administrative tribunal for interpreting and applying immigration law, through a process of case-by-case adjudication, with the federal courts generally deferring to the BIA's interpretation insofar as it is based on a "permissible construction" of the INA. These cases center upon eligibility for asylum, because denials of applications for refugee status cannot be appealed. Denials of asylum by immigration judges in the course of formal removal proceedings, in contrast, may be appealed to the BIA and the federal courts of appeals. Persecution has been construed to mean the infliction of harm by the government, or an entity the government is unable or unwilling to control, "upon persons who differ in a way regarded as offensive ..., in a manner condemned by civilized governments." A showing of past persecution establishes a rebuttable presumption that the alien has a well-founded fear of future persecution. Otherwise, aliens must prove they subjectively fear persecution, and there is a "reasonable possibility" they would suffer persecution if returned to their home country. Such a "reasonable possibility" can exist when there is less than a 50% chance of the occurrence taking place. This persecution must also be "on account of" a protected ground (e.g., race). The REAL ID Act of 2005 (P.L. 109-13) amended the INA to require that a protected ground "was or will be at least one central reason" for the persecution. However, central reason has been construed to mean a reason that is more than "incidental, tangential, superficial, or subordinate to another reason," not as the only or primary reason. Most protected grounds (i.e., race, religion, nationality, political opinion) are fairly straightforward in their definition, if not in their application in specific cases. Particular social group, however, has been construed in various ways by the BIA over the years. When considered by the BIA or appellate courts in light of how the INA's definition of refugee is construed, claims to asylum based on gang-related violence frequently (although not inevitably) fail. In some cases, this is because the harm experienced or feared by the alien is seen not as persecution, but as generalized lawlessness or criminal activity. In other cases, persecution has been found to be lacking because governmental ineffectiveness in controlling the gangs is distinguished from inability or unwillingness to control them. In yet other cases, any persecution that is found is seen as lacking the requisite connection to a protected ground, and instead arising from activities "typical" to gangs, such as extortion and recruitment of new members. The particular social group articulated by the alien (e.g., former gang members, recruits) may also been seen as lacking a "common, immutable characteristic," social visibility (now, social distinction), or particularity.
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This report provides indications of the possible effects of the proposed U.S.-Korea Free Trade Agreement (KORUS FTA) on individual states. For each state the indications result from pairing two sets of data. The first set is based on U.S. International Trade Commission (USITC)-estimated changes in U.S. exports and imports at the national level after full implementation of the KORUS FTA, compared to what trade with South Korea would be under a no-agreement scenario. The second set, included in Appendix A , is Census Bureau data which tracks the annual movement of exports to their foreign destination—in this case South Korea—by state. Whether a state's exports are higher as a result of the KORUS FTA will depend significantly on whether firms that now export take advantage of the market openings (e.g., declining or eliminated tariffs, expanding or phased out quotas) negotiated in this trade agreement. In addition, the extent to which a state's exports change in the same pattern as projected by the USITC estimates will depend on the extent to which the industry in a given state echoes the makeup of the respective industry at the national level. However, because the model upon which USTIC estimates were based uses only highly aggregated sectors, the extent of that similarity or difference cannot be determined. Therefore, the indication of industries for which net exports (exports minus imports) are projected to increase or decrease as listed in Table 4 should be viewed as providing a general "compass" rather than serving as a precise global positioning system in projecting state industry export changes upon full implementation of the KORUS FTA. Estimating the trade effects of FTAs, including the proposed KORUS FTA, is imprecise and highly sensitive to the assumptions that are used. For greater detail, see Appendix C , which discusses trade models used by the USITC and shortfalls associated with Census Bureau state-level trade data. As detailed in the appendix, such estimates are even more problematic at the state level for several reasons. One is the interplay between state industrial composition and problems inherent in the data to measure state exports to a foreign country. That is, the data tend to overestimate agricultural and/or manufacturing exports for some states, and underestimate them for others. In addition, the data capture the export value of the finished product and assign that entire value to the final state from which the product is exported. As a result, the data do not capture the value added by production that occurs in other states. Moreover, while trade agreements generally are comprehensive in nature and cover goods, services , and investment, estimates of exports focus narrowly on the goods sector and do not adequately represent the total impact of the agreements. In addition to the national-level estimates featured in this report, states may experience a broad range of benefits from liberalizing trade in services and reducing or eliminating barriers to investment flows. Provisions that reduce barriers to trade in services potentially could have a large and positive effect on the U.S. economy, since the United States is highly competitive in a number of services sectors and U.S. direct investment abroad often spurs exports. South Korea is the seventh largest U.S. export partner, receiving nearly $39 billion in U.S. goods exports, or about 3% of all such U.S. exports of almost $1.3 trillion in 2010. Individual state shares of these exports varied from 21% (California) to 0.03% (South and North Dakota). When services exports are added, total combined U.S. exports to South Korea in 2010 totaled about $55 billion ( Table 1 ). In contrast, the United States imported nearly $60 billion in goods and services from South Korea in 2010. Goods accounted for $49 billion, or about 2.6% of total U.S. goods imports of $1.9 trillion. As a consequence, the United States experienced a merchandise trade deficit with South Korea in 2010 of $10 billion, or about 1.5% of the total U.S. merchandise trade deficit. Despite being the seventh largest U.S. trade partner, export opportunities for the United States are limited because of the size of the South Korean market, which consists of some 50 million consumers. Table 2 and Table 3 list key U.S. exports to and imports from South Korea, respectively. The products in the tables represent 88% of all U.S. exports to and imports from South Korea. Table 2 indicates that U.S. exports to South Korea are varied, with the top five such U.S. exports accounting for about 50% of all U.S. exports to South Korea. These categories are: machinery (e.g., for manufacturing semiconductor devices), electrical machinery (especially integrated circuits and semiconductor devices), medical instruments, civilian aircraft engines and parts, and organic chemicals. (For more export and import detail, see Table B -1 .) Table 3 shows that U.S. imports from South Korea are narrowly focused and more concentrated than are U.S. exports. Nearly 70% of all import categories are concentrated in three broad sectors. These are: electrical machinery (especially telephone sets and other apparatus for voice/image/data transmission), non-electrical machinery (especially parts and accessories for office machines, refrigerators and freezers, and washing machines), and motor vehicles (primarily passenger cars, parts, and accessories). (For more detail, see Table B -2 .) According to studies conducted by the USITC, U.S. exports of goods to South Korea under the KORUS FTA could increase by more than imports from South Korea, in both percentage and value terms, slightly reducing, but not eliminating the U.S. trade deficit with South Korea. With this slight reduction in the U.S. trade deficit with South Korea, however, the overall U.S. trade deficit with the world would change almost imperceptibly. The USITC projects that, compared with a no KORUS FTA scenario, total U.S. merchandise exports to South Korea as a result of the FTA would grow over the 10-year implementation period, by about 24% an average of about 2% per year, and merchandise imports would grow by about 10%, or an average of about 1% per year, as indicated in Figure 1 . For most products, major increases in exports could occur in the latter part of the phase-in period. The study cautions, however, that without a full quantitative analysis of services trade and international investment patterns, simulation results of the USITC study in general should not be interpreted as changes in total imports and exports, or as implying meaningful information about the balance of trade impact of the entire U.S.-Korea FTA. U.S. imports in some sectors could rise more than normally expected as a consequence of the KORUS FTA. According to the USITC, such imports as textiles, apparel, leather products, petroleum and coal products, metal products, and motor vehicles and parts could increase over the full implementation period of the agreement. The USITC used an economic model known as the Global Trade Atlas Project (GTAP), located at Purdue University to estimate quantitative changes in trade (exports and imports) for 40 sectors. These estimations are based on KORUS FTA changes in tariff rates and tariff rate quotas at the end of the phase-in period of the agreement. The results are reported as a range of high and low proportional effects (percentage increases or decreases in trade) and high and low potential changes in trade values for various sectors, relative to trade flows that would have occurred in 2008 if there were no FTA with South Korea. Table 4 lists these in three groups: (1) sectors for which increases in U.S. exports to South Korea are expected to exceed increases in U.S. imports from South Korea; (2) industries for which U.S. exports and imports are not expected to increase; and (3) sectors for which U.S. imports from South Korea are expected to exceed U.S. exports to South Korea. Note that macroeconomic changes, such as changes in investment patterns, shifts in the relative values of foreign currencies, and changes in types of goods traded can overwhelm the impact on trade of changes in tariffs, such as would occur under the KORUS FTA. At the state level, tables are included for each state in Appendix A . Each state table lists: (1) the top-10 state exports to South Korea at the two-digit harmonized tariff schedule (HTS) level; (2) their dollar value for 2010; and (3) the state's share of total exports to South Korea that the sector's exports represent. These listings may be compared with the USITC-projected direction of trade estimated to result from the KORUS FTA upon full implementation for that highly-aggregated sector at the national level . At a disaggregated level, the composition of trade for any given state may differ considerably from that at the national level. However, because the GTAP model uses only highly-aggregated sectors, the extent of that difference cannot be determined. Exports in the state tables are reported at the two-digit level to correspond with similar categories in the GTAP model. The export data for the various states are from the Census Bureau's series showing the Origin of Movement (OM) of state-level exports, by foreign destination. The Census Bureau's OM Data Series is compiled from the Electronic Export Information (EEI) filed by exporters or their agents. The data represent a shipment of one or more kinds of merchandise from one exporter to one foreign importer on a single carrier. The state identified in the data is that from which the merchandise starts its journey. It represents the origin of transportation , not the origin of production of the exports. According to the Census Bureau, there are a number of known limitations to the data. In particular, whenever shipments represent a consolidation of goods, such as through warehouses, the state with the warehouse will be credited with the exports, rather than the state of origin of the exports. This caveat is particularly relevant to agricultural products shipped from inland states down the Mississippi River for export from the port of New Orleans. In this case, New Orleans would be credited as the state of origin of the exports. In addition, when goods are stored and then exported by central offices or intermediaries, export data would understate exports from the original production state and overstate exports from the office or consolidation point. Generally speaking, OM data tend to overestimate exports from port states such as California and New York, and underestimate exports from such interior states as Iowa, Missouri, and South Dakota. For more details, see Appendix C . Table 5 lists state exports to South Korea based on available OM data. It also includes: (1) information on state shares of all U.S. exports to South Korea, and (2) state exports to South Korea as a share of total state exports to the world. CRS did not attempt to rank the states by the OM data because of limitations explained above—namely that the data tend to overestimate or underestimate exports for various states. State tables follow in Appendix A , listed alphabetically. Appendix A. State Tables Alabama In 2010, Alabama shipped close to $600 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 4% of the state's total exports to the world. The top 10 products accounted for 90% of Alabama's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis (see table, below): Net exports (exports minus imports) could increase in: optical instruments (optical fiber); organic chemicals; plastic; machinery (including engines, motors, and office machine parts); iron and steel scrap; ores, Slag, Ash; paper and paperboard; miscellaneous chemical products; woodpulp; and cereals (corn). According to CRS estimates detailed in Appendix C , data underestimate manufacturing exports from Alabama by at least 25%. Alaska In 2010, Alaska shipped nearly $500 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 12% of the state's total exports to the world. The top 10 products accounted for virtually 100% of Alaska's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: fish and seafood; ores, slag, ash; wood; powered aircraft; electrical machinery (electric motors and generators); prepared fish (fish sticks); fish meal for animal feed; fish/animal bait; machinery (engines and motors); and optical and medical instruments. Arizona In 2010, Arizona shipped nearly $250 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 2% of the state's total exports to the world. The top 10 products accounted for 87% of Arizona's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: electrical machinery (integrated circuits); ores, slag, and ash; optical and medical instruments; cotton; machinery (including semiconductor manufacturing equipment and office machine parts); aircraft parts; copper; and woodpulp. Net exports could decline in: cattle hides and skins. Exports in one industry are not estimated in the USITC study: arms and ammunitions (bombs, grenades). According to CRS estimates detailed in Appendix C , data overestimate both manufactured and agricultural exports from Arizona by at least 25%. Arkansas In 2010, Arkansas shipped $145 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and less than 3% of the state's total exports to the world. The top 10 products accounted for 97% of Arkansas' total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: organic chemicals; poultry; paper and paperboard; electrical machinery (especially electromechanical tools); machinery (especially hand tools); iron and steel; miscellaneous chemical products; inorganic chemicals; and plastic. Exports in one industry are not estimated in the USITC study: arms and ammunition. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Arkansas by at least 25%. California In 2010, California shipped $8 billion in goods to South Korea, according to the Census Bureau. This represented 21% of all U.S. exports to South Korea, and nearly 6% of the state's total exports to the world. The top 10 products accounted for 78% of California's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (semiconductors); electrical machinery (integrated circuits); medical instruments; iron and steel scrap; aircraft engines and parts; edible fruit and nuts; aluminum waste scrap; food preparations; and inorganic chemicals. Net exports could decline in: mineral fuel oil (from coal tar). According to CRS estimates detailed in Appendix C , data overestimate manufacturing exports from California by at least 25%. Colorado In 2010, Colorado shipped about $200 million in goods to South Korea, according to the Census Bureau. This represented 0.5% of all U.S. exports to South Korea, and 3% of the state's total exports to the world. The top 10 products accounted for 91% of Colorado's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: beef; optical and medical instruments; machinery (including computers and components); electrical machinery (including integrated circuits); aluminum; copper; plastic; iron and steel (rolled); and books, newspapers, and manuscripts. Net exports could decline in hides and skins. According to CRS estimates detailed in Appendix C , data underestimate manufactured exports from Colorado by at least 25%. Connecticut In 2010, Connecticut shipped nearly $500 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and 3% of the state's total exports to the world. The top 10 products accounted for 95% of Connecticut's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: powered aircraft; machinery (especially gas turbines and semiconductor manufacturing equipment); electrical machinery (especially that relating to generators); optical and medical instruments (including liquid crystal lasers); miscellaneous chemical products; inorganic chemicals; and plastic. Net exports could decline in: iron and steel products. According to CRS estimates detailed in Appendix C , data underestimate both manufacturing and agricultural exports from Connecticut by at least 25%. Delaware In 2010, Delaware shipped $120 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and less than 3% of the state's total exports to the world. The top 10 products accounted for 97% of Delaware's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: plastic; machinery (machine tool parts); medical instruments; soap, wax; civilian aircraft engines; miscellaneous chemical products; organic chemicals; pharmaceutical products; and inorganic chemicals. Net exports could decline in iron and steel products Florida In 2010, Florida shipped nearly $500 million in goods to South Korea, according to the Census Bureau. This represented about 1% of all U.S. exports to South Korea, and nearly 1% of the state's total exports to the world. The top 10 products accounted for 80% of Florida's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: plastic; medical devices (including orthopedic appliances, artificial body parts, and hearing aids); machinery (including gas turbines); electrical machinery (including integrated circuits); civilian aircraft engines; tanks and other armored fight vehicles; and pharmaceuticals. Net exports could decline in motor vehicles and parts, leather articles and solid fuels from coal. Exports in one industry are not estimated in the USITC study: repaired military products. According to CRS estimates detailed in Appendix C , data overestimate both manufacturing and agricultural exports from Florida by at least 25%. Georgia In 2010, Georgia shipped close to $650 million in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and more than 2% of the state's total exports to the world. The top 10 products accounted for 78% of Georgia's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery; civilian aircraft engines and parts; woodpulp; plastic; medical instruments; electrical machinery; organic chemicals; salt, sulfur, earth, stone; iron and steel; and miscellaneous chemical products. Hawaii In 2010, Hawaii shipped $15 million in goods to South Korea, according to the Census Bureau. This represented less than 0.04% of all U.S. exports to South Korea, and more than 2% of the state's total exports to the world. The top 10 products accounted for 86% of Hawaii's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: civilian aircraft engines and parts; cocoa products; edible fruit and nuts; aluminum waste and scrap; preserved nuts and seeds; machinery (especially computers and components); woodpulp; and fish and seafood (especially shrimp). Net exports could decrease in copper articles. Exports in one industry are not estimated in the USITC study: paintings and drawings. Idaho In 2010, Idaho shipped more than $500 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 10% of the state's total exports to the world. The top 10 products accounted for 99% of Idaho's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: electrical machinery (integrated circuits), cheese and nonfat dry milk; paper and paperboard; machinery (semiconductor manufacturing equipment); special purpose motor vehicles; beauty products; processed potato chips; vegetables; and woodpulp. Export change in one industry is not estimated in the USITC study: exports of arms and ammunition According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Idaho by at least 25%. Illinois In 2010, Illinois shipped close to $1 billion in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and nearly 2% of the state's total exports to the world. The top 10 products accounted for 70% of Illinois' total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: electrical machinery (especially electrical apparatus for telephone-related equipment); medical instruments; various types of machinery; animal feeds; tractors; chemical products; synthetic precious stones; iron and steel scrap; civilian aircraft engines and parts; and corn. Net exports could decline in: motor vehicles, including passenger cars, parts and accessories. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Illinois by at least 25%. Indiana In 2010, Indiana shipped more than $500 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 2% of the state's total exports to the world. The top 10 products accounted for 90% of Indiana's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: pharmaceutical products; machinery (especially computers and components); orthopedic appliances, artificial body parts, and medical instruments; tanks and other armored fight vehicles and parts; electrical machinery; plastic; miscellaneous chemical products; aluminum; books, newspapers and manuscripts; and stone plaster and cement. Net exports could decline in motor vehicles, parts, and accessories. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Indiana by at least 25%. Iowa In 2010, Iowa shipped $224 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and more than 2% of the state's total exports to the world. The top 10 products accounted for 82% of Iowa's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: pork; aluminum; machinery (including piston engines); optical and medical instruments; pharmaceutical products; animal feeds; electrical machinery (radar apparatus and navigational and remote control apparatus); prepared meat (sausages); civilian aircraft engines and parts; and paper and paperboard. According to CRS estimates detailed in Appendix C , data underestimate both manufactured and agricultural exports from Iowa by at least 25%. Kansas In 2010, Kansas shipped $228 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and more than 2% of the state's total exports to the world. The top 10 products accounted for 94% of Kansas' total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: beef; inorganic chemicals; pet food; machinery (including self-propelled bulldozers; graders, and scrapers); civilian aircraft engines and parts; miscellaneous chemical products; and optical and medical instruments. Net exports could decline in: cattle and horse hides and skins, and synthetic filament yarn. Exports in one industry are not estimated in the USITC study: repaired military products. According to CRS estimates detailed in Appendix C , data underestimate both manufactured and agricultural exports from Kansas by at least 25%. Kentucky In 2010 Kentucky shipped nearly $500 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 3% of the state's total exports to the world. The top 10 products accounted for 89% of Kentucky's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: inorganic chemicals; plastic (silicone); machinery (especially semiconductor manufacturing equipment); pharmaceutical products (blood and vaccines); miscellaneous chemical products; electrical machinery; optical and medical instruments, and organic chemicals. Net exports could decline in vehicle parts. Exports in one industry are not estimated in the USITC study: exports of arms and ammunition. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Kentucky by at least 25%. Louisiana In 2010, Louisiana shipped $2 billion in goods to South Korea, according to the Census Bureau. This represented 4% of all U.S. exports to South Korea, and 4% of the state's total exports to the world. The top 10 products accounted for 97% of Louisiana's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: corn; soybeans; organic chemicals; animal feed (soymeal and distillers' grains); machinery (hoists); iron and steel scrap; plastic; soybean oil; and miscellaneous chemical products. Net exports could decline in oils from high temperature coal tar. According to CRS estimates detailed in Appendix C , data overestimate agricultural exports from Louisiana by at least 25%. Maine In 2010, Maine shipped nearly $100 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and more than 3% of the state's total exports to the world. The top 10 products accounted for 98% of Maine's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: miscellaneous chemical products; woodpulp; civilian aircraft engines and parts; electrical machinery (integrated circuits); paper and paperboard; machinery (pumps and machine tools); fish and seafood (lobster and frozen eels); plastic; and pharmaceutical products. Exports in one industry are not estimated in the USITC study: arms and ammunition (parts and accessories). Maryland In 2010, Maryland shipped nearly $500 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 5% of the state's total exports to the world. The top 10 products accounted for 92% of Maryland's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: electrical machinery (television, radio, and radar apparatus parts); miscellaneous chemical products; optical and medical instruments; certain base metals; plastic; inorganic chemicals; machinery (especially centrifuges, computers, and components); and aluminum. Net exports could decline in solid fuels from coal. Exports in one industry are not estimated in the USITC study: exports of arms and ammunition. According to CRS estimates detailed in Appendix C , data overestimate manufacturing exports and underestimate agricultural exports from Maryland by at least 25%. Massachusetts In 2010, Massachusetts shipped nearly $900 million in goods to South Korea, according to the Census Bureau, according to the Census Bureau This represented 2% of all U.S. exports to South Korea, and more than 3% of the state's total exports to the world. The top 10 products accounted for 91% of Massachusetts' total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (semiconductor manufacturing equipment and gas turbines); medical instruments; electrical machinery (especially integrated circuits and electronic apparatus for line telephones); pharmaceutical products; toys and equipment (swimming pools); miscellaneous chemical products; plastic; ferrous waste and scrap; silver; and organic chemicals. According to CRS estimates detailed in Appendix C , data overestimate both manufactured and agricultural exports from Massachusetts by at least 25%. Michigan In 2010, Michigan shipped more than $750 million in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and nearly 2% of the state's total exports to the world. The top 10 products accounted for 82% of Michigan's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: various types of motor vehicles and parts; machinery (centrifuges); inorganic chemicals (rare gasses); cosmetics; plastic; medical instruments; soap, wax and dental preparations; and tanning dyeing, painting and putty preparations. Net exports could decline in hides and skins. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Michigan by at least 25%. Minnesota In 2010, Minnesota shipped more than $620 million in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and more than 3% of the state's total exports to the world. The top 10 products accounted for 81% of Minnesota's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: various types of machinery; medical instruments; plastic; electrical machinery (especially integrated circuits); meats; animal feeds; stone, plaster and cement; and organic chemicals. Net exports could decline in impregnated textile fabrics. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Minnesota by at least 25%. Mississippi In 2010, Mississippi shipped about $70 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and less than 1% of the state's total exports to the world. The top 10 products accounted for 92% of Mississippi's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: tanning, dye, paint, putty; electrical machinery (including electrical apparatus for line telephony and integrated circuits; machinery (especially computers and components and pumps, fans, and hoods); poultry; rubber; optical and medical instruments; woodpulp; plastic; cotton; and miscellaneous chemical products. Missouri In 2010, Missouri shipped more than $650 million in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and 5% of the state's total exports to the world. The top 10 products accounted for 87% of Missouri's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: aircraft and spacecraft parts and vehicles; medical instruments; meat (especially pork); machinery; pharmaceutical products; ores; electrical machinery; and miscellaneous chemical products. Net exports could decline in solid fuels from coal. Export change in one industry is not estimated in the USITC study: military apparel and equipment. According to CRS estimates detailed in Appendix C , data underestimate both manufacturing and agricultural exports from Missouri by at least 25%. Montana In 2010, Montana shipped $187 million in goods to South Korea, according to the Census Bureau. This represented 0.5% of all U.S. exports to South Korea, and 13% of the state's total exports to the world. The top 10 products accounted for nearly 100% of Montana's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: inorganic chemicals; machinery (semiconductor manufacturing equipment); electrical machinery (insulated wire and optical sheath fiber cables); optical medical instruments (liquid crystal decides and lasers); civilian aircraft engines and parts; and salt, sulfur, earth, and stone; pharmaceutical products. Net exports could decline in solid fuels from coal. Exports in one industry are not estimated in the USITC study: repaired military products. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Montana by at least 25%. A substantial portion of the state's agricultural production is processed in neighboring states for export, or transported to port states (i.e., Oregon and Washington) which record them as exports. Nebraska In 2010, Nebraska shipped nearly $300 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 5% of the state's total exports to the world. The top 10 products accounted for 96% of Nebraska's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: beef; aluminum; various optical and medical instruments; plastic; pharmaceutical products (blood and vaccines); machinery (including transmission products); tomato products; and electrical machinery (especially electrical apparatus.) Net exports could decline in cattle hides and skins and wadding, felt, twine, and rope. According to CRS estimates detailed in Appendix C , data underestimate both manufactured and agricultural exports from Nebraska by at least 25%. Nevada In 2010, Nevada shipped $40 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and nearly 1% of the state's total exports to the world. The top 10 products accounted for 88% of Nevada's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: medical instruments; machinery (especially pumps and parts); electrical machinery (especially integrated circuits); photographic or cinematographic goods; base metals (titanium); inorganic chemicals; mineral water, and civilian aircraft engine equipment and parts. Exports could decline in mineral fuel from coal tar.. Exports in one industry are not estimated in the USITC study: repaired military products. According to CRS estimates detailed in Appendix C , data overestimate manufacturing exports from Nevada by at least 25%. New Hampshire In 2010, New Hampshire shipped $131 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and 3% of the state's total exports to the world. The top 10 products accounted for 98% of New Hampshire's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase: machinery (including various types of pumps); electrical machinery (especially industrial furnaces); optical and medical instruments; civilian aircraft engines and parts; plastic; inorganic chemicals; tanning, dye, paint, and putty; and aluminum. Net exports could decline in iron and steel products. According to CRS estimates detailed in Appendix C , data overestimate agricultural exports from New Hampshire by at least 25%. New Jersey In 2010, New Jersey shipped close to $1.7 billion in goods to South Korea, according to the Census Bureau. This represented 4% of all U.S. exports to South Korea, and 5% of the state's total exports to the world. The top 10 products accounted for 83% of New Jersey's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: precious metals (platinum); machinery (semiconductor manufacturing equipment); organic chemicals, electrical machinery (integrated circuits); pharmaceutical products; miscellaneous chemical products; medical instruments (orthopedic appliances and artificial body parts); inorganic chemicals and rare earth elements; and iron and steel scrap. Exports in one category: arms and ammunition, are not addressed in the USITC study. According to CRS estimates detailed in Appendix C , data overestimate both manufacturing and agricultural exports from New Jersey by at least 25%. New Mexico In 2010, New Mexico shipped $28 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and nearly 2% of the state's total exports to the world. The top 10 products accounted for 92% of New Mexico's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: civilian aircraft engines and parts; machinery (especially taps, cocks and valves for pipes and semiconductor manufacturing equipment); cotton; dairy products (cheese and whey); electrical machinery (especially semiconductor devices, electric apparatus for switching, and electric capacitors); cereal flour; miscellaneous chemical products; plastic; and optical and medical instruments. Exports could decline in articles of nickel. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from New Mexico by at least 25%. New York In 2010, New York shipped nearly $2 billion in goods to South Korea, according to the Census Bureau. This represented 5% of all U.S. exports to South Korea, and nearly 3% of the state's total exports to the world. The top 10 products accounted for 82% of New York's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (semiconductor manufacturing equipment); civilian aircraft engines and parts; electrical machinery (integrated circuits); optical and medical instruments; miscellaneous chemical products; plastics; and wood pulp. Exports in three categories: repaired military products, arms and ammunition, and art and antiques, are not addressed in the USITC study. According to CRS estimates detailed in Appendix C , data overestimate both manufacturing and agricultural exports from New York by at least 25%. North Carolina In 2010, North Carolina shipped more than $600 million in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and more than 2% of the state's total exports to the world. The top 10 products accounted for 82% of North Carolina's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (including engines and air and vacuum pumps); electrical machinery (especially integrated circuits and semiconductor devices); plastic; precious stones with precious metals; pharmaceutical products; meat (especially pork); woodpulp; and tobacco. Net exports could decline in synthetic filament yarn and motor vehicles, parts and accessories. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from North Carolina by at least 25%. North Dakota In 2010, North Dakota shipped $11 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and less than 1% of the state's total exports to the world. The top 10 products accounted for 97% of North Dakota's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (self-propelled bulldozers, graders, and scrapers); soybeans; edible fruit and nuts, electrical machinery (line telegraph equipment); organic chemicals, prepared sausage; and dried peas. Net exports could decline in passenger vehicles, possibly increase in tractors; and stay about the same in wheat and wheat flour. According to CRS estimates detailed in Appendix C , data underestimate manufacturing and agricultural exports from North Dakota by at least 25%. Ohio In 2010, Ohio shipped nearly $650 million in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and close to 2% of the state's total exports to the world. The top 10 products accounted for 76% of Ohio's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery; electrical machinery; medical instruments; base metals; chemical products; plastic; tanning, dye, painting and putty products, and organic chemicals. Net exports could decline in, passenger cars, parts, and accessories; and possibly increase in armored fight vehicles and parts; According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Ohio by at least 25%. Oklahoma In 2010, Oklahoma shipped $58 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and about 1% of the state's total exports to the world. The top 10 products accounted for 93% of Oklahoma's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (especially gas turbines and pumps); cotton, medical instruments; civilian aircraft engines and parts; meat (pork); glue-like substances; miscellaneous chemical products; books, newspapers, and manuscripts; Net exports could decline in iron and steel products. According to CRS estimates detailed in Appendix C , data underestimate both manufacturing and agricultural exports from Oklahoma by at least 25%. Oregon In 2010, Oregon shipped close to $1 billion in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and 5% of the state's total exports to the world. The top 10 products accounted for 89% of Oregon's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: fertilizers; machinery (semiconductor manufacturing equipment); electrical machinery (integrated circuits and semiconductor devices); forage products; ferrous waste and scrap; medical instruments; aluminum waste and scrap; preserved food (processed potato products); and paper and paperboard. Net exports could stay the same in wheat. According to CRS estimates detailed in Appendix C , data overestimate agricultural exports from Oregon by at least 25%. Pennsylvania In 2010, Pennsylvania shipped close to $1 billion in goods to South Korea, according to the Census Bureau. This represented 2% of all U.S. exports to South Korea, and more than 2% of the state's total exports to the world. The top 10 products accounted for 70% of Pennsylvania's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (especially metal rolling mills computers, and components); medical instruments; various types of electrical machinery; inorganic chemicals; iron and steel; plastic, soap wax; cocoa; and miscellaneous chemical products. Net exports could decline in solid fuels from coal. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Pennsylvania by at least 25%. Rhode Island In 2010, Rhode Island shipped $17 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and close to 1% of the state's total exports to the world. The top 10 products accounted for 93% of Rhode Island's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery; optical and medical instruments; articles of silver; plastic; electrical machinery; soap, wax; fish and seafood (especially frozen eels); and woodpulp. Net exports could decline in wadding, felt, twine, and rope; and iron and steel products. According to CRS estimates detailed in Appendix C , data underestimate both manufacturing and agricultural exports from Rhode Island by at least 25%. South Carolina In 2010, South Carolina shipped nearly $400 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 2% of the state's total exports to the world. The top 10 products accounted for 86% of South Carolina's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in; medical instruments (orthopedic appliances, artificial joints); woodpulp; machinery (especially roller bearings and parts and computers and components); paper and paperboard; plastic; pharmaceutical products; rubber (especially tires); organic chemicals; and miscellaneous chemical products. Net exports could decline in vehicles (motor vehicle parts and accessories; and passenger cars). According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from South Carolina by at least 25%. South Dakota In 2010, South Dakota shipped $13 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and 1% of the state's total exports to the world. The top 10 products accounted for 98% of South Dakota's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: meat pork; toys and sports equipment (arcade tables); machinery (self-propelled bulldozers, graders, and scrapers); salt, sulfur, earth and stone; organic chemicals; dairy (cheese and curd); explosives (fireworks and signal flares); electrical machinery (especially semiconductors); and glazier's putty. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from South Dakota by at least 25%. Tennessee In 2010, Tennessee shipped over $550 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and more than 2% of the state's total exports to the world. The top 10 products accounted for 81% of Tennessee's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: medical instruments; plastic, tanning, dye and putty; machinery (including computers, components, and parts for engines); woodpulp; electrical machinery; meat (chicken); and pig iron. Net exports could decline in vehicles (especially passenger cars and motor vehicle parts and accessories); and artificial filament yarn. According to CRS estimates detailed in Appendix C , data underestimate manufacturing exports from Tennessee by at least 25%. Texas In 2010, Texas shipped more than $6.4 billion in goods to South Korea, according to the Census Bureau. This represented 17% of all U.S. exports to South Korea, and 3% of the state's total exports to the world. The top 10 products accounted for 91% of Texas's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (semiconductor manufacturing equipment and machinery parts); electrical machinery (semiconductor devices and integrated circuits); organic chemicals; plastic; miscellaneous chemical products; medical instruments; and cotton. Net exports could decline in mineral fuel oil (from coal tar); and iron and steel products. According to CRS estimates detailed in Appendix C , data overestimate both manufacturing and agricultural exports from Texas by at least 25%. Utah In 2010, Utah shipped nearly $300 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and 2% of the state's total exports to the world. The top 10 products accounted for 86% of Utah's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: electrical machinery (integrated circuits); beauty products; miscellaneous food preparations; base metals (zirconium); optical/medical instruments including catheters and X-ray equipment); ores, fruit and vegetable juices; and soap, wax, and dental preparations. Net exports could decline in iron and steel products and motor vehicle parts and accessories. According to CRS estimates detailed in Appendix C , data overestimate manufactured exports from Utah by at least 25%. Vermont In 2010, Vermont shipped $130 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and 3% of the state's total exports to the world. The top 10 products accounted for 99% of Vermont's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: electrical machinery (especially integrated circuits); paper and paperboard; optical and medical instruments; machinery (especially semiconductor manufacturing equipment); dairy products (cheese and whey); and copper. Net exports could decline in wadding felt, twine and rope; and iron and steel products (stove elements). Exports in one industry are not estimated in the USITC study: arms and ammunition. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Vermont by at least 25%. Virginia in 2010, Virginia shipped nearly $400 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and more than 2% of the state's total exports to the world. The top 10 products accounted for 87% of Virginia's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: electrical machinery (especially integrated circuits, electric motors and generators); machinery (including machine tools); plastic; paper and paperboard; beauty products; optical and medical instruments; iron and steel (rolled), and meat (especially poultry). Net exports could decline in solid fuel from coal and manmade staple fibers. According to CRS estimates detailed in Appendix C , data overestimate agricultural exports from Virginia by at least 25%. Washington In 2010, Washington shipped over $2.7 billion in goods to South Korea, according to the Census Bureau. This represented 7% of all U.S. exports to South Korea, and 5% of the state's total exports to the world. The top 10 products accounted for 82% of Washington's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: corn; aircraft (civilian aircraft engines and parts); wood; scrap iron; animal feed; forage products including hay and alfalfa; paper and paperboard; machinery (computers and components); and electrical machinery (integrated circuits). Net exports could decline in mineral fuel oil. According to CRS estimates detailed in Appendix C , data overestimate agricultural exports from Washington by at least 25%. West Virginia In 2010, West Virginia shipped over $100 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and less than 2% of the state's total exports to the world. The top 10 products accounted for 91% of West Virginia's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: plastic; nickel (plates, sheets, strip and foil); organic chemicals; soap, wax; ceramic products; aluminum (aluminum plates sheets, and strip); woodpulp; and rubber. Net exports in one industry could decline in mineral fuel (from coal) and iron and steel products. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from West Virginia by at least 25%. Wisconsin In 2010, Wisconsin shipped $360 million in goods to South Korea, according to the Census Bureau. This represented 1% of all U.S. exports to South Korea, and nearly 2% of the state's total exports to the world. The top 10 products accounted for 86% of Wisconsin's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: machinery (especially computers and components, refrigerators, freezers and heat pumps); medical instruments; electrical machinery (especially for line telephones and electrical light equipment); meat (frozen beef); preserved food (canned sweet corn); vehicles (parts and accessories for bicycles and wheel chairs); dairy (whey and cheese); soybeans; and plastic. Net exports could decline in raw cattle hides and skins and motor vehicle parts and accessories. According to CRS estimates detailed in Appendix C , data underestimate agricultural exports from Wisconsin by at least 25%. Wyoming In 2010, Wyoming shipped nearly $40 million in goods to South Korea, according to the Census Bureau. This represented less than 0.5% of all U.S. exports to South Korea, and nearly 4% of the state's total exports to the world. The top 10 products accounted for virtually 100% of Wyoming's total exports to South Korea. By the end of the KORUS FTA implementation period, based on USITC's analysis: Net exports could increase in: inorganic chemicals; miscellaneous chemical products; miscellaneous food (baking powders); optical instruments (optical telescopes); salt, sulfur, earth and stone; forage products; plastic (silicone); and machinery (pumps and fans). Net exports could decline in iron and steel products. According to CRS estimates detailed in Appendix C , data overestimate manufacturing exports and underestimate agricultural exports from Wyoming by at least 25%. Appendix B. Detailed U.S.-South Korea Trade Data Appendix C. Trade Models and Data Issues Trade Models Trade models of the type used in the analysis of the KORUS FTA are part of a class of economic models referred to as computable general equilibrium models (CGE) that incorporate data on trade and a range of domestic economic variables on nearly 100 countries. As a result of this large number of countries, and the vast amounts of data that are used, the models can provide important insights into the mechanisms by which changes in tariffs or other parameters can affect a range of countries. For practical reasons, however, the data in the models must be limited, so the models necessarily must sacrifice some level of precision in their estimating abilities. Since such trade models originally were developed with the intent of analyzing the economic effects of such multi-country trade agreements as the Uruguay Round, this lack of precision was not considered to be an important drawback. However, this lack of precision may be an issue when the models are used to estimate the effects of bilateral trade agreements, especially at the state level, where the overall amount of trade and, therefore, the impact of the agreement, is expected to be less than that of a comprehensive multilateral agreement. In addition, such models do not account for changes in exchange rates, since such effects were considered to be neutral in a large multi-country trade agreement. Movements in exchange rates, however, could have an important impact on trade patterns that involve countries that are parties to a bilateral trade agreement. In addition, estimates derived from trade models represent a static analysis that does not represent the dynamic effects that likely arise from trade agreements. In particular, the estimates are based on the assumption that all other economic factors would remain constant during the time leading to full implementation. The estimates also are based on the assumption that the composition of trade between the United States and South Korea at the time the estimates were made, in this case 2001 data projected to 2008, would also remain constant. Considering the dynamic nature of both economies, however, these assumptions appear to be unrealistic and may limit the usefulness of the final results of the trade model. If the U.S. and South Korean economies continue to change over the next decade at the rate experienced during the past decade, both economies and the composition of trade between them likely will differ appreciably from what can be projected from current data. In order to mitigate some of the limitations of the trade model, USITC industry analysts refined the estimates—that is, they prepared a qualitative assessment, of the potential impact of the agreement at the industry level. These estimates provide an analysis of the immediate impact of the agreement and of the phased elimination of tariffs and tariff rate quotas on 40 broadly-defined industrial sectors and on a group of 20 narrowly defined industrial sectors and their sub-sectors. Both of these groups of industries are used in this report to provide estimates of the impact of the KORUS FTA on state-level industries. State Export Data Issues As mentioned, this report uses Census Bureau data on the origin of movement of commodities by state to estimate exports to South Korea as a result of the KORUS FTA. The Census Bureau's Origin of Movement (OM) Data Series is compiled from the Electronic Export Information (EEI) filed by exporters or their agents. The OM data series tracks exports from the zip code where their documented transportation begins, not the origin of production, to the country of their foreign destination. The data represent a shipment of one or more kinds of merchandise from one exporter to one foreign importer on a single carrier. The state identified in the data is that from which the final merchandise starts its journey. According to the Census Bureau, there are a number of known limitations to the data. In particular, whenever shipments represent a consolidation of goods, such as through warehouses, the state with the warehouse will be credited with the exports, rather than the state of origin of the exports. This caveat is particularly relevant to agricultural products shipped from inland states down the Mississippi River for export from the port of New Orleans. In this case, New Orleans would be credited as the state of origin of the exports. In addition, when goods are stored and then exported by central offices or intermediaries, export data would understate exports from the original production state and overstate exports from the office or consolidation point. Generally speaking, the origin of movement (OM) data tend to overestimate exports from port states such as California and New York and underestimate exports from such interior states as Iowa, Missouri, and South Dakota. This miscounting is particularly prevalent when products are either consolidated or stored by central offices or intermediaries before entering official export channels. In such a case, the state-level export data do not provide a precise picture of the product composition of exports from each state to the world or to individual countries such as South Korea. Despite this limitation, these data provide the best available indication of what is produced and exported from each state. The issue of underestimation or overestimation is less of a problem among manufactured goods than among agricultural products. For manufactured products, the origin of movement and the origin of production often coincide. Typically, manufacturers ship their exports to a foreign destination directly from the factory gate or from a nearby distribution facility. In these instances, the state where the product is manufactured receives credit for the export. CRS estimates that OM data underestimates manufacturing exports by 25% or more in 10 states and overestimates them in 12 states, as shown in Table C -1 . However, manufactured products from different states sometimes are consolidated for export before shipment. When this occurs, the state-of-production-origin is lost. Instead, the state where these manufactured goods are consolidated receives credit for the entire value of the export, even though those products were manufactured in other states. In general, coastal states with large ports such as California, Texas, or New York record higher exports because of these consolidated shipments, while inland states report lower exports. Several other issues affect state-level trade statistics for manufactured goods. Value-added considerations are not taken into account in recording state level exports. The OM data series only reports the sales price and the state from which the completed/finished product is exported. It does not capture value added by myriads of workers and businesses in states where intermediate steps were taken toward the completion of complex manufactured export goods, such as automobiles and aircraft –exports that are comprised of thousands of parts produced in many different locations. As a result, the OM data seriously underestimates value added in many states. See Table C -1 for a list of states whose exports are overestimated or underestimated by the data series. Accounting for agricultural exports by state, however, is particularly complicated. The Census Bureau explicitly warns that the OM state export data tend to understate agricultural exports from farm states and inflate agricultural exports from states with major ports that handle large volumes of bulk agricultural commodities (e.g., grains, soybeans) and high-value shipments of processed foods. By CRS calculations, OM data underestimate agricultural exports by at least 25% in more than 28 states, and overestimate such exports by the same extent in 12 states. Bulk agricultural products in particular are overwhelmingly sold in many interior states to intermediaries, who ship them by barge or rail to major coastal ports to await export. Other unprocessed agricultural products are produced in one state but sent to a warehouse in another state, or to a facility for processing into a food or beverage product, before being exported. When shipped, these products are not counted as exports of the state where the commodities were produced but rather as exports from the state where they began to move to foreign markets. For instance, corn and soybeans produced in Iowa, Missouri, and other Midwestern states are shipped down the Mississippi River for consolidation at the elevators located in New Orleans. Also, a food product produced in Idaho, and then shipped to a Washington wholesaler or freight forwarder for sale abroad, could be credited as an export of Washington state instead of as a export from Idaho under the OM state export data collection system.
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In February 2011, the United States and South Korea finalized negotiations on a bilateral free trade agreement. As a result, the Obama Administration is expected to submit implementing legislation to the 112th Congress on the proposed U.S.-South Korea Free Trade Agreement (KORUS FTA). This report addresses congressional interest in the effects of this agreement on exports by state to South Korea by using two sets of data. Data developed by the U.S. International Trade Commission (USITC) are used to identify the possible direction of trade change for 40 industries at the national level. These results are paired with lists of each state's top 10 exports which provide a guide to the possible direction of trade for various state industries as a result of tariff elimination and tariff rate quota reductions under the proposed KORUS FTA. Improved access for services, liberalized investment regimes, and elimination of non-tariff barriers for a few goods and agricultural products are not captured in this analysis. Estimating the trade effects of a potential FTA, however, is highly sensitive to the assumptions used and to important limitations of the available data. Such estimates are especially problematic at the state level. As a result, the data in this report should be viewed as providing a general sense of the possible impact of the proposed FTA on state level exports. Over the full implementation period of the agreement, a broad range of economic factors can overwhelm the potential effects of tariff and tariff rate quota provisions. Whether a state's exports are higher as a result of the KORUS FTA will depend significantly on whether firms that now export take advantage of the market openings (e.g., declining or eliminated tariffs, expanding or phased out quotas) negotiated in this trade agreement. In addition, the extent to which state exports change in the same pattern as projected by the USITC estimates, will depend on the extent to which they echo the makeup of the respective industry at the national level. While South Korea is the United States' seventh largest trading partner, it accounts for less than 3% of all U.S. trade. It has a population one-sixth that of the United States. By comparison, Canada and Mexico, the United States' first and third largest trading partners, with whom the United States also has a trade agreement (the North American Free Trade Agreement (NAFTA)), accounted for 16% and 12% respectively of total U.S. trade in 2010. The impact of the KORUS FTA on the exports of individual states reflects both projected national effects on industrial sectors and the composition of industries within each state. Manufactured products currently dominate U.S.-South Korea trade, and the dollar value of exports in virtually all industries is expected to be higher than without a trade agreement. However, the greatest sectoral growth rate in trade is expected to come from agricultural exports, in states with large agricultural sectors. Higher imports in some industries, particularly auto and parts production, are not expected to affect gross exports, but could affect net exports. The discussion in this report is limited to presenting the effects of the KORUS FTA on U.S. exports to South Korea on a national level with possible implications at the state level. It does not present data on U.S. imports from South Korea at the state level because of data issues. Nevertheless, increases in imports in some sectors and in some states could be higher than increases in exports as a consequence of the FTA.
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T his report provides an overview of the payment and other protections for subcontractors on certain federal prime contracts under the Miller Act, the 1988 amendments to the Prompt Payment Act, and the Small Business Act. Congress enacted these statutes to give subcontractors rights and remedies they would not otherwise have because of legal doctrines relating to sovereign immunity, privity of contract, and freedom to contract. Payment and other protections for subcontractors on federal contracts are of perennial interest to Members and committees of Congress, in part, because many subcontractors are small businesses, and it is the "declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small business concerns." A Depression-era enactment named after its sponsor, Representative John Elvis Miller of Arkansas, the Miller Act creates a federal remedy for subcontractors who "furnish[] labor or material in carrying out work provided for" in certain federal construction contracts. Absent the Miller Act, such subcontractors would generally have to rely on breach of contract actions against the prime contractor under state law to recover payments due to them because of the operation of the legal doctrines of privity of contract and sovereign immunity. Although working pursuant to a subcontract under a federal contract, subcontractors generally cannot enforce the payment or other terms of the contract or subcontract against the federal government because there is no privity of contract, or direct contractual relationship, between the subcontractor and the government. The subcontractor's contract is with the prime contractor, as is the government's contract; there is no contract between the subcontractor and the government. Additionally, because the government has sovereign immunity and cannot be sued without its consent, the subcontractor cannot place a mechanic's lien on the improved property, as it potentially could with a private construction project. The Miller Act requires that, before any contract of more than $150,000 is awarded for the construction, alteration, or repair of a "public building or public work of the Federal government," the contractor furnish two bonds to the government. The first of these is a performance or completion bond, which would compensate the government for any defects in the contractor's performance under the contract. The second is a payment bond, which would assure that certain persons who supply labor or materials used in carrying out the work provided for in the contract receive payment. Both bonds become legally binding upon award of the contract, and their "penal amounts," or the maximum amounts of the surety's obligation, must generally be 100% of the original contract price plus 100% of any price increases. The act further authorizes "[e]very person that … furnished labor or material" in carrying out work provided for in the contract who was not paid in full within 90 days of completing performance to bring a civil action on the payment bond for the amount due. However, "[e]very person," as used here, has been construed to include only first- and second-tier subcontractors. Lower-tier subcontractors are excluded, as are "materialmen" or other parties who supply materials or labor without a contract. These exclusions are partly based on policy considerations and partly based on the definition of "subcontractor." Prime contractors would have greater difficulties in protecting themselves from liability to remote tiers of subcontractors or materialmen than they would in protecting themselves from liability to first- or second-tier subcontractors. Materialmen are excluded because the usage of "subcontractor" in the building trades includes only "one who performs for or takes from the prime contractor a specific part of the labor or material requirements of the original contract." The term "thus exclude[s] ordinary laborers and materialmen." Within one year of completing performance, first- and second-tier subcontractors seeking payment on a Miller Act bond must file suit in the name of the United States in the federal district court for the area where the subcontractor provided labor or services under the contract. They must also provide the prime contractor with notice served in the same manner as a summons, or by any other means that provides written, third-party verification of delivery to the contractor at its place of business or primary residence. Failure to provide proper notice may bar recovery from either the prime contractor or the surety. Assuming proper notice, the amount a subcontractor may recover if it prevails in the litigation is generally based on the contract amount for the goods or services or, if no amount is specified in the contract, the amount that a person in the subcontractor's position at the time and place the services were rendered would have spent completing those services. However, after performance is completed, subcontractors may waive in writing their right to bring a civil action, in which case no recovery may be made on the bond. Contractors that fail to obtain performance bonds as required under the Miller Act are in breach of their contract with the government and could potentially be terminated for default by the government. However, the subcontractor cannot recover from the government for the prime contractor's failure to obtain a bond, or its failure to obtain a sufficient bond. Enacted in response to agencies' widely reported delays in paying their bills, the Prompt Payment Act of 1982, as amended, generally requires federal agencies to pay interest on any payments they fail to make by the date(s) specified in the contract, or within 30 days of receipt of a "proper invoice," if no date is specified in the contract. This act originally applied only to payments made by the government to prime contractors, although it encompassed payments under all types of contracts (e.g., manufacturing, construction, service). However, the Prompt Payment Act was amended in 1988 to extend certain payment protections to subcontractors on federal construction contracts, in part, because agencies' continued practice of paying late created particular difficulties for subcontractors on construction projects. At the time when these amendments were adopted, subcontractors reportedly performed 80% of the work on construction projects, and subcontractors on construction contracts generally do not get paid until the prime contractor has been paid. Without the 1988 amendments, or similar contract terms, prime contractors would generally be free to agree to whatever payment terms they wish with their subcontractors and would not necessarily pay their subcontractors as quickly. The 1988 amendments require that every construction contract awarded by a federal agency contain clauses obligating the prime contractor to (1) pay the subcontractor for "satisfactory performance" under the subcontract within seven days of receiving payment from the agency and (2) pay interest on any amounts that are not paid within the proper time frame. The contract must also obligate the prime contractor to include similar payment and interest penalty terms in its subcontracts, as well as require its subcontractors to impose these terms on their subcontractors. This latter provision, requiring subcontractors to impose the terms on their subcontractors, ensures that the payment and interest penalty requirements "flow down" to all tiers of subcontractors. The prime contractors would have obligations to any first-tier subcontractors, who would have obligations to second-tier subcontractors, who would have obligations to third-tier subcontractors, etc. The 1988 amendments do, however, allow contractors and higher-tier subcontractors to negotiate terms permitting them to retain or withhold payment from subcontractors or lower-tier subcontractors without incurring interest penalties. "Retainage" is generally said to occur when a contractor holds back a specified percentage (often 10%) of each progress payment otherwise due under a construction contract as a routine matter, or because of the subcontractor's failure to perform. Retainage can be seen as a type of withholding. However, the term "withholding" can also be used more broadly to describe the nonpayment of contract amounts because of debts of the contractor outside of the contract. Contractors withholding funds under a contract subject to the Prompt Payment Act must generally provide both the procuring agency and the subcontractor with written notification of withholding, and the amount withheld cannot exceed the amount specified in this notice. Contracting parties often agree to retainage and withholding in order to encourage timely completion of the contract and ensure full understanding between the parties regarding the terms of completion. Because the payment and interest clauses of the contract apply only to the parties, the federal government's obligations run only to the prime contractor. Prime contractors have the duty to pay subcontractors, and subcontractors have the duty to pay lower-tier subcontractors. The federal government cannot be interpleaded as a party to any disputes between contractors and subcontractors over late payments or interest, and contractors' obligations to pay subcontractors also cannot be passed on to the federal government in any way, including by contract modifications or cost-reimbursement claims. In 2011-2012, the Obama Administration issued guidance that supplements the requirements of the Prompt Payment Act as to the payment of small business contractors and subcontractors. Initially, this guidance called for agencies to pay small business contractors within 15 days of receipt of a proper invoice. However, subsequent guidance sought to address payment of small business subcontractors by calling for agencies to "accelerate payments to all prime contractors, in order to allow them to provide prompt payments to small business subcontractors." Subsequently, in November 2013, the Administration amended the Federal Acquisition Regulation (FAR) to implement the accelerated payment policy as to small business subcontractors . As amended, the FAR requires that agencies' prime contracts include terms that obligate the contractor, [u]pon receipt of accelerated payments from the Government, [to] make accelerated payments to its small business subcontractors under this contract, to the maximum extent practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, after receipt of a proper invoice and all other required documentation from the small business subcontractor. The FAR amendment also requires that agencies' contracts include terms which obligate prime contractors to incorporate similar language in their subcontracts with small businesses (including those for the acquisition of commercial items), thereby binding themselves to make accelerated payments to their subcontractors. However, agencies are not required to pay interest on any payments that are not made within "accelerated" time frames, unlike with "late" payments under the Prompt Payment Act. In addition, because they lack privity of contract with the government, small business subcontractors generally cannot hold agencies accountable if the prime contractor fails to incorporate the requisite clauses in its subcontracts, or fails to make accelerated payments pursuant to such clauses. The FAR has not been similarly amended to address "accelerated" payments to small business contractors , although the general policy of accelerating payments to such entities remains in effect. Section 8(d) of the Small Business Act provides several different protections to subcontractors that qualify as "small businesses" pursuant to the act, by generally requiring prime contractors to (1) agree to subcontract certain percentages of the work to be performed under federal contracts to various types of small businesses; (2) make "good faith efforts" to work with the subcontractors whom they "used" in preparing their bids or proposals; and (3) notify the contracting officer of the federal agency that awarded the contract in writing if payment to a subcontractor is late or reduced. Amendments made to Section 8(d) of the Small Business Act in 1978 established the "Small Business Subcontracting Program," a program designed to benefit certain prospective subcontractors on federal prime contracts. The requirements of this program vary depending upon the anticipated value of the contract. Contracts valued at over $150,000 and performed within the United States must generally include two clauses pertaining to subcontracting with small businesses. The first of these clauses articulates federal policies regarding subcontracting with small businesses and timely payment of subcontractors: It is the policy of the United States that small business concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled by service-disabled veterans, qualified [Historically Underutilized Business Zone] HUBZone small business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, and small business concerns owned and controlled by women shall have the maximum practicable opportunity to participate in the performance of contracts let by any Federal agency, including contracts and subcontracts for subsystems, assemblies, components, and related services for major systems. It is further the policy of the United States that its prime contractors establish procedures to ensure the timely payment of amounts due pursuant to the terms of their subcontracts with small business concerns, small business concerns owned and controlled by veterans, small business concerns owned and controlled by service-disabled veterans, qualified HUBZone small business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, and small business concerns owned and controlled by women.. The second of these clauses embodies the contractor's agreement to carry out the aforementioned policy "to the fullest extent consistent with the efficient performance of this contract," as well as cooperate in any studies necessary to determine the extent of its compliance. Contracts in excess of $700,000 ($1.5 million for construction contracts) that offer subcontracting possibilities generally must also incorporate a subcontracting plan that includes the following: "[s]eparate percentage goals" for subcontracting with small businesses, veteran-owned small businesses, service-disabled veteran-owned small businesses, HUBZone small businesses, small disadvantaged businesses, and women-owned small businesses; a statement of the total dollars planned to be subcontracted and the total dollars planned to be subcontracted to small businesses; a description of the principal types of supplies and services to be subcontracted; and assurances that the contractor will (1) include terms relating to the government's policy of promoting contracting with small businesses in all subcontracts that offer subcontracting opportunities and (2) require all subcontractors receiving subcontracts valued in excess of $700,000 ($1.5 million for construction) that are not themselves small businesses to adopt their own subcontracting plans. Contractors on these "larger" contracts are also required by Small Business Administration (SBA) regulations to provide pre-award written notification to unsuccessful small business offerors on all subcontracts valued at over $150,000 for which a small business concern received a preference. This notification must include the name and location of the apparently successful offeror and its small business status, if any. "Large" prime contractors are encouraged, but not required, to provide similar notice to offerors for subcontracts valued at less than $150,000. The contracting officer has discretion in determining whether particular contracts require a subcontracting plan, and the percentage goals for particular contracts need not correspond to the procuring activities' goals for the percentage of contract and/or subcontract dollars awarded to various categories of small businesses. However, any subcontracting plan that is required constitutes a material part of the contract, potentially allowing the contractor to be terminated for default if it fails to substantially perform in accordance with the requirements of the plan. Additionally, the contract must include a clause requiring the contractor to pay liquidated damages of an "amount equal to the actual dollar amount by which the contractor failed to achieve each subcontracting goal" if the contractor fails to make a good faith effort to comply with the plan. Agencies are also required to consider contractors' performance vis-à-vis their subcontracting plans when evaluating their past performance, determining whether prospective contractors are responsible, and making source selection decisions in certain negotiated procurements. If such percentage goals were not contained in the subcontracting plan, prime contractors would generally be free to subcontract with whomever they wish, and various categories of small businesses would not necessarily have this opportunity to obtain federal contract dollars. However, although subcontracting plans are intended to benefit small businesses, these businesses are not parties to the contract between the government and the contractor, and they generally cannot enforce its terms against the prime contractor. Only the government may generally do so. The 111 th Congress expanded the payment and other protections for small business subcontractors under Section 8(d) of the Small Business Act when it enacted the Small Business Jobs Act (SBJA) of 2010. Among other things, the SBJA amended Section 8(d) to require that prime contracts incorporating subcontracting plans also include terms obligating the contractor to: make a good faith effort to acquire articles, equipment, supplies, services, or materials, or obtain the performance of construction work from the small business concerns used in preparing and submitting … the bid or proposal, in the same amount and quality used in preparing and submitting the bid or proposal, and provide the contracting officer with a written explanation whenever it fails to do so. In addition, the SBJA amended Section 8(d) to require that prime contractors with subcontracting plans notify the contracting officer in writing if they pay a subcontractor a reduced price, or if payment is more than 90 days past due on a contract for which the federal agency has paid the prime contractor. Contracting officers are also required to consider any "unjustified failure" by a prime contractor to make full or timely payments to a subcontractor in evaluating the contractor's performance, and note any "history" of unjustified failures to make full or timely payment in the Federal Awardee Performance and Integrity Information System (FAPIIS). Regulations promulgated by SBA to implement these provisions of the SBJA further bar prime contractors from restricting subcontractors' ability to "discuss[] any material pertaining to payment or utilization with the contracting officer," apparently with the intent of promoting reporting by subcontractors in the event that prime contractors fail to provide the requisite notices. However, the preface to these regulations also makes clear that SBA does not view the SBJA as requiring contracting officers to involve themselves in disputes regarding reduced or late payments, or regarding whether particular subcontractors were "used" in preparing bids or proposals. Instead, SBA envisions contracting officers factoring contractors' failure to work with small businesses "used" in their bids or offers, or unjustifiable late or reduced payments, into contractors' performance evaluations.
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Payment and other protections for subcontractors on federal contracts are of perennial interest to Members and committees of Congress, in part, because many subcontractors are small businesses, and it is the "declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small business concerns." Subcontractors on federal contracts do not have "privity of contract"—or a direct contractual relationship—with the federal government. As such, subcontractors would generally lack the payment and other protections that federal prime contractors enjoy. However, Congress has enacted several measures that give small business and other subcontractors certain protections. Key among these are the Miller Act, the 1988 amendments to the Prompt Payment Act, and Section 8(d) of the Small Business Act. The Miller Act of 1935, as amended, authorizes subcontractors who furnished labor or materials used in carrying out federal construction projects valued in excess of $150,000 to bring a civil action against prime contractors' payment bonds to obtain payments due. Congress enacted the Miller Act to compensate for the difficulties that subcontractors would otherwise have in obtaining payment from federal construction contractors, given that they cannot place a mechanic's lien on the work because the government has sovereign immunity. The doctrine of sovereign immunity protects the government from being sued without its consent, and the Contract Disputes Act waives the government's sovereign immunity only as to suits involving contracts to which the government is a party, not subcontracts under these contracts. Relatedly, because there is no privity of contract between the government and the subcontractor, the subcontractor generally cannot sue to enforce the payment or other terms of the subcontract against the government. The 1988 amendments to the Prompt Payment Act provide an additional form of payment protection for subcontractors on federal construction contracts by requiring federal agencies to include in their contracts a clause obligating the prime contractor to pay the subcontractor for "satisfactory" performance within seven days of receiving payment from the government. Absent such a clause in the prime contract, the prime contractor would generally be free to agree to whatever payment terms it wishes with the subcontractor and would not necessarily pay the subcontractor as quickly. However, the federal government cannot be interpleaded as a party to any disputes between contractors and subcontractors over late payments or interest, and contractors' obligations to pay subcontractors cannot be passed on to the federal government in any way, including by contract modifications or cost-reimbursement claims. Section 8(d) of the Small Business Act provides yet another payment protection for subcontractors by requiring that prime contractors notify officials of the federal agency that awarded the contract (known as "contracting officers") in writing whenever they pay a "reduced price" to a subcontractor for completed work, or whenever payment is more than 90 days past due. Section 8(d) also generally requires that prime contractors agree to plans for subcontracting certain percentages of the work to be performed under federal contracts to various types of small businesses. In addition, under Section 8(d), prime contractors must make "good faith efforts" to work with the subcontractors whom they "used" in preparing their bids or proposals, and provide agency contracting officers with a written explanation whenever they fail to do so. Without these subcontracting plans, or similar contract terms, prime contractors would generally be free to subcontract with whomever they wish for the completion of work under the contract and would not be required to deal with various categories of small businesses.
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President Obama's FY2015 budget proposes to add to the Temporary Assistance for Needy Families (TANF) block grant a $602 million per year "Pathways to Jobs" fund. The fund would exclusively finance subsidized employment programs. The proposal outlined in budget documents would make grants to states to subsidize jobs for low-income parents, including noncustodial parents; guardians of children; and youth. Eligible persons would either have to be eligible for TANF cash assistance or have incomes below 200% of the poverty line. Under the proposal, the program would subsidize up to 100% of employment costs (wages, workplace benefits, training, and administrative costs) for the first 90 days of employment. Partial subsidies would be payable thereafter. To offset the cost of the "Pathways to Jobs" fund, the budget proposes to end the current law TANF "contingency fund. " The Administration's "Pathways to Jobs" proposal comes as interest in subsidized employment for the economically disadvantaged has been rekindled by a brief experience of TANF-funded jobs during the recent recession. To help assess the proposal, this report provides background on government-funded subsidized employment programs; discusses the history of subsidized employment within the TANF block grant; and examines some of the policy considerations raised by the proposal. Subsidized employment programs use government funds to pay all or part of the wages of those working in jobs. The job may be in either the public or the private sector. The employment subsidies are payments to employers that reduce the cost of hiring and employing a program participant. These jobs pay wages, unlike unpaid activities that are performed in exchange for receiving a cash assistance benefit (often referred to as "workfare"). Subsidized employment programs are also distinct from "on-the-job training," because there is no explicit requirement that employees be given training opportunities. Historically, subsidized employment programs usually provided public service jobs. They began as measures to provide work and income during the mass unemployment of the Great Depression, as the federal government employed persons in the Works Progress Administration (WPA) and Civilian Conversation Corps (CCC). Beginning in the 1970s, public service jobs were also used to address unemployment during recessions. Under the Comprehensive Employment and Training Act (CETA), public service jobs were used both to address cyclical unemployment as well as provide employment to the economically disadvantaged. These were jobs in state or local governments. CETA's public service employment program ended in 1981. From that time until the 2007-2009 recession, subsidized employment was provided primarily in summer youth employment, and in transitional jobs demonstrations targeting very "hard-to-serve" adults. Transitional jobs are usually in either state or local governments or in the nonprofit sector. There has been limited funding for transitional jobs. In FY2011, an appropriation of $40 million was provided for the Department of Labor's (DOL's) enhanced transitional jobs demonstration program. Though subsidized employment, by paying part or all of the wages to employers, has been a small part of recent policies for the economically disadvantaged, wage subsidies in general have been an important part of public policy for low-income families with children since the 1990s. The largest wage subsidies go directly to low-income workers (rather than employers) through the Earned Income Tax Credit (EITC) and child tax credit. These two refundable tax credits are conditioned on having earnings, and are policies designed to "make work pay" more than public assistance and induce parents who would earn low wages into the labor force. Less attention has been focused on reducing the costs to employers of hiring people in low-income families. Much of the experience of subsidizing private sector employment is from tax credits to employers for hiring recipients of public assistance or disadvantaged persons (for example, the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit). Though there is limited recent experience with subsidized employment programs from which to determine whether they can achieve their policy goals, this might soon change. The Department of Health and Human Services (HHS) is currently fielding an experiment evaluating subsidized jobs programs, though findings from this study are yet to be published. The Department of Labor is currently fielding and evaluating "enhanced" transitional jobs programs. Additionally, the recent "Farm Bill" permitted states to operate pilot work programs in the Supplemental Nutrition Assistance Program (SNAP), which could include subsidized employment. The TANF block grant is best known for helping states finance cash assistance ("welfare") for needy families with children. In addition to cash assistance, TANF finances a wide range of benefits and services aimed at ameliorating the effects of, and addressing the root causes of, child poverty. Since the enactment of the 1996 welfare reform law, which established TANF, states have had the authority to use TANF funds for subsidizing the employment for certain populations. States can subsidize employment for recipients of cash assistance, or operate programs for broader populations as long as it is consistent with TANF goals. The populations states can use TANF to assist include parents, including noncustodial parents, and youths. States have broad latitude in designing their TANF programs, including subsidized employment. However, states must have procedures in place to address potential "displacement" of regular workers by TANF assistance recipients involved in work activities, including subsidized employment. States are prohibited from employing a TANF assistance recipient in a position when another individual is on layoff from the same or a substantially equivalent job, and they cannot place an individual in a job from which another person has been fired for the purpose of replacement with a TANF assistance recipient in an activity. States must create a procedure to hear complaints of violations of the "nondisplacement" rules. Though subsidized employment has been a part of TANF from its inception, up until FY2010 it was little used. Figure 1 shows federal and state TANF expenditures on wage subsidies for FY2000 through FY2012. As shown, expenditures tended to be low before FY2010, but then spiked to over $1 billion in FY2010. The spike occurred at the level of peak unemployment caused by the 2007-2009 recession. It was also in response to extra TANF funding provided, in part, to finance subsidized employment programs. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) included a provision to create a special temporary "Emergency Contingency Fund" (ECF) within TANF. The ECF was created, in part, because of projections that the "regular" TANF contingency fund created in the 1996 welfare reform law would be exhausted. Unlike other TANF grants to states, the ECF financed three categories of spending only, rather than any allowable TANF activity. The three categories were (1) basic assistance, (2) non-recurrent short-term aid, and (3) subsidized employment. Of the $5 billion in extra funds provided to states and tribes under the ECF, $1.3 billion financed extra spending for subsidized employment. Most of the subsidized employment expenditures financed by the ECF were made in one year, FY2010. The ECF financed an estimated 280,000 subsidized job slots, making it the largest subsidized employment program of its kind since the 1970s. About half of these slots were for needy parents; the other half were used to expand youth employment programs. The ECF was created as an emergency measure in response to steep employment declines during the 2007-2009 recession, and did not include provisions to evaluate the efficacy of its spending. However, a retrospective study of ECF-funded subsidized employment found the following: States were able to implement subsidized employment programs rapidly in response to ECF funding. Some states expanded existing programs; others created entirely new programs. Unlike previous subsidized employment programs, the ECF often financed jobs in the private sector. While some programs provided public sector employment as well, the ECF did not rely solely on public service employment to provide jobs. Many of those served by ECF subsidized jobs were not on the TANF cash assistance rolls. Some individuals might have been eligible for TANF assistance and were in subsidized jobs in lieu of receiving cash assistance. However, the ECF also served a broader population than those eligible for TANF cash. To make subsidized employment programs attractive for private sector employers, states tended to select "work-ready" individuals for subsidized jobs. Under TANF, st ates must meet numerical work participation standards, which specify that a percentage of each state's cash assistance caseload must be engaged in certain activities. There are 12 enumerated activities that states may count toward meeting their standards, including subsidized public sector and subsidized private sector employment. Figure 2 shows the percentage of TANF cash assistance adults who were engaged in public or private sector subsidized employment for FY2000 through FY2011. As shown, this percentage has been relatively low throughout the period. There was an increase in the share engaged in subsidized employment beginning in FY2008, and this percentage spiked in FY2010. However, even in FY2010, the share of TANF adults engaged in subsidized employment reached only 1.6%—which translates into a monthly average of about 19,000 recipients. This reinforces the finding from the study on ECF-funded subsidized employment that many of these jobs went to people who were not on the cash assistance rolls. ECF-subsidized employment benefitted a broader population of disadvantaged adults and youth. The Administration's proposal to create a TANF fund to exclusively finance subsidized employment and end the current law contingency fund raises two sets of policy considerations. The first is whether subsidized employment programs can achieve certain policy goals. Subsidized employment programs can be intended to serve a number of policy purposes, including (1) creating jobs, (2) providing income support to those in subsidized jobs, and (3) increasing the long-term employability of participants. There is some research to draw upon in assessing whether the TANF subsidized employment initiative might meet these goals. The second set of policy considerations asks whether certain policy goals are forgone by offsetting the cost of the subsidized employment program through ending the current law contingency fund. Policy makers, should they choose to end the current TANF contingency fund, might wish to consider alternative uses of the budget savings from such an action. A policy goal of subsidized employment, particularly during economic downturns, is creating jobs that would otherwise not exist. The available evidence from previous public service employment programs indicates that some new jobs are created. However, at least some of these public service jobs would have existed as regular public sector jobs in the absence of the program. At the conclusion of the CETA public service employment program in 1981, the Congressional Budget Office (CBO) noted that there were "no firm estimates" of the degree to which public service employment funds substituted for state and local funds in employing individuals. The research on employer tax credits for hiring disadvantaged workers notes that the rate of participation among employers in these tax credit programs is fairly low. Programs with low interest among employers are unlikely to have job creation potential. However, it has been noted that programs that are less targeted to the most disadvantaged might receive more interest from employers. A goal of the 1996 welfare reform law was to have assistance recipients work. It attempted to end "long-term dependency on public benefits without being required to return anything to society." Subsidized jobs provide the opportunity to earn income through work, furthering that goal. There are three evaluations of subsidized jobs programs to help inform whether this policy goal might be met: The National Supported Work Demonstration of the 1970s, and two more recent evaluations of "transitional jobs." The three evaluations found that the subsidized employment program raised the earned income of program participants during the period that they were in subsidized jobs. That is, they are effective in employing those who would otherwise not be employed. Thus, the past research indicates that if the goal of a subsidized employment program is to provide income support through work, subsidized employment can be an effective strategy. The existing evaluation research provides mixed evidence on whether subsidized employment programs increase the long-term employability of program participants. That is, does participation in subsidized employment provide benefits once the subsidized job ends? One of the first evaluated subsidized jobs programs—the National Supported Work Demonstration Project of the 1970s—found beneficial long-term impacts of participation for single mothers receiving assistance. However, more recent evaluations of "transitional jobs" programs found little evidence of long-term impacts. The President's FY2015 budget proposal would offset the cost of the new "Pathways to Jobs" fund by ending the current law contingency fund. The TANF contingency fund was established in response to the 1996 welfare law's changes in financing programs providing assistance to needy families with children. The 1996 law converted pre-TANF matching grant programs, which automatically responded to changes in expenditures and caseloads, into a set block grant. The basic TANF block grant is a fixed dollar amount and does not change with the circumstances in a state (e.g., its economic conditions, caseloads, or number of children in poverty). The fixed basic grant under TANF led to concerns that funding might be inadequate during economic downturns. Thus, the 1996 law created a separate $2 billion fund to provide extra TANF funding during those periods. States would need to meet criteria of economic need in order to access the fund. Figure 3 shows TANF contingency fund grants and their relationship to the unemployment rate for FY1998 through FY2014. As shown in the figure, the contingency fund often has not behaved as a countercyclical source of extra TANF funds. The fund was little used before FY2008. Grants did not increase together with the unemployment rate during the 2001 recession. States generally did not meet the criteria of economic need required to access this fund during that recession. Beginning in 2008, grants did increase with the more severe recession of 2007-2009. With the increase in access to the contingency fund, it was projected that the $2 billion fund would be exhausted. In fact, the contingency fund was exhausted in early FY2010. Figure 3 also shows grants from the ECF. It was the ECF—and not the regular contingency fund—that provided the bulk of extra TANF funding in response to the recent severe recession. The ECF expired at the end of FY2010. Congress has provided new, annual appropriations for the regular contingency fund in each year, FY2011 to FY2014. For future years, the Congressional Budget Office (CBO) baseline assumes that TANF contingency fund grants will remain at their current level, despite continuing declines in unemployment. Based on these projections, the contingency fund would also not behave as intended for the future, as spending would continue even in an improved economy. Table 1 shows the estimated FY2014 contingency fund awards by state. In FY2014, 20 states are drawing funds from the TANF contingency fund. Though the existing contingency fund has not functioned as originally intended, the use of these funds for subsidized employment would leave TANF without a potential source of additional spending during a future recession. During the past recession, state government budgets were stressed, with many states cutting back on spending to meet balanced budget requirements. However, for the period when the ECF provided states with extra funds, states generally maintained their TANF benefit amounts. When the ECF expired at the end of FY2010, a number of states reduced their benefits and tightened eligibility for cash assistance. Congress could opt to redesign the TANF contingency fund so that it would be more responsive to changes in economic conditions than the current contingency fund. That is, it could create a fund that would spend less than is currently projected during good economic times, and would provide a higher level of funding in case the economy falls into recession. Though a fund to provide extra grants during recessions might help TANF respond to future economic downturns, there are a number of difficulties in developing such a fund. Each recession is different—and there is no guarantee that a program that would have been responsive in past recessions will be responsive in future recessions. Subsidized employment programs historically were provided in the workforce programs, with most jobs in the public sector. Such public service jobs used to be associated with both counter-cyclical job creation as well as providing work for the economically disadvantaged. Except for youth employment programs, large-scale public service employment ended in 1981. The brief experience of TANF ECF-funded subsidized jobs has rekindled interest in providing government funds to subsidize the cost of employing the economically disadvantaged. Unlike many earlier subsidized jobs programs, the ECF did not rely on public service jobs alone, financing some jobs in the private sector. Subsidized jobs are one means of having economically disadvantaged parents work—a goal of the 1996 welfare reform law. However, the evidence is mixed on whether subsidized jobs programs can have positive long-term impacts on the employment and earnings of program participants. Research comparing the efficacy of subsidized jobs to other potential policies—such as education, training, or on-the-job training—has yet to be done. U.S. Department of Health and Human Services, Administration for Children and Families, Office of Planning, Research, and Evaluation (OPRE). Subsidizing Employment Opportunities for Low-Income Families. A Review of State Employment Programs Created Through the TANF Emergency Fund , OPRE Report 2011-38, December 2011, prepared by MDRC, http://www.acf.hhs.gov/sites/default/files/opre/tanf_emer_fund.pdf . Dan Bloom. Transitional Jobs: Background, Program Models, and Evaluation Evidence. MDRC. February 2010. http://www.mdrc.org/sites/default/files/transitional_jobs_background_fr.pdf .
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President Obama's FY2015 budget proposal would establish within the Temporary Assistance for Needy Families (TANF) block grant a "Pathways to Jobs" fund. The fund would help states pay for subsidized employment programs targeted toward needy parents, guardians, and youth. Subsidized employment programs use government funds to pay all or part of the wages, benefits, and other costs of employing a participant. Under the President's proposal, the subsidized job could be in either the public or the private sector. Funding for "Pathways to Jobs" would be $602 million per year beginning in FY2015. The Administration's "Pathways to Jobs" proposal comes as interest in subsidized employment as a policy for the economically disadvantaged was rekindled by a brief experience of TANF-funded jobs during the recent recession. The American Recovery and Reinvestment Act of 2009 (P.L. 111-5) created a temporary "Emergency Contingency Fund" (ECF) that provided $5 billion for FY2009 and FY2010. The ECF was created, in part, because of projections that the TANF contingency fund created in the 1996 welfare reform law would be exhausted. The ECF was different from other TANF grants to states in that it financed only certain TANF expenditures: basic assistance, short-term aid, and subsidized employment. Of the $5 billion in ECF funding, $1.3 billion financed increased subsidized employment expenditures. An estimated 280,000 persons benefitted from ECF-funded subsidized jobs. About half of these persons were adult parents; the other half were youth. ECF subsidized employment differed from earlier subsidized jobs initiatives by placing some adult parents in private sector jobs, in addition to public service employment. ECF-funded subsidized employment served a population broader than those on the TANF cash assistance rolls. Subsidized employment programs can have a number of policy goals: job creation, particularly during a recession; providing income support through work; and improving the long-term employability of participants. There is little recent experience to draw on in assessing the Administration's proposal. However, past research has indicated that subsidized employment programs can meet the goal of providing income support through work, as evaluations have indicated that such programs employ those who would otherwise not have a job. The research is less conclusive on the other policy goals. The costs of the Administration's proposed TANF-subsidized employment initiative would be offset by ending the current law TANF contingency fund. The TANF contingency fund was created in the 1996 welfare reform law and provided $2 billion for extra grants to states during recessions. However, the fund often has not behaved as a countercyclical source of extra TANF funds. In assessing the Administration's proposal, policy makers might also consider whether savings from ending the current contingency fund should go to subsidized employment programs or other uses—for example, creating a modified contingency fund to provide a better countercyclical source of extra TANF funds.
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Afghanistan has been a central U.S. foreign policy concern since American forces, in the wake of the September 11, 2001, attacks, helped lead a military campaign against Al Qaeda and the Taliban government that harbored it. Since then, the United States, along with NATO and other international partners, has deployed tens of thousands of troops and provided tens of billions of dollars in development assistance. The overarching goal of this effort is to support the elected Afghan government and bolster its security forces against a resilient insurgency by the Taliban and others, including (since 2014) an active affiliate of the Islamic State (IS, also known as ISIS, ISIL, or the Arabic acronym Da'esh ). After an Afghan opposition coalition known as the Northern Alliance drove the Taliban government out of Kabul with the help of American airpower and a small number of U.S. special forces, the U.N. convened Afghan leaders in Bonn, Germany to lay out a roadmap for the creation of a democratic government in Afghanistan. Taliban representatives were not invited to participate in the meetings in Bonn. That conference established an interim administration headed by Hamid Karzai, and called for a June 2002 emergency loya jirga (a traditional Afghan consultative assembly). Another loya jirga was convened in late 2003 to endorse a new constitution, which was ratified in January 2004. Afghanistan held its first presidential election in October 2004, and Karzai was elected with 55% of the vote. The first parliamentary elections followed in September 2005. Sporadic Taliban attacks continued during this time, with U.S. intelligence collecting evidence of an "organized Taliban revival" by early 2004. Under intense U.S. pressure most Al Qaeda and Taliban fighters had fled into Pakistan, where they helped to inspire an Islamist insurgency that would later drive the Pakistani state into full-scale crisis. At the same time as they battled Al Qaeda and other Islamist militants at home, Pakistan's security institutions aided the Afghan Taliban, including by providing safe haven to much of its leadership, a legacy of Pakistan's formal recognition of the group from 1996 to 2001. By 2007, despite nascent democratic development and improvements in most Afghans' quality of life, the American effort in Afghanistan, once described as "the good war," appeared "off course," with security deteriorating, narcotics production increasing, and levels of Taliban violence steadily rising. In response, President Barack Obama increased the number of American forces (from approximately 36,000 in February 2009 to a high of about 100,000 in 2011) as part of an effort to combat the Taliban insurgency and increase the capacity of the Afghan government and security forces. Most security metrics improved during the "surge," but uncertainty rose as Afghan forces took the lead for security nationwide (in mid-2013) amidst a steady drawdown of U.S. and international forces as part of a planned withdrawal. That uncertainty was compounded by the 2014 presidential election, which was marred by widespread allegations of fraud and was only resolved with the creation of a fragile unity government formed after months of U.S. mediation. Still, the NATO-led International Security Assistance Force (ISAF, 2003-2014) mission was replaced by Resolute Support Mission (RSM, 2015-present) at the end of 2014 as scheduled. The killing of Taliban leader Mullah Mansour (successor to original Taliban leader Mullah Omar, who died of natural causes in 2013) in a May 2016 U.S. airstrike in Pakistan demonstrated continued Taliban vulnerabilities to U.S. military and intelligence capabilities. At the same time, the Taliban expanded their control and influence in rural areas while pressuring urban centers (as evidenced by their brief seizure of the provincial capital of Kunduz in 2015). President Donald Trump expressed few policy positions on Afghanistan during the 2016 presidential campaign, though he had previously conveyed skepticism about the American effort there. After months of debate within the Administration, President Trump announced a new strategy for Afghanistan and South Asia in a nationwide address on August 21, 2017. The strategy features a tougher line against Pakistan and a larger role for India; no set timetables; expanded targeting authorities for U.S. forces; and around 3,000 additional troops, bringing the total number of U.S. forces in the country to approximately 14,000-15,000 (about 8,500 of which are part of RSM). President Trump, who criticized his predecessor's use of "arbitrary timetables," did not specify what conditions on the ground might necessitate or allow for alterations to the strategy going forward. Some have characterized the Trump strategy as "short on details" and serving "only to perpetuate a dangerous status quo." Others welcomed the strategy, contrasting it favorably with proposed alternatives such as a full withdrawal of U.S. forces, which President Trump described as his "original instinct," or a strategy that relies heavily on contractors. More than a year after President Trump's speech, it remains unclear to what extent the new strategy has changed dynamics on the ground in Afghanistan. While U.S. officials continue to publicly express optimism, the extent of territory controlled or contested by the Taliban has steadily grown in recent years by most measures. In its July 30, 2018, report, the Special Inspector General for Afghanistan Reconstruction (SIGAR) reported that the share of districts under government control or influence remains at 56%, tied for the lowest level recorded in the two years SIGAR has tracked that metric, with 14% under insurgent control or influence, and the remaining 30% contested. While most Taliban gains have been in sparsely populated rural or mountainous areas, the group has also been able to contest urban centers; militants have briefly overrun two provincial capitals in 2018 thus far (Farah in May, Ghazni in August). Additionally, the Taliban have demonstrated an ability to conduct operations in different parts of the country simultaneously and inflict significant casualties on Afghan forces, though the U.S. military classified those figures and various other metrics related to ANDSF performance in 2017. Reflecting the Trump Administration's reported frustration with the 17-year-old U.S. war effort, 2018 has seen a flurry of diplomatic activity that may portend progress toward peace talks. Most importantly, the Trump Administration is reportedly considering direct talks with the Taliban in what would represent a significant change in American policy. Other reports, which U.S. officials have not denied, indicate that at least some preliminary discussions between U.S. and Taliban officials have already taken place. However, the Afghan government, or some of its members, may be opposed to any negotiation with the Taliban in which they are not the lead interlocutor, and the Taliban's own stance on negotiations is unclear. Ongoing disputes between Afghan leaders may worsen in advance of long-delayed and already controversial parliamentary elections, set for October 2018, and the presidential election slated for April 2019. In the decade before the September 11, 2001, terror attacks, Afghanistan was not a major focus of congressional attention. Since then, Congress has taken an active role in shaping U.S. policy toward Afghanistan. Major initiatives and areas of congressional interest are described below. U.S. military forces deployed into Afghanistan under the 2001 Authorization for Use of Military Force (AUMF, P.L. 107-40 ), which allows the president "to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided" the September 11, 2001, attacks as well as any entities that harbored them. The Taliban regime collapsed after about two months of major combat operations. U.S. operations in Afghanistan against the Taliban, Al Qaeda, and the local Islamic State affiliate continue under that resolution, though Members have proposed a range of measures to replace the 2001 AUMF with a new authorization that could alter U.S. military engagement in Afghanistan, as outlined in the chart below. After the fall of the Taliban, U.S. efforts shifted quickly to providing humanitarian support to the Afghan people, stabilizing the country, and building up a democratic Afghan government. One of the most important congressional measures in this regard was the 2002 Afghanistan Freedom Support Act (AFSA, P.L. 107-327 ), which authorized a total of $3.8 billion in humanitarian, developmental, counter-narcotics, and security assistance over four years. The act contains a number of provisions directing U.S. efforts in Afghanistan and establishing congressional oversight thereof; many of these provisions anticipate additional congressional directives enacted in subsequent years. Such provisions include the authorization of funds for specific purposes (including the creation of positions within executive branch agencies; see below); regular notification and reporting requirements; and subjecting aid to Afghanistan to the same conditions as assistance provided under other pieces of legislation, like the Foreign Assistance Act of 1961 and the Arms Export and Control Act of 1976. The U.S.-led invasion of Iraq in March 2003 largely overshadowed the war in Afghanistan, and much of the legislative attention to Afghanistan in the subsequent several years came in bills and legislative provisions that treated the two wars together. As conditions in Afghanistan deteriorated, however, congressional attention returned to Afghanistan and some Members sought to scrutinize the U.S.-led international project there more closely. Congress mandated a number of reports, which remain among the most important sources for information on U.S. efforts in Afghanistan. One of the most significant congressional oversight actions was the 2008 establishment of a Special Inspector General for Afghanistan Reconstruction (SIGAR), modeled in part on a similar office overseeing Iraq. Congress directed that SIGAR publish quarterly reports detailing the obligation and expenditure of funds appropriated for Afghan reconstruction. Congress also required periodic audits and investigations of specific projects and funds. The FY2008 National Defense Authorization Act (NDAA) added more reporting requirements. Section 1230 of the Act directed the President, through the Department of Defense, to submit a biannual report on "Progress Toward Security and Stability in Afghanistan." The first report was submitted under that title in June 2009. In the FY2015 NDAA ( P.L. 113-291 ), Congress required a report on "Enhancing Security and Stability in Afghanistan," among other reporting requirements, and biannual reports have been submitted under that title since June 2015 (most recently on July 3, 2018). In addition to these ongoing reports, Congress has regularly mandated the submission of one-time reports on specific issues in appropriations and defense authorization bills. Individual report directives proposed to and included in legislation in the 115 th Congress can be found below. Congress has appropriated $126.3 billion for relief and reconstruction in Afghanistan s ince FY2002 , according to SIGAR's July 30, 2017 quarterly report. During the Karzai administration, the United States and oth e r international donors "increasingly sought to condition assist ance funds for Afghanistan… as a result of inadequate reforms." A 2014 report by m ajority s taff of the Senate Foreign Relations Committee also recommended that "a higher proportion of U.S. assistance should be conditioned based on specific reforms by the Afghan government." Accordingly, Congress has imposed a number of directives and conditions on the use of both security and development assistance to Afghanistan (e.g. , Economic Support Fund, ESF, and International Narcotics Control and Law Enforcement, INCLE) for a number of years. Most of those statutory conditions have been enacted through appropriations measures. As outlined below, FY 2019 appropriations bills would prohibit the use of funds for activities that involve individuals suspected of involvement in corruption, narcotics trafficking, or human rights violations . A dditionally, they would require the Secretary of State to certify that the Afghan government is governing democratically , protect ing women's rights, and publicly reporting its national budget (among other conditions) before obligating funds . T here are a number of additional conditions on U.S. assistance not specific to Afghanistan, such as the Leahy Laws prohibiting security assistance to foreign security forces that have perpetrated a gross violation of human rights. S ome have suggested that Afghan forces may have committed such violations . Congress has also played an important role in shaping the bureaucratic structures within the executive branch that are responsible for U.S. policy on Afghanistan. In the 2002 AFSA, Congress authorized the creation of a "coordinator" for Afghanistan and U.S. assistance there, to serve at the rank of ambassador. In 2007, the House passed a bill that would have authorized a Senate-confirmed special envoy to promote cooperation between Afghanistan and Pakistan. The George W. Bush Administration described the section authorizing the special envoy as "significantly objectionable," and the Senate did not take up the bill." In 2009, however, the Obama Administration created a similar position under State Department general authorities by appointing Richard Holbrooke as the first Special Representative for Afghanistan and Pakistan (SRAP). Various congressional proposals in recent years would have statutorily authorized, altered the mission of, required reporting on, or otherwise addressed the office, which the Trump Administration closed in September 2017. Other congressional measures have sought to condition, limit, or end the U.S. military effort in Afghanistan. While no measure limiting or terminating the U.S. military presence in Afghanistan has ever passed either chamber, support for such proposals in the House of Representatives generally seems to have grown from 2009 to 2014, the period when most of these measures were introduced. House bills calling for a "responsible end to the war in Afghanistan," for example, attracted 33 cosponsors in 2010 and 72 cosponsors in 2011; NDAA amendments that would have cut off funding for U.S. operations (other than the withdrawal of U.S. forces) attracted 113 and 153 votes in 2012 and 2014, respectively. Since the Trump Administration's announcement of the South Asia strategy in August 2017, congressional interest in Afghanistan seems to have increased, with some Members assessing the new strategy, events on the ground, and broader U.S. foreign and domestic policy interests as they relate to Afghanistan. The table below provides summaries and information on the status of proposed and enacted Afghanistan-related legislation in the 115 th Congress.
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For nearly two decades, Congress has shaped the U.S. approach to Afghanistan and the ongoing conflict there. This product provides a summary of legislative proposals considered in the 115th Congress that relate to U.S. policy in Afghanistan. These address a number of issues, including the following. The size, mission, and other aspects of the U.S. troop presence in the country. Types of information that the executive branch provides to Congress, largely as part of regular reporting requirements. The role of women in Afghan society, government, and the military. The purposes for U.S. aid, and conditions under which it can be obligated. The overall U.S. strategy in Afghanistan, including prospects for a negotiated settlement. Regional dynamics, including the role of Russia in Afghanistan. While Pakistan is a key player in the Afghan conflict, the measures described in this report do not include any primarily related to Pakistan, though many such proposals reference the war in Afghanistan. This report also does not include legislative proposals related to special immigrant visas for Afghan nationals who work for or on behalf of the U.S. government in Afghanistan. For more on that program, see CRS Report R43725, Iraqi and Afghan Special Immigrant Visa Programs, by Andorra Bruno. For more information on U.S. policy in Afghanistan, see CRS Report R45122, Afghanistan: Background and U.S. Policy In Brief, by Clayton Thomas.
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During the Obama Administration, the two federal agencies primarily responsible for administering the private health insurance provisions in the Affordable Care Act (ACA)—the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS), and the Internal Revenue Service (IRS) within the Treasury Department—took a series of actions to delay, extend, or otherwise modify the law's implementation. This report discusses selected administrative actions taken by CMS and the IRS through February 2015 to address ACA implementation. The report is no longer being updated and is available primarily for reference purposes. Table 1 summarizes the more significant administrative actions taken, all of which focused on implementation of the ACA's complex set of interconnected provisions to expand private insurance coverage for the medically uninsured and underinsured. These actions were not the result of a single policy decision. Instead, they represented many separate decisions taken by the Obama Administration to address a variety of factors affecting the implementation of specific provisions of the law. The Administration announced a series of delays and other changes before and during the first (i.e., 2014) open enrollment period and the problematic launch of the federal—and some state-run—exchanges. The second (i.e., 2015) open enrollment period that closed on February 15, 2015, experienced far fewer administrative and technical problems. Other administrative actions largely focused on the ACA's tax provisions. The 2014 tax filing season (deadline April 15, 2015) was the first one in which individuals were required to indicate on their tax return whether they had health insurance coverage that meets the ACA's standards. Those without coverage risked being penalized unless they could claim an exemption. In addition, everyone who enrolled in coverage for 2014 through an exchange and received advance payments of the premium tax credit had to file a federal tax return in which they reconciled those payments with the actual tax credit to which they were entitled. In compiling the table, CRS made decisions about which administrative actions to include, and which ones to leave out. Generally, CRS included the more significant actions that had been the subject of debate among health policy analysts and, in many instances, the target of criticism by opponents of the ACA. It is important to keep in mind that the table is not—nor was it intended to be—a comprehensive list of ACA-related administrative actions. The table entries, which are grouped under general topic headings, are not organized in any particular priority order. Each entry includes a brief summary of the action and some accompanying explanatory material and comments to help provide additional context. Where available, links are provided to relevant regulatory and guidance documents online. Readers are encouraged to review these documents for more details about each action, including the motivation and legal authority for taking it. A companion CRS report summarizes all the legislative actions taken by the 112 th , 113 th , and 114 th Congresses to repeal, defund, delay, or otherwise amend the ACA. Perhaps the most controversial administrative action taken by the Administration was its decision to delay enforcement of the ACA's "employer mandate." On July 9, 2013, the IRS announced that it would not take any enforcement action against employers who fail to comply with the law's employer mandate until the beginning of 2015 (see Table 1 ). This ACA provision, which took effect on January 1, 2014, requires employers with 50 or more full-time equivalent employees (FTEs) to offer their full-time workers health coverage that meets certain standards of affordability and minimum value. Those employers who do not provide such coverage risk having to pay a penalty if one or more of their employees obtain subsidized coverage through an exchange. The IRS subsequently announced that employers with at least 50 but fewer than 100 FTEs will have an additional year to comply with the employer mandate (see Table 1 ). According to the Administration, these actions were taken after it was concluded that the ACA's employer mandate could not be enforced until the related requirement that employers report the coverage they offer to their employees had been fully implemented. The IRS indicated that it would work with stakeholders to simplify the reporting process consistent with effective implementation of the law. Other controversial administrative actions include those taken in response to the decision by insurers to cancel individual and small-group health plans that do not meet the ACA's new standards for health insurance coverage, which also took effect on January 1, 2014. On November 14, 2013, the Administration notified state insurance commissioners of the option to delay enforcement of certain health insurance reforms under the ACA. It encouraged state officials to permit insurers to renew noncompliant policies in the individual and small-group market for policy years starting between January 1, 2014, and October 1, 2014. The Administration subsequently extended this policy for two years. Thus, at the option of state regulators, insurers could continue to renew noncompliant policies at any time through October 1, 2016 (see Table 1 ). The Administration was criticized for creating numerous special enrollment periods that enable individuals to enroll in an exchange plan outside the annual open enrollment period. Individuals can qualify for a special enrollment period as a result of a variety of events that affect their ability to obtain or maintain health insurance coverage (e.g., moving, losing job-based coverage, gaining legal U.S. residency). Special enrollment periods were also established for individuals unable to begin or complete the process of enrolling in an exchange plan before the end of the open enrollment period because of technical problems or other circumstances. State-run exchanges were encouraged to adopt special enrollment periods similar to the ones established for federally facilitated exchanges. In addition, the Administration established numerous hardship exemptions from the ACA's "individual mandate" penalty. Under the law, most U.S. citizens and legal residents are required to maintain ACA-compliant health coverage beginning in 2014. Those without coverage for three or more consecutive months are subject to a penalty unless they meet one of the statutory exemptions, or qualify for one of the health coverage-related or hardship exemptions established by CMS. In some instances the hardship exemption is tied to qualifying for a special enrollment period. For example, individuals who qualified for a special enrollment period to finish enrolling in an exchange plan after the 2014 open enrollment period closed on March 31, 2014, were granted a hardship exemption so that they would not be penalized for being uninsured for the first four months of the year (see Table 1 ). Opponents of the ACA, who believe that the law is fundamentally flawed, argued that some of the Obama Administration's actions were effectively rewriting the ACA in an effort to make it work and add to the public's confusion about the law. The ACA's critics asserted that the actions taken by the Administration to delay enforcement of the employer mandate were illegal and raised concerns that the President was not upholding his constitutional duty to faithfully execute federal law. The Administration countered that its actions were not a refusal to implement and enforce the ACA as written. Instead, they represented temporary corrections necessary to ensure the effective implementation of a very large and complex law. Agency officials pointed to a number of factors that made it difficult to meet various ACA deadlines. Those factors included a lack of appropriations to help fund implementation activities, technological problems including the poorly managed launch of the websites for the federally facilitated exchanges and some state-run exchanges, and the need to phase in the various interconnected parts of the law so as to avoid unnecessary disruption of employment and insurance markets. Regarding the delay of the employer mandate, the Administration said that its actions were no different from those taken by previous administrations faced with the challenges of implementing a complicated law. The Administration noted that its decision to grant employers "transition relief," taken pursuant to administrative authority under the Internal Revenue Code to "prescribe all needful rules and regulations" to administer tax laws, was part of an established practice to provide relief to taxpayers who might otherwise struggle to comply with new tax law. Notwithstanding the Administration's arguments, critics question whether some of the recent delays of ACA provisions exceed the executive's traditional discretion in enforcing law to the point that they represent a blatant disregard of the law. For example, they argue that the decision to encourage states to allow insurers to renew noncompliant policies for people who want to keep their current plans directly contravenes provisions of the ACA that had become politically inconvenient. On July 30, 2014, the House voted 225-201 to approve a resolution ( H.Res. 676 ) authorizing Speaker John Boehner, on behalf of the House, to sue the President or other executive branch officials for failing to "to act in a manner consistent with [their] duties under the Constitution and laws of the United States with respect to implementation of the [ACA]." The Speaker indicated that any such lawsuit would specifically challenge the Administration's delay of the ACA employer mandate. "In 2013, the President changed the health care law without a vote of Congress, effectively creating his own law by literally waiving the employer mandate and the penalties for failing to comply with it," said Mr. Boehner. A lawsuit was filed on November 21, 2014, consisting of two counts. First, it claimed that the Administration had violated the Constitution by delaying the ACA employer mandate. Second, the lawsuit challenged the ACA's cost-sharing subsidies. These are paid to insurance companies to reduce the out-of-pocket health care costs of certain individuals and their families receiving premium tax credits. Unlike the premium tax credits, for which the ACA provided a permanent appropriation, the lawsuit argues that the law did not appropriate any funding for the cost-sharing subsidies.
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During the Obama Administration, the two federal agencies primarily responsible for administering the private health insurance provisions in the Affordable Care Act (ACA)—the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS), and the Internal Revenue Service (IRS) within the Treasury Department—took a series of actions to delay, extend, or otherwise modify the law's implementation. This report summarizes selected administrative actions taken by CMS and the IRS through February 2015 to address ACA implementation. The report is no longer being updated and is available primarily for reference purposes. A companion product—CRS Report R43289—summarizes all the legislative actions taken by the 112th, 113th, and 114th Congresses to repeal, defund, delay, or otherwise amend the ACA. The most significant administrative action was the decision by the IRS to delay implementation of the law's "employer mandate." This ACA provision, which took effect on January 1, 2014, requires employers with 50 or more full-time equivalent employees (FTEs) to offer their full-time workers health coverage that meets certain standards of affordability and minimum value. Those employers who do not provide such coverage risk having to pay a penalty if one or more of their employees obtain subsidized coverage through an exchange. The IRS announced that it would not take any enforcement action against employers who fail to comply with the law's employer mandate until the beginning of 2015. Subsequently, the agency announced that employers with at least 50 but fewer than 100 FTEs would have an additional year to comply with the employer mandate. Other controversial administrative actions include those taken in response to the decision by insurers to cancel individual and small-group health plans that do not meet the ACA's standards for health insurance coverage, which also took effect on January 1, 2014. Opponents of the ACA argued that these administrative actions were an attempt to rewrite the law in order to make it work. They asserted that some of the Administration's actions were illegal and raised concerns that the President was not upholding his constitutional duty to faithfully execute federal law. The Administration countered that its actions were authorized by federal law and represented temporary corrections necessary to ensure the effective implementation of a very large and complex act. On July 30, 2014, the House approved a resolution (H.Res. 676) authorizing Speaker John Boehner, on behalf of the House, to sue the President or other executive branch officials for failing to "to act in a manner consistent with [their] duties under the Constitution and laws of the United States with respect to implementation of the [ACA]." A lawsuit was filed on November 21, 2014, consisting of two counts. First, it claimed that the Administration had violated the Constitution by delaying the ACA employer mandate. Second, the lawsuit challenged the Administration's authority to pay cost-sharing subsidies, arguing that the law had not appropriated any funding for them.
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The United States established diplomatic relations with Mongolia in 1987, when it was still a Communist state, and since then has sought to expand bilateral cultural and economic ties. In 1991, following the signing of a bilateral trade agreement, President Bush restored Mongolia's most-favored-nation (MFN) trading status—now referred to as Normal Trade Relations (NTR)—under the conditional annual waiver provisions of Title IV of the Trade Act of 1974. That NTR status was made permanent (PNTR) effective July 1, 1999, obviating the annual trade status review process. In 1990, the ruling Mongolian People's Revolutionary Party (MPRP) declared the end of the country's one-party communist state and initiated democratic reforms with U.S. assistance. Since then, the country has been an enthusiastic practitioner of democratic government, although not without some difficulty. Mongolia has seen several reshufflings of government, for instance—the most recent in 2008-2009, when the MPRP won a majority in the State Great Hural and elected the head of the Party as Prime Minister (2008), and the Democratic Party Chairman won popular election as Mongolia's president (2009). This report provides background information on Mongolia, including political and economic conditions, the status of U.S.-Mongolian political and economic relations, and key security and foreign policy issues. Once part of the Chinese empire, Mongolia achieved independence in 1921 in a revolution backed by the Soviet Union. After this, the communist Mongolian People's Revolutionary Party (MPRP) ruled for almost 70 years, maintaining a tenuous balance between the Soviet Union and China and receiving substantial financial assistance from each. Public demonstrations for political pluralism in 1990 led to the resignation of the Communist MPRP government, whose leaders declared the end of a one-party Communist state. Since then, Mongolia has been undergoing a political and economic transition to a parliamentary democracy under new constitutional rules adopted in 1991. After decades of dependency on Soviet aid (at one point worth nearly 40% of the country's GDP), Mongolia has sought to broaden its foreign contact and trade. Mongolia's legal and financial institutions remain underdeveloped and are a serious impediment to improving the country's economy and business climate. In part because of these weak institutions, the existence and enforcement of laws protecting private property is extremely limited even though the government passed a land ownership law in 2002 that allows the sale of farmland to individuals. Government corruption also is becoming a more acute problem and was the subject of demonstrations and protests during the 2005 presidential election campaign. In some respects, and with considerable assistance from western democratic organizations, the fledgling government has made great strides in the 15 years since it adopted multi-party politics. Still, Mongolia's legislative processes remain in their infancy. It was only in 2004, for instance, that Mongolia's parliament, the State Great Hural (SGH), passed measures giving parliamentary committees separate budgets, staff, and rules of procedure. The first public hearing by a parliamentary committee was held only in 2002, although western groups providing assistance are encouraging the SGH to hold public hearings as a routine part of the legislative process. Despite the official demise of Communism in Mongolia in 1990, the formerly communist MPRP has continued to play a dominant political role. In the first popular elections ever for Mongolia's parliament in 1990, the formerly communist People's Great Hural, the MPRP won 80% of the seats. In turn, the same year, this MPRP-dominated parliament elected an MPRP member, P. Ochirbat, as Mongolia's first president. While a new constitution in 1992 created a new parliament (the State Great Hural) to replace the People's Great Hural, the MPRP also won a significant majority in the new body. Its 71 out of a total of 76 seats gave it firm control while Mongolia's fledgling opposition parties remained essentially powerless. But the balance began to tip away from the MPRP in 1994, when the party turned against Ochirbat after he vetoed legislation passed by the parliament. When Ochirbat lost the MPRP's backing in Mongolia's first direct presidential election in 1993, he ran and won as an opposition candidate. Mongolia's parliamentary elections on June 30, 1996, were the first in which an effective, organized opposition existed to challenge the MPRP's 75-year rule. The "Democratic Union," formed over a period of about five years by a coalition of eight opposition parties, was the only party to field a clear, recognizable political platform to challenge MPRP candidates. It achieved a stunning electoral victory in what was widely regarded as a free and fair election. With 91% of the electorate turning out to vote, the Democratic Coalition took 50 of the 76 seats, giving it a majority in the parliament as well as the support of President Ochirbat. The new Mongolian leadership was quoted as crediting the victory to help from U.S. political strategists (such as the International Republican Institute and the National Democratic Institute) and to study of American political devices—the "Contract with America" in particular. Economic issues, political reform, and foreign relations dominated the 1996 election campaign. In a political strategy that many came to view as the cause of the MPRP's downfall, the party offered no firm prescriptions for Mongolia's political problems or for its relations with other countries. Democratic Union coalition candidates, on the other hand, put forward a more specific policy agenda, vowing to make government more transparent, sell state-owned media organizations, establish pension plans, increase teacher salaries, and reform Mongolia's judicial system. Finally, the coalition placed a strong emphasis on friendship with the West—primarily with the United States, which Mongolia calls its "third neighbor." Mongolia held two related elections in 1997. In the presidential election on May 18, the results of the 1993 presidential election were reversed, and the presidency was won by Natsagiin Bagabandi, the MPRP candidate, leaving the government divided between the executive and the parliament. Bagabandi won with 60.8% of the vote against two other candidates: the incumbent of seven years, President Ochirbat, from the Democratic Union coalition, which retained its majority in the Great Hural from the 1996 elections; and Gombojav, from the Mongolian Unity Party (MUP). On August 20, 1997, Mongolia held an interim parliamentary election to replace Bagabandi, who had to give up his seat in the Great Hural in order to become president. Bagabandi's former parliamentary seat was won by MPRP member Nambaryn Enkhbayar. To some extent, political analysts at the time regarded Bagabandi's election as a symbolic gesture of public frustration over the drastic and painful economic reforms imposed by the new government after the 1996 elections in an attempt to cope with the collapse of Soviet subsidies after the fall of the Soviet Union. Under those reforms, unemployment, crime, and taxes rose, while other financial and economic policies were not entirely successful. In addition, some believed that the Democratic coalition majority elected in 1996 did not communicate its goals and policies effectively enough to the public to sustain its popularity in the 1997 presidential election cycle. Most believed that Bagabandi's election would not change the overall direction of democratic development and reform in Mongolia. For one thing, Mongolia's 1991 Constitution reserves only limited powers to the President—in principle, the power to veto—while giving most political power to the Great Hural, including the power to appoint government ministers. Nevertheless, the Democratic coalition's 50-seat majority in the Great Hural, though substantial, was still one vote short of the margin needed to override presidential vetoes. Mongolia's political situation became more tumultuous in 1998, with a series of political crises leading to much legislative maneuvering between the MPRP-led government and the ruling Democratic coalition. On April 17, 1998, Prime Minister Enkhsaikhan announced his resignation in the wake of public discontent over harsh reform measures he had adopted to strengthen Mongolia's economy. On April 23, 1998, Enkhsaikhan was replaced as Prime Minister by MNDP member Tsakhiagiyn Elbegdorj, the majority leader in parliament, who was elected with 60 votes out of the 76 members in the Great Hural. Elbegdorj, in turn, was forced to resign by a no-confidence vote in the Great Hural on July 24, 1998—making his government the shortest in Mongolia's brief democratic history—because of his controversial decision on May 27, 1998, to allow the state-owned Renovation Bank to merge into the privately held Golomt Bank. The parliamentary group of the MPRP charged that the decision on the bank merger violated the Mongolian constitution and posed a threat to national economic security. In the ensuing months, the ruling parliamentary coalition struggled with President Bagabandi over the naming of a new Prime Minister, with Bagabandi repeatedly rejecting the Great Hural's choice of Davaadorj Ganbold. In December 1998, the new MNDP leader, Janlavyn Narantsatsralt, became Prime Minister. But his government fell in scandal in July 1999. On July 30, 1999, the Great Hural endorsed as Prime Minister Rinchinnyamyn Amarjargal, another Democratic coalition candidate. Ultimately, in 2000, the strain of these political crises proved too much for the Democratic coalition. It collapsed, setting the stage for a dramatic comeback by the MPRP in parliamentary elections in July, when MPRP candidates won 72 out of the 76 seats in the Great Hural. That month, the MPRP leader, Nambaryn Enkhbayar, became Mongolia's 5 th Prime Minister in two years. In December 2000, the remnants of the former Democratic coalition, including the MNDP and the MSDP, merged to form the Democratic Party (DP). President Bagabandi was elected to a second term as president in May 2001. In the 2004 parliamentary elections, an assortment of democratic-minded parties under the umbrella title Motherland Democracy Coalition (MDC) won 34 parliamentary seats (out of a total of 76) to the MPRP's 38 seats. After weeks of political gridlock, the two groups compromised to form a workable coalition government: the Democratic Party leader, Tsakhiagiyn Elbegdorj, became the new Prime Minister and the MPRP assumed 10 positions in Elbegdorj's 18-member cabinet. But the troubled government struggled with growing unemployment, allegations of corruption, and factional differences. The increasing popular disillusionment with the coalition's rule was reflected in presidential elections in May 2005, when MPRP candidate and former Prime Minister Nambaryn Enkhbayar won the presidency (considered a less powerful position than that of Prime Minister) with 53.4% of the vote, compared to the 19.7% garnered by his Democracy Party rival, Mendsaikhani Enkhsaikhan. On January 11, 2006, the fragile government collapsed altogether when all 10 MPRP cabinet members resigned in protest to what they said was the alliance's ineffective governance and loss of public support. The collapse was followed by days of protests in the capital—some protesting government corruption and economic deprivation, some accusing the MPRP of attempting to seize power for itself. The official government response to the MPRP resignation, however, followed established political procedures. On January 25, 2006, the parliament chose Miyeegombo Enkhbold, MPRP chairman, as the new Prime Minister succeeding Elbegdorj. According to reports, the Democratic Party declined the MPRP's offer to join in a "national unity" government and instead chose to function as an opposition and establish a "shadow cabinet." Since the collapse of the Democratic Coalition in 2006, the MPRP has been able to maintain an uneasy dominance in what has become a volatile political scene in Mongolia. In legislative elections for the Great Hural on June 29, 2008, the MPRP increased its legislative margin to 47 seats (up from 39 in the previous election) out of a total of 76 seats, followed by the Democratic Party with 25 seats. After Democratic Party Chairman Tsakhya Elbegdorj declared the elections to have been fraudulent, demonstrators attacked MPRP headquarters in Ulan Bator, burning the building and causing the government to declare a four-day state of emergency – the first in the country's history – in the capital. The election results were upheld by the electoral commission on July 3, 2008, but continued to be contested by the Democratic Party. The newly elected parliament finally was sworn in on August 26, 2008, after the MPRP invited the opposition to join in yet another fragile coalition government and agreed to investigate allegations of electoral fraud. On September 11, 2008, the Great Hural elected MPRP member Sanjaaglin Bayar, seen as an economic reformer favoring private enterprise, as the new prime minister of the coalition government. Mongolia held elections for president in May 2009, with incumbent president Nambaryn Enkhbayar running again on the MPRP ticket. Opposition parties united behind Democratic Party candidate Tsakhiagiin Elbegdorj, who declared himself the victor. MPRP candidate Enkhbayar conceded defeat and said he accepted the electoral results. Mongolia's economy is relatively poor and agrarian, with few industries but extensive mineral deposits. About one-third of Mongolia's people live in poverty. Its gross domestic product (GDP) in 2008 was an estimated $5.3 billion – this figure rises to $9.4 billion when measured on a purchasing power parity (PPP) basis, which factors in price differentials between Mongolia and the United States. Mongolia's per capita GDP on a PPP basis (a commonly-used measurement of a country's living standards) was $3,541, equivalent to 7.6% of U.S. levels. Industry contributed 35.7% of Mongolia's GDP in 2007 (mining alone contributed 27.4%), followed by agriculture at 20.6%, transport and communications at 9.3%, and trade at 7.6%. Mineral production accounts for 77% of industrial output, 67% of foreign direct investment (FDI), 40% of the central government's revenues, and 57% of Mongolia's export earnings. The collapse of the Soviet Union in the early 1990s had a severe impact on Mongolia's economy, which had employed Soviet-style economic policies and heavily relied on Soviet assistance. After that aid abruptly ended, the economy suffered; real GDP fell by 9.2% in 1991 and by 9.5% in 1992, leading to a significant decline in Mongolian living standards. Subsequently, the central government moved to privatize its state-owned economy and adopt other free market reforms. From 1990 to 2006, the proportion of GDP accounted for by the private sector rose from 4% to 80%. Such reforms enabled Mongolia to join the World Trade Organization (WTO) in 1997. Mongolia has struggled to reform the economy while promoting economic growth. From 1997 to 2002, real GDP growth averaged only 2.8%. In 2003, Mongolia agreed to pay Russia $250 million, an enormous sum for the government, to resolve most of its debt obligations in an effort to strengthen investor confidence. From 2003 to 2008, real annual GDP growth averaged 8.7%; much of that growth resulted from increases in global metal prices (such as cooper and gold), and relatively mild winters (which affects livestock). However, inflation has been a problem for the past few years; in 2008 the consumer price index rose by an estimated 23.2% over the previous year. Mongolia, like most other countries of the world, has been hard hit by the current global economic slowdown (see Table 1 ). The International Monetary Fund (IMF) projects real GDP growth will slow from 8.9% in 2008 to 2.7% in 2009. Exports are projected to fall from $2.5 billion to $1.9 billion, due to falling prices for copper and a decline in demand for exports by its major trading partners, especially China. Global Insight, an international forecasting firm, projects that Mongolia's real GDP could fall by 3.9% in 2009. Growing trade imbalances and rising government deficits have also put new strains on the central government. In April 2009, the IMF agreed to extend a $224 million loan to Mongolia to help it meet its balance of payments needs. In addition to the effects of the global economic slowdown, challenges Mongolia faces over the long term include a weak banking system, sharp fluxes in global mineral prices, high dependency on imported energy, high unemployment, weak rule of law, government corruption, and inadequate infrastructure. Mongolia's merchandise exports and imports in 2007 totaled $1.9 billion and $2.1 billion, respectively (see Table 2 ). The top three Mongolian exports were copper, gold, and animal hairs. Its top three imports were oil; machinery, and transport equipment. China was Mongolia's largest export market (accounting for 74.2% of total, mainly minerals), followed by Canada (11.4%) and the United States (3.4.%). Russia was Mongolia's largest source of its imports. mainly oil (at 34.3% of total), followed by China (31.1%) and South Korea (5.6%); the United States ranked 6 th at 2.4% (see Figure 1 and Figure 2 ). According to a U.S. government report, Mongolia supports foreign direct investment (FDI) in all sectors and businesses and does not discriminate against foreign investors except in certain sectors. Foreigners may own 100% of any registered business with the exception of land ownership, petroleum extraction, and strategic minerals deposits. Cumulative FDI in Mongolia through 2008 was estimated at $2.5 billion. The largest foreign investors in Mongolia (cumulative through 2005) were China (47.4% of total), Canada (12.2%) and South Korea (7.3%); the United States ranked 6 th at 2.3%. FDI in 2008 was estimated at $682.5 million, but was projected by the IMF to fall to $316.5 million in 2009, due to the effects of the global financial crisis. Russia is a large and growing investor and economic player in Mongolia. In March 2009, Russia extended a $300 million loan to help boost Mongolia's agriculture sector. In May 2009, the Russian and Mongolian governments agreed to create the Mongolian Railway Company, a 50-50 joint venture that is intended to help Mongolia modernize and build up its railroad system in exchange for development rights in various mining ventures (including uranium, coal, and copper), a deal reportedly valued at $7 billion. In June 2009, the Mongolian government reportedly requested the United States to re-direct nearly $188 million dollars in U.S. aid to improve the rail network to other projects, due to objections from Russia. Since the early 1990s, Mongolia has pursued an open and non-aligned foreign policy, seeking supportive friendships broadly in Asia and around the world and taking a more active role in international organizations, particularly in the United Nations. Not surprisingly given its geographical location, the land-locked country maintains good relations with Russia and China, its two giant neighbors. As a new democracy, Mongolia also places a high priority on cultivating good relations with the United States, which government officials in Ulaan Bator have referred to as Mongolia's "third neighbor." The United States recognized Mongolia in 1987 and since then has sought to expand cultural and economic ties. At Mongolia's invitation, the United States began a Peace Corps program there in 1991, which by 2007 was maintaining about 100 Peace Corps volunteers in the country. Also in 1991, following the signing of a bilateral trade agreement, the President restored Mongolia's most-favored-nation (MFN) trading status—now referred to as Normal Trade Relations (NTR)—under the conditional annual waiver provisions of Title IV of the Trade Act of 1974. NTR status was made permanent for Mongolia effective July 1, 1999, obviating the annual trade status review process, and creating a more stable trade environment. Total USAID assistance to Mongolia from 1991 through 2008 was about $174.5 million. Major USAID programs have focused largely on promoting sustainable private sector-led economic growth and more effective and accountable governance. The Administration proposed FY2009 USAID budget would give Mongolia $10.4 million. One primary U.S. interest in Mongolia is in supporting the country's ongoing transition from a communist state to a nation with a market-based economy and a democratically elected government. U.S. support for both Mongolia's political and its economic reforms has been tangible. The United States strongly supported Mongolia when it joined the IMF, the World Bank, and the Asian Development Bank in 1991. Congress annually has earmarked U.S. assistance amounts for Mongolia to signal its support. In addition, in 2007, the House Democracy Assistance Commission initiated a program of parliamentary assistance to Mongolia's parliament, the State Great Hural. Mongolia is a relatively minor U.S. trading partner. In 2008, Mongolia was the 164 th largest U.S. export market (at $57.2 million) and its 139 th largest source of imports (at $52.8 million). From 2000 to 2008, U.S. exports to Mongolia more than tripled, but they remain extremely small. U.S. imports from Mongolia peaked in 2004 at $239.1 million, but have steadily declined each year since, largely due to a sharp fall in U.S. imports of apparel products. Major U.S. exports to Mongolia in 2008 included motor vehicles, agriculture and construction machinery, and railroad rolling stock, while the top three imports from Mongolia were apparel, basic chemicals, and animal hairs (see Table 3 , Table 4 , and Table 5 ). U.S. data for January-April 2009 show that U.S. exports to Mongolia were up 16.4% over the same period in 2008, while U.S. imports from Mongolia were down 87.0%. On July 15, 2004, the United States signed a Trade and Investment Framework Agreement (TIFA) with Mongolia to boost bilateral commercial ties and resolve trade disputes. Annual TIFA meetings have been held, focusing largely on issues relating to protection for intellectual property, standards development, and transparency. In addition, the two sides created the U.S.-Mongolian Business Forum to hold annual meetings involving government and private sector officials on how to improve mutual trade and investment opportunities. The most recent forum was held in Washington, DC, in June 2009 and focused on energy development, including coal mining and production, renewable energy, oil and gas, and nuclear energy. From 1991-2004, the U.S. Agency for International Development (USAID) provided around $150 million in assistance to Mongolia. USAID programs have focused on two main projects which seek to promote private sector led economic growth and efforts to achieve more effective and accountable governance; U.S. appropriations for these two projects totaled $7.5 million in FY2007. Other projects have sought to promote: tax reform, the investment climate, tourism, and business training for rural inhabitants. Mongolia also is eligible for assistance under the U.S. Millennium Challenge Account. In an address to the American Center For Mongolian Studies in June 2006, U.S. Ambassador to Mongolia Pamela Slutz called on Mongolia to lessen its dependence on foreign assistance by promoting policies that would encourage more trade and foreign investment. The ambassador stated that (according to the World Bank and IMF) Mongolia had received $2 billion in assistance over the last 15 years, and that it annually receives $300 million in aid, making it one of the world's most dependent countries on foreign aid. Mongolia has asked for a Free Trade Agreement (FTA) with the United States. However, U.S. officials have indicated that Mongolia must make major reforms of many sectors of its trade regime and legal system, and to improve its labor conditions, before it will consider FTA negotiations. In FY2004, Mongolia became an eligible country for U.S. assistance through a Millennium Challenge Account (MCA). After a consultation process, Mongolia submitted an official MCA proposal to the Millennium Challenge Corporation (MCC) late in 2005. The MCC conducted "due diligence" on Mongolia's proposal (assessing it for its suitability, technical viability, and compliance with MCC environmental and other guidelines) for several years. During her visit to Mongolia in January 2007, the Managing Director of the MCC, Frances Reid, reaffirmed that it was the U.S. intent to conclude an MCA agreement with Mongolia in 2007. On June 14, 2007, the MCC issued notification to Congress initiating a 15-day consultation period prior to commencing Compact negotiations with Mongolia. On September 12, 2007, the MCC Board of Directors awarded Mongolia a $285 million aid program, focused mainly on improving rail transportation, property rights, and vocational education and health care. On October 22, 2007, President Bush approved the aid package during a visit to Washington, DC, by Mongolian President Nambaryn Enkhbayar after the two presidents signed an MCC Compact. Mongolia was an early political supporter of the U.S. global anti-terror effort, as well as an early logistics supporter, offering training opportunities and overflight clearances for U.S. forces. Mongolia has contributed troops, engineers, and medical personnel to Operation Iraqi Freedom since April 2003. At the request of the United States, Mongolian forces also are participating in training artillery units of the Afghan National Army. U.S. appreciation for this assistance led in part to last year's visits to Mongolia by Secretary of Defense Donald Rumsfeld (in October 2005) and President George Bush (in November 2005)—the first U.S. Defense Secretary and U.S. President ever to visit Mongolia. President Bush's visit resulted in a Joint Statement reaffirming the U.S.-Mongolian "comprehensive partnership between their two democratic countries based on shared values and common strategic interests ... " In 2006, Mongolia expanded its global peacekeeping activities by sending a contingent of 250 soldiers to protect the U.N. war crimes tribunal in Sierra Leone, a platoon to participate in the NATO mission in Kosovo, and by helping to serve as U.N. observers in Sudan and Ethiopia/Eritrea. On October 23, 2007, the U.S. and Mongolia signed a memorandum of understanding to increase cooperation in preventing nuclear smuggling by allowing the U.S. to install radiation detection equipment in Mongolia and at several of its border crossings. In addition, the two sides signed the Proliferation Security Initiative Shipboarding Agreement, which would allow either side to request the other to confirm the nationality of a U.S. or Mongolian flagged vessel, and possibly detain the ship or its cargo, in order to prevent the proliferation of weapons of mass destruction (WMD).
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Once a Soviet satellite state ruled by the communist Mongolian People's Revolutionary Party (MPRP), Mongolia underwent a democratic transformation in 1990 after public demonstrations for political pluralism led to the resignation of the MPRP government. Since then, Mongolia has been undergoing a chaotic political and economic transition to a parliamentary democracy under new constitutional rules adopted in 1991. The now non-communist MPRP has competed in free elections with opposition parties that grew from economic reformists. The country remains quite undeveloped, but with enormous potential from vast metal and mineral resources. Mongolia's political scene remains democratic but volatile, with the MPRP able to maintain an uneasy dominance. In legislative elections on June 29, 2008, the MPRP increased its legislative margin to 47 seats (up from 39) out of a total of 76 seats, followed by the Democratic Party with 25 seats. After Democratic Party Chairman Tsakhya Elbegdorj declared the elections to have been fraudulent, demonstrators attacked MPRP headquarters in Ulaanbaatar, causing the government to declare a four-day state of emergency in the capital. Ultimately, the MPRP invited the opposition to join in yet another in a series of fragile coalition governments. Mongolia has seen several reshufflings of government since 1990. A former coalition government collapsed in 2006. The United States recognized Mongolia in 1987 and since then has sought to expand cultural and economic ties. At Mongolia's invitation, the United States began a Peace Corps program there in 1991, which by 2007 was maintaining about 100 Peace Corps volunteers in the country. Also in 1991, following the signing of a bilateral trade agreement, the President restored Mongolia's most-favored-nation (MFN) trading status—now referred to as Normal Trade Relations (NTR)—under conditional annual waiver provisions. NTR status was made permanent (PNTR) for Mongolia effective July 1, 1999. In FY2004, Mongolia became eligible for U.S. assistance through the Millennium Challenge Account (MCA), and submitted a proposal late in 2005. On September 12, 2007, the MCC Board of Directors awarded Mongolia a $285 million aid program, focused mainly on improving rail transportation, property rights, and vocational education and health care. President Bush approved the aid package on October 22, 2007. The House Democracy Assistance Commission (HDAC) has established a partnership with the Mongolian parliament, the State Great Hural, focusing on parliamentary reform and improving transparency in government. HDAC sent its first bipartisan delegation to Mongolia in the summer of 2007. Mongolia's relatively small economy relies heavily on trade and, like many other countries, has been hit hard by the global economic downturn. Prices for Mongolia's main export, copper, have declined sharply. U.S.-Mongolian bilateral trade is relatively small; total trade in 2008 was $110 million. China and Russia account for a large share of Mongolia's trade. U.S. foreign aid to Mongolia has focused largely on helping it complete its transition to a free market economy and enhancing the rule of law; the Administration's proposed FY2009 USAID budget would give Mongolia $10.4 million. In June 2009, Mongolia's government reportedly asked the United States to re-direct nearly $188 million dollars in aid to improve the rail network, due to objections from Russia. This report provides background information on Mongolia, including political and economic conditions, the status of U.S.-Mongolian political and economic relations, and key security and foreign policy issues.
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Japan's trade policy has historically centered on multilateral negotiations and dispute resolution mechanisms. The rules of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) have provided Tokyo an ability to interact with its trade partners on an equal basis. Given its global trade interests, a contentious bilateral past with the United States, and historic legacy with Asian countries, particularly Korea and China, reliance on the multilateral system has helped promote Japan's trade interests. Over the past five years, Japan has shifted course somewhat by pursuing negotiations in the WTO but by also seeking free trade agreements (FTAs) and Economic Partnership Agreements (EPAs) with mostly Asian countries. An FTA is an agreement between two countries or regional groupings to eliminate tariffs and other trade barriers, while an EPA goes further by also attempting to facilitate the free movement of people and capital among the partners to an agreement. Non-members find their exports discriminated against. As a practical matter, officials at Japan's Ministry of Economy, Trade, and Industry (METI) acknowledge that there is little difference between an FTA and EPA. METI, however, prefers the EPA label based on the view that it does less to provoke domestic political opposition than the "free trade" moniker. The pursuit of FTAs is occurring worldwide with nearly 300 estimated to be currently in effect. The United States has an extensive FTA program and agenda, and has FTAs in effect with two Asian-Pacific countries—Singapore and Australia. Europe has been pursuing a similar course for years. China and six ASEAN states (Thailand, Malaysia, Indonesia, Philippines, Singapore, and Brunei) are in the process of establishing an FTA by 2010. Now Japan is trying to catch up. Economists still disagree about the merits of negotiating FTAs on the grounds that discrimination may undermine the multilateral trading system while others believe that FTAs promote multilateral deals in the long run. The concern is that FTAs could lead to a "spaghetti bowl" of overlapping conflicting trading partnerships each with its own set of rules at the expense of a more unified and non-discriminatory set of multilateral rules. But domestic support in Japan for an FTA program appears strong. Prime Minister Koizumi is firmly behind the approach, as well as the ruling LDP-Komeito coalition. While the Democratic Party, the major opposition party, supports the general thrust of the policy, some members maintain that the United States and China should be considered as prospective FTA partners. Given its own aggressive FTA program, the United States is hardly in a position to criticize Japan's new policy orientation. But it has considerable interest in whether Japan's policy evolves in a manner that is supportive of U.S. interests in Asia—which include promoting a stable balance of power and insuring that U.S. trade and investment interests are not discriminated against in the region. Japan's FTA program has been motivated by a combination of economic and political objectives. The most important entail avoidance of becoming isolated as other major trading countries actively pursue FTAs, energizing domestic economic activity, and promoting Japanese influence in Asia. Japan's concern about the possible emergence of economic blocs in the Americas and in Europe goes back to the early 1990s. In 1994 the United States entered into the North America Free Trade Agreement (NAFTA) and announced plans to create a Free Trade Area of the Americas. Europe at the same time was busy entering into preferential trade agreements and subsequently has come to conduct trade relations on a multilateral or non-discriminatory basis with only a handful of trading partners, including Japan and the United States. In 1999 the collapse of multilateral trade negotiations at the WTO Ministerial in Seattle shook Japanese confidence in the future of multilateralism. China's decision in 2001 to negotiate an FTA with ASEAN countries was also a seminal event, providing more ammunition for those in Japan that were advocating a change of policy course. The case for developing an FTA program was also driven by Asian economic trends and opportunities. METI officials see East Asia as the fastest growing region in the world and a region that is increasingly vital to Japan's economic future. FTAs and EPAs are viewed as one way to deepen economic ties with East Asia and facilitate a new division of labor and production sharing. The experience of the European Union has demonstrated that, as institutional integration develops, so too does intra-regional division of labor that leads to a more effective production network and to more efficient industrial structures. As a result, METI maintains that both individual parties to an FTA, as well as the region as a whole, can enjoy more robust economic growth powered by an expansion of exports and imports. Reform-minded METI officials also hope that an aggressive FTA-EPA program will serve as a force for promoting domestic agricultural reforms. By entering into negotiations with trading partners that continue to demand liberalization of Japan's protected agricultural sector, it is hoped that domestic support for programs that might aid farmers transition to a less protected environment would be proposed and implemented. Finally, many decision makers see FTAs providing Japan with varied political and diplomatic advantages. These range from increasing Japan's bargaining power in WTO negotiations to helping Japan better compete with China for influence in Asia. Under the view that FTAs symbolize special relationships based on political trust, Japan hopes to bolster its diplomatic influence on a range of political and security issues. Three regions—Asia, North America, and Europe—account for 80% of Japan's total trade. Given that the simple average tariff rates imposed by the United States and the European Union are low (3.6% for the U.S. and 4.1% for the EU) compared to East Asia (10% for China, 14.5% for Malaysia, 16.1% for South Korea, 25.5% for the Philippines, and 37.5% for Indonesia), the Government of Japan (GOJ) placed priority on negotiating FTAs with countries in East Asia. Not only do East Asian countries impose the highest trade barriers against Japanese exports, they also account for the highest and most dynamic share of Japan's trade, thereby providing the greatest additional opportunities for expanding Japan's economy via cuts in both foreign and domestic trade barriers. As shown in Table 1 , 11 East Asian countries (China, South Korea, Taiwan, Hong Kong, Thailand, Singapore, Malaysia, Australia, the Philippines, Indonesia, and Vietnam) purchased nearly 50% of Japan's total exports in 2004, up from 33% in 1998. Similarly, Japan is sourcing a growing share of its imports from these 11 countries as well. As shown in Table 2 , these countries supplied Japan with 47.86% of its imports in 2004, up from 39.59% in 1998. Accordingly, in developing its FTA strategy, the GOJ placed the highest priority on negotiating FTAs with the Republic of Korea and the four largest ASEAN member states (Thailand, the Philippines, Malaysia, and Indonesia). An FTA with Mexico, now in effect, was also made a priority due to the relatively high tariffs Japanese companies face compared to those companies from the United States, Canada, and European Union. The latter enjoy duty free treatment for the most part due to NAFTA (1994) and the EU-Mexican FTA (2000). After achieving FTAs with priority countries, the GOJ views China and Australia as the next most promising candidate partners. Consideration is also being given to countries outside East Asia, including Chile and Switzerland. Since Japan launched its first FTA negotiation with Singapore in 2000, progress has been hampered by a defensive agricultural position. While some liberalization has been achieved, the amount so far has been greatly constrained by an inability to offer major reductions in its most protected crops—beef, rice, starches, wheat, and dairy—and to open up its borders to foreign labor. Some critics have argued that Japan, following a course of least resistance, could end up with numerous watered-down FTAs that neither harm nor energize the Japanese economy. According to this view, the FTAs with the largest benefits for Japan, such as Australia, China, and South Korea, are also the most politically challenging and the most likely to fail. A short synopsis of the main features and significance of Japan's FTA program follows. The negotiations are divided into four categories: (1) those already entered into force; (2) those agreed to in principle; (3) those under negotiation; and (4) those that are in the pipeline or under consideration. The Japan-Singapore Economic Partnership Agreement (JSEPA), Japan's first EPA/FTA, was entered into force in November 2002. Tariffs were eliminated on 98% of the merchandise trade between the two countries, and further liberalization took place in services and investment. Given that there is virtually no agricultural trade between the two countries, and tariffs were already very low, it reportedly was a very easy FTA to conclude. According to one report, other than some increase in imports of Japanese beer, Singapore has experienced no major changes from the FTA. The minimal impact may be due to the fact that tariffs were low to begin with and some chemical products in which Singapore companies have a competitive edge, were excluded from the agreement. From Japan's perspective, the significance of this initial FTA seems to be good learning experience for its negotiators in how to negotiate an FTA. Japan and Mexico signed an FTA/EPA in September 2004 and it went into effect in April 2005. Under the agreement (formally called an EPA), tariffs on 90% of goods that account for 96% in total trade value will be phased out by 2015, making 98% of exports from Japan and 87% of imports from Mexico duty free. Previously, only 16% of Japanese exports received duty-free treatment from Mexico, whereas 70% of Mexican exports entered duty free. From Japan's perspective, the agreement helps eliminate the disadvantages its companies have incurred in competing against North American and European firms since NAFTA went into effect in 1994 and the EU-Mexican FTA went into effect in 2000. Facing an average Mexican tariff of 16%, Japan saw its share of Mexican imports drop sharply, from 6.1% in 1994 to 3.7% in 2000. Since the FTA became operational, its import share increased to 4.8% in 2001, to 5.5% in 2002, and 4.4% in 2003. Japan's auto and steel companies are expected to benefit the most. The FTA offers a new tariff-free export quota for Japanese cars, in addition to the existing quota of about 30,000. The duty-free quota will make up 5% of the Mexican market in the first year and the quotas will be expanded before being completely lifted by 2011. With the abolition of the tariffs, exports of Japanese-finished cars are expected to double in the next few years. Steel tariffs are also being eliminated over a 10-year period. The agreement is notable in that Japan agreed to reduce some protection of agricultural products. While the details remain sketchy, Japan reportedly cut tariffs on a variety of products such as pork, orange juice, fresh oranges, beef and poultry although these commodities will still will be regulated by quotas. (Actual tariff rates are to be negotiated after the FTA is in place for two years). Yet, the value of Mexico's agricultural products exempt from import tariffs will still be less than 50% of its total agricultural exports to Japan. Furthermore, Mexico supplies only 1% of Japan's total imports of agricultural products, suggesting that the limited liberalization will not pose much of a threat to Japanese producers nor be a precedent for other FTAs. Negotiations with the Philippines began in February 2004 and a basic EPA was reached in principle at a bilateral summit in November 2004. The agreement, which covers investment, trade in services, customs procedures, intellectual property, and competition policy, is expected to be finalized this year and become effective in 2006. A key bargain in the agreement calls for the Philippines to lowers its tariffs on most steel products and autos by 2010 in exchange for lower Japanese tariffs on pineapples and bananas. Bananas are not grown in Japan and pineapples are only grown in a small area of Okinawa. For the most part, Japan negotiated not to open its market further to sensitive agricultural products such as rice, wheat, barley, designated dairy products, beef, pork, starches and selective fishery products. Liberalization of Japan's protection of raw cane sugar will be reconsidered after the agreement has been in effect for four years. In return, Japan agreed to allow more Philippine nurses and care givers to work in Japan if they pass Japanese qualification examinations (in Japanese). The number and selection process of such care providers has not yet been determined, and remains a major stumbling block to finalizing the agreement. Negotiations with Malaysia began in January 2004 and a basic EPA agreement was reached in May 2005. The two sides hope to sign the agreement before the year-end, putting it into effect in 2006. One estimate is that the agreement will increase Japan's gross domestic product by 0.08% in real terms and boost Malaysia's real GDP by 5.07%. The FTA will eliminate or reduce tariffs on industrial goods by 2015. Of particular interest to Japan, Malaysia has agreed to immediately remove tariffs on all parts imported for local car production (used for the so-called breakdown format, under which components are imported to Malaysia for assembling). Customs duties on most finished vehicles (i.e. large cars that do not compete with Malaysian cars) and other car parts will be gradually removed by 2010. Japanese automakers that manufacture locally can cut production costs if tariffs on auto parts from Japan are removed. Tariffs on small vehicles which compete with Malaysia's Proton "national car" will be abolished in stages by 2015. The grace period is designed to shield the market for small Malaysian-made autos, like those produced by Proton Holdings, from outside competition for five years. National car Proton and privately manufactured Perodua, have more than 70% of the market in Malaysia. Malaysia also agreed to eliminate tariffs on essentially all steel products within 10 years. Japan for its part will eliminate tariffs on selective farm and fishery products within 10 years, with immediate abolishment of tariffs on such products as mangoes, durians, papayas, okra, shrimp, prawns, jellyfish, and cocoa. The tariff on margarine will be lowered from 29.8% to 25% in five years, and up to 1,000 tons of bananas will be duty free immediately. Tariffs on all forestry products except plywood, which is one of Malaysia's top exports to Japan, will also be eliminated immediately. But sensitive products such as rice, wheat, barley, dairy, beef, pork, starches, and fishery items under import quota are excluded from liberalization. Japan's negotiations with Korea, which began in December 2003, are currently stalled. The two sides initially planned to submit liberalization offers by January 2005, but both countries developed reservations. Reportedly, Japan expressed reluctance to abolish tariffs on agricultural and marine products, while South Korea hesitated to cut tariffs on industrial goods, particularly those that could affect its auto sector. South Korean officials are also worried that an FTA could exacerbate its large trade deficit with Japan. Prospects for more flexible negotiating positions were not helped by a recent WTO case that Korea filed against Japan's import quotas for dried laver seaweed. Korea reportedly took a hard line on this marine product that it does not export in great quantities to symbolize its protest over Japan's refusal to negotiate "seriously" on agricultural issues. Japan's negotiation with Thailand, which began in February 2004, has proved difficult due in large part to agriculture. Japan and Thailand initially agreed that rice—long considered the main obstacle in the negotiations—would not be subject to tariff cuts. But Thailand still continues to demand elimination of Japan's tariffs on chicken, sugar, starch and forestry and fisheries products. Thailand also wants Japan to accept more chefs and spa specialists. Japan's demands on Thailand center on autos and steel. Cuts on Thai auto tariffs—which are 80% for Japanese built cars—are complicated by heavy Japanese foreign direct investment in the Thai auto sector. Japanese companies control over 80% of the production, sales, and exports of autos in Thailand. Japan and Indonesia agreed in June 2005 to launch FTA/EPA negotiations with a view to reaching agreement by June 2006. The agreement would cover trade in goods and services, investment, labor flows, technological exchanges, and intellectual property rights. Indonesia, which is a major provider of crude oil, coal, and natural gas to Japan, hopes to see the agreement facilitate a large-scale increase in Japanese foreign investment. Japan's agricultural protection, along with Indonesia's protection of its auto and steel sectors, are likely to be divisive issues. Japan is considering FTA/EPA negotiations with a number of other countries, including Australia, Chile, China, and Switzerland. In addition, after concluding agreements with Malaysia, the Philippines and Thailand, Japan hopes to expand those agreements (including the one with Singapore) to ASEAN as a whole. Malaysia, the Philippines, and Thailand account for about 75% of Japan's trade with ASEAN. The conclusion of an FTA with either the United States or the European Union is not being considered, due largely to constraints on liberalizing trade in agricultural, forestry, fishery products. Australia is an important trading partner for Japan and a key supplier of Japan's oil, coal, iron ore, and natural gas. Two years of FTA discussions, however, have not progressed far reportedly due to Japan's resistance to open its market to more beef, rice, and dairy products from Australia. While a high-level agreement was made in April 2005 to continue discussing the feasibility of an FTA, most observers think that Australia won't enter into negotiations if agriculture is not on the table. In effectively downplaying the prospects for this FTA, Prime Minister Koizumi noted that an FTA with Australia that included beef would have an adverse effect on relations with the United States. While many Japanese officials are intrigued by the possibility of negotiating an FTA with China, the consensus is that it is much too early to move forward. For the present, Japan wants to monitor China's fulfillment of WTO obligations, the status of its state-owned sectors, and progress in Doha Round of multilateral negotiations. Switzerland is what one Japanese trade official calls a good pipeline project. An attractive feature of this prospective negotiation is that the Swiss do not want to liberalize agriculture so there would be no major impediment to a negotiation. Lacking much liberalizing content, such an agreement would have mostly geo-political merit. Japan's ability to promote its economic interests through an aggressive FTA/EPA program is constrained by protection of its agricultural sector and rigid immigration policies. While the FTA/EPA negotiations themselves provide pressures for more open policies, the ministries charged with these portfolios (Agriculture and Justice, respectively) have not yet advanced effective reform policies that would make a substantial difference. Agriculture accounts for only 1.3% of Japan's GDP and 4.6% of its total employment, but remains heavily supported and protected from import competition. According to the OECD, support to producers as a percent of gross receipts was 58% in 2002-04, down from 61% in 1986-1988, but still almost twice the OECD average. Rice, wheat, other grains, meat, sugars, and dairy are the most heavily supported commodities. Tariff-rate quotas are employed to shield these commodities from international competition, resulting in food prices that in Tokyo are on average 130% higher than the rest of the world. Many in Japan believe that support for agricultural protection will disappear over time. They cite the declining share of the population engaged in agriculture and the high percentage of farmers (60%) who are over 65 years old and who derive the majority of their income from non-agricultural activities. In the process, the hold of the agricultural lobby is said to be slipping as evidenced by the slippage of the LDP in the 2004 Upper House election. The LDP derives most of its support from rural areas, in part, due to Japan's disproportionate electoral districting system; each rural vote is worth an estimated 2 urban votes. However, policy reforms to help move Japan away from considerable agricultural protection have been slow to materialize. While the Ministry of Agriculture, Forestry, and Fisheries has released papers that have raised the idea that Japan should stop wasting resources on crops that can be imported more cheaply, little follow-up has occurred. These reports advocate consideration of policies that would increase competition in the sector by encouraging new entrants and providing direct compensation to farmers through tax incentives in lieu of price controls and high tariffs. In large measure, this is due to opposition from influential members of the LDP's "farm tribe." In the absence of a substantive reform plan to make Japan's farm sector more efficient, agriculture is bound to continue to be a major stumbling block for concluding economically meaningful FTAs/EPAs. Among industrial nations, Japan maintains the tightest policy towards accepting foreign workers and remains extremely cautious about changing course. However, due to a declining birthrate and an aging workforce, Japan's decision-makers are under increased pressure to accept more foreign workers to keep the economy from stagnating. The demands of FTA negotiating partners such as the Philippines and Thailand to liberalize Japan's labor market prohibitions have brought added pressures and debate about a more open door policy. A 1999 government employment plan called for Japan to promote foreign employment in "specialized and technical areas," but a "careful approach based on national consensus" towards manual workers. Despite the needs in certain sectors to accept more foreign workers, such as nurses and care providers, public support is lacking. Concerns about increased crime rates, the social costs of accepting more foreigners, and an adverse impact on Japanese homogeneity tend to dominate, along with the resistance of labor unions. In addition, neither the LDP or the Democratic Party stand clearly in favor of liberalizing immigration. The significance of the immigration issue transcends the problems it creates for Japan reaching closure on FTA negotiations with its Asian partners, such as Thailand and the Philippines. The continuation of exclusionary immigration policies may also undercut Japan's ambition to play a leading role in a more integrated and interdependent Asian economy. Japan's FTA program, assuming the current defensive course persists, may have varied effects on U.S. interests. On the one hand, it is likely to provide a positive, yet small, boost to increasing Japan's role in the economics and political economy of East Asia. It is also likely to be favorable to bilateral trade ties as other Asian trading partners, instead of the United States, pressure Japan to open its agricultural market further. In the absence of a Japan-U.S. FTA as a realistic option, other forms of comprehensive engagement may be considered. On the other hand, lack of a meaningful agricultural reform program bodes poorly for positive support from Japan in the agricultural negotiations of the Doha Round. There are also concerns that a defensive and weak FTA program pursued by Japan could allow China to play a more dominant role in the Asian economy—perhaps even creating an exclusionary Asian trading bloc. More than a decade ago, there was concern in the United States that Japan was an economic threat because its economy was too strong. Subsequently, U.S. policymakers have come to believe that Japan is more of a problem when its economy is weak. A lackluster growth position in Japan not only affects U.S.-Japan trade and financial ties adversely, but also undermines growth of the East Asian economy. Moreover, an economically strong Japan is needed to serve as a counterweight to a rising China. Despite regaining a good deal of financial stability in recent years, Japan's economy remains weak. With growth projections of no more than 1.3%-1.6% over the next five years, Japan will not be in a position to play much of a locomotive role either for the United States or the region. This assessment is not likely to be altered by the estimated weak impact of Japan's FTA program on growth. Lagging China in FTAs with Asian countries, as well in other trade and investment linkages, Japan currently cannot be said to be moving rapidly to establish itself as a credible counterweight to a rising China. Post 9/11, U.S.-Japan trade relations arguably have received less attention than security issues. With the exception of Japan's ban of the imports of beef from the United States, there have been few bilateral trade disputes and tensions. Perhaps due to a declining share of the U.S. trade deficit and a stagnant economy for much of the 1990s, Japan's economy is no longer seen as threat to major U.S. industries. The reduction in bilateral tensions has been accompanied by Japan's FTA negotiating partners replacing the United States as demanders of agricultural trade liberalization. To the extent that these pressures lead to cuts in Japan's agricultural protection or agricultural reform proposals, this will be helpful to U.S. agricultural interests not only in bilateral context, but also in the context of the Doha Round. Unfortunately, slow movement or progress along these lines is occurring. At the same time, Japan's FTAs could diminish the benefits that the United States has obtained from FTAs. The Japan-Mexico FTA and the Japan-Singapore FTA are cases in point, moving Japan towards an equal footing with these trading partners. Although proposals have been made in the past for negotiation of an FTA between Japan and the United States, Japan's reluctance to reduce its agricultural protection has proved a formidable stumbling block. Nothing has changed in recent years to alter that calculation, but concerns have been raised that the respective FTA programs of the two sides could allow the bilateral economic relationship to drift and weaken as Japan engages increasingly with its Asian neighbors and the U.S. seeks new partnerships throughout the world. One consequence could be lost economic opportunities for the two largest economies in the world, as well as a weakening of political and security cooperation. In this context, one former U.S. trade negotiator has proposed consideration of what he calls a "Comprehensive Economic Initiative" (CEI) between Japan and the United States. The CEI is seen as a way for Japan and the United States (both governments and private sector representatives) to consider actions to promote trade, investment, financial flows, and deregulation, and to harmonize standards and coordinate competition policy. China has been much more aggressive than either Japan or the United States in negotiating FTAs. Beijing has concluded a partial FTA with ASEAN ahead of Japan and South Korea. China has also opened its tropical farm products to Thailand in a partial FTA, and has also agreed to start FTA negotiations with Singapore, Australia, and New Zealand. Moreover, China's long-term goal may be to form the center of an East Asian trade bloc. Given that the United States has a limited FTA agenda with Asian countries (FTAs in place with Singapore and Australia and talks contemplated with only South Korea), an East Asian trade bloc could have the potential for substantial discrimination against U.S. exports. In addition, such a bloc could have adverse effects on U.S. influence in the region. Also worrisome is the possibility of a Japan-China FTA. Much of Japan's private sector reportedly is enthusiastic about such a deal. A Japanese government sponsored study found that a China FTA could boost Japan's GDP by 0.5%, the most among any potential partner country or region. While many big obstacles stand in the way of a Japan-China FTA, the possibility should give pause to U.S. policymakers. Some observers opine that the United States would actively work to deter Japan from entering into an FTA with China. At the same time, China's aggressive FTA program is said to being used by Tokyo's opposing FTA negotiators for negotiating advantage. Trade negotiators representing ASEAN, for example, reportedly have played this "China card" by telling Japan that China is more forthcoming and willing to negotiate an FTA than Japan. Presumably, this kind of gamesmanship could nudge Japan to take more aggressive and trade liberalizing FTA positions. How this confluence of FTA developments in Asia ultimately impacts U.S. interests is uncertain. What seems clear, however, is the need for U.S. policymakers to give appropriate attention to how U.S. trade policies can best affect trends in the region to evolve in a direction favorable to U.S. interests.
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Japan's trade policy historically has centered on multilateral negotiations and dispute settlement mechanisms. Over the past five years, however, Japan has shifted course somewhat by seeking free trade agreements (FTAs) with a number of countries, mostly in Asia. An FTA is an agreement between two countries or regional groupings to eliminate or reduce tariffs and other barriers on trade in goods and services. Non-members find their exports discriminated against. The pursuit of FTAs is occurring worldwide. The U.S. has an aggressive program and has FTAs in place with two Asian-Pacific countries—Singapore and Australia—and is negotiating one with Thailand. Europe has been pursuing a similar course for years. China and 10 members of the Association of Southeast Asian Nations (ASEAN) began implementing a partial FTA this year. Now Japan is trying to catch up. By freeing up trade in goods and services, Japan hopes to energize its economy, as well as to better compete with China for influence in Asia—objectives that seem to support U.S. interests. However, Japan's FTA program to date has not been robust enough to have much impact. Constrained by domestic pressures to continue protection of its agricultural sector, the FTA agreements Japan now has implemented with Singapore and Mexico and is scheduled to implement next year with the Philippines, Malaysia, and Thailand are unlikely to have a significant impact on Japan's economy. Agreements with larger countries where the commercial stakes are greater, such as South Korea, Australia, and China, are either stalled or being shied away from. Agriculture is Japan's biggest constraint on moving forward on FTAs. While some progress is being made in cutting tariffs on food items that serve small markets, highly protected rice and beef markets are not being offered for liberalization. Moreover, in the absence of a substantial farm reform program that would make liberalization of these products easier, many Japanese decision-makers hope protectionist pressures will go away over time with an aging farmer population that is shrinking and increasingly part-time. Japan's FTA program, assuming the current cautious and defensive course persists, is likely to have varied effects on U.S. interests. On the one hand, it is likely to provide a positive, yet small, boost to increasing Japan's role in the economics and political economy of East Asia. It is also likely to be favorable to bilateral trade ties as other Asian trading partners (instead of just the United States) pressure Japan to open its agricultural market further. On the other hand, the absence of a meaningful agricultural reform bodes poorly for support from Japan in the agricultural negotiations of the Doha Round. There are also concerns that a defensive and weak FTA program could allow China to play a more dominant role in the Asian economy through its own FTA program—perhaps even creating a exclusionary Asian trading bloc. This report will be updated as events warrant.
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Among the creative works that U.S. copyright law protects are sound recordings, which the Copyright Act defines as "works that result from the fixation of a series of musical, spoken, or other sounds." Owners of copyrighted sound recordings have exclusive rights to reproduce, adapt, or distribute their works, or to perform them publicly by digital means. Normally, anyone who wants to exercise any of the copyright owner's exclusive rights must obtain the copyright owner's permission to do so, typically by direct negotiations between copyright owners and users. However, the copyright law also provides several types of statutory, or compulsory, licenses for sound recordings. These licenses allow third parties who pay statutorily prescribed fees to use copyrighted sound recordings under certain conditions and according to specific requirements, without having to negotiate private licensing agreements. In 1998, in the Digital Millennium Copyright Act (DMCA), Congress amended several statutory licensing statutes to provide for and clarify the treatment of different types of Internet broadcasting, or "webcasting." Some transmissions of sound recordings are exempt from the public performance right, for example, a nonsubscription broadcast transmission; a retransmission of a radio station's broadcast within 150 miles of its transmitter; and a transmission to a business establishment for use in the ordinary course of its business. In contrast, a digital transmission by an "interactive service" is not exempt from the public performance right, nor does it qualify for a statutory license. The owner of an interactive service—one that enables a member of the public to request or customize the music that he or she receives —must negotiate a license, including royalty rates, directly with copyright owners. But, two categories of webcasting that do qualify for a compulsory license are specified "preexisting" subscription services (existing at the time of the DMCA's enactment) and "an eligible nonsubscription transmission." A subscription service is one that is limited to paying customers. The broader category of webcasters who may qualify for the statutory license under 17 U.S.C. § 114(d) are those who transmit music over the Internet on a nonsubscription, noninteractive basis. A licensee under § 114 may also qualify for a statutory license under 17 U.S.C. § 112(e) to make multiple "ephemeral"—or temporary—copies of sound recordings solely for the purpose of transmitting the work by an entity legally entitled to publicly perform it. The initial ratemaking proceeding for statutory royalty rates for webcasters for the period 1998 through 2005 (referred to as "Webcaster I") proved to be controversial, perhaps reflecting in some degree the relative newness of both the DMCA and webcasting activity. A Copyright Arbitration Royalty Panel (CARP) issued a recommendation for the initial statutory royalty rate for eligible nonsubscription webcasters on February 20, 2002. Small-scale webcasters objected to the proposed rates. In accordance with then-existing procedures, the Librarian of Congress, on the recommendation of the U.S. Copyright Office, rejected the CARP's recommendation and revised rates downward. Congress interceded as well with enactment of the Small Webcasters Settlement Act (SWSA) of 2002, P.L. 107-321 . Although very complex, the law permitted more options than the royalty rates established by the Librarian's order. Qualifying small webcasters, for example, could elect to pay royalties based on a percentage of revenue or expenses rather than on a per-song per-listener basis. The rate agreement made pursuant to SWSA was published in the Federal Register but not codified in the Code of Federal Regulations. However, by SWSA's own terms, its provisions were not to be considered in subsequent ratemaking proceedings. Subsequent to passage of the SWSA and the initial ratemaking proceeding, Congress substantially revised the underlying adjudicative process. Enactment of the Copyright Royalty and Distribution Reform Act of 2004, P.L. 108-419 , abolished the CARP system and substituted a Copyright Royalty Board composed of three standing Copyright Royalty Judges. Rates established pursuant to the original ratemaking determination and SWSA were to remain in effect through 2005. As required by law, in March 2007 the Copyright Royalty Board announced royalty rates for the period that commenced (retroactively) from January 1, 2006, through December 31, 2010. The general process for statutory license ratemaking factors in a three-month period, during which interested parties are encouraged to negotiate a settlement agreement. In the absence of an agreement, written statements and testimony are gathered, discovery takes place, hearings are held, and the Copyright Royalty Board issues a ruling. Notice announcing commencement of the "Webcaster II" proceedings was published on February 16, 2005. On March 9, 2007, the Copyright Royalty Board issued its decision, which was published as a Final Rule and Order on May 1, 2007. The final determination of the CRB establishes new rates for commercial and noncommercial webcasters who qualify for the § 114 compulsory license; the decision is effective on July 15, 2007. Rates are as follows: For commercial webcasters: $.0008 per performance for 2006, $.0011 per performance for 2007, $.0014 per performance for 2008, $.0018 per performance for 2009, and $.0019 per performance for 2010. This includes fees for making an ephemeral recording under 17 U.S.C. § 112. For noncommercial webcasters: (i) For Internet transmissions totaling less than 159,140 Aggregate Tuning Hours (ATH) a month, an annual per channel or per station performance royalty of $500 in 2006, 2007, 2008, 2009, and 2010. (ii) For Internet transmissions totaling more than 159,140 Aggregate Tuning Hours (ATH) a month, a performance royalty of $.0008 per performance for 2006, $.0011 per performance for 2007, $.0014 per performance for 2008, $.0018 per performance for 2009, and $.0019 per performance for 2010. These rates include fees for making an ephemeral recording under 17 U.S.C. § 112. Minimum fee. Commercial and noncommercial webcasters will pay an annual, nonrefundable minimum fee of $500 for each calendar year or part thereof. This rate structure does not make special provision for "small" webcasters, who were addressed in the SWSA by reference to revenues. The standard for establishing rates, set forth by statute, is known as the "willing buyer/willing seller" standard. The determination is informed by the "Webcaster I" initial royalty proceedings of the CARP. In essence, both the previous CARP and the current Copyright Royalty Board attempt to implement the statutorily mandated standard to reach a royalty rate. Explaining its interpretation of the governing language, the CRB wrote the following: Webcaster I clarified the relationship of the statutory factors to the willing buyer/willing seller standard. The standard requires a determination of the rates that a willing buyer and willing seller would agree upon in the marketplace. In making this determination, the two factors in section 114(f)(2)(B)(i) and (ii) must be considered, but neither factor defines the standard. They do not constitute additional standards, nor should they be used to adjust the rates determined by the willing buyer/willing seller standard. The statutory factors are merely to be considered, along with other relevant factors, to determine the rates under the willing buyer/willing seller standard. The board considered the proposals of representatives for "small" webcasters that rates be structured as a percentage of revenue, but ultimately rejected them: In short, among the parties on both sides who have proposed rates covering Commercial Webcasters, only Small Commercial Webcasters propose a fee structure based solely on revenue. However, in making their proposal, this group of five webcasters clearly is unconcerned with the actual structure of the fee, except to the extent that a revenue-based fee structure—especially one in which the percent of revenue fee is a single digit number (i.e., 5%)—can protect them against the possibility that their costs would ever exceed their revenues.... Small Commercial Webcasters' focus on the amount of the fee, rather than how it should be structured, is further underlined by the absence of evidence submitted by this group to identify a basis for applying a pure revenue-based structure to them. While, at times, they suggest that their situation as small commercial webcasters requires this type of structure, there is no evidence in the record about how the Copyright Royalty Judges would delineate between small webcasters and large webcasters. And, in a substantive footnote, the board expressed its view that it lacks statutory authority to carve out royalty rate niches for the emergent business models promoted by small commercial webcasters: It must be emphasized that, in reaching a determination, the Copyright Royalty Judges cannot guarantee a profitable business to every market entrant. Indeed, the normal free market processes typically weed out those entities that have poor business models or are inefficient. To allow inefficient market participants to continue to use as much music as they want and for as long a time period as they want without compensating copyright owners on the same basis as more efficient market participants trivializes the property rights of copyright owners. Furthermore, it would involve the Copyright Royalty Judges in making a policy decision rather than applying the willing buyer/willing seller standard of the Copyright Act. In setting the rates, the board looked to proposed "benchmark" agreements to determine what a hypothetical buyer and seller would agree to in the marketplace. It rejected the proposals advanced by the radio broadcasters and small commercial webcasters that the appropriate benchmark was the fee paid to performing rights organizations (PROs), such as ASCAP, BMI and SESAC, for the digital public performance of the underlying musical composition. It also rejected a proposal that analog over-the-air broadcast music radio be used as a benchmark, with reference to musical composition royalties paid by such broadcasters to the PROs. Based on the evidence before it, the Copyright Royalty Board found that the most appropriate benchmark agreements are those in the market for interactive webcasting covering the digital performance of sound recordings, with appropriate adjustments. In summary, the Copyright Royalty Board's decision, like that of its predecessor, the CARP, declines to delineate a separate class or to integrate a separate market analysis on behalf of "small" webcasters. The expiration of the option to pay a percentage of revenues, to be replaced by a minimum payment, per-song per-listener formula, was, predictably, not well received in the small webcasting business community, among others. Some Members of Congress voiced concern as well. What follows below are descriptions of the responses to the CRB decision in different settings: the negotiating table, the federal courts, and the Congress. Following the issuance of the CRB decision, private negotiations between SoundExchange, the organization charged with collecting and distributing performance royalties, and both large and small webcasters were initiated in an attempt to reach a compromise royalty rate agreement that would serve as an alternative to the payment scheme provided by the CRB decision. In response to a request from the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property, SoundExchange offered in May 2007 to extend the terms of the Small Webcaster Settlement Act of 2002, with some modifications, to certain qualified small webcasters through 2010. "Small" webcasters, those with annual revenues of less than $1.25 million, could pay royalties based on a percentage of revenue model, that is, fees of 10% of all gross revenue up to $250,000, and 12% for gross revenue above that amount. SoundExchange's proposal for small webcasters, however, was met by criticism that the deal would effectively restrict small webcasters from becoming larger, more profitable businesses and would limit the diversity of music that may be played. Another proposal that was discussed and subsequently agreed to between several of the largest webcasters and SoundExchange is a $50,000 per year cap on the $500 annual-per-channel minimum fee through 2010. In exchange for this cap, the webcasters agreed to provide SoundExchange with a comprehensive annual accounting of all songs performed (24 hours a day, 365 days a year) and to form a committee with SoundExchange to evaluate the issue of unauthorized copying of Internet radio streams (a practice known as "streamripping," or the process of converting ephemeral Internet-streamed content into permanent recordings). The agreement does not require webcasters to implement technological measures aimed at preventing their listeners from engaging in streamripping, however. In a unilateral offer put forth by SoundExchange, qualified small webcasters (those earning $1.25 million or less in total revenues) would be permitted to stream sound recordings of all SoundExchange members by paying royalties under the old percentage-of-revenue scheme. Over 20 small webcasters have since accepted this offer, the terms of which are retroactive to January 1, 2006, and continue through December 31, 2010. Parties to the "Webcaster II" proceeding before the CRB appealed the board's decision. On April 16, 2007, the Copyright Royalty Board issued an order denying rehearing. On May 30, 2007, several parties, including the Digital Media Association, National Public Radio, and a coalition of small commercial webcasters filed suit in the U.S. Court of Appeals for the D.C. Circuit requesting a stay pending their appeal of the board's decision. The motion alleged that the board's decision is arbitrary and capricious in several respects, but particularly with regard to the requirement of a minimum fee "per station" or "per channel." On July 11, 2007, a three-judge panel of the court of appeals denied the emergency motion to delay the CRB decision pending the parties' appeal. The five separate appeals by the parties were consolidated into one case. On July 10, 2009, the federal court of appeals issued an opinion in the case that affirmed nearly all aspects of the "Webcaster II" royalty rate proceeding, although it vacated the $500 minimum annual fee per channel or station and remanded that portion of the determination for the CRB to reconsider. In evaluating the CRB's determination, the appellate court followed the standard of review provided for under the Administrative Procedure Act (APA); that is, the court was required to "uphold the results of adversarial agency proceedings unless they are arbitrary, capricious, contrary to law, or not supported by substantial evidence." The court admitted that "the standard of review applicable in ratemaking cases is highly deferential." According to the court, the webcasters failed to show that the CRB's rates satisfied any of the criteria under the APA that would permit the court to set them aside. The court also upheld the CRB's decision to reject the small commercial webcasters' arguments for including a percentage of revenue royalty fee option, noting that the Copyright Royalty Judges are not required to preserve the business of every participant in a market. They are required to set rates and terms that "most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller." 17 U.S.C. § 114(f)(2)(B). If small commercial webcasters cannot pay the same rate as other willing buyers and still earn a profit, then the [Copyright Royalty] Judges are not required to accommodate them. While the D.C. Circuit Court of Appeals sustained the royalty rates that were the result of the "Webcaster II" proceeding, the court vacated the minimum fee provision of the CRB determination that would have required webcasters to pay a minimum fee of $500 per channel or station. The court first observed that the Copyright Act requires the CRB to set a minimum fee that licensees must pay to cover the "administrative costs of the copyright owners in administering the license." While acknowledging that some webcasters represented by the Digital Media Association (DiMA) had reached an agreement with SoundExchange in 2007 to cap the minimum fees at $50,000 per year per license, the court explained that not all parties that would be bound by the CRB decision had contracted around the statutory minimum fee requirement and thus the issue was not moot. The court expressed concern that the CRB's determination on minimum fees did not reveal an awareness of the possibility of a licensee paying "hundreds of thousands of dollars or more" in minimum fees, depending on the potential interpretation of the phrase "per channel or station": Depending on future interpretations of "channel or station," the Judges' determination might impose enormous fees on some business models and tiny fees on others, based on regulations that have not yet been defined. Such a regime is arbitrary and does not appear to represent what "would have been negotiated in the marketplace between a willing buyer and a willing seller." Consequently, the appellate court remanded the minimum fee portion of the determination to the CRB for further reconsideration. On October 23, 2009, the CRB issued an order that established a one-month period, from November 2, 2009, until December 2, 2009, during which the parties to the litigation were to negotiate and submit a settlement of the minimum fee issue for commercial webcasters. SoundExchange and DiMA submitted a settlement on December 2, 2009, to the CRB, which calls for each commercial webcaster that utilizes the § 114 compulsory license to pay an annual, nonrefundable minimum fee of $500, for each individual channel and each individual station that it maintains, although no commercial webcaster is required to pay more than $50,000 per calendar year. To implement the settlement, the CRB published proposed regulations concerning the minimum fees in the Federal Register on December 23, 2009; public comments and objections to the proposed amendments were due no later than January 22, 2010. Two bills related to the CRB's decision were introduced in the 110 th Congress (the Internet Radio Equality Act; H.R. 2060 , S. 1353 ) that would have nullified the board's decision and substituted different rates and terms. Neither were enacted, however. Instead, the 110 th Congress passed the Webcaster Settlement Act of 2008 ( P.L. 110-435 ) that authorized SoundExchange to enter into settlement agreements with webcasters that effectively replace the CRB's decision. Such authority expired on February 15, 2009. In the 111 th Congress, the Webcaster Settlement Act of 2009 ( P.L. 111-36 ) was passed to reinstate SoundExchange's authority to negotiate settlement agreements with webcasters for a period of 30 days starting on July 1, 2009. The Webcaster Settlement Act of 2008 (WSA of 2008), H.R. 7084 , was introduced on September 25, 2008, by Representative Inslee and then subsequently approved by voice vote in the House on September 27 and by unanimous consent in the Senate on September 30. It was signed by President Bush on October 16, 2008 ( P.L. 110-435 ). The purpose of the act was to provide statutory authority for SoundExchange to negotiate and enter into alternative royalty fee agreements with webcasters that would replace the rates established under the CRB's decision, while Congress was in recess for the November 2008 elections. However, the act provided a limited period of time for reaching voluntary accords, as it terminated SoundExchange's authority to make settlements with webcasters on February 15, 2009. These agreements "shall be binding on all copyright owners of sound recordings and other persons entitled to payment ... in lieu of any determination [of royalty rates] by the Copyright Royalty Judges." However, the act did not mandate that SoundExchange negotiate agreements with webcasters. The WSA of 2008 amended 17 U.S.C. § 114(f)(5), which had been added to the Copyright Act by the Small Webcaster Settlement Act of 2002. The act deleted references to "small" webcasters, thereby allowing the section to pertain to all webcasters regardless of size. The act also amended the section to state that agreements "may" include provisions for payment of royalties on the basis of a percentage of revenue or expenses, or both, and a minimum fee; the section originally provided that agreements "shall" contain these terms. The WSA also provided that the terms of a negotiated agreement may be effective for up to a period of 11 years beginning on January 1, 2005. The act permitted any agreement to be precedential in future CRB ratemaking proceedings, if the parties to the agreement so expressly authorized. Finally, the act declared that nothing in the WSA of 2008 (or any agreement entered into under it) shall be taken into account by the U.S. Court of Appeals for the District of Columbia Circuit in its review of the May 1, 2007, determination of royalty rates by the Copyright Royalty Judges. Three negotiated royalty agreements have been made under the authority of the WSA of 2008. The Corporation for Public Broadcasting (CPB) and SoundExchange announced on January 15, 2009, that they had reached a "comprehensive agreement" on the royalty rates to be paid for Internet streaming of sound recordings by approximately 450 public radio webcasters, including CPB-supported station websites, NPR, NPR members, National Federation of Community Broadcasters members, American Public Media, Public Radio Exchange, and Public Radio International. The agreement, which substitutes for the statutory rates determined by the CRB in May 2007, covers a royalty period from January 1, 2005, through December 31, 2010. Under the agreement, CPB is required to pay SoundExchange a single, "up-front" flat-fee royalty payment of $1.85 million. The agreement applies to 450 public radio stations in the years 2005-2007, with an allowance for growth in the number of stations of up to 10 per year starting in 2008 (therefore a maximum of 480 stations in 2010). In addition, CPB, on behalf of the public radio system, is to provide SoundExchange with consolidated usage and playlist reporting in order to "improve the efficiency of the payment process helping to ensure that performers and sound recording copyright owners are accurately paid for the use of their recordings." As a condition of the agreement, NPR also agreed to drop its appeal of the CRB's royalty rate decision. On February 15, 2009, the National Association of Broadcasters (NAB) and SoundExchange informed the Copyright Office that they had made an agreement that covers an extended royalty period (from January 1, 2006, through December 31, 2015) for terrestrial AM or FM radio broadcasters (licensed by the Federal Communications Commission) who simulcast their signal or stream other programming over the Internet. The negotiated agreement calls for each broadcaster to pay an annual minimum fee of $500 for each of its channels, although no broadcaster is required to pay more than $50,000 on the minimum fees. In addition, broadcasters must pay royalty rates on a per-performance basis, as follows: Broadcasters must also submit, on a monthly basis, "census" reports to SoundExchange that detail information about the songs that they play over the Internet, including song title, artist, album, number of times a song is played, and the number of listeners for each song. "Small" broadcasters that stream less than 27,777 aggregate tuning hours per year may pay $100 per year to obtain a waiver from this detailed annual census reporting requirement. On February 15, 2009, a limited number of "small" webcasters reached an agreement with SoundExchange for the same royalty period as the NAB's license (2006-2015). The webcasters that are party to this agreement must comply with census reporting requirements and pay annual minimum fees that vary from $500 to $5,000, depending on specified gross revenue limits. The negotiated royalty rate for these small webcasters is as follows: All of the three agreements described above provide that their rates and terms are nonprecedential, and "shall not be admissible as evidence or otherwise taken into account in any administrative, judicial, or other government proceeding involving the setting or adjustment of" royalties for Internet transmission of copyrighted music. Although SoundExchange successfully negotiated new rates with certain categories of webcasters discussed above, SoundExchange did not reach agreements with all webcasters, including the largest commercial webcasters such as Pandora, Live365, and RealNetworks, prior to the February 15, 2009, sunset of SoundExchange's settlement authority under the WSA of 2008. SoundExchange appealed to Congress to renew such authority due to "positive developments in its discussions" with these webcasters. The Webcaster Settlement Act of 2009 (WSA of 2009) ( H.R. 2344 , S. 1145 ) was introduced in the House on May 12, 2009, by Representative Inslee, and in the Senate by Senator Wyden on May 21, 2009. On June 9, 2009, the House passed H.R. 2344 by voice vote under suspension of the Rules of the House. The Senate passed H.R. 2344 without amendment by unanimous consent on June 17, 2009. President Obama signed the bill on June 30, 2009 ( P.L. 111-36 ). The WSA of 2009 reinstated SoundExchange's authority to negotiate settlement agreements for a 30-day period starting on July 1, 2009. Pursuant to the WSA of 2009, SoundExchange negotiated five royalty agreements. The first agreement was announced on July 7, 2009, and is available to certain "pureplay" commercial webcasters (those that derive nearly all of their revenue from the streaming of sound recordings) such as Pandora, AccuRadio, and Live365.com. Commercial pureplay webcasters can either opt-in to the agreement or choose not to sign onto it and instead comply with the CRB-issued rates and terms. The pureplay agreement covers three rate classes: large commercial webcasters (those exceeding $1.25 million in annual revenues); small pureplay webcasters (those with an annual gross revenue of less than $1.25 million and that do not exceed certain monthly aggregate tuning hour limits ); and webcasters that provide bundled, syndicated, or subscription services. The pureplay webcaster agreement pertains to the royalty period starting on January 1, 2006, and ending on December 31, 2015 (although it expires at the end of 2014 for small webcasters). Commercial webcasters that want to claim the benefit of the rates and terms under this agreement must submit to SoundExchange an election form every year. The agreement contains the following warning: It is the responsibility of each transmitting entity to ensure that it is in full compliance with applicable requirements of the statutory licenses under Sections 112(e) and 114 of the Copyright Act. SoundExchange is not in a position to, and does not, make determinations as to whether each of the many services that rely on the statutory licenses is eligible for statutory licensing or any particular royalty payment classification, nor does it continuously verify that such services are in full compliance with all applicable requirements.... SoundExchange and copyright owners reserve all their rights to take enforcement action against a transmitting entity that is not in compliance with all applicable requirements. The rates available under the pureplay webcaster agreement are described in Table 3 . Under the pureplay agreement, commercial webcasters must provide monthly census reports to SoundExchange concerning every sound recording performed during that month and the number of performances of each recording. The agreement also provides that its rates and terms may not be admissible as evidence or otherwise taken into account in any administrative, judicial, or other government proceeding concerning the setting of royalties for public performance of sound recordings. Furthermore, the agreement contains a clause that expresses the following sentiment: These Rates and Terms shall be considered as a compromise motivated by the unique business, economic and political circumstances of Commercial Webcasters, copyright owners and performers rather than as matters that would have been negotiated in the marketplace between a willing buyer and a willing seller. The agreement with college-affiliated Internet radio webcasters covers those that are "directly operated by, or [are] affiliated with and officially sanctioned by, and the digital audio transmission operations of which are staffed substantially by students enrolled at, a domestically-accredited primary or secondary school, college, university or other post-secondary degree-granting educational institution." The college webcaster agreement covers the period from January 1, 2011, until December 31, 2015. There is a minimum annual fee of $500 for each individual channel and each station that the college webcaster operates. For college webcasters that make total transmissions in excess of 159,140 aggregate tuning hours (ATH), the webcaster must pay additional usage fees at the following per-performance rates: College webcasters that do not exceed 55,000 total ATH per month for any individual channel may pay a $100 annual "proxy" fee in lieu of providing reports of use to SoundExchange. Those not exceeding 159,140 total ATH per month may submit reports of use on a sample basis (two weeks per calendar quarter) and such reports need only report how many times a song is played (rather than ATH or actual total performances). College webcasters that exceed 159,140 total ATH must submit census reporting (name of each song performed and how many listeners for each song). The college webcaster agreement expressly provides that the rates and terms contained within the agreement may be used as precedent in future ratemaking proceedings. The noncommercial religious broadcaster agreement governs the royalty period from 2006 to 2015. Like the agreement made with noncommercial college webcasters, this agreement requires religious webcasters to pay SoundExchange an annual minimum fee of $500 for each individual channel or station through which they stream sound recordings over the Internet. This minimum fee constitutes "full payment" for the religious webcaster to stream up to 159,140 monthly ATH of programming on each channel or station. If religious webcasters stream in excess of that amount per month, they must pay SoundExchange additional royalties at the following rates: Religious webcasters that do not exceed 44,000 ATH per year may pay SoundExchange a $100 proxy fee to waive the reporting requirement. Those not exceeding 159,140 total ATH per month may submit reports of use on a sample basis (two weeks per calendar quarter) and such reports must describe total ATH. Religious webcasters that exceed 159,140 total ATH per month must submit census reporting (total performances and number of listeners). Unlike the noncommercial educational webcaster agreement, the noncommercial religious broadcaster agreement does not authorize its rates to be precedential in future administrative, judicial, or other government proceeding involving royalty rate setting. The agreement SoundExchange reached with Sirius XM applies not to performances of sound recordings transmitted by satellite, but rather to the streaming of Sirius programming over the Internet or to mobile phones using Internet technology. The Sirius agreement covers the royalty period 2009-2015, and the annual minimum fee required is $500 for each individual channel and each station. There is a $50,000 cap on this minimum fee in any one year. In addition, Sirius must pay royalties at the following per-performance rate: The Sirius XM agreement requires monthly statements of account and reports of use. In addition, it expressly authorizes the use of the agreement in future ratemaking proceedings. Under the WSA of 2009, Sound Exchange and the Corporation for Public Broadcasting (CPB) reached another agreement that extends the agreement the parties had made under the WSA of 2008. The second agreement governs the royalty period from January 1, 2011, through December 31, 2015. The total license fee that CPB must pay to SoundExchange for this royalty period is $2.4 million, payable in five equal installments each year starting December 31, 2010. The license applies to 490 public radio stations in the year 2011, with an allowance for growth in the number of stations of up to 10 per year (and a limit of 530 stations in 2015). For all of these stations, if the total music ATH exceeds certain ATH limits per year, CPB must pay additional fees to SoundExchange on a per performance basis as specified in the table below: The agreement requires CPB-affiliated public radio broadcasters to submit reports of use, play frequency, and ATH per calendar quarter. The agreement provides that the rates, fees, and other requirements are nonprecedential and may not be introduced as evidence or taken into account in any ratemaking proceeding. Although the past two years have been consumed with the reactions to the Copyright Royalty Board's May 2007 decision, time marches on, and the CRB announced on January 5, 2009, that it would begin the third proceeding ("Webcaster III") to determine the royalty rates for the statutory license covering Internet transmissions of sound recordings, applicable to the next royalty period that runs from January 1, 2011, through December 31, 2015. Any webcaster that chooses not to opt-in to one of the settlement agreements described above may participate in this proceeding and would be bound by the rates and terms that the CRB shall determine.
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Under the Copyright Act, Internet radio broadcasters, or "webcasters," that stream copyrighted music to their listeners are obliged to pay royalty fees to the sound recording copyright owners at statutory rates established by the Copyright Royalty Board (CRB). However, some webcasters may also have the option of paying different royalty fees that are privately negotiated with SoundExchange, the entity that collects performance royalties on behalf of sound recording copyright owners and recording artists. On March 9, 2007, the CRB announced statutory royalty rates for certain digital transmissions of sound recordings by webcasters for the royalty period January 1, 2006, through December 31, 2010. Several webcasters appealed the CRB's decision to the U.S. Court of Appeals for the District of Columbia Circuit. The appellants argued that the rates were unreasonably high and that the absence of a cap on minimum fees paid per licensee was arbitrary and capricious. On July 10, 2009, the federal court of appeals issued a decision that upheld nearly all aspects of the CRB's determination of rates. Two recent laws, the Webcaster Settlement Act of 2008 (WSA of 2008; P.L. 110-435) and the Webcaster Settlement Act of 2009 (WSA of 2009; P.L. 111-36), facilitated the ability of webcasters to enter into voluntary agreements with SoundExchange that provide alternative royalty rates that substitute for the statutory rates established under the CRB's decision. These agreements generally permit a webcaster to pay lower rates and may cover a longer royalty period. Pursuant to the WSA of 2008 and 2009, voluntarily negotiated royalty agreements were reached between SoundExchange and the following entities: the Corporation for Public Broadcasting (for the online streaming of public radio stations); the National Association of Broadcasters (for online simulcasts by FM and AM radio stations); a group of "small" webcasters; certain "pureplay" commercial webcasters (those that derive nearly all of their revenue from the streaming of sound recordings) such as Pandora, Live365.com, and AccuRadio; noncommercial educational webcasters (college-affiliated Internet radio stations); noncommercial religious broadcasters (that stream their AM/FM programming over the Internet); and Sirius XM (concerning Internet streaming of Sirius programming as opposed to its satellite-transmitted programming). Although the above settlements cover the same royalty period as the CRB's determination (from 2006 through 2010), some rate agreements extend beyond that period, until the end of 2015. Thus, webcasters that are parties to extended agreements need not participate in the CRB proceedings to determine statutory royalty rates for the period 2011 to 2015, which were initiated in January 2009. Any webcaster that chooses not to opt-in to a settlement agreement with SoundExchange must instead comply with the applicable statutory rates and terms established by the CRB for the period 2006-2010, and will be subject to any new rates that the CRB determines for 2011-2015. This report surveys the legislative history of this issue, the CRB's rate decision, and the congressional and public response.
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Federal law has regulated money in elections for more than a century. Concerns about limiting the potential for corruption and informing voters have been at the heart of that law and related regulations and judicial decisions . Restrictions on private money in campaigns, particularly large contributions, have been a common theme throughout the history of federal campaign finance law. The roles of corporations, unions, interest groups, and private funding from individuals have attracted consistent regulatory attention. Congress has also required that certain information about campaigns' financial transactions be made public. Collectively, three principles embodied in this regulatory tradition—limits on sources of funds, limits on contributions, and disclosure of information about these funds—constitute ongoing themes in federal campaign finance policy. Throughout most of the 20 th century, campaign finance policy was marked by broad legislation enacted sporadically. Major legislative action on campaign finance issues remains rare. Since the 1990s, however, momentum on federal campaign finance policy, including regulatory and judicial action, has arguably increased. Congress last enacted major campaign finance legislation in 2002. The Bipartisan Campaign Reform Act (BCRA) largely banned unregulated soft money in federal elections and restricted funding sources for pre-election broadcast advertising known as electioneering communications . As BCRA was implemented, regulatory developments at the Federal Election Commission (FEC), and some court cases, stirred controversy and renewed popular and congressional attention to campaign finance issues. Since BCRA, Congress has also continued to explore legislative options and has made comparatively minor amendments to the nation's campaign finance law. The most notable recent statutory changes occurred in 2014, when Congress eliminated public financing for presidential nominating conventions and increased limits for some contributions to political parties. Some of the most recent notable campaign finance developments beyond Congress have occurred at the Supreme Court. The 2010 Citizens United ruling spurred substantial legislative action during the 111 th Congress and continued interest during subsequent Congresses. The ruling was, however, only the latest—albeit perhaps the most monumental—shift in federal campaign finance policy to occur in recent years. In another 2010 decision, SpeechNow.org v. Federal Election Commission , the U.S. Court of Appeals for the District of Columbia held that contributions to political action committees (PACs) that make only independent expenditures cannot be limited—a development that led to formation of "super PACs." This report is intended to provide an accessible overview of major policy issues facing Congress. Citations to other CRS products, which provide additional information, appear where relevant. The report discusses selected litigation to demonstrate how those events have changed the campaign finance landscape and affected the policy issues that may confront Congress, but it is not a constitutional or legal analysis. As in the past, this version of the report contains both additions of new material and deletions of old material compared with previous versions. This update emphasizes those topics that appear to be most relevant for Congress, while also providing historical background that is broadly applicable. This report will be updated occasionally as events warrant. Dozens or hundreds of campaign finance bills have been introduced in each Congress since the 1970s. Nonetheless, major changes in campaign finance law have been rare. A generation passed between the Federal Election Campaign Act (FECA) and BCRA, the two most prominent campaign finance statutes of the past 50 years. Federal courts and the FEC played active roles in interpreting and implementing both statutes and others. Over time and in all facets of the policy process, anti-corruption themes have been consistently evident. Specifically, federal campaign finance law seeks to limit corruption or apparent corruption in the lawmaking process that might result from monetary contributions. Campaign finance law also seeks to inform voters about sources and amounts of contributions. In general, Congress has attempted to limit potential corruption and increase voter information through two major policy approaches limiting sources and amounts of financial contributions, and requiring disclosure about contributions and expenditures. Another hallmark of the nation's campaign finance policy concerns spending restrictions. Congress has occasionally placed restrictions on the amount candidates can spend, as it did initially through FECA. Today, candidates and political committees can generally spend unlimited amounts on their campaigns, as long as those funds are not coordinated with other parties or candidates. Modern campaign finance law was largely shaped in the 1970s, particularly through FECA. First enacted in 1971 and substantially amended in 1974, 1976, and 1979, FECA remains the foundation of the nation's campaign finance law. As originally enacted, FECA subsumed previous campaign finance statutes, such as the 1925 Corrupt Practices Act, which, by the 1970s, were largely regarded as ineffective, antiquated, or both. The 1971 FECA principally mandated reporting requirements similar to those in place today, such as quarterly disclosure of a political committee's receipts and expenditures. Subsequent amendments to FECA played a major role in shaping campaign finance policy as it is understood today. In brief Among other requirements, the 1974 amendments, enacted in response to the Watergate scandal, placed contribution and spending limits on campaigns. The 1974 amendments also established the FEC. After the 1974 amendments were enacted, the first in a series of prominent legal challenges (most of which are beyond the scope of this report) came before the Supreme Court of the United States. In its landmark Buckley v . Valeo (1976) ruling, the Court declared mandatory spending limits unconstitutional (except for publicly financed presidential candidates) and invalidated the original appointment structure for the FEC. Congress responded to Buckley through the 1976 FECA amendments, which reconstituted the FEC, established new contribution limits, and addressed various PAC and presidential public financing issues. The 1979 amendments simplified reporting requirements for some political committees and individuals. To summarize, the 1970s were devoted primarily to establishing and testing limits on contributions and expenditures, creating a disclosure regime, and constructing the FEC to administer the nation's campaign finance laws. Despite minor amendments, FECA remained essentially uninterrupted for the next 20 years. Although there were relatively narrow legislative changes to FECA and other statutes, such as the 1986 repeal of tax credits for political contributions, much of the debate during the 1980s and early 1990s focused on the role of interest groups, especially PACs. By the 1990s, attention began to shift to perceived loopholes in FECA. Two issues—soft money and issue advocacy (issue advertising)—were especially prominent. Soft money is a term of art referring to funds generally perceived to influence elections but not regulated by campaign finance law. At the federal level before BCRA, soft money came principally in the form of large contributions from otherwise prohibited sources, and went to party committees for "party-building" activities that indirectly supported elections. Similarly, issue advocacy traditionally fell outside FECA regulation because these advertisements praised or criticized a federal candidate—often by urging voters to contact the candidate—but did not explicitly call for election or defeat of the candidate (which would be express advocacy ). In response to these and other concerns, BCRA specified several reforms. Among other provisions, the act banned national parties, federal candidates, and officeholders from raising soft money in federal elections; increased most contribution limits; and placed additional restrictions on pre-election issue advocacy. Specifically, the act's electioneering communications provision prohibited corporations and unions from using their treasury funds to air broadcast ads referring to clearly identified federal candidates within 60 days of a general election or 30 days of a primary election or caucus. After Congress enacted BCRA, momentum on federal campaign finance policy issues arguably shifted to the FEC and the courts. Implementing and interpreting BCRA were especially prominent issues. Noteworthy post-BCRA events include the following: The Supreme Court upheld most of BCRA's provisions in a 2003 facial challenge ( McConnell v. Federal Election Commission ). Over time, the Court held aspects of BCRA unconstitutional as applied to specific circumstances. These included a 2008 ruling related to additional fundraising permitted for congressional candidates facing self-financed opponents (the "Millionaire's Amendment," Davis v. Federal Election Commission ) and a 2007 ruling on the electioneering communication provision's restrictions on advertising by a 501(c)(4) advocacy organization ( Wisconsin Right to Life v. Federal Election Commission ). Since 2002, the FEC has undertaken several rulemakings related to BCRA and other topics. Complicated subject matter, protracted debate among commissioners, and litigation have made some rulemakings lengthy and controversial. Congress enacted some additional amendments to campaign finance law since BCRA. The 2007 Honest Leadership and Open Government Act (HLOGA) placed new disclosure requirements on lobbyists' campaign contributions (certain bundled contributions) and restricted campaign travel aboard private aircraft. In 2014, as discussed below, Congress raised some limits for contributions to political parties. The following discussion highlights those topics that appear to be enduring and significant in the current policy environment. The discussion begins with changes directly affected by Citizens United because those developments most fundamentally altered the campaign finance landscape. In January 2010, the Supreme Court issued a 5-4 decision in Citizens United v. Federal Election Commission . In brief, the opinion invalidated FECA's prohibitions on corporate and union treasury funding of independent expenditures and electioneering communications. As a consequence of Citizens United , corporations and unions are free to use their treasury funds to air political advertisements and make related purchases explicitly calling for election or defeat of federal or state candidates ( independent expenditures ) or advertisements that refer to those candidates during pre-election periods, but do not necessarily explicitly call for their election or defeat ( electioneering communications ). Previously, such advertising would generally have had to be financed through voluntary contributions raised by PACs affiliated with unions or corporations. DISCLOSE Act Consideration Following Citizens United . Since Citizens United , the House and Senate have considered various legislation designed to increase public availability of information ( disclosure ) about corporate and union spending. Particularly in the immediate aftermath of the decision, during the 111 th Congress, most congressional attention responding to the ruling focused on the DISCLOSE Act ( H.R. 5175 ; S. 3295 ; S. 3628 ). The House of Representatives passed H.R. 5175 , with amendments, on June 24, 2010, by a 219-206 vote. By a 57-41 vote, the Senate declined to invoke cloture on companion bill S. 3628 on July 27, 2010. A second cloture vote failed (59-39) on September 23, 2010. No additional action on the bill occurred during the 111 th Congress. This period during the 111 th Congress marked the most substantial legislative progress that the DISCLOSE Act has made to date. Versions of the bill were introduced in both chambers in subsequent Congresses, but none advanced to floor consideration in either chamber. In the 112 th Congress, the Senate debated a motion to proceed to the measure in July 2012 but declined (by a 53-45 vote) to invoke cloture. In the 113 th Congress, the Senate Rules and Administration Committee held a hearing on a version of the bill, S. 2516 . The 114 th and 115 th Congresses considered the DISCLOSE Act again, but no substantial legislative activity occurred. On March 26, 2010, the U.S. Court of Appeals for the District of Columbia held in SpeechNow.org v. Federal Election Commission that contributions to PACs that make only independent expenditures—but not contributions—could not be constitutionally limited. As a result, these entities, commonly called super PACs , may accept previously prohibited amounts and sources of funds, including large corporate, union, or individual contributions used to advocate for election or defeat of federal candidates. Existing reporting requirements for PACs apply to super PACs, meaning that contributions and expenditures must be disclosed to the FEC. Additional discussion of super PACs appears in another CRS product. As the ramifications of Citizens United and SpeechNow continued to unfold, other forms of unlimited fundraising were also permitted. In October 2011, the FEC announced that, in response to an agreement reached in a case brought after SpeechNow ( Carey v. FEC ), the agency would permit nonconnected PACs—those that are unaffiliated with corporations or unions—to accept unlimited contributions for use in independent expenditures. The agency directed PACs choosing to do so to keep the independent expenditure contributions in a separate bank account from the one used to make contributions to federal candidates. As such, nonconnected PACs that want to raise unlimited sums for independent expenditures may create a separate bank account and meet additional reporting obligations rather than forming a separate super PAC. Super PACs have, nonetheless, continued to be an important force in American politics because only some traditional PACs would qualify for the Carey exemption to fundraising limits. Implementing Citizens United and SpeechNow fell to the FEC. The commission issued advisory opinions (AOs) within a few months of the rulings recognizing corporate independent expenditures and super PACs. Afterward, some corporations, unions, and other organizations began making previously prohibited expenditures or raising previously prohibited funds for electioneering communications or independent expenditures. Despite progress on post- Citizens United AOs, agreement on final rules took years. A December 2011 Notice of Proposed Rulemaking (NRPM) posing questions about what form post- Citizens United rules should take remained open until late 2014, reflecting an apparent stalemate over the scope of the agency's Citizens United response. In October 2014, the commission approved rules essentially to remove portions of existing regulations that Citizens United had invalidated, such as spending prohibitions on corporate and union treasury funds. The 2014 rules did not require additional disclosure surrounding independent spending, which some commenters had urged, but which others argued was beyond the agency's purview. On April 2, 2014, the Supreme Court invalidated aggregate contribution limits in McCutcheon v. FEC . "Base" limits capping the amounts that donors may give to individual candidates still apply. For 2013-2014—pre- McCutcheon —individual contributions could total no more than $123,200. Of that amount, $48,600 could go to candidates, with the remaining $74,600 to parties and PACs. Following McCutcheon , individuals may contribute to as many candidates as they wish provided that they adhere to the base contribution limits (e.g., $2,700 per-candidate, per-election for the 2018 election cycle). Additional discussion appears in another CRS product. For the first time since enacting BCRA in 2002, Congress raised the statutory limit on some campaign contributions in December 2014. Specifically, the FY2015 omnibus appropriations law, P.L. 113-235 , increased contribution limits to national political party committees. Most prominently, these party committees include the Democratic National Committee (DNC), Democratic Congressional Campaign Committee (DCCC), Democratic Senatorial Campaign Committee (DSCC), Republican National Committee (RNC), National Republican Congressional Committee (NRCC), and the National Republican Senatorial Committee (NRSC). The new law also permits these committees to establish new accounts, each with separate contribution limits, to support party conventions, facilities, and recounts or other legal matters. Under inflation adjustments announced in February 2017, individuals could contribute at least $813,600 to a national party committee annually in 2017-2018. Political action committees (PACs) may also make larger contributions to parties. For multicandidate PACs—the most common type of PAC—contributions to a national party increased from $45,000 to at least $360,000 annually. Unlike limits for individual contributions, those for PACs are not adjusted for inflation. Additional detail appears in another CRS product. Two notable public financing changes have occurred since 2010, although neither is directly related to Citizens United. Most relevant for federal campaign finance policy, P.L. 113-94 , enacted in April 2014, terminated public financing for presidential nominating conventions. The 2016 conventions were the first since 1972 funded entirely with private money. Additional discussion appears in other CRS products. The second major development occurred in 2011 and primarily affects state-level candidates but also has implications for federal policy options. On June 27, 2011, the Supreme Court issued a 5-4 opinion in the consolidated case Arizona Free Enterprise Club's Freedom Club PAC et al. v. Bennett and McComish v. Bennett . The decision invalidated portions of Arizona's public financing program for state-level candidates. The majority opinion, authored by Chief Justice Roberts, held that the state's use of matching funds (also called trigger funds, rescue funds , or escape hatch funds ) unconstitutionally burdened privately financed candidates' free speech and did not meet a compelling state interest. The decision has been most relevant for state-level public financing programs, as a similar matching fund system does not operate at the federal level. However, the decision also appears to preclude rescue funds in future federal proposals to restructure the existing presidential public financing program or create a congressional public financing program. The Office of Law Revision Counsel, which maintains the U.S. Code , moved FECA and other portions of federal election law to a new Title 52 of the U.S. Code in September 2014. Previously, FECA and most other relevant campaign finance law were housed in Title 2 of the U.S. Code . This editorial change does not affect the content of the statutes. Nonetheless, it is a major change for those who need to search or cite federal election law. Unless otherwise noted, FECA citations throughout this report have been changed to reflect the new Title 52 location. Congress amended FECA in an FY2019 appropriations bill to require Senate political committees to file their campaign finance reports electronically. H.R. 5895 ( P.L. 115-244 ) amends FECA to change the place of filing for Senate campaign finance reports from the Secretary of the Senate to the FEC. The text does not require electronic filing per se. However, per FECA, all political committee reports filed with the commission (except for political committees with less than $50,000 of annual activity) must be filed electronically. Therefore, changing the place of filing to the FEC changes both the place and method of filing. Corporations and unions are still banned from making contributions in federal elections. PACs affiliated with, but legally separate from, those corporations and unions may contribute to candidates, parties, and other PACs. As noted elsewhere in this report, corporations and unions may use their treasury funds to make electioneering communications, independent expenditures, or both, but this spending is not considered a contribution under FECA. The prohibition on using soft money in federal elections remains in effect. This includes prohibiting the pre-BCRA practice of large, generally unregulated contributions to national party committees for generic "party building" activities. As noted elsewhere in this report, in December 2014, Congress enacted legislation, which President Obama signed ( P.L. 113-235 ), permitting far larger contributions to political parties than had been permitted previously. These funds are not soft money, in that they are subject to contribution limits and other FECA requirements (e.g., disclosure). Nonetheless, some might contend that the spirit of these contributions resembles soft money. Others contend that the increased limits allow parties to compete with newly empowered groups, such as super PACs, that are not subject to contribution limits. Pre-existing base limits on contributions to campaigns, parties, and PACs generally remain in effect. Despite Citizens United's implications for independent expenditures and electioneering communications, the ruling did not affect the prohibition on corporate and union treasury contributions in federal campaigns. As noted above, SpeechNow permitted unlimited contributions to independent-expenditure-only PACs ( super PACs) . The FEC has not issued rules regarding super PACs per se. In July 2011 the commission issued an advisory opinion stating that federal candidates (including officeholders) and party officials could solicit funds for super PACs, but that those solicitations were subject to the limits established in FECA and discussed below. Also as noted elsewhere in this report, the FEC announced in October 2011, per an agreement reached in Carey v. FEC , that nonconnected PACs would be permitted to raise unlimited amounts for independent expenditures if those funds are kept in a separate bank account. Although major contribution limits remain in place, as noted above, some party contribution limits have increased. More consequentially, post- McCutcheon aggregate contribution limits no longer apply. Therefore, although individuals were, for example, still prohibited from contributing more than $2,700 per candidate, per election during the 2018 cycle, the total amount of such giving is no longer capped. Table 1 below and the table notes provide additional information, as do other CRS products. The FEC announced 2018-cycle limits in February 2017. Other recent developments notwithstanding, disclosure requirements enacted in FECA and BCRA remain intact. In general, political committees must regularly file reports with the FEC providing information about receipts and expenditures, particularly those exceeding an aggregate of $200; the identity of those making contributions of more than $200, or receiving more than $200, in campaign expenditures per election cycle; and the purpose of expenses. Those making independent expenditures or electioneering communications, such as party committees and PACs, have additional reporting obligations. Among other requirements Independent expenditures aggregating at least $10,000 must be reported to the FEC within 48 hours; 24-hour reports for independent expenditures of at least $1,000 must be made during periods immediately preceding elections. The existing disclosure requirements concerning electioneering communications mandate 24-hour reporting of communications aggregating at least $10,000. Donor information must be included for those who designated at least $200 toward the independent expenditure, or $1,000 for electioneering communications. If 501(c) or 527 organizations make independent expenditures or electioneering communications, those activities would be reported to the FEC. As explained in the " What Has Changed " section of this report, the 115 th Congress changed the filing format for Senate political committees. The 115 th Congress has not otherwise substantially altered campaign finance law. As with other recent Congresses, provisions in enacted appropriations measures (including the electronic-filing provision) also affected campaign finance policy or law. Congress also held related oversight hearings. Additional detail appears below. On February 7, 2017, the Committee on House Administration ordered H.R. 133 reported favorably. The bill would terminate the presidential public financing program. Remaining amounts in the Presidential Election Campaign Fund (PECF) would be transferred to a pediatric research fund to which previously eliminated party-convention funds were transferred under P.L. 113-94 , and to the general fund of the U.S. Treasury for deficit reduction. Additional information appears in another CRS product. Also on February 7, 2017, the Committee on House Administration ordered H.R. 634 reported favorably. The bill would terminate the Election Assistance Commission and transfer some election administration functions back to the Federal Election Commission (FEC). In addition to providing appropriations for the Federal Election Commission, the language contained in consolidated appropriations legislation enacted during the 115 th Congress (see, for example, P.L. 115-31 ; P.L. 115-141 ) continued the prohibition on requiring reporting certain political contributions or expenditures as a condition of the government-contracting process, and on requiring campaign finance disclosure to the Securities and Exchange Commission. As of this writing, four of six commissioners remain at the Federal Election Commission. One nomination occurred during the 115 th Congress. The 115 th Congress occasionally addressed issues related to campaign finance in legislative or oversight hearings. In particular, these included attention to foreign influence in U.S. elections and disclaimers in online communications. The 114 th Congress enacted no major changes to campaign finance law. The possibility of foreign money affecting U.S. campaigns emerged as a component of some congressional hearings and agency activity beginning in the summer and fall of 2016. FECA prohibits foreign nationals from making contributions, or giving other things of value, or making expenditures in U.S. federal, state, or local elections. Some Members of Congress and Federal Election Commissioners have raised questions about whether prohibited foreign funds could have influenced recent elections, whether additional legislative or regulatory safeguards are necessary to protect future elections, or both. Some Members of Congress also raised the issue at various oversight hearings. In September 2018, the FEC reported to congressional appropriators about the agency's enforcement of the FECA ban on foreign funds. Congress required the report in joint explanatory language accompanying the FY2018 Financial Services and General Government portion of the omnibus appropriations law ( H.R. 1625 ; P.L. 115-141 ). The report summarized commission processes for identifying possible foreign funds and enforcing the existing FECA ban; it did not propose additional action. FECA prohibits "personal use" of campaign funds. In practice, this means that campaigns may not use funds to pay for expenses that would exist without the campaign (the "irrespective test"). Recently, through advisory opinions (AOs), the FEC has permitted using campaign funds for two instances that might otherwise be considered prohibited personal use. These are (1) using campaign funds for certain security expenses; and (2) using campaign funds for certain child care expenses. After the June 14, 2017, attack on several Members of Congress, staff, and U.S. Capitol Police officers in Alexandria, Virginia, House Sergeant at Arms Paul Irving wrote to the FEC requesting guidance about the permissibility of using campaign funds to pay for residential security systems. The FEC treated the letter as an AO request. On July 13, 2017, citing similar previous requests and specific threat information and recommendations from the Capitol Police and Sergeant at Arms, the FEC approved the request. As a result, Members of Congress may use campaign funds for installing, upgrading, or monitoring residential security systems in circumstances similar to those addressed in the AO. These systems must be "non-structural" and may not be primarily intended to increase the home's value. The FEC also recently has determined that the FECA ban on corporate contributions does not prohibit campaigns from accepting certain information technology (IT) services. In August 2018, Microsoft asked the FEC whether it could provide free enhanced security services to "election-sensitive users" of its Office 365 email service, and other services without making a prohibited corporate in-kind contribution. In its request, Microsoft stated that these security services would be available to federal, state, and local campaigns, as well as parties, vendors, and "think-tank" organizations involved in campaigns. The commission determined that Microsoft's proposal was permissible because the company "would be providing [enhanced security] services based on commercial and not political considerations, in the ordinary course of its business, and not merely for promotional consideration or to generate goodwill." In May 2018, the FEC granted New York congressional candidate Liuba Grechen Shirley's request to use campaign funds to pay for certain child care expenses. The commission based its decision on a related 1995 AO request (1995-42) and the agency's determination that the child care the candidate required resulted directly from her candidacy. Several Members of Congress urged the FEC to grant the request. In recent Congresses, FEC enforcement and transparency issues attracted attention in Congress and beyond. Legislation to restructure the agency has been introduced in several recent Congresses. (Additional information appears in other CRS products. ) The Senate Judiciary Subcommittee on Crime and Terrorism held a 2013 hearing on enforcement of campaign finance law. In addition, in the House, the Committee on House Administration continued to request documents from the agency about its enforcement practices. Major attention to the matter appears to have begun in November 2011, when the Committee on House Administration, Subcommittee on Elections, held an FEC oversight hearing—the first in almost a decade. Negotiations between the committee and commission appear to have resulted in the ongoing effort to approve and publicly release a new FEC enforcement manual. Debate over the matter continued at the FEC, sometimes including acrimonious meetings among commissioners. The issue remains unresolved. In addition to oversight of the agency itself, the Senate may consider nominations to the agency. As of this writing, four of six commissioners remain in office. One nomination was pending during the 115 th Congress. The FEC has civil responsibility for enforcing FECA. The Department of Justice (DOJ) enforces the act's criminal provisions, and the FEC may refer suspected criminal violations to DOJ. Throughout its history, FEC enforcement has been controversial, partially because the commission's six-member structure as established in FECA sometimes produces stalemates in enforcement actions. Some have argued that DOJ should pursue more vigorous enforcement of campaign finance law, both on its own authority and in lieu of FEC action. Some Members of Congress have proposed requiring companies to provide additional information to shareholders if the companies choose to make electioneering communications or independent expenditures. These proposals are sometimes referred to as "shareholder protection" measures, although the extent to which they would benefit shareholders or companies is subject to debate. In 2013, the Securities and Exchange Commission (SEC) dropped plans to consider additional corporate disclosure of political spending, although some advocates continue to urge the agency to consider the topic. Since then, some advocates of additional campaign finance regulation have continued to urge the SEC to take regulatory action to require campaign-related disclosure. As noted previously, Congress has prohibited requiring additional disclosure to the FEC, through some recent appropriations measures. In July 2010, citing Citizens United , the SEC issued new "pay-to-play" rules—which are otherwise beyond the scope of this report—to prohibit investment advisers from seeking business from municipalities if the adviser made political contributions to elected officials responsible for awarding contracts for advisory services. Although the rules appeared not to be targeted to federal candidates, they can implicate state-level officeholders seeking federal office. This includes, for example, governors running for President. The rules have been controversial in some cases and were the subject of litigation. During the spring of 2011, media reports indicated that the Obama Administration was considering a draft executive order to require additional disclosure of government contractors' political spending. Although the executive order was never issued, the topic continues to garner attention. The House Committee on Oversight and Government Reform and Committee on Small Business held a joint hearing on the topic on May 12, 2011. Through recent appropriations bills, including those enacted during the 115 th Congress, Congress also prohibited requiring additional contractor disclosure. Politically active tax-exempt organizations, regulated primarily by the Internal Revenue Code (IRC), have been engaged in elections since at least the early 2000s. Some suggest that Citizens United provided clearer permission for incorporated 501(c)(4) social welfare groups and 501(c)(6) trade associations to make electioneering communications and independent expenditures. Unions, 501(c)(5)s, have long participated in campaigns, but Citizens United has been interpreted to permit labor organizations to use their treasury funds, like corporations, to make ECs and IEs. Amid increased interest in, and activity by, the groups post-2010, controversy has emerged about how or whether their involvement in federal elections should be regulated. Currently, because 501(c) organizations are not political committees as defined in FECA, they do not fall under FEC or FECA requirements unless they make ECs or IEs. Nonetheless, many such groups engage in activity that might influence campaigns. Other CRS products that focus on tax law provide additional detail, much of which is beyond the scope of this report. In November 2013, the Internal Revenue Service (IRS) and the Department of the Treasury announced a notice of proposed rulemaking (NPRM) that could significantly affect how some tax-exempt organizations engage in campaign activity. Amid controversy, that initial proposal was withdrawn, apparently to be superseded by a new proposal. The status of a rulemaking remains unclear, but, as of this writing, reports suggest that the agency continues to develop a proposal. Whether the IRS should continue with a rulemaking, and if so, what that rulemaking should cover, has generated sharp disagreement in Congress and among various advocacy groups. As of this writing, the issue remains unresolved. One of the most controversial elements of campaign finance disclosure concerns identifying donors to organizations that make electioneering communications and independent expenditures. Although FECA requires that those giving more than $200 "for the purpose of furthering" IEs must be identified in political committees' disclosure reports filed with the FEC, the "purpose of furthering" language does not appear in the portion of FECA covering ECs. Nonetheless, FEC regulations also use the "purpose of furthering" language as a threshold for identifying donors to corporations or unions making ECs. As a result, some contend that the EC regulations improperly permit those contributing to ECs to avoid disclosure by making unrestricted contributions (i.e., not "for the purpose of furthering" ECs). On the basis of that argument and others, then-Representative Van Hollen sued the FEC in 2011. A series of federal district and appellate court rulings occurred thereafter. In January 2016, the U.S. Court of Appeals for the D.C. Circuit upheld the FEC rules. Another recent case, CREW v. FEC , considers the "purpose of furthering" donor-disclosure standard for IEs rather than ECs. In November 2012, Citizens for Responsibility and Ethics in Washington (CREW), which identifies itself as a "watchdog" group, filed a complaint with the FEC, alleging, among other things, that 501(c)(4) group Crossroads GPS failed to disclose its donors as required under FECA and agency regulations. In November 2015, FEC commissioners deadlocked on whether Crossroads GPS had violated commission regulations and FECA (Matter Under Review 6696). CREW then sued the commission for, among other things, allegedly failing to enforce disclosure requirements. In August 2018, Chief Judge Beryl A. Howell, of the U.S. District Court for the District of Columbia, ruled in CREW's favor. After the court ruling took effect on September 18, 2018, certain groups that previously did not disclose some of their donors to the FEC now must do so. The FEC issued filing guidance on October 4, 2018, but another rulemaking is expected, which could change reporting requirements. Campaign practitioners offer differing interpretations of the new reporting requirements and suggest that additional litigation could occur. Telecommunications law administered by the Federal Communications Commission (FCC)—a topic that is otherwise beyond the scope of this report—has implications for elements of political advertising transparency. In BCRA, Congress required broadcasters to place information about political advertising prices and purchases in a "political file" available for public inspection. Partially in response to Citizens United , in 2011 the FCC revisited rulemaking proceedings the agency began in 2007 to consider whether broadcasters should be required to make information from the political file available on the internet rather than only through paper records at individual television stations. On April 27, 2012, the FCC approved new rules to require television broadcasters affiliated with the ABC, CBS, Fox, and NBC networks in the top 50 designated market areas (DMAs) to post political file information on the commission's website. These rules took effect on August 2, 2012. Stations outside the top 50 DMAs or unaffiliated with the top four networks were required to comply as of July 2014. In February 2016, the FCC extended the online-disclosure requirements to cable and satellite operators and broadcast radio. These requirements arguably enhance transparency by making "ad buy" data more readily available than in the past. Broadcasters are required to post their political file information online, not to aggregate total costs or otherwise summarize advertising purchases in ways typically used by researchers and policymakers. In addition, no standard file format is required. Consequently, drawing broad conclusions from the data is challenging. Historically, disclosure aimed at reducing the threat of real or apparent conflicts of interest and corruption has received bipartisan support. In fact, disclosure typically has been regarded as one of the least controversial aspects of an otherwise often-contentious debate over the nation's campaign finance policy. Disclosure, then, could yield opportunities for cooperation among Members of both major parties and across both chambers. On the other hand, some recent disclosure efforts have generated controversy. Particularly since the 111 th Congress consideration of the DISCLOSE Act, some lawmakers raised concerns about whether the legislation applied fairly to various kinds of organizations (e.g., corporations versus unions) and how much information those airing independent messages rather than making direct candidate contributions should be required to report to the FEC. Revised versions of the legislation, introduced in subsequent Congresses, did not contain spending restrictions, although some observers have questioned whether required reporting could inhibit political speech. Post- Citizens United legislative activity among those who favor additional disclosure has generally emphasized the DISCLOSE Act, but, as noted elsewhere in this report, some have also proposed reporting particular kinds of spending to agencies such as the IRS or the SEC. As 501(c) tax-exempt organizations' spending has received attention, measures proposing somewhat similar reporting as DISCLOSE, with additional tax implications (most of which are beyond the scope of this report) have also emerged. As noted previously, litigation and FEC rulemakings in the past decade have also considered the applicability of the "purpose of furthering" donor-disclosure standard for ECs and IEs. Additional disclosure poses the advantage of making it easier to track the flow of political money. Disclosure, however, does not guarantee complete information, nor does it necessarily guard against all forms of potential corruption. For example, current requirements generally make it possible to identify which people or organizations were involved in a political transaction. This information promotes partial transparency, but does not, in and of itself, provide detailed information about what motivates those transactions or, in some cases, where the funds in question originated. Additional disclosure requirements from Congress, the FEC, or the IRS could provide additional clarity. Disclosure and the related topic of disclaimers (referring to statements of attribution in political advertising) in online advertising have been especially prominent topics in recent years. In particular, after the Citizens United decision, and reports of foreign interference in the 2016 elections using social media, renewed interest in online advertising appeared in Congress and at the FEC. In 2011, the FEC announced an Advanced Notice of Proposed Rulemaking (ANPRM) to receive comments on whether it should update its rules concerning internet disclaimers, but the agency did not advance new rules. In 2016, the FEC announced that it was reopening the comment period on the 2011 ANPRM. It again reopened the comment period in October 2017. Several Members of Congress filed comments. On November 16, 2017, the FEC voted to draft revised internet-disclaimer rules (a notice of proposed rulemaking) for paid advertising. The commission may consider adopting those revised rules in the future. Congress has not enacted legislation focused specifically on online campaign activity, although elements of existing statute and FEC rules address internet communications. In October 2017, the Honest Ads Act ( H.R. 4077 ; S. 1989 ) was introduced to amend the Federal Election Campaign Act (FECA; 52 U.S.C. §§30101-30145) to further regulate some online ads. On October 24, 2018, the House Subcommittee on Information Technology, Committee on Oversight and Government Reform, held a hearing that addressed disclaimers and disclosures surrounding online political advertising generally. After Citizens United , one potential concern is how candidates will be able to field competitive campaigns amid unlimited expenditures from super PACs, 501(c) organizations, corporations, or unions. One option for providing additional financial resources to candidates, parties, or both, would be to raise or eliminate contribution limits. However, particularly if contribution limits were eliminated, corruption concerns that motivated FECA and BCRA could reemerge. As noted previously, Congress raised limits for some contributions to political parties in 2014. Another option, which Congress has occasionally considered in recent years, would be to raise or eliminate current limits on coordinated party expenditures. Coordinated expenditures allow parties to buy goods or services on behalf of a campaign—in limited amounts—and to discuss those expenditures with the campaign. In a post- Citizens United and post- McCutcheon environment, additional party-coordinated expenditures could provide campaigns facing increased outside advertising with additional resources to respond. Permitting parties to provide additional coordinated expenditures may also strengthen parties as institutions by increasing their relevance for candidates and the electorate. A potential drawback of this approach is that some campaigns may feel compelled to adopt party strategies at odds with the campaign's wishes to receive the benefits of coordinated expenditures. Those concerned with the influence of money in politics may object to any attempt to increase contribution limits or coordinated party expenditures, even if those limits were raised in an effort to respond to labor- or corporate-funded advertising. Additional funding in some form, however, may be attractive to those who feel that greater resources will be necessary to compete in the modern era, or perhaps to those who support increased contribution limits as a step toward campaign deregulation. A version of the FY2016 FSGG bill ( S. 1910 ) reported in the Senate would have amended FECA to permit parties to make unlimited coordinated expenditures on behalf of their candidates if the candidate did not control or direct such spending. That provision, however, was not included in the FY2016 consolidated appropriations law ( P.L. 114-113 ; H.R. 2029 ). Both before and after Citizens United , questions have persisted about whether unlimited independent expenditures permit parties, PACs, and other groups to subsidize candidate campaigns. Such concerns first emerged in the 1980s with PAC spending. After Citizens United , the emergence of super PACs and increased activity by 501(c) organizations increased attention to a concept known as coordination . A product of FEC regulations, coordination restrictions are designed to ensure that valuable goods or services—such as polling or staff expertise—are not provided to campaigns in excess of federal contribution limits. In practice, establishing coordination is difficult. Existing regulations require satisfying a complex three-part test examining conduct, communications, and payment. Some Members of Congress and advocacy groups have proposed that Congress specify a more precise coordination standard by enacting legislation. Some elements of federal campaign finance policy have substantially changed in recent years; others have remained unchanged. Enactment of BCRA in 2002 marked the culmination of efforts to limit soft money in federal elections and place additional regulations on political advertising airing before elections. BCRA was an extension of efforts begun in the 1970s, with enactment of FECA, to regulate and document the flow of money in federal elections. BCRA's soft-money ban and some other provisions remain in effect; but Citizens United , SpeechNow , and other litigation since BCRA have reversed major elements of modern campaign finance law. The changes discussed in this report suggest that the nation's campaign finance policy may be a continuing issue for Congress. Disclosure requirements, a hallmark of federal campaign finance policy, remain unchanged, but the topic has taken on new controversy. Additional information would be required to fully document the sources and rationales behind all political expenditures. For some, such disclosure would improve transparency and discourage corruption. For others, additional disclosure might be viewed with suspicion and as a potential sign of government intrusion. Particularly in recent years, tension has also developed between competing perspectives about whether disclosure limits potential corruption or stigmatizes those who might choose to support unpopular candidates or groups. Fundraising, spending, and reporting questions have been at the forefront of recent debates in campaign finance policy, but they are not the only issues that may warrant attention. Even if no legislative changes are made, additional regulation and litigation are likely, as is the constant debate over the role of money in politics. Although some of the specifics are new, these themes discussed throughout this report have been present in campaign finance policy for decades.
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Major changes have occurred in campaign finance policy since 2002, when Congress substantially amended campaign finance law via the Bipartisan Campaign Reform Act (BCRA). The Supreme Court's 2010 ruling in Citizens United and a related lower-court decision, SpeechNow.org v. FEC, arguably represent the most fundamental changes to campaign finance law in decades. Citizens United lifted a previous ban on corporate (and union) independent expenditures advocating election or defeat of candidates. SpeechNow permitted unlimited contributions supporting such expenditures and facilitated the advent of super PACs. Although campaign finance policy remains the subject of intense debate and public interest, there have been few recent major legislative or regulatory changes. In activity related to campaign finance policy, provisions in recent appropriations laws have prohibited some additional reporting requirements surrounding contributions and expenditures. Enacted 115th Congress legislation containing these provisions includes FY2018 consolidated appropriations law P.L. 115-141. Also through the appropriations process, the 115th Congress enacted legislation (P.L. 115-244) amending the Federal Election Campaign Act (FECA) to require electronic filing of Senate campaign finance reports. The above actions notwithstanding, the 115th Congress has not enacted major changes to campaign finance law, and there have been no major regulatory changes during the same period. The Committee on House Administration ordered reported a bill (H.R. 133) that would terminate the Presidential Election Campaign Fund. In addition, in some congressional legislative hearings, some Members of Congress have raised questions about whether prohibited foreign funds could have influenced the 2016 and 2018 elections, and required the FEC to issue a report on its enforcement of the FECA ban on such funds. Post-Citizens United, debate over disclosure and deregulation have been recurring themes in Congress and beyond. Legislation to require additional information about the flow of money among various donors, the DISCLOSE Act, passed the House during the 111th Congress and was reintroduced during subsequent Congresses. Congress also has considered alternatives, which include some elements of DISCLOSE, or proposals that would require additional disclosure from certain 501(c) groups. The debate over whether or how additional disclosure is needed has also extended to the Federal Election Commission—and congressional oversight of the agency—and the courts. During the same period, statutory and judicial changes eased some contribution limits and affected the presidential public financing program. Most consequentially, the Supreme Court invalidated aggregate contribution limits in April 2014 (McCutcheon v. FEC). Also in 2014, Congress and President Obama terminated public funding for presidential nominating conventions (P.L. 113-94). Congress responded to these events by including language in the FY2015 omnibus appropriations law (P.L. 113-235) that increased limits for some contributions to political party committees, including for conventions. This report considers these and other developments in campaign finance policy and comments on areas of potential conflict and consensus. This report emphasizes issues that have been most prominent in recent Congresses. It also discusses major elements of campaign finance policy. This report will be updated occasionally to reflect major developments.
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Buprenorphine is one of three medications currently used in medication-assisted treatment of opioid use disorders. As such, buprenorphine's effectiveness, safety, and availability are of considerable interest to policymakers seeking to address the ongoing opioid crisis in the United States. During the 115 th Congress, committees held hearings on opioid-related topics such as implementation of the Comprehensive Addiction and Recovery Act of 2016 (CARA, P.L. 114-198 ), the effects of the opioid crisis on families, and opioid use among veterans. Members have introduced more than 150 bills related to opioids. On October 24, 2018, President Trump signed into law H.R. 6 , the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (the SUPPORT Act; P.L. 115-271 ), a broad measure designed to address widespread overprescribing and abuse of opioids in the United States. Congressional actions taken in recent years to address the opioid crisis, including the SUPPORT Act, have included attempts to increase access to buprenorphine. Among the U.S. population aged 12 or older, an estimated 11.4 million individuals (4.2%) used heroin, misused prescription pain relievers, or did both in 2017. This includes over 2 million people (0.8% of the U.S. population aged 12 or older) who met full diagnostic criteria for an opioid use disorder. A minority of those with a substance use disorder receive specialty treatment. In 2016, 21.1% of those with any opioid use disorder received specialty substance use treatment, including 37.5% of those with heroin use disorder and 17.5% of those with prescription pain reliever use disorders. This CRS report attempts to answer questions policymakers may have about the following topics: the effectiveness of buprenorphine as a treatment for opioid use disorder, the demand for buprenorphine as a treatment for opioid use disorder, and access to buprenorphine as a treatment for opioid use disorder. The information about effectiveness in this report is based on a systematic review of research on buprenorphine. A systematic review is a comprehensive report collating all of the relevant empirical evidence on a specific topic. A more thorough explanation of the methodology for the systematic review of the literature, including all citations on which much of the information in this report is based, is available in the Appendix . The report focuses on buprenorphine as a treatment for opioid use disorder for adults. It does not provide a comprehensive overview of opioid abuse as a public health or criminal justice issue. Whether buprenorphine (or any medication) is effective is not a simple "yes" or "no" answer, for several reasons. Buprenorphine comes in different formulations, each of which has been evaluated separately. Studies may define effectiveness in different ways and may compare buprenorphine to different treatments (e.g., another medication or a nonpharmacological treatment). Also, effectiveness is weighed against safety risks. Finally, buprenorphine may be more effective for some people, or in some circumstances, than in others. The following sections address these topics. Buprenorphine is a partial opioid agonist, meaning it binds to the same opioid receptors in the brain as full opioid agonists (such as heroin or methadone) but activates the receptors less strongly. Similar to methadone, buprenorphine can reduce the cravings and withdrawal symptoms that often accompany discontinuation of the opioid of abuse, but buprenorphine does so without producing the same euphoria or "high." As a partial agonist, buprenorphine offers less potential for abuse and has a lower overdose risk than methadone. Buprenorphine was first approved by the Food and Drug Administration (FDA) as a pain reliever in 1981. Research on buprenorphine as a pain analgesic showed mixed effectiveness, though the drug did demonstrate lower rates of abuse than other opioid pain medications such as oxycodone. More than 20 years after it was first approved to treat pain, buprenorphine was approved by FDA as a treatment for opioid use disorder, under the trade names Subutex® and Suboxone®. The difference between the two products is that Suboxone® combines buprenorphine with naloxone – an opioid antagonist that blocks opioid receptors from being activated and thereby reduces the risk of abuse. Since 2002, FDA has approved other forms of buprenorphine (with and without naloxone) for the treatment of opioid use disorders, as shown in Table 1 . Overall, research on buprenorphine has found it to be an effective medication for maintenance treatment of opioid dependence. A 2014 review of buprenorphine efficacy trials conducted by Cochrane found that buprenorphine can be useful in helping individuals discontinue opioid drug use and maintain abstinence. The efficacy of buprenorphine in reducing opioid use, however, appeared to be dependent on several factors. For example, buprenorphine effectiveness seems to be dose dependent. It was only found to be superior to placebo when used at high doses. Buprenorphine was most effective when used at 16mg daily doses or higher, compared to low or medium doses of 15mg or less. The standard of care for buprenorphine treatment currently includes "flexible dosing" which involves individual clinicians determining dose based on each patient, rather than fixed dosing consisting of predetermined dosage regimens. Other factors influencing the effectiveness of buprenorphine include primary opioid of use (i.e., prescription pain medication versus heroin) and length of buprenorphine treatment (see questions below for further elaboration). When compared to methadone (the most common treatment for opioid abuse), buprenorphine appears to be equally as effective in promoting abstinence from drug use. Buprenorphine offers several benefits compared to methadone. Buprenorphine has less potential for abuse and overdose than methadone, and some research suggests it may be more cost effective. Abrupt discontinuation of buprenorphine leads to milder withdrawal symptoms than methadone. Individuals using buprenorphine, however, appear to drop out of treatment at higher rates than those using methadone. Table 2 describes various opioid treatment modalities. Treatment retention describes the rate in which individuals remain in substance abuse treatment. Retention is often essential to achieve the goals of the treatment, namely abstinence from drug use. Retention in treatment for individuals using buprenorphine increases linearly as both the dose of buprenorphine and length of time spent weaning off the medication increase. Put simply, research implies that as the dose of buprenorphine increases, retention in treatment improves. Similarly, with a longer period of tapering off the medication comes greater retention in the treatment. Taper length for buprenorphine is also associated with greater rates of abstinence from other opioids and successful completion of treatment. Therefore, the higher the dose of buprenorphine and the longer individuals are on the medication, the more likely they are to remain in treatment, abstain from opioid use, and successfully complete treatment. Studies seem to indicate that methadone is better able to retain participants in treatment than buprenorphine, but it remains unclear why this is the case. It may be that buprenorphine, being a partial opioid agonist, is less satisfying than methadone because it does not produce a comparable euphoric effect. Also, buprenorphine may not typically be increased to effective doses quickly enough, resulting in more attrition early in treatment. It is also possible that buprenorphine does not retain people as well because mild withdrawal symptoms from the opioid of abuse may still be present for many patients while using the medication. Being only a partial opioid agonist, buprenorphine is also easier to discontinue without withdrawal symptoms of its own, which may make dropping out of treatment less difficult. Buprenorphine is an opioid itself and therefore carries a risk for addiction and overdose. As a partial opioid agonist, the euphoric effects of buprenorphine are low compared to full agonists like heroin, fentanyl, morphine, or methadone. Therefore, the abuse potential for buprenorphine is generally considered to be less than that of full opioid agonists. Overdoses caused solely by buprenorphine are rare, with most overdoses occurring when the medication is used at the same time as other drugs such as benzodiazepines or other sedatives. Other adverse events associated with buprenorphine diverted intravenously, such as the transmission of communicable diseases, are similar to those of other misused injected substances. When buprenorphine is combined with naloxone, an opioid antagonist, it discourages misuse via injection which may contribute to buprenorphine's lower rates of abuse and overdose. Preliminary evidence on buprenorphine suggests it may be a safer treatment compared to methadone. Buprenorphine has less abuse potential and appears to result in fewer fatalities than methadone. In one study, patients taking buprenorphine experienced half as many ambulatory care visits compared to those taking methadone, suggesting buprenorphine use was associated with fewer incidents endangering health and safety. Only a few studies have compared mortality rates between buprenorphine and methadone treatments; however, existing data suggest that methadone is associated with a higher potential for mortality in the first few weeks of treatment. Research indicates that rates of opioid overdose with buprenorphine are lower than those associated with methadone. Data from one study conducted in France showed that death rates attributable to methadone may be as much as three times greater than that of buprenorphine, though other studies found no significant differences. Comparison of the safety of these two treatments in the United States awaits further research. There appear to be differences in successful outcomes of treatment for opioid addiction based on whether an individual was primarily abusing prescription pain medication or heroin. When using buprenorphine for addiction treatment, heroin users seem to have less positive outcomes compared to individuals who abuse prescription painkillers. While both groups are retained in treatment at similar rates, those abusing pain medication demonstrate greater improvement when using buprenorphine. Also, several of the studies noted that more than ever before, heroin users began their drug abuse with prescription opioid medications. The effectiveness of buprenorphine treatment, therefore, may depend in part on whether an individual with opioid use disorder has transitioned from misusing prescription opioids to using heroin. Buprenorphine is one of three medications currently used to treat adults addicted to opioids. The precipitous rise in opioid misuse in the last decade and increasing financial burden of this epidemic highlight the need for effective treatments. Despite marked increases in opioid abuse, deaths attributed to opioids, and related hospital admissions, the majority of individuals in need of treatment do not receive it. Opioid overdose deaths have increased significantly in the past 15 years ( Figure 1 ). In 2015, an estimated 33,091 Americans died of opioid-related overdoses. In 2016, that number increased to 42,249. Data for 2017 revealed 47,600 deaths involving opioids, representing a fourfold increase over 2002, around the advent of the epidemic. Almost a third of patients prescribed opioid pain relievers misuse these medications, and an estimated 1 in 10 become addicted. Misuse of opioid pain medications remains high ( Figure 2 ). In 2017, an estimated 11.4 million people aged 12 and older misused opioids, including 11.1 million misusers of prescription pain relievers and 886,000 heroin users. While the majority of individuals who misuse prescription opioids will not progress to heroin use, they are 13 times more likely to use heroin in their lifetime than those who use pain medication as prescribed. The financial costs of this epidemic have been substantial. The combined economic influence of the opioid epidemic (healthcare, labor, and criminal justice costs) was estimated at $92 billion in 2016, an increase of 67% from a decade ago. Another analysis, which included the cost of opioid overdose fatalities, estimated the cost of the opioid epidemic at $504 billion in 2015. Buprenorphine is regulated differently when used for opioid use disorder than when used for pain. The Controlled Substances Act (CSA) limits who may prescribe (or administer or dispense) buprenorphine to treat opioid use disorder, and the circumstances under which they may do so. These limits have implications for how patients gain access to buprenorphine and how they pay for buprenorphine. The different forms of buprenorphine (e.g., implants vs. sublingual, etc.) also have implications for how patients gain access to buprenorphine and how they pay for it. Buprenorphine may be used to treat opioid use disorder in two settings: (1) within a federally certified opioid treatment program (OTP) and (2) outside an OTP pursuant to a waiver. When used within an OTP, buprenorphine is administered or dispensed on site, rather than prescribed. That is, a patient does not receive a prescription to be filled at a retail pharmacy; instead, a patient receives the buprenorphine at the OTP, necessitating nearly daily visits to the OTP unless the patient is using injectable or implantable forms of buprenorphine which can last up to several months. A physician or other practitioner (e.g., physician assistant or nurse practitioner) may obtain a waiver to administer, dispense, or prescribe buprenorphine outside an OTP. This is commonly known as a DATA waiver, drawing its name from the law that established the waiver authority: the Drug Addiction Treatment Act of 2000 (DATA 2000). Under the CSA, as amended by DATA 2000 and subsequent legislation, the requirement for separate Drug Enforcement Administration (DEA) registration as an OTP may be waived if both the medication and the practitioner meet specified conditions. To date, buprenorphine is the only medication to meet the conditions for the DATA waiver. To qualify for a waiver, a practitioner must notify the Health and Human Services (HHS) Secretary of the intent to use buprenorphine to treat opioid use disorders and must certify that he or she is a qualifying practitioner; can refer patients for appropriate counseling and other services; and will comply with statutory limits on the number of patients that may be treated at one time. The patient limit is 30 individuals during the first year and may increase to 100 after one year or immediately if the practitioner holds additional credentialing or operates in a qualified practice setting. The patient limit may increase to 275 after one year under certain conditions specified in regulation. The SUPPORT Act removed the temporary authority (through October 1, 2021) for qualifying nurse practitioners and physician assistants to obtain DATA waivers and expanded the definition of "qualifying other practitioners" to include clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives. Qualifying nurse practitioners and physician assistants may obtain waivers permanently, while clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives are authorized to obtain DATA waivers until October 1, 2023. In the 1990s, the makers of buprenorphine argued successfully that opioid substitution therapy with buprenorphine need not be limited to OTPs, primarily because the safety profile of buprenorphine compared favorably to that of methadone. Congress remained convinced that opioid substitution therapy with buprenorphine should be subject to restrictions beyond those applicable when the same opioid medications are used to treat pain. The patient limit is one such restriction. As originally enacted, DATA 2000 amended the CSA to allow qualifying physicians to treat opioid addiction using buprenorphine and imposed a patient limit of 30 individuals. This patient limit remains in place for qualifying practitioners that do not meet additional requirements. In 2006, the CSA was amended to allow a DATA-waived physician to increase the patient limit to 100 patients after one year. As aforementioned, subsequent legislation expanded eligibility for DATA waivers to other clinicians besides physicians. Pursuant to a statutory provision authorizing the HHS Secretary to raise the patient limit through rulemaking, in March 2016, HHS issued a notice of proposed rulemaking that would have increased the patient limit to 200. The proposed higher patient limit was intended to significantly increase patient capacity for practitioners qualified to prescribe at this level while also "ensuring quality of care and minimizing diversion." In response to public comments arguing that raising the patient limit to 200 was not likely to make a significant impact on addressing the treatment gap, HHS issued a final rule setting the patient limit at 275 after two years (subject to certain conditions). Using survey data, HHS found that an OTP could manage, on average, 262 to 334 patients at any given time. HHS set the new DATA waiver patient limit near the low end of this range, a conservative estimate of the number of patients who could be treated by a single physician in "a high-quality, evidence-based manner that minimizes the risk of diversion." The SUPPORT Act codified this number in law, allowing practitioners to increase the patient limit to 275 after one year of maintaining a waiver to treat up to 100 patients. The SUPPORT Act also amended the CSA to allow up to 100 patients to be treated immediately if the practitioner holds additional credentialing or operates in a qualified practice setting. As opioid abuse rates have increased, the federal government has made efforts to address this epidemic. Both Congress and the Administration have implemented policies intended to increase access to buprenorphine, such as changes to the DATA waivers described above. Policy efforts to address the opioid epidemic have corresponded with increased treatment availability. Since 2003, treatment capacity has increased and continues to rise. The number of OTPs offering buprenorphine increased from 121 (11% of all OTPs) in 2003 to 779 (58% of all OTPs) in 2015. The number of non-OTP substance abuse treatment facilities (non-OTPs) offering buprenorphine increased from 620 (5% of all non-OTPs) in 2003 to 2,625 (21% of all non-OTPs) in 2015. In total, the proportion of facilities (either OTP or non-OTP) providing buprenorphine treatment increased from 14% in 2007 to 29% of all facilities in 2017. The total number of facilities offering buprenorphine is depicted in Figure 3 . This does not include practitioners with office-based (as opposed to facility-based) practices. Data from SAMHSA's annual National Survey of Substance Abuse Treatment Services (N-SSATS) indicate that the proportion of clients at substance use facilities who receive buprenorphine has increased in the past decade, from less than 1% in 2007 to 8% in 2017. The cumulative number of DATA-waived providers has increased also. The number of DATA-waived physicians with a 30-patient limit increased from 1,800 in 2003 to 16,095 by 2012, and those with a 100-patient limit expanded from 1,937 in 2007 to 6,103 in 2012. By 2012, the maximum number of patients who could be treated with buprenorphine in the United States was 1,093,150, a rate of 420.3 per 100,000 people aged 12 years and older. Due to this increase in DATA-waivers for buprenorphine treatment, nearly 3.5 times as many patients could be treated with buprenorphine in 2012 as were receiving methadone in 2012. The Substance Abuse and Mental Health Services Administration (SAMHSA), which oversees the buprenorphine waiver program, provides daily updates on the number of DATA waivers. As of December 1, 2018, the number of DATA-waived providers with a 30-patient limit exceeded 40,000 and those with a 100-patient limit exceeded 11,000. The number of practitioners with a 275-patient limit totaled over 4,500. This provides the capacity for almost 3.6 million patients to be treated with buprenorphine. Despite this increase, access to substance abuse treatment such as buprenorphine has not kept pace with the mounting rates of opioid addiction in the United States. In 2012, the difference between the number of people experiencing opioid dependence and the combined methadone and buprenorphine treatment capacity in the U.S. was nearly one million. Forty-eight states and the District of Columbia had higher rates of past-year opioid abuse than capacity for buprenorphine treatment in 2012. During that year, 82% of federally certified opioid treatment programs (OTPs) reported operating at 80% or greater capacity. Admissions to substance abuse treatment facilities involving prescription opioids nearly quadrupled between 2002 and 2014. In 2015, 18.3% of individuals in need of treatment for an illicit drug problem, including prescription pain relievers, received it. In 2016, one-fifth (21.1%) of those with any opioid use disorder received specialty treatment, including 37.5% of those with heroin use disorder and 17.5% of those with prescription pain reliever use disorders. A study conducted in Massachusetts found that of individuals recently hospitalized for a nonfatal opioid-related overdose, less than one-third received any medication-assisted treatment in the 12 months following the overdose. In addition, while the capability to treat patients with buprenorphine has expanded through an increase in DATA-waivers, practitioners with these waivers are not treating to capacity. A 2018 study by SAMHSA leadership found that the number of patients being treated by DATA-waived providers was substantially lower than the authorized waiver patient limit. The percentage of clinicians prescribing buprenorphine at or near the patient limit in the past month was 13.1%. Geography may be relevant in understanding the treatment discrepancy: where services are located may be more important than the capacity for treatment in addressing the gap between need and availability. Other factors affecting the treatment gap besides location of services may include health insurance coverage, reimbursement for treatment services, transportation, stigma, awareness of treatment options and availability, and motivation for recovery among others. The cost of any prescribed medication is influenced by the pharmaceutical manufacturer, the insurer, the health plan or prescribing clinic, and the retail pharmacies that dispense the medication. It is difficult, therefore, to identify a precise figure for the cost of buprenorphine. The Department of Defense (DOD) and the National Institute for Drug Abuse (NIDA) have estimated the following costs: methadone treatment: $126 per week ($6,552 per year) buprenorphine treatment: $115 per week ($5,980 per year) naltrexone: $1,176.50 per month ($14,122 per year) Most of the research comparing the costs of medication-assisted treatments has found similar results, suggesting buprenorphine may be cheaper than other medications. Some studies, however, have been inconclusive or suggest the opposite. In one study conducted at a Veterans Affairs (VA) medical center, the average cost of care for six months of buprenorphine treatment was $11,597. The costs associated with methadone over that same time period were $14,921. The costs were not significantly different in subsequent months after the first six months of treatment, however. Indirect costs in that same study were also higher for the methadone group, which had twice as many ambulatory care visits as the buprenorphine group. Other estimates suggest that the costs of buprenorphine treatments may be as much as 49% lower than those for methadone. Preliminary studies on the subdermal formulation of buprenorphine approved in 2016 suggest that this type of treatment may have lower total costs than other forms. Other studies have found buprenorphine treatment costs equivalent to, or slightly higher than, those for methadone. For instance, NIDA reported that the annual cost of methadone treatment may be closer to $4,700 per patient. The findings of a few studies may not be representative of the costs of buprenorphine (or methadone) in other VA medical centers or other settings. Determination of the cost effectiveness of buprenorphine, particularly compared to other treatment options such as methadone, awaits further research. Medicare reimbursement for prescription drugs depends on the setting in which the drugs are used and how they are administered. In general, Medicare Part A covers drugs used as part of an in-patient medical treatment; Medicare Part B covers prescription drugs that are not usually self-administered and are furnished and administered as part of a physician service; and Medicare Part D covers FDA-approved drugs that (1) are available only by prescription, (2) are used for a medically accepted indication, and (3) are not covered under Parts A or B. As noted previously, buprenorphine may be administered or dispensed (but not prescribed) in an OTP, and also may be administered, dispensed, or prescribed outside an OTP pursuant to a DATA waiver. Medicare does not recognize OTPs as covered providers, and does not provide Medicare reimbursement for buprenorphine dispensed in an OTP. Medicare Part B has no separate benefit category for drugs used in the management of opioid use disorder. However, Part B will cover long-acting injectable and implantable forms of buprenorphine if administered by a physician and used in the management of opioid use disorder (referred to as "incident to a physician's services" by Medicare). Since January 1, 2018, Medicare Part B has provided a separate payment for insertion, removal, and removal with reinsertion of buprenorphine subdermal implants. Part B does not pay for self-administered drugs used during a provider visit. For example, if a physician's office stocks sublingual buprenorphine, its use would not be paid under Part B because such forms of the drug are considered self-administered (thus not payable under the "incident to" benefit). Payment to a physician for the observation of self-administration of the drug by the patient (such as initial induction doses, for example) may be possible under Part B. Medicare Part D plans must cover buprenorphine and other self-administered drugs used in MAT for opioid use disorder, either on their formularies (list of covered drugs) or via a coverage exception request by an enrollee. Part D plans also must provide a transition supply of drugs for new enrollees who are already in treatment for opioid use disorder. Part D plans are to place MAT drugs on lower-cost-sharing tiers, although beneficiary cost sharing might vary depending on the Part D plan. Medicare Part D does not cover oral buprenorphine or buprenorphine-naloxone combination products for the treatment of opioid dependency when they are administered or dispensed by OTPs. The Centers for Medicare & Medicaid Services has told Part D plan sponsors that they are expected to set low enrollee cost-sharing for MAT drugs, including buprenorphine. All 48 states that responded to a 2017 survey (Arkansas and Illinois did not respond) indicated that their Medicaid programs covered buprenorphine. Analysis of 2013-2014 survey data found that all 50 states and the District of Columbia covered buprenorphine and that 49 respondents imposed some limits, such as prior authorization requirements, duration of treatment, or per-day maximum doses. Even though state Medicaid programs cover buprenorphine, states may only cover certain buprenorphine forms or may only cover buprenorphine under certain conditions. For instance, a state Medicaid program may use a formulary that requires beneficiaries to enroll and attend MAT therapy or counseling before they can receive buprenorphine. States also may use a preferred drug list to require providers to use specific products first. Buprenorphine is one of three medications currently used to treat adults addicted to opioids. The rise in opioid abuse in the last decade and substantial financial burden of this epidemic highlight the need for effective treatments. Overall, buprenorphine appears to be an effective medication for treatment of opioid dependence. Despite marked increases in opioid abuse, related hospital admissions, and overdose deaths, the majority of individuals in need of treatment do not receive it. Prescribing practices for buprenorphine as a treatment for opioid use disorder are carefully regulated and include provisions that limit the number of patients certain providers can treat simultaneously. Congress and the executive branch have made efforts to increase access to buprenorphine treatment while balancing potential risks of this opioid-replacement therapy. Congress is likely to continue grappling with the opioid crisis for some time, as policymakers and medical and public health professionals wait for new data to indicate whether existing efforts have changed the trajectory of the opioid epidemic. Striking a balance between providing access to buprenorphine and maintaining quality standards for those who prescribe or dispense it may prove challenging. Report Methodology Much of the information in this CRS report is based on a systematic review of the scientific literature on buprenorphine, undertaken in August 2017. A systematic review is a single comprehensive report collating all of the relevant empirical evidence on a specific topic. Systematic reviews use explicit, systematic methods to identify studies that fit pre-specified eligibility criteria. Systematic reviews have become an increasingly important source of information for clinical practice and policymaking. They synthesize large amounts of information and provide better estimations of performance and generalizability than individual studies. CRS' systematic review aimed to determine how well buprenorphine works in the treatment of opioid dependence compared to other treatments (such as methadone) or no treatment at all. Studies were included if they were comparisons of buprenorphine with other interventions in outpatient community settings in the United States and were published in the past five years. These included primary and secondary analyses of randomized control trials, quasi-experimental studies, and cohort studies. The CRS review concentrated on effectiveness rather than efficacy (see textbox under " How well does buprenorphine maintain people in treatment? "). Therefore, studies were excluded from this review if they examined efficacy, occurred in inpatient settings, focused on withdrawal, or occurred outside the United States. To identify original articles that met the inclusion criteria, we developed a search strategy for each of the three scientific databases used. We searched PubMed life science and biomedical database, PyscINFO behavioral sciences and mental health database, and CINAHL nursing journal database through July 21, 2017. Article Summaries Table A-1 provides full citations and abbreviated references to the 16 articles identified above. Table A-2 summarizes each article, including its participants, study design and aims, and conclusions.
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Buprenorphine is a medication used to treat adults addicted to opioids (it is also used in the treatment of pain). Buprenorphine's effectiveness, safety, and availability in the treatment of opioid addiction are of considerable interest to policymakers seeking to address the ongoing opioid epidemic in the United States. Congressional actions taken in recent years to address the opioid crisis have included attempts to increase access to buprenorphine. This report addresses questions policymakers may have about the effectiveness of buprenorphine, the demand for buprenorphine, and access to buprenorphine. Effectiveness of Buprenorphine Overall, buprenorphine appears to be an effective medication for treatment of opioid dependence. When compared to other treatments for opioid addiction such as methadone, buprenorphine appeared equally as effective in promoting abstinence from drug use. Buprenorphine does not seem to retain individuals in treatment as well as methadone, however, though the reasons for this remain unclear. The research on buprenorphine suggests that it works better at higher daily doses (16mg or higher). The higher the dose of buprenorphine and the longer people used the drug, the more likely they were to remain in treatment, abstain from opioid use, and successfully complete treatment. Preliminary data suggest that buprenorphine may be safer and more cost effective than methadone; comparison of the safety and costs of buprenorphine with other treatments awaits further research. Demand for Buprenorphine Admissions to substance abuse treatment facilities involving prescription opioids nearly quadrupled between 2002 and 2014; in 2015 18% of individuals in need of treatment for opioid use disorders received it. In 2016, one-fifth (21.1%) of those with any opioid use disorder received specialty treatment, including 37.5% of those with heroin use disorder and 17.5% of those with prescription pain reliever use disorders. Despite marked increases in opioid abuse, deaths attributed to opioids, and related hospital admissions, the majority of individuals in need of treatment do not receive it. Access to Buprenorphine Buprenorphine is regulated differently when used to treat opioid use disorder than when used to treat pain. The Controlled Substances Act (CSA) limits who may prescribe (or administer or dispense) buprenorphine to treat opioid use disorders, and the circumstances under which they may do so. These limits have implications for how patients gain access to buprenorphine and how they pay for buprenorphine. Buprenorphine comes in different formulations, and these modes of administration also have implications for how patients gain access to buprenorphine and how they pay for buprenorphine. As of December 1, 2018, the Substance Abuse and Mental Health Services Administration has estimated the U.S. capacity for health providers to treat with buprenorphine at over 3.6 million patients. Nonetheless, access to substance abuse treatment such as buprenorphine has not kept pace with the mounting rates of opioid addiction in the United States.
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The Bush Administration considers coal a major component of its National Energy Strategy.The Administration anticipates a long-term reliance on coal because of its low-cost abundance.Numerous issues arise when harnessing this cheap, abundant fuel source. This report examines someof the major legislative issues related to coal in the 109th Congress, including coal and energysecurity, clean air and environmental concerns, funding strategies for technology R&D, loanguarantees for coal gasification projects, and the Abandoned Mine Land program. Energy that is available, reliable, and affordable is a focal point when discussing energysecurity concerns. (2) Andcoal will be part of that conversation. Out of the four major fuel sources -- oil, gas, uranium, andcoal -- coal has the largest domestic reserve base, the largest share of U.S. energy production inBTUs, and the smallest percent met by imports. The Energy Information Administration (EIA)projects that coal imports will continue to be negligible through 2025, while there will be a growingreliance on foreign sources for other major fuels. In addition, coal is forecast to be the largest sourceof domestic fuel production in the foreseeable future. Coal supplies 22% of U.S. energy demand but over 50% of the energy used by the electricpower sector (both utility and non-utility consumers). The electric power sector consumes 90% ofall coal in the United States. The remaining 10% is used in the industrial and commercial sectorsor used in coke plants. Coal use in the electric power sector has maintained a share greater than 50%for the past two decades. The EIA forecasts electricity consumption to grow by 1.9% per year through 2025 -- from3,481 billion kilowatt hours (kwh) to 5,220 billion kwh. (3) The increase in demand is largely to be met by new coal-fired ornatural gas-fired power plants. The price of each fuel, the capital costs associated with power plantconstruction, and plant efficiencies will determine the competitiveness of each fuel source. Butbecause of limited domestic supply, natural gas supply is unlikely to keep pace with demand. Thiswill lead to increased imports, according to EIA forecasts. Per-well reserve additions are expectedto continue to decline over the EIA forecast period (2004-2025). EIA further forecasts that naturalgas will not displace coal as the dominant fuel supply for power generation despite projectedincreases in liquefied natural gas (LNG) imports, additional domestic supply from the lower 48states, and Alaskan natural gas from a newly constructed pipeline. (4) Power plant development for electricity generation is primarily driven by economics. Thelower-cost, more efficient operations are the plants that get built. Production costs include the costsof fuel, operation and maintenance, and capital. Fuel costs are a major consideration for fossilfuel-fired plants, and the fuel cost differences between a coal-fired and natural gas-fired plant aresignificant. For instance, fuel costs for a coal-fired plant are about 24% of total costs, whereas fuelcosts for a natural gas facility are close to 69% of total costs. This price difference could give coalan advantage. However, new plant capital costs favor natural gas, accounting for only 23% of totalelectric production costs. Capital costs for new coal-fired plants are closer to 60% of total costs. Table 1 , below, illustrates the dynamics of power plant economics for advanced coal and advancedcombined cycle (natural gas-fired) plants expected to be built in the years 2015 and 2025. Table 1. Costs of Producing Electricity from NewPlants (2003 mills/Kwh) Source: DOE/EIA, Annual Energy Outlook, 2005, p. 89. A combination of low capital costs, greater efficiency, and reasonable natural gas prices ledto the current build-up of natural gas-fired capacity. Power plant capacity rose an estimated 186gigawatts (GW) from 2000 to 2003: 27 GW in 2000; 42 GW in 2001; 72 GW in 2002; and 45 GWin 2003. About 175 GW was new natural gas-fired capacity, and only 1 GW was new coal-firedcapacity. (5) This build-uphas led to excess capacity, which should diminish after 2010. Capacity utilization would rise from72% in 2003 to 83% in 2025, according to EIA. EIA projects that a total of 281 GW of new capacity will be needed by 2025 -- including anestimated 19 GW annually from 2011 to 2025 (268 GW total). Natural gas facilities (combinedcycle; combustion turbine or distributed generation technology) are forecast to account for 60% ofthe new capacity. Total new coal capacity of 87 GW is to come online between 2004-2025; thus,coal capacity will be 33% of new capacity after 2011, according to EIA. New coal capacity becomesmore competitive with natural gas late in the forecast between 2016 and 2025. Despite relativelylow coal costs, the high capital costs will likely limit the number of advanced coal integratedgasification combined cycle (IGCC) facilities to about 16 plants or 6 GW of commercial capacityby 2025. (6) Rising natural gas prices will lead to the construction of more coal-fired facilities betweenthe years 2010 and 2025, according to EIA. Coal is competitive at natural gas prices of $4-$6 permillion Btus; prices above that range push up the total cost of gas-fired power facilities abovecoal-fired plants. Even so, natural gas, as a percent of the total electricity, will increase to 24% in2025 from 17% in 2003, projects EIA, while nuclear and petroleum will remain flat. Renewablesrise from 359 billion Kwh to 489 billion Kwh during the same time period. Coal maintains a 50%share of the electricity market in 2025, says EIA. New capacity is also needed to replace retired capacity and to meet rising demand. Anestimated 43 GW of fossil fuel capacity is expected to be retired from 2004 to 2025 (3 GW Coal;15 GW of older oil or gas combustion turbines or combined cycle, and 25 GW of oil and gas steamplants). If the EIA forecasts prove to be accurate, then long-term investment in clean coal could payoff because of the greater coal capacity needs beyond 2016. Among the most important factors towatch regarding coal versus natural gas-fired plants are the natural gas prices, capital costs for IGCCplants, and stricter environmental regulations aimed at pollutants derived from burning coal. By mandating significant reductions in three pollutants emitted by coal-fired electricgenerating units, proposed Clear Skies legislation could have significant impact on coal productionand distribution, if enacted. Electric utilities are the largest users of coal, and legislation restrictingtheir emissions could affect coal markets in several ways, depending on the specifics of any finallegislation. In the 109th Congress, a modified version of the President's proposed Clear Skies legislationhas been introduced by Senator Inhofe -- S. 131 . The proposal would amend the CleanAir Act to place caps on electric utility emissions of sulfur dioxide (SO 2 ), nitrogen oxides (NOx),and mercury (Hg). Implemented through a tradeable allowance program, the emissions caps wouldbe imposed in two phases: 2010 (2008 in the case of NOx) and 2018. (8) The proposed caps aresummarized in Table 2 . Table 2. Proposed Emission Caps Under S.131 Although proposed Clear Skies legislation is the focus of legislative debate, regulatoryinitiatives currently being promoted by Environmental Protection Agency (EPA) raise many of thesame issues for coal interests as does Clear Skies. These initiatives include the proposed Clean AirInterstate Rule and the proposed Mercury Rule. (9) When Clear Skies was introduced in the 108th Congress, EPA conducted an analysis of itseffects on the coal industry. (10) While the analysis indicated growth in coal production forelectric utility consumption (from 905 million tons in 2000 to 998 million tons in 2020), coalgeneration's share of the 2020 generation mix (11) was projected to decline from 46% to 44%. The beneficiary ofthis projected decline was natural gas combined cycle, whose share of the mix climbed from 24%in 2000 to 26% in 2020. Obviously the actual mix that would result from any enactment of ClearSkies would be heavily dependent on future natural gas prices and utility decisions with respect tocompliance strategies. With respect to compliance strategies, the EPA analysis projected a substantial increase inthe installation of flue-gas desulfurization units (FGD) to achieve the 70% reduction in SO 2 requiredby the proposed legislation. Currently, about 100,000 megawatts (Mw) of coal-fired capacity hasFGD units. EPA projected that Clear Skies would result in that number rising to just over 200,000Mw by 2020. (12) Thiswould increase the share of FGD-equipped coal-fired capacity in the country from about one-thirdto two-thirds. A similar increase was expected for the installation of Selective Catalytic Reduction(SCR) to reduce NOx emissions, although some of that increase would be due to the implementationof the NOx SIP Call. (13) Such an increase in emissions control (particularly FGD units) could reduce the marketadvantage that high-sulfur coal currently enjoys in the coal markets. As indicated by Table 3 , EPAanalysis indicates that the Interior Basin in particular benefits from the increased SO 2 controls. Table 3. EPA's Projections of Coal Production Under Clear SkiesLegislation (million tons) Source : EPA, Technical Analysis, Section D , p. D-3. With respect to Hg controls, S. 131 would weaken the proposed phase 1 Hg capfrom the 26 tons originally proposed by the Administration to 34 tons, based on a DOE estimateabout the actual level of emissions that could be achieved without dedicated Hg controls (i.e.,"co-benefits"). There are substantial differences between the Hg characteristics of bituminous andsubbituminous coals, and uncertainty about what the actual "co-benefits" levels for Hg control are. If Clear Skies reflects the actual "co-benefits" levels, the effect of Hg controls on coal productionwould be nil, beyond that estimated for SO 2 and NOx controls. Likewise, the commercialization ofemerging Hg control technology, such as activated carbon injection (ACI), would eliminate any shiftbetween coal types. However, there is substantial controversy over what any "co-benefits" level isand the future availability of ACI and other alternatives. The pivotal issues for coal and Clear Skies include the following: (1) the potential for naturalgas to erode market share for coal due to higher pollution control costs under Clear Skies, (2) thepotential for market shift between western suppliers and eastern suppliers because of increased SO2controls, and (3) the uncertain effects of Hg controls if they exceed "co-benefit" levels or if emergingHg controls are not available. Clear Skies faces an uncertain future. In March 2005, the Senate Environment and PublicWorks Committee killed S. 131 on a 9-9 vote. However, many of the issues identifiedhere also manifest themselves in EPA's final Clear Air Interstate Rule (CAIR) and its final Hg rule. So the issue is not likely to disappear. The original Clean Coal Technology (CCT) program began in 1984 to demonstrate emissionscontrol technologies, advanced electric power generation facilities, and coal and industrial processingprojects. Congress had appropriated $2.5 billion for the CCT program by 1990, but since 1994 asmuch as $300 million had been deferred or rescinded because of limited commercial prospects andless Administration interest. President Bush, however, has revived the CCT program under a newbanner -- the Clean Coal Power Initiative (CCPI) -- focusing on advanced coal combustiontechnology for removal of SOx, NOx, mercury, and fine particulate matter and carbon sequestration. Coal plants are responsible for 69% of all SO2, 33% of mercury, 39% of CO 2 , and 22% of nitrogenoxide air emissions in the United States. The CCPI is a 10-year, $2 billion government-industry cost sharing program structuredsimilarly to the original CCT program. There are currently 10 active CCPI projects. The DOEwanted the early projects to focus on technologies that would reduce pollutants being addressedunder the President's "Clear Skies" proposal and Global Climate Change initiative. Round 1 projectsfeature multi-pollutant control systems, while Round 2 features two multi-pollutant controltechnologies and two integrated gasification combined cycle (IGCC) demonstration projects.Announcements for Round 3 projects are expected to occur during FY2006. One of the issues that arise is funding for long-term clean coal technology versus closer-termpilot and demonstration projects. Both are being funded. Based on recent appropriation trends, thegreatest interest for closer-term R&D is with IGCC projects for electricity supply and emissionsreduction. There are two small-scale IGCC commercial plants operating today: a 250 megawatt (MW)facility operated by Tampa Electric Power in Florida and a 300 MW facility operated by Cinergy atits Wabash River site in Indiana. IGCC technology involves the gasification of coal to produceelectricity. During the gasification process, coal is co-fed with water and oxygen in a reducingatmosphere at high pressure to produce synthetic gas, carbon monoxide, and hydrogen. Sulfur andcarbon dioxide are also produced and removed. The synthetic gas drives a combustion turbine,whose exhaust is used to make steam to drive a secondary turbine. One of the biggest obstaclesfacing IGCC is the reliability of the gasification process. Because of reliability questions, amongother challenges, large-scale competitive commercial plants may still be years away. Both Congressand the Administration continue to invest heavily in IGCC because of the potential benefits fromreduced NOx, SOx, mercury, and particulate matter. Moreover, lower CO 2 emissions throughgreater plant efficiencies and/or potential sequestration could be substantial. The Administration is looking at very long-term investments as well. FutureGen representsthat strategy. FutureGen -- an integrated sequestration and hydrogen research initiative -- is a $1billion dollar industry/government partnership to build a coal-fired gasification and hydrogenproduction plant to serve as a prototype to test emissions-free and carbon sequestration technologies. The goal is to permanently sequester CO2 in a geologic formation. A FutureGen plant wouldprovide 275 MW from electricity and hydrogen and sequester 1 million metric tons of carbondioxide annually. The project is designed to build international support to address "global warmingand energy security." (15) The prototype will allow DOE to operate a large-scale facility to prove the technical feasibility ofzero emission production. Out of the $950 million cost estimate of the project, DOE would invest$500 million, plus an additional $120 million from its sequestration program, the private sectorwould contribute $250 million (which would be capped), and about $80 million is anticipated fromthe international community. The funding for FutureGen began in FY2004 at $9 million. Appropriations were nearlydoubled to $17.5 million in FY2005. The Bush Administration is seeking $18 million for FY2006. Project funding between FY2004 and FY2006 is for plant definition and NEPA requirements. Funding requests are projected by DOE to rise rapidly in the near-term to $50 million in FY2007,then $100 million in FY2008, at which time procurement and construction efforts would begin. DOEprojects another $228 million of direct funding needed between FY2009-FY2013, plus an additional$120 million from the DOE Sequestration program during this time frame. Finally, an additional$77 million would be needed through FY2018. The Bush Administration has also been seeking tocancel previously appropriated funds for the original CCT program and shift that money toFutureGen. Congress has blocked such an effort in the past two budgets. Below is a summary of the Administration's funding request for Clean Coal R&D programsfor FY2006: Clean coal power initiative -- A 10 year, $2 billion effort that began in FY2002. TheAdministration has submitted a $50 million request for FY2006. Nearly $400million in funding has already been appropriated since FY2002. Rounds 1 and 2 arealready underway. DOE's Office of Fossil Energy will begin Round 3 solicitationsduring FY2006 Coal R&D programs -- These programs are being encouraged by the Administration.Within the Fossil Energy R&D program, Coal R&D programs, other than the CCPIand FutureGen, would rise by 5.9% to $218 million while nearly all other fossilenergy programs would be cut. Major cuts to programs other than coal are proposedwhich would reduce the total Fossil Energy program to $491.5 million -- 14% ($80.5million) less than the enacted amount for FY2005. Coal Gasification -- Within the Coal R&D program, the Administration's request forgasification research went up from $34.5 million in FY2005 to $56.4 million inFY2006. FY2005 appropriations were $45.8 million. This level of increase is anindication of more commitment by the Administration and Congress to IGCC effortsaimed at commercialization of the technology. Carbon sequestration -- The R&D program would receive $67.2 million in theAdministration's FY2006 request -- a $21.8 million increase over FY2005. FutureGen -- The FY2006 Administration request is $18 million. The FY2006 funding request for Fossil Energy R&D is heavily weighted towards clean coaltechnology, potentially at the expense of other fossil technologies -- such as natural gas orpetroleum technology R&D. However, the CCPI may need consistently higher investments in aconstrained spending environment to provide the desired long-term results -- a commerciallyaffordable coal technology for electricity generation while substantially reducing emission levels. If funding support or incentives are not high enough, industry may forgo the long-term commitmentneeded and instead abandon gasification projects altogether. Even with heavy investment in cleancoal/gasification strategies, natural gas-fired generation may retain its economic advantage over thelong-term because of moderate natural gas prices and/or more efficient gas units. On a similar note,technology obstacles with IGCC may not be resolved, IGCC may not be deployed for larger-scalecommercial production, and decades-long R&D funding never recouped. However, the strategy of investing in coal-gasification projects for closer-termcommercialization fits EIA's forecast that16 commercial IGCC plants will be on-line between2011-2025. The total output would still be only 7% of all coal-fired capacity, but if there are capitalcost reductions and greater technological efficiencies, IGCC is likely to continue its growth beyond2025. The House-passed version of the FY2006 Energy and Water Development appropriations bill( H.R. 2419 ), which includes funding for Fossil Energy R&D, supports theAdministration's request for CCPI and FutureGen. However, while both agree there is an unusedpreviously appropriated balance of $257 million from the Clean Coal Technology program, theAdministration requests rescinding the money and incorporating the funds into the fossil fuel accountfor FutureGen activities as an advanced appropriation to be used in FY2007 and beyond. The Houseapproved, instead, deferring the $257 million, while acknowledging that the funds will be used forthe FutureGen program in FY2007 and beyond. Energy legislation initiated in the 107th Congress reached a conference-level agreement( H.R. 6 ) in the 108th Congress, and was passed by the House but was blocked by aSenate filibuster. A Senate alternative ( S. 2095 ) introduced to address the differenceswith the House version over MTBE and energy tax incentives also died in the 108th Congress. Theseearlier versions both contained provisions under Title IV (Coal) that would have provided loanguarantees for various coal projects focused on developing the IGCC technology. Provisions underTitle IX supported R&D for IGCC, carbon sequestration, and other coal-related technologies. Therewere also loan guarantees to fund a Fischer-Tropsch synthetic fuels project for diesel fuel. Legislation in the 109th Congress for an omnibus energy bill ( H.R. 6 ) wasapproved by the House on April 21, 2005. H.R. 6 includes provisions for coal nearlyidentical to the H.R. 6 conference report filed in the 108th Congress. (17) Within the Clean CoalPower Initiative section there would be loan guarantees for specific IGCC projects. Federal loansor loan guarantees would account for up to 30% of all obligated money in any fiscal year with thefederal share not to exceed 50% of any one project. Pollution control projects (i.e., for mercury,NOx, SOx, and particulate matter) would get $500 million in funding, and $1.5 billion would beauthorized for cogeneration and gasification projects between fiscal years 2006 and 2012. CoalTechnology provisions include an R&D program on IGCC systems, turbines for synthetic gas fromcoal, carbon sequestration, and loan guarantees for development of Fischer-Tropsch diesel fuels. TheSenate version of comprehensive energy legislation ( S. 10 ), among other things,authorizes CCPI for $200 million annually for FY2006-FY2014. Funding for R&D and loan guarantees for the development of IGCC technology appear tohave some bipartisan support, based on previous support of clean coal technology programs receivedin the annual Interior appropriations bill. The Natural Resources Defense Council (NRDC), while on record in support of IGCCtechnology because of its potential for emissions reduction and better efficiencies, would prefer tosee more stringent standards serve as a catalyst for the industry to solve the clean air problem. (18) That sentiment is echoedby Resources for the Future Senior Fellow Dallas Burtraw. He argues that the Clean Air ActAmendments of 1990 were the catalyst that led to major reductions in SO2 despite years ofincentives. (19) AnAmerican Electric Power (AEP) representative contends that without a subsidy, large-scale IGCCdevelopment will not take place. The AEP argues that the Administration would need to"jump-start" development of about six commercial-scale plants. (20) The DOE has a studyunderway to help determine the "best federal incentives" to move IGCC forward. (21) The Senate Committee on Energy and Natural Resources held hearings on energy policy inFebruary 2005, but the anticipated schedule for omnibus energy legislation in the House has slowed. Concern over spending has given rise to differing opinions about how costly the energy taxprovisions in the bill should be. On February 10, 2005, the House Science Committee reported H.R. 610 , legislation including less controversial R&D provisions that were part ofcomprehensive legislation debated in the 108th Congress. The Surface Mining Control and Reclamation Act (SMCRA, P.L. 95-87 ), enacted in 1977,established reclamation standards for all coal surface mining operations and for the surface effectsof underground mining. It also established the Abandoned Mine Land (AML) program to promotethe reclamation of sites mined and abandoned prior to the enactment of SMCRA. To financereclamation of abandoned mine sites, the legislation established fees on coal production. Thesecollections are divided into federal and state shares; subject to annual appropriation, AML funds aredistributed annually to states with approved reclamation programs. Since the program's inceptionand through FY2004, collections have totaled $7.1 billion; appropriations from the fund have totaled$5.5 billion. The unappropriated balance in the fund approached $1.7 billion at the end of FY2004.As of the end of FY2004, roughly $1.1 billion of this sum is credited to the state share accounts, ofwhich nearly $430 million alone is in Wyoming's account, because -- even though most of the sitesawaiting cleanup are in the eastern part of the nation -- coal production has shifted westward.Consequently, the western states have been making significantly larger contributions to the fund inrecent years. Authorization for collection of AML fees was scheduled to expire at the end of FY2004 andwas extended nine months to the end of June 2005 by the Consolidated Appropriations Act for 2005( P.L. 108-447 ). Subsequently, H.R. 1268 ( P.L. 109-13 ), a supplemental appropriationsbill for FY2005, extended AML authorization to the end of FY2005. Bills have been introduced inthe 109th Congress to extend the authorization for fee collections and make changes to the programthat would address concerns about the mechanics of the program, the fee structure, and theunappropriated balances. Legislation reauthorizing AML was introduced in the 108th Congress, but did not pass. Inaddition, Congress did not adopt in its FY2005 AML appropriation an Administration proposal thatwould have refunded, through a significant increase in appropriations, unobligated state balancesover a 10-year period. In its FY2006 budget request, the Administration has made virtually the sameproposal and seeks an additional $58 million to begin returning the unobligated balances. A billadvancing the Bush changes to the AML program, H.R. 2721 , was introduced May 26,2005. Under the Bush plan, unappropriated balances would be returned to states and Indian tribesthat had completed reclamation of their Priority 1 sites. These states would no longer receive grantsfrom the AML fund itself, freeing up funds to be targeted to states with sites awaiting cleanup. It isnot apparent that the Administration proposal will receive a different reception in the 109th Congressthan in the previous one. Another bill introduced in the 109th Congress, H.R. 1600 , is similar to legislationintroduced in the 108th Congress, and differs greatly in some respects from the Administrationproposal. The bill would extend authorization of the program through FY2020, and reduce the feecollected per ton of coal production. It would maintain the distinction between state and federalshares and would require that 50% of annual contributions be returned to states even if cleanup ofpriority abandoned mine sites had been completed. States and tribes would be allowed to use themoney for other purposes if cleanup of AML sites had been completed. Both H.R. 2721 and H.R. 1600 would end an allocation of a portion of AML collections to the RuralAbandoned Mine Land Program, a program that has received no appropriation since 1995.
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Major legislative issues related to coal in the 109th Congress include coal and energy security,clean air and environmental concerns, funding strategies for technology R&D, loan guarantees forcoal gasification projects, and the Abandoned Mine Land (AML) program. The Administration anticipates a long-term reliance on coal because of its relatively low-costabundance. Coal supplies 22% of U.S. energy demand but over 50% of the energy used by theelectric power sector. The Energy Information Administration forecasts electricity consumption togrow by 1.9% per year through 2025. The increase will largely be met by new coal-fired or naturalgas-fired power plants. By mandating significant reductions in three pollutants emitted by coal-fired electricgenerating units, proposed Clear Skies legislation ( S. 131 ) could have significantimpact on coal production and distribution, if enacted. When Clear Skies was introduced in the 108thCongress, the Environmental Protection Agency (EPA) conducted an analysis of its effects on thecoal industry. While the analysis indicated growth in coal production for electric utility production(from 905 million tons in 2000 to 998 million tons in 2020), coal generation's share of the 2020generation mix was projected to decline from 46% to 44%. Clear Skies legislation, however, facesan uncertain future. In March 2005, the Senate Environment and Public Works Committee killed S.131 on a 9-9 vote. In FY2002, President Bush initiated the Clean Coal Power Initiative (CCPI) focusing onadvanced coal combustion technology for removal of SOx, NOx, mercury, and fine particulatematter and carbon sequestration. The CCPI is a 10-year, $2 billion government-industry cost sharingprogram. The FY2006 funding request for Fossil Energy R&D is heavily weighted towards cleancoal technology, potentially at the expense of other fossil technologies -- such as natural gas orpetroleum technology R&D. Legislation in the 109th Congress for an omnibus energy bill ( H.R. 6 ) wasapproved by the House on April 21, 2005. H.R. 6 includes provisions for coal nearlyidentical to the H.R. 6 conference report filed in the 108th Congress. Within the CCPIsection there would be loan guarantees for specific integrated gasification combined cycle projects. The Senate Committee on Energy and Natural Resources approved its version of the bill( S. 10 ) on May 26, 2005. Authorization for collection of AML fees was scheduled to expire at the end of FY2004 andwas extended nine months to the end of June 2005 by the Consolidated Appropriations Act for 2005( P.L. 108-447 ). Subsequently, H.R. 1268 ( P.L. 109-13 ) a supplemental appropriationsbill for FY2005, extended AML authorization to the end of FY2005. In its FY2006 budgetsubmission for the Office of Surface Mining, the Administration once again proposed the changesin the AML program included with the FY2005 budget, this time seeking a $58 million increase inthe appropriation for the fund. This report will be updated.
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Bolivia is a country rich in cultural diversity and natural resources, whose political and economic development have been stymied by chronic instability, poverty, corruption, and deep ethnic and regional cleavages. In 1825, Bolivia won its independence from Spain, but then experienced frequent military coups and counter-coups until democratic civilian rule was established in 1982. As a result of the War of the Pacific (1879-1883) with Chile, Bolivia lost part of its territory along the Pacific coast and has no sovereign access to the ocean, a source of lingering resentment among Bolivians. Bolivia does have preferential rights of access to the Chilean ports of Antofagasta and Arica and the Peruvian port of Ilo. As a result of the Chaco War with Paraguay (1932-1935), Bolivia lost access to the Atlantic Ocean by way of the Paraguay River and significant territory. Bolivia possesses the second-largest natural gas reserves in Latin America after Venezuela and significant mineral deposits, yet at least 42% of Bolivians live in poverty (down from 64% in 2005). Some sources point to a higher figure, nearing 60%. Bolivia has been deemed as having an "acute" level of vulnerability to natural disasters; recent flooding has disproportionately affected poor communities in rural areas. Bolivia's population of 10.5 million people is among the most ethnically diverse in South America. Quechua and Aymara are the two predominant indigenous groups, together comprising some 55% of the population. Despite the National Revolution of 1952, in which the Bolivian indigenous peoples benefitted from land reform and expanded suffrage, indigenous groups have historically been under-represented in the Bolivian political system and disproportionately affected by poverty and inequality. In the 1980s, indigenous-based political parties and movements emerged in Bolivia, and by 2006 some 17% of members of the Bolivian Congress self-identified as indigenous. Since the mid-2000s, indigenous representatives have used the legislature as a forum to advocate for indigenous rights, equitable economic development, and the preservation of indigenous land and culture. Nevertheless, indigenous communities continue to engage in large-scale protests to ensure that their interests are met. Bolivia has been a major producer of coca leaf, the main ingredient in the production of cocaine. Although coca leaf is legal in the country for traditional uses and is grown legally in some parts of the country, its cultivation for illegal purposes increased in the 1970s and 1980s. By the early 2000s, cultivation levels had decreased to half of the levels of the 1990s as a result of aggressive, U.S.-backed policies to eradicate illicit production. These policies, and the way in which they were implemented, caused social unrest and economic hardship in the two main coca-growing regions. Opposition to forced eradication policies led to the rise of coca growers' trade unions and an associated political party, the Movement Toward Socialism (MAS). Since taking power in January 2006, Evo Morales and his leftist Movement Toward Socialism (MAS) party have presided over a period of relative political stability and economic expansion. After being governed by six different presidents between 2001 and 2005, Bolivians have repeatedly gone to the polls to reaffirm their support for Morales and the MAS; the party now has majorities in both chambers of the legislature. President Morales has expanded state control over the economy by renegotiating contracts with some companies to increase the taxes and royalties they pay, and by expropriating other companies. These policies have angered foreign investors, but have brought the government substantial revenue. President Morales has used that influx of revenue to expand social programs and provide cash transfers to the elderly, families with children, and pregnant women. Buoyed by record prices for its gas and mineral exports, economic growth in Bolivia has averaged 4.5% per year during the Morales Administration, according to the World Bank. Under Evo Morales, democracy in Bolivia has in some ways become more representative and participatory, but less accountable and transparent. The participation of women in all branches of the federal government increased after a law mandating gender parity in the selection process for government jobs took effect; however, women remain under-represented in mayoral posts. Indigenous participation in the executive branch, legislature (where seven seats are set aside for representatives from indigenous districts), and courts has increased since Morales took office. The 2009 constitution guarantees the autonomy of subnational entities (departments, indigenous communities, municipalities, and sub-departmental regions), providing more opportunities for direct political participation, but challenges remain in implementing those provisions. According to the United Nations (U.N.), additional progress needs to be made in order to protect indigenous communities' rights, particularly their right to be consulted prior to infrastructure or mining projects being carried out on their lands. In dealing with the opposition, President Morales and his government have periodically used anti-democratic methods to consolidate power and quell dissent. In December 2007, for example, Morales' supporters in the Constituent Assembly passed a draft constitution (which prioritized indigenous rights and agrarian reform) during a series of sessions that many opposition delegates were not permitted to attend. Opposition governors and other political leaders have also been sidelined by sometimes controversial charges of corruption and other malfeasance. The corruption, inefficiency, and politicization in Bolivia's criminal justice system have been identified as barriers to democratic development in the country. Restrictions on freedom of the press, including retaliatory actions against media outlets that do not report positively about government actions, as well as periodic attacks against journalists critical of the government, have been reported. With Bolivia's traditional political parties in disarray, opposition to Morales has generally been divided between those in the wealthy eastern provinces (led by Governor Rubén Costas of Santa Cruz) who oppose his state-led, pro-indigenous policies, and those who originated from within his own base, some of whom favor more radical policies than he does. Despite opposition from conservative sectors during his first term and protests by unions and indigenous groups during his second term, Morales has remained popular in Bolivia, particularly among the poor and indigenous (who were arguably neglected by previous governments). President Morales received the support of 67% of Bolivian voters in a national recall referendum held in August 2008, 61% support for the new constitution he backed in 2009, and 64% support for his re-election that year. Support for President Morales remains higher in the poorer western highlands (where Quechua and Aymara indigenous groups predominate) than in the wealthier eastern lowlands, sometimes called the Media Luna (Half Moon) states of Beni, Pando, Santa Cruz, and Tarija (see Figure 1 ). The coca leaf has been used for thousands of years by indigenous communities in the Andean region for spiritual and medical purposes, and its use is considered an important indigenous cultural right. In 2013, the United Nations accepted Bolivia's petition for recognition that it allows coca cultivation for licit uses within its borders. The coca leaf is also a primary component of cocaine, an illicit narcotic. Unlike past Bolivian governments, which sought to criminalize coca production, President Morales and the MAS developed a "coca yes, cocaine no" policy for Bolivia that permits each family to produce one cato (1,600 square meters) of coca to be used for traditional uses, but any coca grown beyond that is subject to eradication. The policy seeks to (1) recognize the positive attributes of the coca leaf; (2) commercialize coca for licit uses; (3) continue "rationalization" of coca (voluntary eradication) in the Chapare and extend it to other regions; and, (4) increase interdiction of cocaine and other illicit drugs at all stages of production. Proponents of the "coca yes, cocaine no" policy argue that it is a culturally sensitive approach to coca eradication that is widely accepted in Bolivia. They assert that Morales' experience as a coca grower has enabled him to negotiate agreements with producers in regions where prior governments were unable to limit coca cultivation. Critics of Morales' coca policy argue that it is based on the false premises that traditional demand for coca exceeds the current legal threshold of 12,000 hectares, and that there are viable markets outside Bolivia for licit coca-based products. A 2013 study funded by the European Union reportedly found that Bolivia needs some 14,700 hectares to meet traditional demands for coca, but produces more than 25,000 hectares. According to U.S. estimates, coca cultivation in Bolivia declined by 4,000 hectares between 2009 and 2012. In 2012, estimated coca cultivation in Peru was twice that of Bolivia and estimated coca cultivation in Colombia was three times that of Bolivia. The way that Bolivia is perceived by international investors contrasts markedly with the way its macroeconomic and fiscal policies have been evaluated by economists from the leading multilateral development institutions. Bolivia ranks 167 th out of 189 countries evaluated in the World Bank's 2013 Ease of Doing Business report and third from the bottom (behind Haiti and Venezuela) among Latin American and Caribbean countries. Summing up several other investment climate rankings, the State Department maintains that Bolivia receives a "low ranking" due, in part, to its official corruption, social unrest, expropriations of private companies, and questionable commitment to international dispute settlement. Nevertheless, the World Bank has praised Bolivia's economy, which is driven by state-centered policies and fueled by commodity exports, for its positive macroeconomic results, declining public debt, and increasing international reserves. The International Monetary Fund (IMF) has found that solid economic performance, prudent fiscal policy, and "active social policies since the mid-2000s have helped Bolivia to nearly triple income per capita and reduce poverty." Despite its recent economic expansion, Bolivia remains among the poorest countries in South America and one of the most unequal countries in the Western Hemisphere. Bolivia ranked 108 th out of 187 countries in the U.N. Development Program's 2012 human development index. Bolivia has one of the lowest life expectancies in the region (67), as well as some of the highest maternal and child mortality rates. These indicators are much worse in indigenous and rural communities, due to a continued lack of access to sanitation and health services. Progress has been made in some critical areas, however. For example, according to the Pan American Health Organization (PAHO), access to treated drinking water stood at 50% in rural areas as recently as 2007. In 2012, 79% of the population had access to clean water. Like other populist leaders in Latin America, Evo Morales is seeking to extend his time in office rather than entrusting his legacy to a successor such as, for example, Vice President Alvaro García Linera. Morales backtracked on an earlier pledge not to run for a third term after a controversial Constitutional Court decision in May 2013 cleared him to compete in the October 2014 presidential elections. Although the 2009 constitution established a two-term limit for Bolivian presidents, the Constitutional Court ruled that President Morales is exempted from that limit due to the fact that he is technically serving his first term under the new constitution. Polls predict that President Morales will be easily re-elected. In a poll from mid-February 2014, Morales had 46% of the vote. His closest rivals were Samuel Medina, a cement magnate, with 13.4% support, and Governor Rubén Costas, with 9% support. Some analysts doubt that any opposition candidate from the Media Luna stands a chance at defeating President Morales. For instance, none of the opposition candidates have thus far been able to capitalize on popular protests that forced the Morales Administration to back away from pushing the Congress to enact a new mining code. Bolivia is also scheduled to convene legislative elections in October 2014. There are 60 Senate seats and 130 Chamber of Deputies seats up for election. Some predict the opposition could prevent the MAS from winning a majority in the Senate, where each province holds four seats. From the late 1980s through the mid-2000s, U.S. relations with Bolivia centered largely on controlling the production of coca leaf and coca paste, much of which was usually shipped to Colombia to be processed into cocaine. In support of Bolivia's counternarcotics efforts, the United States provided significant interdiction and alternative development assistance, and forgave all of Bolivia's debt for development assistance projects and most of the debt for food assistance. Bolivia, like Peru, had been viewed by many as a counternarcotics success story, with joint air and riverine interdiction operations, successful eradication efforts, and some effective alternative development programs. Others, however, view the forced eradication policies that U.S. antidrug efforts emphasized as a social and political disaster that fueled popular discontent, worsened Bolivia's chronic instability, and contributed to human rights violations. Prior to the December 2005 elections, most analysts predicted that a Morales victory would complicate U.S. relations with Bolivia. After the election, U.S. State Department officials congratulated Evo Morales but noted that "the quality of the relationship between the United States and Bolivia will depend on what kind of policies they [Morales and the MAS government] pursue." Despite an initial openness to dialogue, U.S.-Bolivian relations became tense soon after President Morales took office. U.S. officials expressed concerns about the Morales government's commitment to combating illegal drugs, its ties with Venezuela and Cuba, and its nationalization of Bolivia's hydrocarbons industry. Tensions in U.S.-Bolivian relations flared during the fall of 2007 as Bolivian authorities (including President Morales) complained that some U.S. assistance was going to support opposition groups seeking to undermine the MAS government. In 2008, U.S.-Bolivian relations deteriorated from what analysts described as "tenuous" at best in the summer, to extremely tense by the fall. U.S.-Bolivian relations hit their lowest point in modern times in September 2008, when President Morales accused the U.S. Ambassador to Bolivia of supporting opposition forces and expelled him from the country. The U.S. government responded by expelling Bolivia's Ambassador to the United States. On September 16, 2008, President Bush designated Bolivia as a country that had failed to live up to its obligations under international narcotics agreements. That decision was closely followed by the suspension of Bolivia's trade preferences under the Andean Trade Preferences Act (ATPA) for a lack of counternarcotics cooperation. On November 1, 2008, Bolivian President Morales announced an indefinite suspension of U.S. Drug Enforcement Administration (DEA) operations in Bolivia after accusing some DEA agents of espionage. The Peace Corps also suspended operations in Bolivia that fall due to "growing instability" in the country and has since closed the program. It is unlikely that the agency would resume operations until and unless the U.S. government has more of a diplomatic presence in the country. Periodic efforts to repair relations in subsequent years have failed for different reasons. After two years of high-level negotiations, on November 7, 2011, the U.S. and Bolivian governments signed a Framework Agreement to guide relations that said both governments looked forward to the "early return of ambassadors to both Washington and La Paz." However, after the United States requested Bolivian approval of a nominee to serve as U.S. Ambassador in La Paz (through the diplomatic procedure known as agrément ) in November 2012, the Bolivian government leaked the name of the U.S. nominee to the press. President Morales then said in February 2013 that he no longer had an interest in exchanging Ambassadors. Two events that occurred in 2013 resulted in the end of most, if not all, U.S. foreign aid to Bolivia. In May 2013, President Morales asked the U.S. Agency for International Development (USAID) to end its operations in Bolivia after 52 years in the country. He claimed that USAID had funded opposition forces that had sought to undermine his government, charges that USAID vigorously denied. As USAID began shutting down its operations, the State Department decided to close its International Narcotics and Law Enforcement Affairs office in Bolivia in December 2013 due to a lack of adequate cooperation from Bolivian authorities. Another source of tension in the relationship has been the case of New York flooring contractor Jacob Ostreicher, who launched a rice farm in Bolivia in 2008. The Bolivian government arrested Mr. Ostreicher on suspicion of money laundering in June 2011, imprisoned him for 18 months in what was termed pre-trial detention, and then placed him under house arrest even though he was never formally charged with a crime. Several Bolivian officials in the Interior Ministry and Attorney General's Office reportedly were jailed for allegedly attempting to extort Ostreicher in exchange for his release. Corruption and inefficiency in Bolivia's judicial system has been identified as a serious human rights problem in the country. Congress held multiple hearings pushing for Mr. Ostreicher to be freed; he eventually escaped house arrest and returned to the United States in December 2013. The Bolivian government considered Mr. Ostreicher a fugitive. As the United States criticized Bolivia's handling of the Ostreicher case, Bolivia protested the U.S. government's 2012 denial of its request for former President Gonzalo Sánchez de Lozada, currently living in the United States, to be extradited to Bolivia to stand trial for civilian deaths that occurred when he ordered government security forces to respond to violent civilian protests in the fall of 2003. When Evo Morales took office, Bolivia was among the top recipients of U.S. aid in Latin America. However, assistance levels have been declining since FY2007. Bolivia received $122.1 million in U.S. assistance in FY2007, including $66 million in counternarcotics assistance for robust interdiction and alternative development programs. Other goals of U.S. assistance in Bolivia included promoting economic opportunities, particularly for indigenous groups; combating malaria and other illnesses while also strengthening and decentralizing healthcare provision; and providing support for justice reform and for regional and municipal governments. Since many of the regional governments were controlled by opposition parties, President Morales came to oppose USAID's regional and municipal government strengthening programs. As a result of President Morales' decisions to expel the U.S. Ambassador, DEA, and USAID, U.S. assistance to Bolivia fell from $99.7 million in FY2008 to $5.2 million in FY2013 and to zero in FY2014. The FY2015 budget request does not include any funding for Bolivia. Although other donors, such as the European Union (EU), support development assistance, health, and alternative development programs in Bolivia, they have not traditionally provided the same types of surveillance and interdiction programs that the U.S. government supported through the State Department and DEA. The EU has recently begun to fund interdiction with the construction of a base in Yapacani, Santa Cruz, for Bolivian antidrug forces, as well as a program to improve Bolivian border controls. On September 13, 2013, President Obama identified Bolivia as a major drug producing country that had "failed demonstrably" to make sufficient efforts to meet its obligations under international counternarcotics agreements for the sixth consecutive year. The U.S. determination was made despite the fact that Bolivia reported eradicating over 10,000 hectares of coca in 2012 and that official U.S. estimates for coca cultivation and potential cocaine production in Bolivia showed decreases of 2% and 18%, respectively, for 2012 as compared to 2011. Arguments used to justify the determination include Bolivia's reservation to the 1961 U.N. Single Convention on Narcotic Drugs (allowed by the U.N. in January 2013 but opposed by the United States) recognizing coca leaf chewing as legal in the country, Bolivia's failure to prevent coca produced for licit uses from being diverted into illicit markets, and its inability to convict individuals accused of drug trafficking. The U.S. determination was vigorously rejected by the Bolivian government. Bolivia is not a major U.S. trade partner; two-way trade totaled just over $2 billion in 2013. Bolivia's largest export by far is natural gas, with the bulk of that destined for neighboring Brazil and Argentina. Bolivian exports to the United States in 2013 consisted mainly of precious metals and stones followed by tin and related products. Although the United States is not Bolivia's primary export market, it does rank just behind Brazil and ahead of China as a source for Bolivian imports. In 2013, top Bolivian imports from the United States included heavy machinery, electronics, and vehicles. From 1991 through 2008, Bolivia received U.S. trade preferences under the Andean Trade Preference Act (ATPA; Title II of P.L. 102-182 ). The purpose of ATPA was to promote economic growth in the Andean region and to encourage a shift away from dependence on illicit drugs by supporting legitimate economic activities. ATPA encouraged some limited textile and jewelry production in Bolivia. As previously stated, Bolivia's ATPA benefits were suspended in 2008 due to its lack of counternarcotics cooperation with the United States. The effects of that suspension on the Bolivian economy as a whole have been small because exports under ATPA accounted for a small percentage of Bolivia's GDP. A majority of Bolivia's textile exports are now destined for Venezuela. Economists predict that Bolivia is likely to enjoy steady economic growth averaging roughly 4% in the coming years (2015-2018). Even if prices or demand for its commodity exports were to fall, neither of which is likely, Bolivia's significant reserves should cushion its economy from economic shocks. Economic growth and improving social indicators should enable President Morales and the MAS to continue dominating the Bolivian political system for the foreseeable future, despite periodic protests from disgruntled interest groups. With presidential elections expected to be held in October, the Morales government is unlikely to make overtures to improve relations with the United States. At the same time, none of the issues that usually draw U.S. interest to particular Latin American countries—proximity, counternarcotics concerns, or trade—are particularly salient with Bolivia. Bolivia is a landlocked country in South America that supplies only 1% of U.S. cocaine and whose primary trade partner is Brazil. And, although Bolivia is a member of the nine-member Venezuelan-led Bolivarian Alliance of the Americas (ALBA), it does not possess the same ambitions to serve as a regional counterweight to the United States as Venezuela. Nevertheless, there is always a chance that President Morales could change his mind regarding a desire to improve relations with the United States and eventually exchange Ambassadors. He reportedly expressed a willingness to do so within an environment of "mutual respect" during a meeting with a recent U.S. Senate delegation to Bolivia. It remains to be seen what type of conditions either government might place on efforts to improve relations.
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In the last decade, Bolivia has transformed from a country plagued by political volatility and economic instability that was closely aligned with the United States to a relatively stable country with a growing economy that now has strained relations with the U.S. government. Located in the Andean region of South America, Bolivia, like Peru and Colombia, has been a major producer of coca leaf, the main ingredient in the production of cocaine. Since 2006, Bolivia has enjoyed a period of relative political stability and steady economic growth during the two presidential terms of populist President Evo Morales, the country's first indigenous leader and head of the country's coca growers' union. Buoyed by a booming natural gas industry, Morales and his party, the leftist Movement Toward Socialism (MAS) party, have decriminalized coca cultivation, increased state control over the economy, expanded social programs, and enacted a new constitution favoring the rights of indigenous peoples. U.S. interest in Bolivia has traditionally centered on counternarcotics, trade, and development matters. From the late 1980s through the mid-2000s, successive Bolivian governments, with financial and technical assistance from the United States, tried various strategies to combat illicit coca production, including forced eradication. In support of Bolivia's counternarcotics efforts, the United States has provided significant interdiction and alternative development assistance, and has forgiven all of Bolivia's debt for development assistance projects and most of the debt for food assistance. From 1991 through November 2008, Bolivia also received U.S. trade preferences in exchange for its counternarcotics cooperation under the Andean Trade Preference Act (ATPA; Title II of P.L. 102-182). Bolivia also received U.S. development, democracy, and health assistance provided by the U.S. Agency for International Development (USAID) from 1961 through 2013. Although President Morales' policies have proven popular with his supporters, they have worried foreign investors and strained U.S. relations, particularly in the realm of drug control. With an antagonistic foreign policy closely aligned with that of Venezuela, Bolivian-U.S. relations have been more tense during the Morales Administrations than they have been in decades. Despite significant strains in the bilateral relationship, the two countries have not formally severed diplomatic or consular relations, even though they have not exchanged Ambassadors since President Morales expelled the U.S. Ambassador in the fall of 2008. Due to actions taken by the Morales government (including the 2013 expulsion of USAID from the country) and a lack of counterdrug cooperation with the United States, Bolivia has lost U.S. trade preferences and no longer receives U.S. foreign aid. This report provides background information on Bolivia, an analysis of its current political and economic situation, and an assessment of some key issues in Bolivian-U.S. relations.
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Over the last few years, nowhere have tensions between the United States and its Europeanallies and friends been more evident than on a range of issues related to the Middle East. (1) These include Iraq, theIsraeli-Palestinian conflict, and Iran. Some worry that U.S.-European differences in combatingterrorism are growing wider. How best to approach the challenges posed by Syria may also figureprominently on the transatlantic agenda in the near future. Although the European countries are notmonolithic in their opinions with respect to the Middle East, views among them often tend to bemuch closer to each other than to those of the United States. This is largely because Europeanperspectives on the region have been shaped over time by common elements unique to Europe'shistory and geostrategic position. Some Bush Administration officials and Members of Congress are concerned that the recentvitriolic disputes between Washington and a number of European capitals on Middle East issuescould constrain U.S. policies, and erode the broader transatlantic relationship and U.S.-Europeancounterterrorism efforts in the longer term. The 9/11 Commission Report notes that nearly everyaspect of U.S. counterterrorism strategy relies on international cooperation, including with Europeangovernments and multilateral institutions such as NATO and the European Union (EU). Someprovisions in the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) seek toenhance international collaboration against terrorism. The Bush Administration has sought to mendtransatlantic relations in its second term, but U.S.-European policy differences over Middle Easternissues are likely to persist. Many analysts argue that the United States and Europe share common vital interests in theMiddle East: combating terrorism; halting proliferation of weapons of mass destruction (WMD);promoting Middle East peace and stability; ensuring a reliable flow of oil; and curtailing Islamicextremism. These experts assert that the goals of U.S. and European policies toward these variouschallenges are not that far apart. Both sides of the Atlantic tend to emphasize different interests. Europe largely views the Israeli-Palestinian conflict as the preeminent concern, believing it to be thekey source of regional instability that fuels terrorism, Islamic extremism, and domestic politicalunrest at home. In contrast, the Bush Administration stresses that terrorism and weaponsproliferation must be confronted to ensure U.S. national security, and that the conditions for peaceand stability in the Middle East will not be possible until these twin threats are removed. Thesedifferent perspectives often result in the employment of disparate tactics by the two sides of theAtlantic as they pursue their foreign policy agendas in the region. A combination of factors lie at the root of U.S.-European tensions on the Middle East. Theyinclude different histories, geography, and demographics; the nature of economic ties with theregion; somewhat divergent threat perceptions; and different views on the appropriate role of the useof force. Many analysts also suggest that current U.S.-European frictions over many Middle Eastissues are heightened on the one hand by European views of a unilateralist Bush Administration, andon the other by growing EU ambitions to play a larger role on the world stage. Europe's long and complex history with the Middle East shapes its views toward the regionin ways that are distinct from those of the United States. Europe's ancient religious crusades andmore recent colonial experiences in the Arab world still weigh heavily on its collective psyche, andproduce twin pangs of wariness and guilt. This wariness leads many Europeans, for example, tocaution Washington against overconfidence in its ability to win the battle for Arab "hearts andminds" through force, or to impose stability and democracy. Residual guilt about Europe'scolonialist past causes many of its citizens to identify with what they perceive as a struggle forPalestinian freedom against Israeli occupation; at the same time, the Holocaust engenders Europeansupport for the security of Israel, but Europeans believe this will only be ensured by peace with thePalestinians. Finally, Europe's own bloody history has produced a broad European aversion to theuse of force and a preference for solving conflicts diplomatically (see below). (2) Europeans claim that the Middle East is part of "Europe's neighborhood," and this proximitymakes the promotion of political and economic stability key to ensuring that problems in the regiondo not spill over into Europe. As examples, Europeans point to several incidents of terrorism ontheir soil over the last three decades stemming from the Israeli-Palestinian conflict, and recent wavesof migrants fleeing political instability and economic hardship. These new migrants add to Europe'salready sizable Muslim population of between 15 to 20 million, which has its roots in Europeanlabor shortages and immigration policies of the 1950s and 1960s that attracted large groups of Turks,North Africans, and Pakistanis. In contrast, the U.S. Muslim population is significantly smaller;estimates range from 4 to 8 million. (3) Moreover, Islam has become a vital force in European domesticpolitics. Some argue this makes European politicians more cautious about supporting U.S. policiesthat could inflame their own "Arab streets" and deepen divisions within European societiesstruggling to integrate growing Muslim populations amid rising anti-immigrant sentiments. Conversely, many analysts suggest that the politically well-organized Jewish community in theUnited States engenders stronger U.S. support for Israel. Europe's extensive economic ties with the Middle East have also received considerable publicattention as a key reason for differing U.S.-European approaches. The EU is the primary tradingpartner of the region. Although a substantial element of this trade is oil, and any changes in the priceor supply of oil would also affect the United States, overall European economic interests are moreintegrated with the region. EU exports to the Middle East, for example, are almost three times thesize of U.S. exports. (4) Some analysts argue that many European countries are primarily motivated by the need to protectthese commercial ties with the region, and often do so at the expense of security concerns. Otherspoint out that if such commercial interests were the drivers of French and German opposition to thewar in Iraq, then both countries would have served those interests better by supporting the U.S.-ledwar to guarantee a share of the post-Saddam Hussein spoils. Still, many experts agree that Europeancountries' extensive trade and economic ties with the region heighten their desires to maintain goodrelations with Arab governments and makes them wary about policies that could disrupt the normalflow of trade and oil. (5) Some observers assert that since the end of the Cold War, American and European threatperceptions have been diverging. Throughout the 1990s, U.S. policy makers often complained thatEurope was preoccupied with its own internal transformation, and largely blind to the newinternational threats posed by terrorism, weapons proliferation, and other challenges emanating fromthe Middle East. Some say the terrorist attacks of September 11, 2001 exacerbated this gap inU.S.-European threat perceptions. While Europeans view terrorism as a major threat, Americansperceive the threat as being much more severe. European officials assert that while some Europeanleaders, such as UK Prime Minister Tony Blair, see and worry about possible links between terroristgroups and weapons proliferators in the Mideast and elsewhere, the average European citizen doesnot. And in certain European countries like Germany, other issues -- such as the economy andpromoting stability in the nearby Balkans -- have taken precedence. (6) A number of analysts suggest,however, that the March 11, 2004, terrorist bombings in Madrid, Spain, have heightened Europeanperceptions of the threat of Islamist terrorism to Europe. One opinion poll from June 2004 foundthat Americans and Europeans now share broadly similar threat perceptions but differ sharply on theuse of force for managing such threats. (7) As a result of Europe's history both pre- and post-World War II, numerous observers suggestthat Europeans are more prone to emphasize multilateral solutions based on the international ruleof law. Many Europeans claim that it is precisely because they have abided by such rules andworked cooperatively together in institutions such as the United Nations and the European Union(and its progenitors) that they have enjoyed decades of unprecedented peace and prosperity. Combined with the devastation they inflicted on themselves and others in the first half of thetwentieth century, many Europeans -- especially Germans -- shy away from the use of force tomanage conflicts and place greater emphasis on "soft power" tools such as diplomatic pressure andforeign aid. They are wary of the use of preemptive force not sanctioned by the internationalcommunity. U.S. critic Robert Kagan calls it a "power problem," observing that Europe's militaryweakness has produced a "European interest in inhabiting a world where strength doesn't matter,where international law and international institutions predominate." (8) Most Europeans, however,reject this thesis. French and British officials in particular argue that they are not pacifists and citetheir roles in the NATO-led war in Kosovo and the U.S.-led military campaign against the Talibanin Afghanistan as just two examples. Many analysts believe that European perceptions of the Bush Administration as inclinedtoward unilateralism and largely uninterested in Europe are exacerbating current transatlantictensions over the Middle East and Persian Gulf. Before September 11, many European governmentswere critical of the Administration's position on international treaties such as the U.N. KyotoProtocol on climate change and its decision to proceed with missile defense. The terrorist attacksswept some of these contentious issues under the rug for a while, but U.S.-European frictionsreturned in early 2002. Many European leaders were alarmed by President Bush's characterizationof Iraq, Iran, and North Korea as an "axis of evil." Other U.S. moves ranging from rejecting theInternational Criminal Court to imposing steel tariffs reinforced the notion that Washington was notinterested in consulting with its long-time allies or committed to working out disagreementsdiplomatically. Furthermore, Europe's history makes many uncomfortable with what they view asthe Bush Administration's division of the world into good and evil and the religious overtones ofsuch terminology. A French commentator asserts, "Puritan America is hostage to a sacred morality;it regards itself as the predestined repository of Good, with a mission to strike down Evil...Europeno longer possesses that euphoric arrogance. It is done mourning the Absolute and conducts itspolitics...politically." (9) Europeans have welcomed the Bush Administration's efforts in its second term to improveU.S.-European relations. Some say that the February 2005 trips to Europe by President Bush andSecretary of State Condoleezza Rice have helped mend fences and improved the atmospherics of therelationship. However, transatlantic tensions have not disappeared, and many Europeans remainskeptical about the degree to which Washington views Europe as a full and valued partner. Some experts assert that the EU's aspirations to play a larger role on the world stage have alsoheightened recent U.S.-European tensions. For many years, the EU has been the key donor offinancial assistance to the Palestinians and has sponsored a range of region-wide developmentalprograms. But the EU's effort over the last decade to develop a Common Foreign and SecurityPolicy (CFSP) to help further EU political integration has prompted the EU to seek a higher-profilerole in the region that goes beyond its traditional "wallet" function. (10) The EU has had somesuccess in forging consensus on its approach to the Middle East peace process, and how best to dealwith Iran. Some say this has helped make certain EU members, such as France, more confident andassertive about confronting U.S. policies with which they do not agree. At the same time, the EUwas unable to agree on a common policy on Iraq; key players such as the United Kingdom, Italy, andSpain more closely supported the U.S. approach to the use of force against Iraq. Critics note that theEU still has a long way to go before it is able to speak with one voice on foreign policy issues, butthe frustration this produces for countries like France may exacerbate reflexive impulses against U.S.leadership. The combination of underlying factors mentioned above help account for many of thedifferences in U.S. and European policies on a range of challenges in the Middle East. Key policygaps exist in U.S. and European efforts to deal with Iraq, address the Israeli-Palestinian conflict,manage Iran and Syria, and counter terrorism. Led by France and Germany, European countries opposed to using force to disarm Iraqasserted that the case for war had not yet been made. They were skeptical of U.S. arguments directlylinking Saddam Hussein and Al Qaeda, and did not view the threat posed by Iraq as imminent -- inpart, because they believed that the 12 years of international sanctions had limited Iraq's ability toacquire weapons of mass destruction. (12) Thus, France, Germany, and others deemed a contained SaddamHussein as a threat they could live with, especially given their judgment that war with Iraq wouldhave dangerous and destabilizing consequences. Many Europeans feared that toppling Saddam couldfurther fragment the country along ethnic and tribal lines, and generate instability. A number of European governments also worried that war with Iraq would inflame their owndomestic "Arab streets," especially given the stalemate in the Middle East peace process. Europeanofficials pointed out that many Muslims view Israeli Prime Minister Ariel Sharon in much the samelight as Washington did Saddam Hussein, and reject as a double standard the use of force againstIraq. Even UK officials who supported the U.S. approach to Iraq were concerned that war couldfurther antagonize Muslims both in the region and in Europe without tangible progress on theIsraeli-Palestinian conflict. Moreover, some Europeans stressed that rather than helping to curbterrorism, war with Iraq would be an additional rallying point for Al Qaeda recruiters and othermilitant Islamic groups. (13) Numerous Europeans also opposed war in Iraq without explicit U.N. authorization becausein their view, it risked destroying the international system of rules and laws created after World WarII to maintain global peace and stability. In light of German history, Berlin was especially reluctantto agree to any preemptive measures not sanctioned by the international community. Even London,Madrid, and Rome, which more closely backed Washington's approach to Iraq, would have preferreda second U.N. resolution explicitly authorizing the use of force. Many Europeans now worry thatthe Bush Administration has opened a Pandora's box. Some note that other states with territorialambitions, perhaps Russia or China, could feel freer to launch similar measures against borderregions under the pretext of preempting threats to their national security. The U.S. action in Iraqcould also prove counterproductive if it encourages other countries to speed up or initiate programsto acquire WMD capabilities in an attempt to deter a U.S. attack. The Bush Administration countersthat the war in Iraq has had precisely the opposite effect, encouraging Libya to abandon its WMDprogram. French and German officials also discount criticism that their preference for a diplomaticapproach to countering Iraq's WMD ambitions was motivated by economic interests. They claimthat 12 years of sanctions reduced these interests to a minimum, and also prohibited oil contractsagreed with Saddam Hussein's regime from taking effect. (14) These officials also note that Paris and Berlin had somewhatlarger financial interests in Iraq prior to the 1990 invasion of Kuwait, but they did not hesitate thento join the coalition against Iraq. At that time, they point out, Iraq had clearly breached internationalrules and posed a clear threat to stability. In the aftermath of the war, U.S.-European tensions over Iraq have abated to some degree,but still linger. U.S. officials have been frustrated by what they view as minimal military or financialassistance from some European countries. Throughout the U.S.-led occupation of Iraq, which endedin June 2004, the role of the United Nations in rebuilding Iraq was a major sticking point. MostEuropean countries, including the UK, favored giving the United Nations a significant role to bolsterthe credibility of the reconstruction process. In contrast, Washington initially favored a narrow,advisory role for the United Nations, with most U.N. activity focused on providing humanitarianassistance and coordinating international aid donations. Washington's position on limited U.N.participation in Iraq won out in the immediate aftermath of the war, as seen in a Security Councilresolution agreed to in May 2003. Although France and Germany approved this resolution, theyannounced that they would not contribute troops or significant bilateral financial aid in light of therestricted U.N. role; they, like several other smaller European nations, were reluctant to become"occupying" powers in Iraq. (15) In September 2003, the United States began seeking to increase international participationin stabilizing Iraq amid ongoing insurgency attacks against U.S. and coalition forces. In October2003, the Administration secured another Security Council resolution calling on the internationalcommunity to help rebuild Iraq, and giving the United Nations a marginally larger role in forginga new Iraqi government; however, it left the United States in overall control of Iraq's transition. Asa result, the resolution fell short of the expectations of many, including France and Germany, andfailed to overcome their resistance to sending troops to Iraq. In June 2004, Washington gained unanimous U.N. Security Council approval of a newresolution endorsing the transfer of Iraqi sovereignty and giving the United Nations a key role insupporting Iraq's ongoing political transition. European governments and EU leaders welcomed thereturn of sovereignty to Iraq and the enhanced U.N. role, but substantial additional European militaryand financial contributions to stabilizing and rebuilding Iraq have remained elusive. France andGermany, among others, continued to object to what they perceived as an ongoing U.S.decision-making monopoly on Iraq policy, especially with regard to the conduct of security policy. They were also resistant to putting their troops in danger to bolster a military campaign that they didnot approve, and which, they believe, has led to an increase in terrorism. Some European countries were also initially hesitant to support a NATO role in Iraq. At theJune 2004 NATO summit in Istanbul, European allies agreed to a request from the new Iraqigovernment for NATO help in training Iraqi security forces. In December 2004, NATO foreignministers decided to expand the alliance's training personnel in Baghdad from 60 to 300 officers,including both trainers and support staff. Six European allies (France, Germany, Belgium, Greece,Spain, and Luxembourg) refused to allow their nationals on NATO's international staff to take partin this mission; they reportedly feared that the training mission could evolve eventually into a combatoperation. During President Bush's February 2005 trip to Europe, however, NATO announced that ithad gained commitments from all 26 allies to contribute to NATO's training of Iraqi security forces,either in or outside of Iraq, or through financial contributions to one of three NATO trust funds forIraq (totaling more that $4.5 million). NATO believes that these commitments will enable it toprovide training eventually to about 1,500 Iraqi officers per year, both inside and outside of Iraq. There are currently 165 NATO personnel in Iraq. In September 2005, NATO opened a Joint StaffCollege outside of Baghdad to provide management and leadership training for Iraqi militaryofficials. (16) Many observers view the NATO agreement reached in February 2005 -- although stillrelatively modest -- as extremely positive, demonstrating a new alliance unity of purpose and actionin Iraq that will help improve U.S.-European relations. Some observers had hoped that the January2005 Iraqi elections for an interim government would lead other countries, such as France andGermany, to engage more robustly in rebuilding and stabilizing Iraq. However, significant additionalassistance has not been forthcoming. France initially resisted taking part under a NATO umbrellato training Iraqi security forces, although it eventually relented and agreed to contribute financiallyand to provide one French military officer, who will help support the training mission at NATO'sheadquarters in Belgium. Germany points out that it is training Iraqi police and military forcesoutside of Iraq, and France has made similar offers to train Iraqi security forces. At the same time, financial constraints on already tight defense budgets and public pressureto withdraw troops in the face of continued violence in Iraq are leading several European countriesto draw down their forces in the U.S.-led multinational coalition. The new Spanish government,elected shortly after the March 11, 2004 terrorist bombings in Madrid, withdrew its 1,300 troopsfrom Iraq in May 2004 and has no plans to re-commit forces. The Hungarian Parliament rejecteda government proposal to extend the mission of its 300 troops beyond the end of 2004; Polandreduced its contingent of 2,400 troops to 1,700 in early 2005; and the Netherlands withdrew its 1,400soldiers in March 2005. Bulgaria has announced that its 400 troops will leave Iraq after theDecember 15, 2005 parliamentary elections for a permanent Iraqi government, and press reportsindicate that the United Kingdom and Italy may consider troop reductions over the next year. (17) The Bush Administration has been seeking to maintain existing international commitmentsin Iraq. Media reports suggest that U.S. officials have been presenting ways for allies with forcesin Iraq to shift their troop commitments to new training and reconstruction-related missions as Iraqiforces become more able to take over security responsibilities. Currently, 13 European countries thatbelong to NATO and/or the EU are contributing either troops or police to Iraq, as are Albania andMacedonia, which harbor NATO and EU membership aspirations. The size of many of thesecontingents, however, is extremely small, with some numbering only a few dozen personnel. (18) EU officials say they are determined to help rebuild Iraq. In July 2005, the EU launched aone-year mission to train Iraqi police, administrators, and judges, primarily outside of Iraq at presentbecause of security concerns. The EU will establish a liaison office in Baghdad, however, and mayconsider future training in Iraq if security conditions improve. In addition, the EU will help financean international protection force for U.N. personnel and facilities in Iraq, but EU member states areunlikely to provide troops for this force. (19) EU leaders also point out that the EU and individual European governments are contributingfinancially to Iraq's reconstruction. At the Madrid donors conference for Iraq in October 2003, theEU and its member states pledged a combined total of $1.25 billion for Iraqi reconstruction,including roughly $235 million (for 2004) from the EU community budget. (20) Bilateral reconstructionassistance offered at the Madrid conference included contributions from some EU members thatopposed the war, such as Belgium and Sweden. Separately, Germany has contributed roughly $155million, mostly for humanitarian assistance, since the outbreak of the Iraq war in March 2003, andFrance has provided about $11 million in humanitarian aid. (21) To date, the EU has provided over $600 million in reconstruction and humanitarianassistance to Iraq from its community budget since 2003 and has proposed about $240 million morefor Iraq in 2006. The EU has also provided about $96 million to support Iraqi elections and itsreferendum on a new constitution in 2005. As a result, the EU claims that it is the majorinternational donor of election assistance to Iraq and a key supporter of its current politicaltransformation. (22) In December 2005, the EU announced that it hopes to open negotiations for a trade agreementwith Iraq in 2006 and to establish a permanent delegation office in Baghdad. EU officials say thatthe trade deal aims to stimulate reforms and economic development in Iraq. (23) Several Europeancountries, including France and Germany, have also agreed to help reduce Iraq's foreign debt. TheBush Administration originally called for nearly complete debt forgiveness for Iraq, but France andGermany favored forgiving a lower level of Iraqi debt. They contended that Iraqi debt forgivenessshould be conditioned on the growth of the Iraqi economy; in their view, Iraq has a relativelyfavorable economic outlook, given its large petroleum reserves, in comparison with poorer,debt-ridden, and more needy African countries. In November 2004, France accepted a U.S.-Germancompromise negotiated in the context of the Paris Club to write off 80% of Iraq's foreign debt. (24) Numerous commentators observe that European opposition to the war with Iraq alsostemmed from frustrations with U.S. policy toward the Israeli-Palestinian stalemate. Although EUmembers were divided over Iraq, they have managed to forge a more common position on theIsraeli-Palestinian conflict; many view this EU position as being broadly more sympathetic to thePalestinians. Others assert that the EU posture is balanced between the two sides of the conflict, inpart because some differences among members remain. Successive German governments, forexample, have maintained that they have a special obligation to Israel and have been keen to ensurethat EU policies also promote Israeli security. The EU backs Israel's right to exist and condemnsterrorist acts against Israel. Europeans, however, generally view resolving the Israeli-Palestinian conflict as key toreshaping the Middle East, fostering durable stability, and decreasing the threats posed to both theUnited States and Europe by terrorism and Islamic militancy. The EU's first-ever security strategy,released in December 2003, cites resolving the Israeli-Palestinian conflict as a top EU priority. Many European officials charge that Washington has focused too much on Iraq and has anunbalanced, excessively pro-Israeli policy. In this view, the United States is alienating the broaderMuslim world, which perceives a U.S. double standard at work. European leaders have clamoredfor the United States to "do more" to get Israeli-Palestinian negotiations back on track, preciselybecause they recognize that only sustained U.S. engagement at the highest levels will force theparties to the conflict, especially Israel, back to the negotiating table. (26) European governmentsand EU officials hope that the death of Palestinian leader Yasser Arafat in November 2004 willcreate a new opportunity to resolve the Israeli-Palestinian conflict. Some U.S. observers suggest that Europe's more pro-Palestinian position is motivated by anunderlying anti-Semitism. In support of this view, they point to a spate of attacks on synagogues andother Jewish institutions in Europe, a strong European media bias against Israel, and recentstatements by some European officials criticizing Israel. In January 2004, two Jewish leaderscharged the European Commission with fueling anti-Semitism with its clumsy handling of tworeports. These leaders objected to the Commission's release in November 2003 of an opinion poll,which showed that 59% of the European public considered Israel a threat to world peace, on groundsthat it was dangerously inflammatory. At the same time, they also criticized the Commission's initialdecision to shelve a 2002 study from the EU's racism monitoring center, claiming that the EU fearedit would incite domestic European Muslim populations with its findings that most anti-Semiticincidents in Europe were carried out by disenfranchised Muslim youth. EU officials contend thatthe report was originally withheld because it was poorly written and lacking in empirical evidence. Following its leak to the press, the EU made public this draft report in December 2003. In March 2004, the EU monitoring center released a new study on anti-Semitism in Europe,which it claims is more exhaustive and comprehensive than the original draft study. The March2004 report identified perpetrators of anti-Semitic attacks in Europe as both young, disaffected whiteEuropeans as well as Muslim youth of North African or Asian origin. Some Jewish leaders criticizedthis new study, asserting that it was "full of contradictions" and sought to downplay the extent towhich anti-Semitic attacks in Europe were carried out by Muslim perpetrators. (27) Europeans stress that while these anti-Semitic incidents are troubling, they do not representa broad, resurgent anti-Semitism in Europe. They note that such acts are carried out by individuals,are not state-sponsored, are punished under European law, and are harshly condemned by Europeanpolitical and civic leaders. Many European governments have sought recently to tighten their hatecrime laws and enhance education and prevention programs. In February 2004, EU officials pledgedto take steps to combat anti-Semitism vigorously at a high-level conference on anti-Semitismsponsored by the European Commission. Europeans also stress that criticism of Israel does notequate to anti-Semitism; they admit that such criticism in the European media and political classeshas been fierce recently, but they suggest this reflects the depth of European anger toward IsraeliPrime Minister Ariel Sharon and his policies. Many European leaders deplore Sharon's tacticstoward the Palestinians, believing them to be heavy-handed and counterproductive. They also objectto his leadership of Israel in light of what they consider his history of human rights violations andwar crimes in Lebanon. (28) Historically, a degree of difference has always existed between U.S. and Europeanapproaches to the Israeli-Palestinian conflict. Europeans have traditionally favored a parallelapproach that applies pressure to all sides. This approach also places equal emphasis on the security,political, and economic development agendas that Europeans believe are all ultimately necessary fora lasting peace. European officials stress that the only way to guarantee Israel's security is to createa viable Palestinian state. This is also why the EU has sought to support the Palestinian Authority(PA) financially and to provide humanitarian, development, and reconstruction assistance. The EU is the largest donor of foreign assistance to the Palestinians. The EU and its memberstates together provide nearly $600 million annually to the Palestinians to promote stability,economic development, and reform. Between 2002 and 2005, EU community aid to the Palestinians-- including donations to the World Bank and U.N. agencies -- was roughly $300 million peryear. (29) Officialsmaintain that there is no evidence that any EU money has been diverted for terrorist purposes, andinsist that checks are in place to ensure that EU funds do not sponsor terrorism. They acknowledgethe fungibility of resources, but believe this is best countered by continuing to press the PA to reformits financial management system. (30) In contrast, the United States has more consistently shared the Israeli view that seriousnegotiations can only take place when there is a clear Palestinian commitment to peace, signified bythe end of violence and terrorist activity. The degree to which different U.S. administrations haverigidly adhered to this more sequential approach has varied over the years, but Europeans believethat September 11 reinforced U.S. tendencies to support Israeli positions on the timing of potentialnegotiations because they hardened the Bush Administration's view of the Palestinians. The terroristattacks also allowed Prime Minister Sharon to position himself as a natural U.S. ally in the fightagainst terrorism. Many Europeans believe the Bush Administration has been too easily persuadedby Sharon and too beholden to Israel for domestic political reasons. They point out that theAdministration draws considerable political support from evangelical Christians, who stronglysupport the state of Israel, and has been eager to win over traditionally Democratic Jewishvoters. (31) Despite the difficulties, optimists assert that common ground exists between U.S. andEuropean policies toward the Israeli-Palestinian conflict. EU leaders have been encouraged byPresident Bush's support for a Palestinian state, long advocated by Europeans. Previous U.S.administrations had shied away from endorsing a two-state solution, maintaining that it was for theparties themselves to determine the outcome. EU officials have also welcomed the evolution of thediplomatic "Quartet" of the EU, Russia, the United Nations, and the United States, and its "roadmap"to a negotiated settlement. European leaders did not support Washington's call to replace the lateYasser Arafat as the head of the PA; they viewed Arafat as the democratically-elected Palestinianleader and feared that any viable alternative would only come from more extremist factions. However, they largely agreed with the U.S. assessment that the PA must be reformed. They werepleased with the PA's decision in the spring of 2003 to create a new prime minister position, and theysupport stronger Palestinian institutions such as the legislature and judiciary, as well as measures toguard against corruption and ensure transparency. (32) The EU has welcomed the U.S. Middle East Partnership Initiative (MEPI), which wasunveiled in December 2002 and designed to promote political, economic, and educationaldevelopment throughout the Middle East. Many Europeans viewed the MEPI as complementingthe EU's region-wide development program (the Euro-Mediterranean Partnership) in place since1995 and saw the MEPI as representing a heightened U.S. awareness of the need for a broaderapproach to address Mideast instability. (33) In May 2003, the Bush Administration proposed creating aU.S.-Middle East free trade area by 2013 to further economic development and liberalization in theregion, and promote peace via increased prosperity. This mirrors EU plans to create aEuro-Mediterranean free trade zone by 2010. European officials were also encouraged by initial U.S. steps to revive the peace process inthe immediate aftermath of the war with Iraq. In late April 2003, the Bush Administration madepublic the Quartet's roadmap, following the swearing-in of a new PA Prime Minister. The EU hadbeen pressing for its release since it was finalized by the Quartet in December 2002. In May 2003,the Bush Administration succeeded in swaying Sharon to endorse the roadmap, albeit withreservations. In June 2003, President Bush visited the region and met with Prime Minister Sharonand then-PA Prime Minister Mahmoud Abbas. European officials viewed positively PresidentBush's decisions to set up a U.S. diplomatic team in Jerusalem to monitor implementation of theroadmap, and to designate then-National Security Adviser Condoleezza Rice as his personalrepresentative on Israeli-Palestinian affairs. Since then, however, many Europeans have become frustrated by the lack of progress on theroadmap amid ongoing violence, and they claim that the Bush Administration has not done enoughto cajole the Sharon government into making more concessions for peace. Although theAdministration has criticized Israel for constructing a security fence and at times raised concernsabout some Israeli anti-terrorist tactics such as territorial closures and home demolitions, critics sayWashington has not devoted the sustained attention needed. They stress that the Administration stillremains wedded to the Israeli view that Palestinian terrorism must end before serious steps towardimplementing the roadmap can be taken. They note, for example, that the U.S. monitoring team inJerusalem kept a very low profile (and has largely been withdrawn); as a result, it failed to providethe necessary level of public scrutiny that was supposed to have served as an incentive for both sidesof the conflict to meet their respective obligations under the roadmap. (34) U.S. support for the Sharon government's unilateral "disengagement plan" for the Gaza Stripwas also contentious for European governments and the EU. Although the EU has welcomed Israel'sAugust 2005 withdrawal from the Gaza Strip, some European policymakers remain concerned thatIsrael views its disengagement from Gaza as an alternative to the road map process. They worry thatIsrael's disengagement from Gaza could lead to the creation of a de facto Palestinian state on far lessterritory than that envisaged under the roadmap process. Many Europeans were dismayed by whatthey viewed as a shift in U.S. policy in April 2004, when President Bush appeared to implicitlyendorse Israel's claim to parts of the West Bank seized in the 1967 Middle East war and to limit thePalestinians' right of return to Israel. The EU maintains that it will not recognize any changes to thepre-1967 borders unless such changes are negotiated between the parties. The Bush Administrationcontends that its endorsement of the Sharon plan was intended to jumpstart the stalled peace processand, like the EU, asserts that all final status issues, including the return of Palestinian refugees, muststill be resolved through negotiations between the parties to the conflict. (35) European governments reportedly played a key role in ensuring that the June 2004 G8Summit initiative on the Broader Middle East and North Africa took into account theIsraeli-Palestinian conflict as part of any push to encourage political, economic, and social reformsin the region. European officials criticized initial U.S. versions of this proposal, originally namedthe Greater Middle East Initiative, for failing to tackle the Israeli-Palestinian conflict. TheEuropeans asserted that any attempt to promote reform in the Middle East would be unsuccessfulif not accompanied by simultaneous efforts to resolve this core problem. They also worried that theUnited States might promote the new initiative as an alternative to the stalled Israeli-Palestinianpeace process. While U.S. and European officials overcame their differences and reached acompromise on the Broader Middle East initiative, critics assert that it has little practical significancefor the deadlocked peace process. (36) Shortly after his re-election in November 2004, President Bush asserted in a news conferencewith UK Prime Minister Tony Blair that he intended to "spend the capital of the United States" tocreate a free and democratic Palestinian state during his next term. Many Europeans, however, arguethat the Administration has been slow to seize the opportunity offered by Arafat's death to push fora quick return to Israeli-Palestinian negotiations. U.S. officials appear to favor a more incrementalapproach. They stress that progress in the peace process will depend largely on Palestinian effortsto democratize, reform, and stop Palestinian terrorism. Washington and European capitals welcomed the January 2005 election of Mahmoud Abbas,who is viewed as committed to ending Palestinian terrorism, as the new President of the PalestinianAuthority. U.S. officials believed that Abbas would need time to institute reforms and establishlegitimacy in the eyes of the Palestinian public before engaging in comprehensive final statusnegotiations with Israel. European leaders agree that developing a viable Palestinian state is anecessity, but have continued to urge the United States to take a more active role in resolving theconflict, partly by putting greater pressure on Israel to take steps toward peace also. (37) Some Europeans view U.S. actions since the start of the second Bush Administration asindications that Washington is working more robustly to promote peace between Israel and thePalestinians. European officials welcomed U.S. Secretary of State Rice's trip to the region in earlyFebruary 2005 and her appointment of a U.S. coordinator to oversee Palestinian security reforms. In May 2005, the United States expanded the U.S. coordinator's role to include mediation betweenthe two sides ahead of Israel's departure from Gaza. Also, the EU was pleased with Washington'ssupport for naming a Quartet special envoy in April 2005 to oversee the political and economicaspects of the Israeli withdrawal from Gaza. Most recently, many European policymakers stress that Secretary Rice's direct involvementin brokering a deal between Israel and the Palestinians on security controls for Gaza border crossingsin November 2005 has had an enormous positive impact on European perceptions of the UnitedStates. U.S. and European officials say the agreement will help end Gaza's isolation, promoteeconomic development, and continue to ensure Israeli security. As part of this accord, the EU isassisting with monitoring the Rafah border crossing point between Gaza and Egypt. About 70 EUmonitors are being deployed to Rafah to provide expert advice and training to Palestinian police andcustoms officers, as well as to allay Israeli concerns that militant leaders or weapons may slip intoGaza through Rafah. (38) In January 2006, the EU also plans to establish a small Palestinian police training andadvisory mission and will send a mission to monitor the upcoming Palestinian legislative electionsthat same month. Although Hamas is listed on the EU's proscribed terrorist list, the EU hasannounced that the monitoring mission will be permitted to have limited contact with Hamascandidates on technical electoral matters. Like the EU, the Bush Administration has called onHamas and all other Palestinian factions to renounce violence but has not backed Israel's call toexclude Hamas from the elections, asserting that the elections are "a Palestinian process." (39) Observers note that these EU missions, especially the one at Rafah, are also an opportunityfor the EU to demonstrate that the Union can be a serious and responsible political player in theregion. At the same time, many in the EU maintain that ultimately, progress toward a long-termpeace is impossible without U.S. leadership. Some Europeans may remain disappointed with thedegree of U.S. engagement. They assert that the Bush Administration still favors a low-key approachto its role in promoting peace in the Middle East. Most analysts believe that further progress in thepeace process will have to await the outcome of Israel's parliamentary elections in March 2006. (40) U.S.-European relations over Iran have experienced a number of ups and downs over the lastdecade. Both sides of the Atlantic share similar goals with respect to Iran: encouraging reforms anda more open society less hostile to Western interests, ending Iranian sponsorship of terrorism againstIsrael, and combating Tehran's efforts to acquire WMD. However, policies have often differedsharply. The views of EU members on Iran have tracked fairly closely, thereby producing broadagreement on a common EU approach inclined toward "engagement." In contrast, the United Stateshas traditionally favored isolation and containment. U.S.-EU frictions over Iran peaked in 1996 withthe passage of the U.S. Iran-Libya Sanctions Act (ILSA), which seeks to impose sanctions on foreignfirms that invest in Iran's energy sector. EU officials oppose what they view as ILSA'sextraterritorial measures and contend that ILSA breaches international trade rules. Tensions eased,however, as U.S. policy began to edge closer toward engagement following the 1997 election ofrelative moderate Mohammad Khatemi as Iran's president, and the conclusion of a U.S.-EUagreement to try to avoid a trade dispute over ILSA. In 2002 and early 2003, U.S.-EU differences on Iran appeared to widen again. In January2002, President Bush included Iran as part of an "axis of evil" in his State of the Union messagefollowing allegations of an Iranian arms shipment supposedly destined for the West Bank and GazaStrip, and revelations of two previous undeclared Iranian nuclear facilities. Iran insists that itsnuclear program is for peaceful, energy-related purposes, but Washington increasingly believes thatIranian nuclear activities are also aimed at producing nuclear weapons. At the same time, the BushAdministration had been growing disenchanted with the prospects for internal Iranian politicalreform. In July 2002, President Bush issued a statement supporting Iranians demonstrating forreform and democracy, which was widely interpreted as a shift in U.S. policy; experts believed itsignaled that Washington had concluded that Khatemi and his reformist faction would not be ableto deliver political change and that engaging with the Khatemi regime would be fruitless. AfterSaddam Hussein was ousted from power in Iraq in 2003, some U.S. officials also began suspectingIran of fomenting unrest among Iraq's long-repressed Shiites. (42) In contrast, European leaders continued to hold out hope for the reformers within Khatemi'sgovernment, and maintained that "the glass was half full." They stressed, for example, what theyviewed as a positive Iranian role in the campaign against the Taliban, Khatemi's success in distancingthe government from the fatwa against British writer Salman Rushdie, and Iran's efforts to combatdrug smuggling. They largely viewed the alleged arms shipment to the Palestinians and Iraniansupport for terrorist groups as the last gasps of a hardline Islamic foreign policy managed by clericalfactions. These optimists also argued that Iran was not seeking nuclear weapons to use against Israelor the West, but rather to burnish its image as a regional power, and that Tehran's weapons programcould still be curtailed. (43) The EU believed that its "conditional engagement" policy would help bolster the reformersin Khatemi's government. In December 2002, the EU launched negotiations on a trade andcooperation agreement with Iran, and a separate but linked political accord promoting EU-Iraniandialogue on human rights, non-proliferation, and counterterrorism. Although some observersquestioned how tight the linkage between these economic and political strands of the EU's strategywould be, EU officials insisted that there would be no progress on the trade pact without equal andparallel progress on the political accord. Europeans rejected U.S. criticisms that they were puttingcommercial interests ahead of security concerns. As one EU official put it, "we're not doing this forpistachios." (44) EU-Iranian trade pact negotiations were effectively suspended in the summer of 2003,however, as the EU grew increasingly frustrated with Iran's slow pace on political reforms and itsongoing human rights violations. Heightened EU worries about the nature of Iran's nuclear programand its lack of compliance with International Atomic Energy Agency (IAEA) safeguards alsocontributed to the stalemate on the trade pact. EU members had high hopes for an October 2003 dealbrokered with Iran by the UK, France, and Germany (the "EU3"); Iran agreed to accept intrusiveinternational inspections of its nuclear facilities, and to suspend production of enriched uranium atleast temporarily, in exchange for promises of future European exports of nuclear energy technology. But this deal soon faltered. The Europeans viewed Iran as dragging its feet in complying with IAEArequirements and were angered by Iran's decision in July 2004 to resume building nuclearcentrifuges. Since then, some observers argue that EU members have taken a harder line on Iran's nuclearactivities, backing several resolutions with the United States rebuking Iran for its lack of cooperationwith the IAEA. A number of analysts suggest that the EU's tougher stance on Iran stems from itsnew WMD policy, agreed in June 2003, that seeks to strengthen the IAEA and calls for exertingconsiderable political and economic pressure on potential proliferators. At the same time, manypoint out that the United States has also demonstrated a new willingness to compromise with itsEuropean partners on Iran. Although Washington has continued to push the IAEA to threaten Iranwith U.N. sanctions, U.S. officials have not actively opposed the more moderate, incentive-basedapproach advocated by European governments. Many pundits speculate that both Europe andWashington have been eager to avoid another large diplomatic row so soon after Iraq. (45) Nevertheless, Washington remained cautious about Iran's intentions, and some U.S.policymakers worried that European leaders were being too lenient. In September 2004, Washingtonadvocated another IAEA resolution that would have set October 31, 2004, as a firm deadline for Iranto suspend all enrichment activities and to dispel remaining doubts about the nature of its nuclearprogram. The United States also wanted a clear "trigger mechanism" that would automatically referIran to the U.N. Security Council -- where it could face trade sanctions -- if it did not comply by thedeadline. Washington backed down on these demands, however, because of a lack of support fromEuropean and non-European IAEA members. European governments argued that the threat ofsanctions would reduce their negotiating leverage and harden Iran's position about its need fornuclear weapons. In November 2004, the UK, France, and Germany brokered a new deal with Iran aimed atending activities that could lead to nuclear weapons production in exchange for promises of civiliannuclear technology and political and trade incentives. Iran claims it agreed to voluntarily andtemporarily suspend its uranium enrichment work as an act of good faith. In mid-December 2004,Iran and the EU3 opened negotiations on a long-term agreement on nuclear, economic, and securitycooperation as part of the deal. The EU also resumed its negotiations with Iran on a trade andcooperation agreement in January 2005 as part of this process. EU3 officials hoped that they couldconvince Iran to make a strategic decision to forego acquiring nuclear weapons in return for trade,aid, and security rewards. Washington remained skeptical about the chances of success of the EU3 approach. U.S.policymakers believed that Iran was using the negotiations process offered by the EU3 to play fortime and likely continuing its work on a covert nuclear weapons program. Meanwhile, Europeansurged greater U.S. engagement with Iran, believing that the absence of the United States from thenegotiating table was limiting their ability to deliver on some of the most ambitious rewardsdiscussed with the Iranians, such as supporting Iranian membership in the World Trade Organization(WTO). Washington had repeatedly blocked Iranian attempts in the WTO to open accessiontalks. (46) European governments continued to promote U.S. engagement with Iran in order to bolsterthe EU3's negotiating position. In March 2005, the Bush Administration agreed to offer limitedeconomic incentives if Iran agreed to cooperate with the EU3 on nuclear matters. The incentivesincluded facilitating Iranian access to spare airplane parts for its aging commercial fleet and droppingobjections to beginning WTO accession negotiations with Iran, which Washington did in May 2005. In return, the EU3 pledged to pursue punitive U.N. measures if negotiations with Iran failed. TheBush Administration stressed that the incentives offered to Iran were not a reward for the Iraniansbut rather were meant to demonstrate the U.S. commitment to improving relations with Europe andU.S. backing for the EU3's efforts to curb Iranian nuclear ambitions. (47) The EU3's discussions with Iran on a permanent nuclear agreement, however, began to breakdown ahead of Iran's June 2005 elections, which resulted in the election of hardliner MahmoudAhmadinejad as president. The EU3's negotiations with Iran have been effectively stalled sinceAugust 2005, following Iran's resumption of uranium conversion, an early stage in the nuclear fuelcycle. In accordance with their March 2005 pledge, the EU3 have been working with the UnitedStates on an International Atomic Energy Agency (IAEA) resolution that would refer Iran to the U.N.Security Council. This resolution, however, has run into opposition from many IAEA members,including Russia, China, and India. In September 2005, the United States and the EU3 succeededin convincing a slim majority of the IAEA's 35 board member countries to pass a resolution findingIran in non-compliance with the Non-Proliferation Treaty and to refer Iran to the U.N. SecurityCouncil, but did not set a timeline or firm date for such a referral. In November 2005, the UnitedStates and EU3 decided against pushing for another IAEA vote to refer Iran to the Security Council,given a lack of support within the IAEA for doing so at that time. Instead, the United States and the EU3 have thrown support behind a Russian proposal inwhich Iranian uranium would be enriched at a facility in Russia and then returned to Iran for civilianuse. Iran has rejected this offer, insisting that it has the right to perform uranium enrichment insideIran. On November 27, 2005, the EU3 offered to hold an exploratory meeting with Iran to see ifthere was "enough common basis" to restart negotiations with Iran on its nuclear program and theRussian compromise proposal. The EU3 insists that it will not resume formal negotiations with Iranuntil Iran re-suspends its uranium conversion work. (48) Washington hopes that Iran will return to the negotiating table with the EU3 but has alsofloated the idea publicly that European and other concerned countries consider curbing their tradeand investment relations with Iran if talks fail to convince Iran to abandon its nuclear ambitions. Some observers suggest that President Ahmadinejad's public statements calling the Holocaust a"myth" and for Israel to be "wiped off" the map may make any EU3-Iranian negotiations over nuclearmatters more difficult and strengthen European resolve to push for a U.N. Security Council referralor other diplomatic or economic sanctions on Iran. At the same time, many Europeans remainconcerned that Washington may ultimately conclude that diplomacy has failed to address the Iraniannuclear threat and that a military option should be considered against Iranian nuclear sites. (49) As with Iran, European policies toward Syria have traditionally been more inclined towardengagement than containment or isolation. Several European countries have long-standing, historicrelationships with Syria, and cooperation between the EU (as an entity) and Syria dates back to thelate 1970s. The EU is a major trading partner for Syria. Syria has participated in the EU'sEuro-Mediterranean Partnership program since its start in 1995. The development of closerEU-Syrian relations has been stymied by EU concerns about the seriousness of Syria's commitmentto undertake political and economic reforms and protect human rights. In October 2004, Syria andthe EU concluded negotiations on a long-delayed Association Agreement, which sets out a newframework for relations in the context of the Euro-Mediterranean Partnership. The Agreementcovers trade and foreign aid, includes provisions on respect for human rights and democraticprinciples, and seeks to promote Syrian cooperation in countering terrorism and the proliferation ofweapons of mass destruction. The Agreement has not yet been ratified, however, by the EU. In contrast, U.S.-Syrian relations have been largely frosty for decades, and Washington hasimposed a range of political and economic sanctions on Syria. In the immediate aftermath of the warwith Iraq, some Europeans were alarmed by U.S. warnings to Syria over its alleged chemicalweapons program and its support for terrorist groups (including radical Palestinian factions and themilitant Lebanese Shi'ite Muslim group Hizballah) and U.S. accusations that Syria was not doingenough to stop the flow of Islamic militants and former Iraqi Baathists into Iraq. Somecommentators worried that U.S.-European differences over Syria could become another difficultflashpoint in the transatlantic relationship. The EU and some European governments, however, appear to have hardened their views ofSyria recently. The conclusion of the Association Agreement was delayed for almost a year becauseof Syria's reluctance to sign up to the WMD clause. And France for the past several years has beenincreasingly vocal about its concerns regarding Syria's 14,000-strong military presence in Lebanonand its heavy involvement in Lebanese politics. France, the former colonial power in Lebanon, hascome to view Syria's dominance of Lebanese politics as a de-stabilizing influence and has beenfrustrated by the lack of internal political reform within Syria. In early September 2004, France andthe United States co-sponsored a U.N. Security Council resolution calling on all foreign forces inLebanon to withdraw and for an end to foreign influence in Lebanon's political system, although itdid not mention Syria by name. The EU in December 2004 essentially endorsed this U.N. resolution,which also called for the disbandment of armed groups in Lebanon, such as Hizballah, which hasties to Syria. The assassination of former Lebanese Prime Minister Rafik Hariri and 22 others in February2005 helped galvanize U.S.-European cooperative efforts to pressure Syria to withdraw all itsmilitary and intelligence personnel from Lebanon. Many suspect Syrian involvement in theassassination, although Syria has denied these allegations. Washington and Paris led the effort toencourage Syria's withdrawal from Lebanon. The EU echoed these demands. The EuropeanParliament warned that Syria's failure to comply with the September 2004 U.N. resolution couldendanger the ratification of the EU-Syrian Association Agreement. The Agreement's ratificationappears to be on hold pending the outcome of the U.N. investigation into the death of Hariri andSyria's alleged involvement. (51) In late March 2005, Syria announced it would withdraw all of its military and intelligencepersonnel from Lebanon; Syria claimed these withdrawals were completed by April 26, 2005. TheUnited Nations has since verified that there is no significant Syrian military or intelligence presenceremaining in Lebanon. Many in the United States and Europe, however, remain concerned that Syriais not fully cooperating with the U.N. investigation into the Hariri assassination and that Syrianofficials maintain undue influence through their extensive contacts in the Lebanese bureaucracy andsecurity services. U.S. and European leaders have also expressed alarm at the series of violentattacks on several prominent anti-Syrian political and media leaders in the months following Hariri'sdeath. On October 31, 2005, the United Nations Security Council unanimously passed a resolution-- co-sponsored by the United States, Britain, and France -- calling on Syria to cooperate fully withthe U.N. investigation into the Hariri killing or face unspecified "further action." The resolution'ssponsors decided against pressing for a threat of clear economic sanctions at that time to gain thesupport of Russia, China, and other Security Council members and maintain a united internationalfront. On December 15, 2005, the U.N. Security Council passed another resolution citing Syria forits continued lack of full cooperation with U.N. investigators, extending for another six months theU.N. probe and authorizing U.N. officials to provide technical assistance to Lebanese authoritiesinvestigating other political killings in which some believe Syria may have been involved. (52) Some analysts question, however, how sustainable U.S.-European cooperation on Syria willbe in the longer term. The United States may be more inclined than France or other EU memberstates to press for punitive measures against Syria sooner rather than later. Another keyU.S.-European division remains the EU's reluctance to add Hizballah -- which is based in Lebanonbut backed by Syria and Iran -- to the EU's common terrorist list. While Washington considersHizballah a terrorist group that supports violence against Israel, some EU members have longresisted U.S. and Israeli entreaties to add Hizballah to the EU's blacklist on grounds that it alsoprovides needed social services and is considered by many Lebanese as a legitimate political force(members of Hizballah have been elected to Lebanon's parliament). France, among other EUmembers, believes that adding Hizballah to the EU's common terrorist list would becounterproductive and could intensify Lebanon's political turbulence. (53) Since September 11, 2001, U.S. and European officials have sought to present a united frontagainst terrorism. Most European governments have cooperated closely with U.S. law enforcementauthorities in tracking down terrorist suspects and freezing financial assets. Many have tightenedtheir laws against terrorism and sought to improve their border control mechanisms. Moreover, theSeptember 11 attacks have given new momentum to EU initiatives to boost police and judicialcooperation both among member states and with the United States to better combat terrorism andother cross-border crimes. The March 11, 2004, terrorist bombings in Madrid, Spain furtherenergized EU law enforcement efforts against terrorism. The terrorist attacks on London's masstransport system in July 2005 have also prompted additional EU efforts to bolster law enforcementand intelligence cooperation and have focused increased European attention on the need to combatIslamist recruitment and radicalization in Europe. (54) Some differences in U.S. and European approaches to counterterrorism exist and havebecome more evident as Washington has broadened the war against terrorism beyond Al Qaeda andAfghanistan. Most EU members continue to view terrorism primarily as an issue for lawenforcement and political action rather than a problem to be solved by military means. ManyEuropean officials and governments are uncomfortable with the Bush Administration's tendency toequate the war in Iraq with the war on terrorism. The past experiences of several European countries in countering domestic terrorists, suchas the Irish Republican Army in the UK or the Basque separatist group ETA in Spain, also colorperceptions. Many Europeans have drawn the lesson that relying on the use of force does not workand only serves to alienate "hearts and minds." Europeans are increasingly worried that the UnitedStates is losing the battle for Muslim "hearts and minds" not only because of the war with Iraq andWashington's traditional support for Israel but also because of U.S. decisions that some chargeviolate human rights, such as detaining suspected Al Qaeda terrorists at Guantánamo Bay. Europeans were deeply dismayed by the Abu Ghraib prison scandal in Iraq; critics charge that it hasseriously damaged U.S. credibility in both the Middle East and in Europe. The 9/11 Commissionrecognized that allegations of U.S. prisoner abuse "make it harder to build the diplomatic, political,and military alliances" that the United States needs in order to combat terrorism worldwide. The EUand judicial officials and parliamentarians from several EU member states have also expressedconcerns about a November 2005 Washington Post news report of alleged "secret" CIA prisons forterrorist suspects in some eastern European countries and the possible use of some European airportsas transit points for U.S. flights transporting abducted terrorist prisoners. (55) Many Europeans believe that although good law enforcement and intelligence capabilitiesare essential, efforts against terrorism will only be successful, ultimately, if equal attention is paidto addressing the political, social, and economic disparities that often help foster terrorist violence. European leaders were initially skeptical of the U.S.-proposed Broader Middle East initiative,however, because they worried that it sought to democratize the Middle East and impose Westernvalues. Although Europeans would agree that a more democratic Middle East would help promotepeace and stability, many doubt that it can be dictated from the outside and are uncomfortable withattempts to do so because to them, it smacks of colonialism and a religious fervor. Some Europeansalso worry that introducing democracy into Arab countries could lead to anti-Western factions ormilitant Islamists winning elections. Thus, some Europeans suggest a more nuanced,country-by-country approach to the region that would seek to identify reformers and work with themto try to effect change and stem terrorism. (56) The compromise ultimately reached by the United States with key European governmentsand others on the Broader Middle East initiative emphasizes regional partnerships and seeks toencourage political reform and social and economic development from within Middle Easternsocieties. The 9/11 Commission welcomed this initiative as a potential starting point for a dialogueabout reform between the Muslim world and the West. Skeptics doubt, however, the extent to whichthe new initiative will truly provide a vehicle for U.S.-European cooperation in the region. Theyassert that each side of the Atlantic will likely continue to engage in the region through its ownexisting policy instruments, such as the U.S. Middle East Partnership Initiative and the EU'sEuro-Mediterranean Partnership. (57) Provisions in the Intelligence Reform and Terrorism PreventionAct of 2004 ( P.L. 108-458 ) seek to promote Middle East development and reform and improveinternational collaboration against terrorism. Another point of U.S.-EU friction centers on definitional differences of what constitutes aterrorist. Several commentators suggest that the EU has been slower to name several organizationsto its common terrorist list because some members view certain groups as more revolutionary thanterrorist in nature. The EU has also been more inclined to distinguish between the political andmilitary wings of the same organization, such as Hamas; although the EU terrorist list includedHamas' military wing since its first iteration in December 2001, the political wing was not addeduntil September 2003. Some EU members had argued that Hamas' political wing provided crucialsocial services in the West Bank and Gaza, and worried that listing it would only further inflame theIsraeli-Palestinian conflict. The EU has been unable to reach agreement, however, on adding relatedcharities or individuals suspected of raising money for Hamas to its list. As mentioned above, EUmember states also remain divided on how to treat Hizballah for similar reasons, despite increasingU.S. and Israeli pressure to include the organization on its common terrorist list. Some analysts are concerned that U.S.-EU cooperation against terrorism -- as well as broaderWestern-Arab cooperation -- could be negatively affected in the future by other contentious Mideastissues. They suggest that European domestic opposition to U.S. policies in the Middle East couldundermine the determination of some European governments to tighten their anti-terrorist laws, orto extradite suspected terrorists to the United States. Others dismiss such concerns. They stress thatEurope remains vulnerable to terrorist attacks, and law enforcement cooperation serves Europeanas well as U.S. interests. They also point out that despite the rift over Iraq, U.S.-EU efforts againstterrorism continue. For example, in June 2003, the EU and the United States signed two treaties onextradition and mutual legal assistance to help harmonize the bilateral accords that already exist, andpromote better information-sharing. Some Europeans remain worried that U.S. actions in Iraq andthe continuing Israeli-Palestinian conflict could weaken Arab countries' resolve to cooperate in thefight against terrorism -- a factor that is often crucial to the success of U.S. and Europeancounterterrorism efforts. (58) The Bush Administration views the Middle East as a key area from which two dominantthreats, terrorism and WMD, emanate. The Administration asserts that these threats must beconfronted to ensure U.S. national security, and argues that greater peace and stability in the regionwill only be possible once these twin threats are eliminated. Many officials criticize thecounterterrorist policies of the previous Clinton Administration as being too weak, which theybelieve contributed to Al Qaeda's sense of impunity. For the Bush Administration, September 11"changed everything" about dealing with regimes that possess WMD because of the risk that theycould supply such weapons to terrorists. (59) The Administration remains convinced that Al Qaeda is eagerto acquire WMD capabilities, and is vexed by what it views as much of Europe's strategic myopiatoward this threat. Although pleased with EU and bilateral European police, judicial, andintelligence cooperation against terrorism, Administration officials claim that law enforcement aloneis not always a sufficient tool, especially for countering WMD proliferation. Moreover, the Bush Administration maintains that removing Saddam Hussein from powerwas a necessary first step on the road to peace and stability in the region. U.S. officials say itdeprives Palestinian-related terrorist networks of a vocal patron who exploited the Israeli-Palestinianconflict for self-serving purposes. They also hope that the display of U.S. power will help promptIran and Syria to forego acquiring WMD and stop supporting anti-Israeli terrorist groups. The BushAdministration remains deeply concerned about Iran's nuclear ambitions and possible progress ona nuclear weapons program, asserts that all options remain on the table, but that it is committed totrying to resolve differences with Iran diplomatically. U.S. officials maintain that they welcome andsupport the EU3's efforts to curb Iranian nuclear aspirations. Washington insists it fully supports a peaceful settlement of the Israeli-Palestinian conflictand the broader effort toward Middle East peace, but also maintains that no permanent peace ispossible without an end to terrorism. The Bush Administration hopes that Arafat's death offers anew opportunity for Palestinians to pursue democratic reforms and a negotiated settlement to theconflict. To help foster greater peace and stability in the Middle East, the Administration has also setits sights on promoting more democratically accountable governments. U.S. officials reject thearguments of European skeptics who say this is not feasible; they point out that the same doubts wereraised after World War II about the ability of Germany and Japan to sustain democratic values. Some U.S. commentators suggest that European governments have been slow to address thedemocratic deficit in the Middle East because they fear doing so would impede their relations withArab states and negatively affect their commercial interests. They believe that the Broader MiddleEast Initiative has forced European governments to grapple with the need for political, economic,and social reform in the region and assert that encouraging reforms should not be held hostage toprogress on the Israeli-Palestinian conflict. As for charges that Washington's pursuit of war with Iraq has damaged the credibility ofmultilateral institutions such as the United Nations and NATO, Administration officials argue thatthe blame lies with France, Germany, and others. In February 2003, President Bush stated that,"High-minded pronouncements against proliferation mean little unless the strongest nations arewilling to stand behind them." Administration officials claim that countries such as France thateffectively blocked a second U.N. resolution explicitly authorizing force against Iraq have weakenedthe United Nations by exposing it as a paper tiger, lacking in authority and power. U.S. critics alsoassert that Paris is keen to promote the United Nations because some of France's self-image as aleading international power derives from its permanent seat on the Security Council. Some suggestthat France and other European countries are eager to keep Washington engaged in multilateralinstitutions because this helps constrain U.S. power and influence. U.S. officials also accuse France,Germany, and Belgium of causing strains within the NATO alliance by blocking for several weeksin early 2003 the deployment of NATO military assets to Turkey to help defend it against a possibleattack from neighboring Iraq. (60) Bush Administration views toward the EU as an actor in the Middle East appear mixed andvary issue by issue. Official U.S. policy supports EU efforts to develop a common foreign andsecurity policy in the hopes that a Europe able to speak with one voice will be a better, moreeffective partner for the United States. Some point to the EU's participation in the Quartet as a keyexample. Other U.S. strategists worry, however, that the position taken on Iraq by some EUmembers, especially France, is motivated by its desire to see the EU evolve into a counterweight tothe United States. They caution that the evolution of more common EU policies could decrease U.S.influence in Europe and widen the gap between the two sides of the Atlantic. A number ofEuropeans were alarmed by Secretary of Defense Donald Rumsfeld's statement splitting Europeanallies into "old" and "new" because they believe it could be indicative of the desire of some inWashington to keep Europe weak and divided. Many EU officials also assert that while France maybe a leading player in the EU, the majority of EU member states and candidate countries reject theFrench notion that Brussels should seek to balance Washington. (61) Congress actively supported U.S. efforts to contain Iraq. Like the Administration, someMembers of Congress expressed serious concerns about the behavior of several European allies inNATO and at the United Nations. France and Germany have borne the brunt of Congressionalcriticisms. In the spring of 2003, some Members proposed sanctions against French imports suchas wine and water, and ending U.S. military contracts with certain French-owned corporations. Others, however, suggested that such actions would negatively affect U.S. subsidiaries of Frenchcompanies and U.S. jobs. H.Amdt. 55 (proposed April 3, 2003 by Representative MarkKennedy) to the wartime supplemental funding measure ( H.R. 1559 , P.L. 108-011 )called for prohibiting the use of Iraq reconstruction funds to purchase goods or services from Franceand Germany, among others; although H.Amdt. 55 passed the House, it was deletedfrom H.R. 1559 as enacted. (62) Many Members are also concerned with possible next steps in the Middle East peace process. Congress remains a strong supporter of Israel and is dismayed by ongoing Palestinian terrorism. Numerous Members view the Quartet's roadmap cautiously, and warn the Administration that noserious negotiations should be pursued until Palestinian violence against Israel stops. Following theJanuary 2005 Palestinian elections, however, both the House and Senate passed resolutionscommending the election results (see H.Res. 56 , introduced by Representative RoyBlunt, passed February 2, 2005, and S.Res. 27 , introduced by Senator William Frist,passed February 1, 2005). Like the Administration, Members of Congress have welcomedMahmoud Abbas as the new President of the PA but also urged him to advance reform and endPalestinian terrorism. (63) Some Members of Congress also continue to demand greater political and economicaccountability before giving any financial assistance to the PA. In January 2005, the BushAdministration proposed $350 million in aid for Palestinian democracy and security programs in itssupplemental budget request. The FY2005 Supplemental Appropriations Act ( P.L. 109-13 ) provideda total of $275 million in response to the President's request, but Congress specified that $50 millionof the funds be used to assist Israel in easing Palestinian movements and that $5 million beearmarked to evaluate the PA's accounting procedures and audit its expenditures. The FY2006foreign operations appropriations act ( P.L. 109-102 ) passed in November 2005 provides $150million for the West Bank and Gaza Strip. (64) Furthermore, Congress continues to eye Iran warily. The United States has imposed a widevariety of economic sanctions against Iran since 1979. Many are aimed at curbing Iranian supportfor terrorism and Iran's WMD aspirations. In August 2001, Congress renewed the Iran-LibyaSanctions Act for another five years ( P.L. 107-24 ). Members of Congress also continue to discussways to encourage regime change and promote democracy in Iran. For both FY2004 and FY2005,Congress appropriated respectively up to $1.5 million (in P.L. 108-199 ) and $3 million (in P.L.108-447 ) for democracy promotion activities in Iran. For FY2006, Congress appropriated up to $10million in democracy promotion funds for use in Iran (in P.L. 109-102 ). In January 2005,Representative Ileana Ros-Lehtinen introduced H.R. 282 that seeks to strengthen ILSAand recommends providing new U.S. aid to pro-democracy groups in Iran. A companion bill, S. 333 , with similar provisions was introduced in February 2005 by Senator RickSantorum. (65) The United States also maintains a number of economic sanctions on Syria. In November2003, Congress passed H.R. 1828 (introduced in April 2003 by Representatives IleanaRos-Lehtinen and Eliot Engel) and President Bush signed the bill as P.L. 108-175 ; it calls for additional sanctions until Syria stops supporting terrorism, ends its occupation of Lebanon, and haltsefforts to develop WMD. The Bush Administration initially worried this legislation mightundermine the Middle East peace process, threaten Syrian cooperation in the U.S. war againstterrorism, and create another point of contention with the EU. The Administration dropped itsobjections to H.R. 1828 in October 2003 following escalating tension between Israel andSyria and allegations that Syria had allowed Arab volunteers bent on attacking U.S. forces to crossinto Iraq. President Bush imposed sanctions in accordance with P.L. 108-175 in May 2004 that banmany U.S. exports to Syria and prohibit Syrian aircraft from flying to or from the United States. (66) Members of Congress expressed serious concerns over the assassination of former LebanesePrime Minister Hariri and called for Syria to withdraw its military forces and intelligence personnelfrom Lebanon. S.Res. 63 (introduced by Senator Joseph Biden) to this effect was passedon February 17, 2005. Some Members are displeased with Syrian actions that they view as hinderingthe U.N. investigation into Hariri's death (see H.Res. 510 introduced by RepresentativeRobert Wexler on October 25, 2005, and H.Res. 598 introduced by RepresentativeDarrell Issa on December 14, 2005). And many Members also remain concerned with the absenceof Hizballah on the EU's common terrorist list. H.Res. 101 (introduced byRepresentative Jim Saxton on February 15, 2005), which urges the EU to add Hizballah to itscommon terrorist list, was passed on March 14, 2005. A similar measure, S.Res. 82 (introduced by Senator George Allen on March 15, 2005), passed on April 29, 2005. Historically, U.S.-European relations have experienced numerous ups and downs. Pro-Atlanticists have always stressed in times of tension the underlying solidity of the transatlanticrelationship given its basis in common values and shared interests. Even without the Soviet threatto bind the two sides of the Atlantic together, many observers note that the United States and itsEuropean allies and friends face a common set of challenges in the Middle East and elsewhere, andhave few other prospective partners. Conventional wisdom has dictated that whatever frictions existin the relationship merely represent disagreements among friends characteristic of U.S.-European"business as usual." However, many analysts worry that the transatlantic relationship is fraying. They questionthe Bush Administration's commitment to partnership with Europe in light of disagreements overthe Middle East and other trade and foreign policy issues. Europeans assert that Washingtonimported disagreements over Iraq into NATO with little concern for the consequences of suchactions for the alliance, which has been the cornerstone of European security for the last half-century. Meanwhile, U.S. critics see little value in trying to bridge U.S.-European policy gaps given thelimited military capabilities of most European countries to contribute to U.S. operations aimed atreducing the threats posed by terrorism and WMD proliferation. Some European officials also resent that U.S. policies toward Iraq exposed divisions amongEU members at a time when the EU has been seeking to shape its future structure and forge a morecommon foreign and security policy. A number of observers suggest that this is a key reason whythe transatlantic quarrel over Iraq was divisive. The internal EU clashes over Iraq were in partindicative of a broader power struggle among and between EU member states and EU candidatesover the future of the Union -- in particular, the future shape of CFSP and who speaks for Europe,as well as what kind of relationship the EU desires with the United States. Despite several commonEU statements in January and February 2003 calling on Iraq to disarm, experts contend thesepronouncements only papered over differences on the use of force, and represented the lowestcommon denominator of EU opinion. Many analysts say the true depth of the EU rift over Iraq was exposed by the January 30,2003 decision of five EU members and three aspirants to publicly call for unity with Washington onIraq, which was followed by a similar declaration by seven other EU candidates and three Balkancountries with EU aspirations. The lack of prior consultation on these statements with Brussels orAthens, holder of the EU's rotating Presidency at the time, outraged Paris and some other EUcapitals. French President Jacques Chirac publically blasted the EU candidates, stating that theywere "badly brought up" and had "missed a good opportunity to keep quiet." (67) Some attribute Chirac's outburst to fears of dwindling French influence over CFSP'sdevelopment as the EU expands to include central and eastern European states that Paris perceivesas more pro-American. (68) Many new EU member states still view the United States as theultimate guarantor of European security. Although some new EU members may have privatelyshared French and German concerns about U.S. actions in Iraq, they viewed the crisis as a strategicchoice between the United States and Saddam Hussein, and calculated that the Iraqi regime was notworth putting good relations with Washington at risk. At the same time, then-EU candidates weredismayed by U.S. Defense Secretary Donald Rumsfeld's comments in February 2003 that dividedEurope into "old" (countries that opposed the U.S.-led invasion of Iraq) and "new" (countries thatsupported it) given their desires to join "a Europe whole and free." Other experts also attribute thestatements supporting the U.S. stance on Iraq to a rebellion by smaller EU members and aspirantsto French-German attempts to reassert themselves as the key drivers of the EU agenda. (69) Since the end of major combat operations in Iraq, European and EU officials have beenseeking to mend fences, both within the EU and between Europe and the United States. Someobservers suggest that the internal EU rift over Iraq may have reinvigorated EU efforts to build CFSPin order to avoid similar bitter internecine disputes in the future. In May 2003, EU foreign ministerstasked the EU's High Representative for CFSP, Javier Solana, with developing an EU securitystrategy to identify common EU security interests and joint policy responses; this new, first-ever EUsecurity strategy was officially approved in December 2003. At the June 2003 EU summit in Greece, EU leaders attempted to portray the EU as a reliablepartner that also recognizes the significant threats posed by terrorism, WMD, and failed states. U.S.policymakers reportedly welcomed the EU's new WMD doctrine, agreed at the Greece summit, andits threat to use "coercive measures" as a last resort, asserting that it marked a "new realism" in theEU. (70) Also in June2003, the United States and the EU issued a joint statement in which they pledged closer cooperationto better combat the spread of WMD. At the June 2004 U.S.-EU summit in Ireland, both sidessought to portray the transatlantic dispute over Iraq as being firmly behind them and stressed theimportance of the U.S.-EU partnership. The Bush Administration asserted that it would make mending transatlantic relations -- inboth NATO and the EU -- a priority in its second term. Europeans welcomed these efforts andresponded positively to President Bush's and Secretary Rice's trips to Europe in February 2005. Many believe they have gone a long way toward improving the atmospherics of the relationship andthat the discussions between President Bush and key European leaders have helped to narrow somedifferences over how to manage Iran and Syria. Despite these hopeful signs, skeptics assert that the wounds from the clash over Iraq have notfully healed and U.S. and European policies still diverge on many issues. Several factors will likelyinfluence how deep and lasting the damage from the dispute over Iraq and subsequent policies in theMiddle East will be to the broader transatlantic relationship. One key determinant will be whetherthe United States and its European allies and friends can cooperate more robustly in the future inrebuilding Iraq. Another factor likely to affect the shape of the future transatlantic relationship maybe whether the Europeans perceive a renewed commitment by the United States to engage in asustained effort to revive Middle East peace negotiations. Furthermore, observers note that the overall transatlantic relationship would furtherdeteriorate if recriminations over Iraq or policy differences on other Middle East issues were toweaken NATO or impede the EU's efforts to forge a deeper and wider Union. Some worry thatWashington has lost confidence in NATO as a result of the failure of France, Germany, and Belgiumto clearly and quickly support their fellow ally Turkey as the conflict with Iraq loomed. They believethis incident will reinforce those in the Administration already inclined to marginalize NATO,viewing it at best as a hedge against a resurgent Russia and as a stabilizing element in the Balkans. Some also suggest that the crisis over Iraq emboldened France to renew its efforts to develop aEuropean defense arm independent of NATO and the transatlantic link. They point to the April 2003meeting of French, German, Belgian, and Luxembourg leaders to discuss creating a Europeanmilitary headquarters. This initiative was scaled back in December 2003, but some experts believethat the EU agreement to enhance its existing military planning capabilities may be the first step indriving the transatlantic alliance apart -- despite the fact that EU leaders also agreed to set up an EUplanning cell at NATO and will accept NATO liaison officers at the EU to ensure transparency andcooperation between the two organizations. Over the last several years, some Europeans worried that the Bush Administration -- in partbecause of U.S.-European differences over Iraq and other contentious Middle East issues -- was keento keep Europe weak and divided in order to preserve U.S. leverage on individual EU member states. They feared that Secretary Rumsfeld's comments about "old" and "new" Europe signaled anunofficial shift in U.S. policy away from continued support for further European integration. Suchconcerns have contributed significantly to recent frictions in the broader U.S.-European relationship. President Bush's visit to the EU's institutions while in Brussels in February 2005, and his clearassertion that "the United States wants the European project to succeed," have helped alleviate someEuropean anxieties. (71) However, if future U.S. policy choices related to Iran, the Israeli-Palestinian conflict, or Syria againdivide EU member states and thus hinder the EU's development of CFSP, this could negatively affectthe broader transatlantic relationship as many Europeans may find the United States an easy targetto blame. Others fear that U.S.-European disputes over the Middle East could spill over into U.S.-EUtrade relations. They point out that the breakdown in trust between the two sides of the Atlanticcould complicate efforts to resolve U.S.-EU trade disputes or to sustain U.S.-EU cooperation inmultilateral trade negotiations. (72)
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Managing policy differences on a range of issues emanating from the Middle East posesserious challenges for the United States and its European allies and friends. The most vitriolicdispute has centered on the conflict in Iraq. However, divisions over how best to approach theongoing Israeli-Palestinian conflict, manage Iran and Syria, and combat terrorism also persist. TheBush Administration and Members of Congress are concerned that continued disagreements betweenthe two sides of the Atlantic could both constrain U.S. policy choices in the region and erode thebroader transatlantic relationship and counterterrorism cooperation over the longer term. TheU.S.-initiated Broader Middle East and North Africa partnership project seeks to encourage reformsin the region and U.S.-European cooperation in tackling Mideast problems. This initiative waswelcomed by the 9/11 Commission, which recommended that the United States "should engage othernations in developing a comprehensive coalition strategy against Islamist terrorism." TheIntelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) contains elements thatseek to promote Middle East development and reform and enhance international cooperation againstterrorism. Many analysts assert that the United States and Europe share common vital interests in theMiddle East: combating terrorism and the proliferation of weapons of mass destruction; promotingMiddle East peace and stability; ensuring a reliable flow of oil; and curtailing Islamic extremism. U.S. and European policies to promote these goals often differ considerably. Although the Europeangovernments are not monolithic in their opinions on the Middle East, European perspectives havebeen shaped over time by common elements unique to Europe's history and geostrategic position. Many Europeans believe the Israeli-Palestinian conflict should be a priority. They view it as a keydriver of terrorism, Islamic extremism, and political unrest among Europe's growing Muslimpopulations. In contrast, the U.S. Administration stresses that terrorism and weapons proliferationare the primary threats and must be pro-actively confronted; peace and stability in the region will notbe possible until these twin threats are removed. A number of other factors, such as divergentperceptions of the appropriate role of the use of force and growing European Union (EU) ambitionsto play a larger role on the world stage, also contribute to the policy gaps that have emerged. How deep and lasting the clash over Iraq and subsequent Middle East policies will be totransatlantic relations will likely depend on several factors, including whether Washington andEuropean capitals can cooperate more robustly to rebuild Iraq; whether Europeans perceive arenewed U.S. commitment to revive the Middle East peace process; and whether differences overMideast issues spill over into NATO or impede EU efforts to forge a deeper Union. This report willbe updated as events warrant. For more information, see CRS Report RL31339 , Iraq: U.S. RegimeChange Efforts and post-Saddam Governance ; CRS Issue Brief IB91137, The Middle East PeaceTalks ; CRS Report RL32048 , Iran: U.S. Concerns and Policy Responses ; CRS Issue Brief IB92075, Syria: U.S. Relations and Bilateral Issues ; and CRS Report RL31612(pdf) , European Counter-terroristEfforts: Political Will and Diverse Responses in the First Year after September 11 .
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Each year, the federal government spends billions of dollars implementing, operating, and modernizing agency financial management systems. Financial systems are vital to the effective management and oversight of public funds, because the information they provide is used by government officials to make decisions about agency programs and operations. For example, federal managers use financial data to monitor contract costs, measure program performance, and identify improper payments. When agency financial systems provide inaccurate or incomplete data, the government might be less able to operate at maximum efficiency, and the risk of waste, fraud, and abuse arguably increases. For example, GAO has reported that financial management deficiencies at the Department of Defense (DOD) have resulted in hundreds of millions of dollars in over- and underpayments to contractors and contributed to DOD's high rate of travel card delinquency. Significant financial management weaknesses can be found throughout the government, and according to GAO most agency financial systems are unable to routinely produce reliable, useful, and timely information. In order to improve the quality of financial data available to government officials, Congress has funded a number of financial management improvement initiatives. Such initiatives, by their nature, are often complex and entail a degree of risk. The National Aeronautics and Space Administration (NASA), for example, spent $180 million on two failed efforts to modernize its financial systems, and NASA's third such attempt, currently underway, will cost an additional $983 million. Similarly, problems with inaccurate data led the Department of Veterans Affairs to halt deployment of its new financial system after an investment of $250 million. One recent effort to improve agency financial systems, the Financial Management Line of Business (FMLOB) initiative, was launched by the Office of Management and Budget (OMB) in 2004. Based on the recommendations of an interagency task force, the FMLOB proposed that the government move to a "shared services" model of financial management, whereby agencies would transfer their core financial system functions—such as accounting, payments, and reporting—to government-wide shared service providers (SSPs). Outsourcing administrative and financial operations to third-party service providers is a common practice in the private sector, and it has already been employed by the federal government in some instances. The National Finance Center, for example, a component of the U.S. Department of Agriculture (USDA), currently provides payroll and personnel services for 120 federal organizations across the three branches of government. According to OMB, the use of SSPs will enhance the timeliness and accuracy of financial information while reducing the costs associated with operating and modernizing agency financial systems. Several departments and agencies have already begun making plans to migrate core functions to SSPs, including the Department of Labor, the Department of Commerce, USDA, and the Environmental Protection Agency. OMB has estimated that remaining agencies will follow suit within the next seven or eight years. While the objective of moving to a shared services environment is widely supported in principle, a range of public and private sector observers has expressed concern that the initiative is moving too fast. Critics say that the capabilities of some SSPs have not been adequately demonstrated, that internal control problems should be addressed prior to migrating core financial systems, and agencies need time to prepare their personnel and build internal support for the initiative. Implementation should be delayed, critics argue, until these and other risk factors have been mitigated. The FMLOB has implications for Congress, in terms of both its appropriations and oversight responsibilities. Large-scale financial modernization efforts have the potential to generate more timely and accurate financial data, which are needed for effective oversight of agency programs and operations. As previously noted, however, modernization initiatives require substantial funding and often fail to produce the intended results. The House Subcommittee on Government Management, Finance, and Accountability, has held several hearings on the initiative, although no bills have been introduced. This report provides background information on the FMLOB's origins and goals, and presents the arguments of supporters and critics of the initiative. Finally, it discusses the project's implementation status. In the spring of 2004, OMB launched a series of interagency task forces to determine if services commonly found in numerous agencies, called lines of business, might be provided in a more efficient manner. The financial management task force determined that "significant savings" over a 10-year period were possible if the government consolidated agency financial systems and standardized the related business processes. In order to realize these savings, the task force recommended that the government establish centralized shared service providers (SSPs) to which agencies would transfer their core financial management functions, rather than invest in modernizing existing agency systems. OMB concurred with the recommendation and worked with the task force to develop an FMLOB business case that outlined the shared services concept and its expected benefits. The business case called for consolidating agency financial systems into a smaller number of government-wide SSPs, each of which could provide financial management services to multiple agencies. According to the business case, transferring agency financial management functions to SSPs would enable to government to: improve its leverage in negotiations with suppliers; reduce future agency development, modernization, and enhancement expenditures; reduce future agency operation and maintenance expenditures; retire agency "stovepiped" core financial systems; re-deploy current agency financial management personnel; improve agency program decision making due to enhanced financial reporting; and leverage best practices for investment management, procurement, budgeting, and real estate management. The business case explained that agencies may select as their service provider either a private sector contractor or one of a limited number of government agencies designated by OMB to be federal SSPs. In order to identify potential federal SSPs, OMB asked agencies with the skills, capabilities, and interest to function as government-wide financial management service providers to include business cases for doing so as part of their FY2006 budget submissions. OMB then evaluated the business cases using a "due diligence checklist" that assessed agencies' past performance, current capabilities, skill to operate a customer-focused organization, and adherence to federal policy and regulations. Based on these evaluations, OMB designated four agencies as federal SSPs: the Bureau of the Public Debt's Administrative Resource Center, the Department of the Interior's National Business Center, the Department of Transportation's Enterprise Service Center, and the General Service Administration's External Services Division. Only these agencies are permitted to compete with private firms for FMLOB contracts. In order to explain the initiative to federal agencies and help them prepare for the transition to a shared services environment, OMB released Version 1 of its Migration Planning Guidance in September 2006. Key provisions of the guidance are outlined below. The stated objective of the FMLOB is to improve the cost, quality, and performance of government financial management systems by utilizing shared service providers and implementing other government-wide reforms. Specific goals of the initiative include providing timely and accurate data for decision making; strengthening internal controls; providing a competitive alternative for agencies to acquire, develop, implement, and operate financial systems through shared services; standardizing business systems, processes, and data elements; and providing seamless data exchange between agencies. With "limited exception," the guidance requires that when an agency identifies a need to upgrade or modernize its core financial system, it must, at that time, either select an SSP or become designated as a federal SSP itself. OMB maintains that this policy enables the government to avoid investments on "in-house" agency systems that would eventually be replaced by more cost effective shared service providers. An agency may continue to operate its in-house system without being designated as a federal SSP only if it can demonstrate that doing so is a better value and lower risk alternative. The guidance provides no estimated timeline for migration, but OMB has told GAO that it expects most federal agencies to move to SSPs "within the next seven to eight years." The guidance stated that all agencies are required to conduct public-private competitions when selecting an SSP, unless OMB grants a deviation. Additionally, when public-private competitions involve work performed by more than 10 full-time employees, those competitions are required to follow OMB Circular A-76, which establishes government-wide guidelines for opening federal jobs to private bids. The guidance makes A-76 optional for competitions involving work performed by 10 or fewer full-time agency employees. The FMLOB includes an effort to establish standardized business practices that all agencies would eventually adopt. For example, it is developing standard processes for core financial management functions, such as payments and reporting, which would make it easier for agencies to share data. The FMLOB has also developed a standard government accounting code, which was released in July 2007. In a January 2008 memorandum, OMB stated that agencies are required to adopt the new business standards when they migrate to SSPs. OMB also argues that the FMLOB will increase the number of agencies in compliance with the Federal Financial Management Improvement Act (FFMIA) of 1996. FFMIA establishes standards for federal agency financial systems, with the objective of ensuring they generate reliable, useful, and timely information for decision makers. In FY2009, 15 of 24 agencies covered by the act were in substantial compliance. OMB has stated that by moving some agencies to SSPs and standardizing financial processes across the government, the FMLOB will help agencies select and implement FFMIA-compliant financial systems. Initial support for the FMLOB, while widespread, was qualified by concerns over the pace of implementation. By the time OMB released the Migration Planning Guidance in September 2006, the Department of Labor had awarded a contract to a private firm for hosting components of its financial system, the Department of Commerce had announced plans to begin consolidating its financial management platforms, the Office of Personnel Management had selected the Bureau of Public Debt as its SSP, and the Environmental Protection Agency had begun evaluating proposals for software, integration, and hosting services. Some observers said that the initiative, given its scope and complexity, was moving too quickly, and that agency migration efforts should have been delayed in order to reduce the risk of costly mistakes. A survey of Chief Financial Officers (CFOs) and other federal financial managers, for example, found "almost no" opposition to using SSPs in principle, so long as the quality of service and the cost of migration met expectations. The survey also revealed that one of the "greatest fears" of agency officials was that they would invest millions of dollars into migrating to SSPs, only to discover that their service provider was not capable of delivering the promised services. One reason for this concern was that some of the designated federal SSPs were components of departments that were themselves not FFMIA compliant. Some managers also suggested that small agencies—those with a budget of less than $100 million—might realize greater gains in efficiency from migrating to SSPs than larger agencies. Overall respondents said that they wanted more evidence of the capabilities of potential SSPs, more guidance on agency recourse should an SSP fail to meet performance expectations, and more time to consider their options before migrating. Similarly, a report by the National Academy of Public Administration (NAPA) endorsed the objectives of the FMLOB while expressing concerns about its implementation. In the report, which was prepared at the request of the House Subcommittee on Government Management, Finance, and Accountability, NAPA stated that the move to a shared services environment "makes a great deal of sense," citing its potential to reduce operating costs and free agency CFOs and their staff to focus on core program activities. Many of the CFOs interviewed for the report were, however, concerned about moving core accounting and reporting functions outside their purview, an opinion that NAPA shared. The report also said that economies of scale might not always result from consolidation, particularly if some agencies contract with multiple SSPs for different elements of their financial management system. NAPA recommended delaying further migrations to allow additional review, discussion, and analysis of these issues. Private sector observers also offered qualified support for the initiative. At FMLOB hearings held in March 2006, Stan Soloway, the president of the Professional Services Council (PSC), called the strategic underpinnings of the initiative "sound and rational ... the right thing to do." He cautioned, however, that the benefits of shared services might not be realized if agency leadership and staff are not "involved and fully invested" in the initiative. Additionally, he questioned whether sufficient attention had been paid to the need for the FMLOB to connect with other lines of business, particularly the Human Resources Line of Business (HRLOB), where travel systems will need to interface with financial systems. If poor planning caused the government to change its requirements during implementation, Soloway said, then the costs of the initiative might rise. PricewaterhouseCooper partner Joe Kull also testified at the March 2006 hearings. Kull, a former OMB deputy controller, said agencies should not be required to meet an "arbitrary timeframe" for implementation, asserting that government projects like FMLOB have often failed because agencies had not invested sufficient resources in educating, training, and communicating with employees about the initiative. Kull also said that it was "critical" for agencies to improve their internal controls prior to migration—even though those improvements might take several years—because core systems are only as good as the data flowing into them. Agency financial systems would thus continue to be limited by weak internal controls even after migration, and presumably those problems would be more difficult to correct when core functions were hosted by a third party. One union, the American Federation of Government Employees (AFGE), strongly criticized the initiative, largely over OMB's policy on the application of Circular A-76 to migration competitions. As previously discussed, agencies are only required to follow the provisions of A-76 when migrating more than 10 full-time positions to an SSP, and A-76 is optional when 10 or fewer full-time employees are involved. In hearings on the FMLOB held in June 2006, the AFGE argued that by making A-76 optional in some cases, agencies were, in effect, authorized to transfer federal jobs to private contractors without giving agency employees the opportunity to compete for them, a practice called "direct conversion." An OMB official said the AFGE had misinterpreted the policy, stating that while A-76 is optional in some instances, a public-private competition is required for every migration, regardless of the number of employees involved. OMB's Migration Planning Guidance, released three months after the hearings, clarifies this point, explicitly stating that direct conversions are not authorized. In a March 16, 2010, memorandum, OMB identified several steps that had been completed in implementing the FMLOB. Among these, OMB noted that it had developed and issued standard business processes for a number of core financial management functions, a competition framework for FMLOB migrations, and a Financial Services Assessment Guide. In its FY2007 Federal Financial Management Report (FFMR), OMB set as a target to migrate a majority of agencies to SSPs by FY2011, but its FY2009 FFMR did not reference any migration goals. The migration status update provided in the FY2009 FFMR noted that five agencies have selected a commercial SSP—the Departments of Agriculture, Labor, and Housing and Urban Development, the Environmental Protection Agency, and the Office of Personnel Management—but it is not clear what stage of migration those agencies are currently in, or when other agencies might begin migrating. GAO has recommended that OMB finalize and publish a migration timeline as soon as possible.
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Federal financial management systems generate the information that is used by government officials to manage and oversee agency programs and operations. Concerns about the quality of agency financial information, and about the costs of operating and modernizing the systems that produce it, have prompted a number of systems improvement initiatives in recent years. One such effort, the Financial Management Line of Business (FMLOB), seeks to improve the cost, quality, and performance of government financial systems by consolidating agency core systems functions at a limited number of third-party shared service providers (SSPs), and by standardizing the related business processes government-wide. As part of the initiative, the Office of Management and Budget (OMB) in 2006 directed all federal agencies needing to upgrade or modernize their financial management systems either to transfer their core financial functions to an SSP, seek designation as an SSP, or to prove that they can operate their in-house systems with less risk and at a lower cost than an SSP. Agencies that undergo migration must, in most cases, select their SSPs through competitions between public and private organizations. OMB's guidance also requires all agencies eventually to adopt government-wide business and accounting practices, which are under development in FMLOB workgroups. It is widely acknowledged that consolidation and standardization might improve the cost and quality of agency financial data. Proponents suggest that the sooner agencies move to SSPs, the sooner the government might enhance its efficiency and capacity for oversight. Concerns have been expressed, however, by both public and private sector observers, that the initiative is moving too fast, and that important issues surrounding the transition to shared service providers have not been adequately addressed. Critics argue that migration should be delayed until agencies have strengthened their internal controls, fully evaluated the qualifications of potential SSPs, and educated their personnel about the initiative. Evidence from previous systems modernization efforts suggests that these issues might put the FMLOB at increased risk for cost overruns, schedule delays, and problems with the accuracy of the data after implementation. Effective congressional oversight of agency programs and operations is dependent, in part, on the availability of timely and accurate financial data. Congress has invested billions of dollars in systems modernization projects in recent years, but these efforts have not consistently yielded significant improvements in the information they produce. The House Subcommittee on Government Management, Finance, and Accountability has held several hearings on the initiative, although no bills have been introduced. This report examines the origins and objectives of the FMLOB, outlines the arguments of the initiative's supporters and critics, and discusses the project's status. It will be updated as events warrant.
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A rare veto of the Energy and Water appropriations bill led to late-session maneuvering for FY2001funding. After President Clinton vetoed H.R. 4733 over a provision (�103) regarding control of the Missouri River (see Title I, Army Corps of Engineers, below),the House voted 315-98 to override the vetoon October 11. On October 12, the Senate attached the H.R. 4733 conference bill, minus �103 and with a fewother water provisions, to H.R. 4635 , the appropriations bill for Veterans Affairs and Housing and Urban Development, and then passedthat bill by a vote of 87-8. OnOctober 18, H.R. 5483 was introduced in the House, containing the Energy and Water appropriationsprovisions included in the Senate-passedversion. On the same day the conference report to H.R. 4635 was filed, including the provisions of H.R. 5483 . The House and theSenate agreed to the conference report on October 19, and the President signed the bill October 27 ( P.L. 106-377 ). Table 1. Status of Energy and Water Appropriations,FY2001 * H.R. 4733 was vetoed October 7. The House voted 315-98 October 11 to override the veto, but theSenate attached the conference bill, minus theprovision provoking the veto, to H.R. 4635 , funding VA/HUD, and passed that bill October 12. H.R. 5483 , containing the Senate'sEnergy and Water provisions, was included in the conference report on H.R. 4635 , filed October 18 ( H.Rept.106-988 ) and passed by the House andthe Senate October 19. The President signed H.R. 4635 October 27. The Energy and Water Development appropriations bill includes funding for civil projects of the Army Corpsof Engineers, the Department of the Interior'sBureau of Reclamation (BuRec), most of the Department of Energy (DOE), and a number of independent agencies,including the Nuclear RegulatoryCommission (NRC) and the Appalachian Regional Commission (ARC). The Administration requested $22.7 billionfor these programs for FY2001, comparedwith $21.2 billion appropriated for FY2000. For the Corps of Engineers, the Administration sought $4.06 billion in FY2001, about $78 million less than the amount appropriated for FY2000. The final billappropriated $4.54 billion. The Administration requested $841 million for FY2001 for the Department of theInterior programs included in the Energy and Waterbill -- the Bureau of Reclamation and the Central Utah Project. This would have been an increase of $32.3 million. The final bill appropriated $816.4 million, anincrease of $10.4 million over FY2000. The request for DOE programs was $18.1 billion, about 8% above theprevious year. The major activities in the DOEbudget are energy research and development, general science, environmental cleanup, and nuclear weaponsprograms. The final bill appropriated $18.3 billion. (Funding of DOE's programs for fossil fuels, energy efficiency, and energy statistics is included in the Interior andRelated Agencies appropriations bill. TheFY2001 net appropriations request for these programs was $865 million.) For the Nuclear Regulatory Commissionand other independent agencies funded in TitleIV of the Energy and Water bill, the net appropriations requested for FY2001 was $177.2 million. The final billappropriated $171.9 million. Table 2. Energy and Water Development Appropriations, FY1994 to FY2001 (budget authority inbillions of current dollars) * *These figures represent current dollars, exclude permanent budget authorities, and reflect rescissions. Table 2 includes FY2001 budget request figures and budget totals for energy and water appropriations enacted for FY1994 to FY2000. Tables 3-7 provide budgetdetails for Title I (Corps of Engineers), Title II (Department of the Interior), Title III (Department of Energy) andTitle IV (independent agencies) for FY2000 -FY2001. The final Energy and Water bill ( P.L. 106-377 ) included $4.54 billion for the civil projects of the U.S. ArmyCorps of Engineers (Corps) for FY2001,approximately $481 million more than requested by the Administration and approximately $403 more than enactedfor FY2000. The Administration requested$4.06 billion for FY2001, slightly less (2%) than the $4.14 billion enacted for FY2000. The House-passed billincluded $4.12 billion; the Senate-passed versionincluded $4.11 billion; the earlier conference version ( H.R. 4733 , vetoed by the President) had included $4.52billion. The final version includes$21.5 million more for the Corps' construction budget. Table 3. Energy and Water Development Appropriations Title I: Corps of Engineers (in millions ofdollars) Funding for Corps of Engineers civil programs is often a contentious issue between the White House and the Congress, with final appropriations bills typicallyproviding more funding than requested. For FY1998, for example, the Congress added $270 million (7%) to the$3.63 billion requested by the Administration. Similarly, the FY1999 bill as passed included a total of $3.86 billion for the Corps, $638 million more (20%) thanrequested, and for FY2000, Congress providedapproximately $250 million more (6%) than requested. The story continued in FY2001. The conference report for H.R. 4733 , which the President vetoed over another issue (see below), included nearly$460 million more (11.3%) than requested. The final version ( P.L. 106-377 ) added $21.5 million to the Corps'construction budget, bringing the total toapproximately $481 million more than requested, about 11.8%. The late additions included $6.9 million more foran Elba, Alabama, flood control project; $10.3million more for the Geneva, Alabama, flood control project; $0.5 million more for the Metropolitan Louisville,Beargrass Creek, Kentucky, project; $2.8 millionmore for the St. Louis, Missouri, environmental infrastructures project; and $1 million more for the Black Fox,Murfree and Oaklands Springs Wetlands,Tennessee, project. The final bill also includes $0.8 million more for the Upper Susquehanna River Basin, NewYork, project under the General Investigationsaccount; however, this amount is offset by an increase of $0.8 million in the line item for reductions and anticipatedsavings, slippage, and carryover balanceswithin that account. Corps Management Reforms. The House Appropriations Committee noted in report language concerns about the Corps' project review process and indicatedits desire for a more streamlined process. The Committee also mentioned recent allegations that agency officialshave improperly manipulated a study ofnavigation improvements on the upper Mississippi River and Illinois Waterway; however, the Committee noted thatbecause these allegations are still underinvestigation, it is recommending no specific action to address the alleged behavior. On a related matter, theCommittee addressed accusations of the Corps'efforts toward "improperly trying to 'grow' its Civil Works program." It noted that while pressure on planners andengineers to "inappropriately justify projects"is clearly unacceptable, it viewed it the "proper role of the Chief of Engineers to advise the Administration, theCongress, and the Nation of the level of investmentin water resources infrastructure ... needed to support the economy and improve the quality of life for our citizens." The Senate Appropriations Committee report also noted criticisms of the Corps' operations and the Committee'sdissatisfaction with the Administration'sproposed management reforms. While the Committee initially did not include language prohibiting such reforms,it put the Administration on notice that it wouldcontinue to "assess the need for such language as the process moves forward." No mention of such language wasincluded in the conference bill or the statementof conference managers. However, language directing the Corps to contract with the National Academy of Sciencesto study the feasibility of establishing anindependent review panel for Corps project studies is included in the conference report for the Water ResourcesDevelopment Act of 2000 ( S. 2796 ,Section 216). Missouri River Water Flows. The final version of the Energy and Water Development appropriations bill deleted Section 103 of the original conference reporton H.R. 4733 . Section 103 would have prohibited, under certain circumstances, the use of funds to revisethe Corps' Missouri River Master WaterControl Manual. Floor consideration of H.R. 4733 stalled in the Senate on July 21 over the language, and a Senate amendment to strike theprovision was defeated 45-52 during floor consideration September 7. The Administration said it would veto thebill if such language remained, and indeed,when the conference left Section 103 in, the President did veto the bill on October 7. The issue involves the controversial subject of how to operate mainstem dams along the Missouri River, given the diverse statutes potentially affecting the Corps'river management activities. Upper basin states generally contend that the current master manual, which has beenunder review for many years, does not reflectchanges in demand along the river. This is especially true, they argue, of increased demand for water and waterreleases to meet fish and wildlife and recreationaluses, particularly water to support the pallid sturgeon, and other threatened and endangered species. Downstreamstates generally fear that changes in theoperations manual to accommodate upstream concerns may result in an inadequate supply of water to meet fullseason navigational uses. Downstream states havealso noted fears of increased flooding below Gavins Point dam if higher water releases are made in the springmonths. For the Department of the Interior, the Energy and Water Development bill provides funding for the Bureau ofReclamation (BuRec) and the Central Utah ProjectCompletion Account. The final bill ( P.L. 106-377 ) includes $39.9 million for the Central Utah Project CompletionAccount, the same as enacted for FY2000. Thebill also includes $776.5 million for BuRec for FY2001, approximately $10 million more than enacted for FY2000. Table 4. Energy and Water Development Appropriations Title II: Central Utah Project CompletionAccount (in millions of dollars) * Includes funds available for Utah Reclamation Mitigation and Conservation Commission activities and $5 millionfor the contribution authorized by �402(b)(2)of the Central Utah Project Completion Act ( P.L. 102-575 ). Table 5. Energy and Water Development Appropriations Title II: Bureau of Reclamation (in millions ofdollars) * Does not reflect appropriations derived from transfer of $25.8 million from the Working Capital Fund, but doesinclude $1.5 million in supplementalappropriations ( P.L. 106-31 ). **Does not include $980,000 transferred from the U.S. Geological Survey to the Bureau of Reclamation forsupport of the Department of the Interior NationalBusiness Center. *** Does not include $424,000 transferred from the U.S. Geological Survey. Most of the large dams and water diversion structures in the West were built by, or with the assistance of, BuRec. Whereas the Corps built hundreds of floodcontrol and navigation projects, BuRec's mission was to develop water supplies and to reclaim arid lands in theWest, primarily for irrigation. Today, BuRecmanages more than 600 dams in 17 western states, providing water to approximately 10 million acres of farmlandand 31 million people. BuRec has undergone many changes in the last 15 years, turning from largely a dam construction agency to a self-described water resource management agency. The agency describes the "intent" of its programs and projects as follows: to operate and maintain all facilities in a safe, efficient, economical, and reliable manner; to sustain the health and integrity of ecosystems while addressing the water demands of a growing west; and to assist states, tribal governments, and local communities in solving contemporary and future water and related resource problems in anenvironmentally, socially, and fiscally sound manner. In practice, however, the agency is limited in how it can address new demands and new priorities because of numerous federal, state and local statutes, compacts,and existing contracts, which together govern the delivery of water to project users. Consequently, any proposalto change BuRec water allocation or watermanagement policies often becomes difficult to implement and extremely controversial. The final bill includes $776.5 million for FY2001 for BuRec, which is approximately $10 million more than enacted for FY2000. Funding for BuRec was notaffected by modifications to the conference bill as included in H.R. 4635 . The House-passed bill includedapproximately $730 million for BuRec forFY2001; the Senate-passed version included $752.7. The Administration requested an appropriation ofapproximately $801.03 million - approximately $33million more than enacted for FY2000. Both the House and Senate Appropriations Committees stated they would not fund the Administration's request of $60 million for the California Bay-DeltaRestoration Program (Bay-Delta, or CALFED), the same amount as was enacted for FY2000, until the programreceived an authorization for such appropriations. (Funding for Bay-Delta is requested in BuRec's budget, but the appropriation would be allocated among severalfederal agencies.) A proposal to include $20million in CALFED funding for FY2001 was dropped in conference, as was a proposal to adopt authorizinglanguage similar to that recently reported from theHouse Resources Committee ( H.R. 5130 ). The Administration submitted language to extend the Bay-Deltaappropriations authorization throughFY2003, for an additional total of $429.9 million (averaging $143.3 million per year, but not requested by year). The FY2001 request of $60 million forBay-Delta activities included $30 million for ecosystem restoration activities, $5 million (maximum) for planningand management, and $24 million for "otheractivities." According to BuRec, there are still unobligated prior year funds that may be used for some CALFEDprojects. The Energy and Water Development bill includes funding for most of DOE's programs. Major DOE activitiesin the bill include research and development onrenewable energy and nuclear power, general science, environmental cleanup, and nuclear weapons programs. TheAdministration's FY2001 request was $18.06billion, which would have boosted DOE programs in the bill by about 8%. The House approved $17.29 billion forDOE programs. The Senate bill contained$17.95 billion. The final bill, P.L. 106-377 , appropriated $18.34 billion. (The FY2001 appropriation for DOE'sprograms for fossil fuels, energy efficiency, theStrategic Petroleum Reserve, and energy statistics, included in the Interior and Related Agencies appropriations bill, P.L. 106-291 , was $1.46 billion. See CRS Report RL30506 , Appropriations for FY2001: Interior and Related Agencies.) Table 6. Energy and Water Development Appropriations Title III: Department of Energy (in millions ofdollars) Renewable Energy. "The solar and renewable energy program is a major component of the Administration'sactivities to address global climate change," according to the Appendix to the U.S. Government's FY2001 Budget(p. 403). In accordance with that policy, DOEproposed to boost solar and renewables funding to $454.8 million (net, including $47.1 million for programs underthe Office of Science) -- an increase of $92.6million (26%) over the FY2000 level. This includes $407.8 million for DOE's Office of Energy Efficiency andRenewable Energy (EERE), an increase of $92.6million, and $47.1 million for the Office of Science, which is the same as for FY2000. The EERE amount includes$29.9 million more for biofuels, $17.1 millionmore for wind, $14.5 million more for photovoltaics, $9.5 million more for electric and storage programs, and $7.5million more for international renewableenergy programs. For Biofuels, DOE proposed an Integrated Bioenergy Technology Research and Technology Initiative, prompted by President Clinton's Executive Order 13134, Developing and Promoting Biobased Products and Bioenergy , and ethanol production from agriculturaland forestry residues. Wind initiatives would accelerate deployment, address regional barriers, and enhance wind energy use in developing countries. Photovoltaic initiatives supportcost reductions, "Million Solar Roofs," and private sector "clean energy" projects and national action plans indeveloping countries. Electric/Storage initiativesfocus on power system security and reliability, power electronics technology, and distributed power systems. The House Appropriations Committee recommended $352.8 million (including $47.1 million for programs under the Office of Science) for the DOE RenewableEnergy Program. However, voice vote approval of an amendment sponsored by Representatives Salmon, Udall,Boehlert and Kaptur ( H.Amdt. 920 ,A006) added $37.7 million, bringing the House-passed total to $390.5 million. In contrast, the Senate approved$444.1 million (including $47.1 million forprograms under the Office of Science) for the DOE Renewable Energy Program. Seven Senate floor amendmentscreated earmarks for various renewable energyprograms, but none of the amendments modified the level of appropriations. The final bill appropriated $422.1 million (including $47.1 million for programs managed by the Office of Science). This figure is $59.9 million, or 17%, abovethe FY2000 funding. It includes $13.6 million more for Electric/Storage, $8.8 million more for Photovoltaics, $7.5million more for Biofuels-Power, $7.0 millionmore for Wind, $6.7 million more for Biofuels-Transportation, and $3.0 million more for Geothermal. However,relative to the request, the final bill provides$32.8 million (7%) less for the Renewable Energy Program. This includes $10.1 million less for Wind, $8.0 million less for Biofuels-Transportation, $7.8million less for Biofuels-Power, $6.5 million less for International Renewables, $5.7 million less for Photovoltaics,and $3.0 million less for Departmental EnergyManagement programs. Nuclear Energy. For nuclear energy programs -- including reactor research and development, space powersystems, and closing of surplus facilities -- the enacted bill provides $259.9 million for FY2001. This amount isabout $30 million below the Administrationbudget request, but the legislation transfers $53.4 million of the request for uranium management programs into anew Uranium Facilities Maintenance andRemediation account and added $9 million more for treatment of depleted uranium stockpiles. The Senate versionof H.R. 4733 had $262 million fornuclear energy, plus $62.4 million for the uranium management programs. The House had approved $231.8 million,plus $53.4 million for uranium management. The approved bill provides the Administration's $35 million request for a program to support innovative nuclear energy research projects, the "nuclear energyresearch initiative" (NERI). The House had voted to leave NERI at the FY2000 funding level of $22.5 million,while the Senate had approved $41.5 million. Theenacted bill provides an additional $7.5 million for a separate program on nuclear energy technologies, which theSenate had proposed to include in NERI. Of thatamount, $4.5 million is to be spent on a "road map for the commercial deployment of a next-generation powerreactor;" $1 million is earmarked to analyzepotential improvements in advanced versions of today's commercial light water reactors; $1 million is for initiativessupporting an advanced gas-cooled reactor;and the final $1 million is for a feasibility study for deploying small modular reactors. Reflecting House and Senate support, the bill provides the Administration's full request of $5 million -- nearly the same as the FY2000 appropriation -- for"nuclear energy plant optimization" (NEPO), a research program to improve the economic competitiveness ofexisting nuclear power plants. The confereesspecified that non-federal partners share at least half the costs of NEPO projects. Funding for NEPO is part of the Administration's Climate Change Technology Initiative. To be matched by industry, the NEPO funding is to focus on research toextend the operating lives of existing reactors and to allow them to operate more efficiently and reliably. Theprogram's goal is to increase the average productionof U.S. nuclear plants to 85% of full capacity by 2010; the capacity utilization percentage of U.S. reactors generallyaverages in the mid-70s, although it was closeto 85% in 1999. Because nuclear plants directly emit no carbon dioxide, greater production of nuclear power from existing reactors could help the United States reduce its total"greenhouse gas" emissions. "Nuclear energy is the only proven large-scale power source that has unlimitedpotential to provide clean and reliable electricity intothe next century," according to the DOE budget justification. However, opponents have criticized DOE's nuclearenergy research programs as providing wastefulsubsidies to a failing industry. Controversy has also been generated by the "electrometallurgical treatment" of DOE spent fuel, a process in which metal fuel is melted and highly radioactiveisotopes are electrochemically separated from uranium and plutonium. DOE contends that such treatment may bethe best way to render sodium-bonded spentfuel -- particularly from the closed Experimental Breeder Reactor II (EBR-II) in Idaho -- safe for long-term storageand disposal. DOE decided in September2000 to use the process to prepare spent fuel for disposal. DOE received $40 million in FY1999 to complete a demonstration program for the technology. Continued research on sodium-bonded fuel treatment received$18 million for FY2000, and DOE requested $15 million for FY2001. The final bill approved the Administrationbudget request within a restructured fundingcategory of $34.9 million for nuclear facilities management. House Appropriations Committee report languagerequires DOE to submit a report by March 2001on the types of waste that the process would produce. Opponents of electrometallurgical treatment contend that it is unnecessary and that the process could be used for separating plutonium to make nuclear weapons. They note that the process uses much of the same technology and equipment developed for the plutonium-fueledIntegral Fast Reactor, or Advanced Liquid MetalReactor, which was canceled by Congress in 1993 partly because of concerns about nuclear weapons proliferation. The appropriations act establishes a new DOE program called Advanced Accelerator Applications, which includes $3 million for research on acceleratortransmutation of waste (ATW) at the University of Nevada-Las Vegas. ATW would use powerful particleaccelerators to transmute long-lived elements inradioactive waste into shorter-lived elements for safer disposal. DOE issued a "roadmap" for the ATW programNovember 1, 1999, concluding that a six-yearR&D program costing $281 million would be needed to support future technology decisions for deploying sucha system. No FY2001 funding was requested orprovided by the House for ATW, but DOE proposed to use some of the $9 million appropriated for FY2000 tocontinue studies of the technology during FY2001. The Senate had earmarked $5 million for ATW studies in Nevada under the new Advanced Accelerator Applicationsprogram. The enacted measure includes DOE's $44 million request for the Fast Flux Test Facility (FFTF) at Hanford, Washington, a boost of about $5 million from thebudget request and $16 million above the FY2000 level. The House had voted to provide $39 million, and theSenate had approved $44 million. FFTF, asodium-cooled research reactor originally designed to support the commercial breeder reactor program, has notoperated since 1992 and is being maintained instandby condition. DOE intends to decide in FY2001 whether to restart the reactor for nuclear research and medicalisotope production or permanently shut itdown. DOE contended that a funding increase would be needed in FY2001 to begin implementing the decision. Science. DOE's science programs consist of a wide variety of basic research activities concentrated in thephysical, biological, and computer sciences, and mathematics. These programs include high-energy physics, nuclearphysics, basic energy sciences (BES),biological and environmental research (BER), fusion energy sciences, and advanced scientific computing. For theDOE science programs, the FY2001 requestwas 12.1% above FY2000. The House approved $2.757 billion for these programs, 10.1% below the request, whilethe Senate appropriated $2.842 billion, 5.4%below the request. Funds were restored in conference, however, with the final bill including $3.186 billion, 0.75%above the request. About two-thirds of the requested increase was concentrated in three areas. First, DOE requested an increase of $162 million in construction funding for theSpallation Neutron Source (SNS) project. The House, citing "severe funding constraints," appropriated level fundingfor the project of $100 million. The Senate,however, approved $221 million for construction, touting the importance of the project for advancing science andtechnology. Again, the final bill restored someof the funding, providing $259.5 million, $2.4 million below the request. DOE also requested a $49 million increase for civilian information technology (IT) research. The latter focuses on development and application of highperformance computing for scientific applications. The House, again citing funding limitations, approved only $5million of the requested increase. The Senateapproved funding about $20 million of the requested increase although much of that would come by shifting fundsfrom other programs. The final bill providednearly all of the requested funding, although a specific amount was not given. The third major program request by DOE was an additional $36 million for nanoscience and nanotechnology research within BES. The House madeno mention of this initiative, although its appropriation for the BES program not including the SNS was $62.9million below the request. The Senate expressedstrong support for the initiative but provided only about 56% of BES funding requested for it. Funds were restoredin conference with the final bill providing thefull request. The House's appropriation for the BER program was 8.8% below the request. Again, funding constraints were cited although the House argued that theappropriation was in line with previous years when new projects started in FY2000 were removed. The Senateapproved funding the program at 0.3% below therequest. The final bill provided $500.3 million for this program, 14.1% above the request. Much of the increaseis for projects specifically identified by Congress. The House approved funding the High Energy and Nuclear Physics programs at their requested level. It did note, however, that it was not anxious to fund designwork for large new accelerators in a period of limited funds. The Senate's appropriation for these two programs wasabout 5.3% below the request. The Senatecited "severe budget constraints" as the reason. Funding was restored in the final bill for a total 2.0% above theoriginal request. The House also approved an increase of $7.5 million above the request for the Fusion Energy Sciences program, which would be a slight increase over theFY2000 level. The Senate, again citing budget constraints, approved funding fusion research at 8.1% below therequest. The final bill funded at the House mark. Nuclear Weapons Stewardship R&D. This activity is aimed at developing the science and technology tomaintain the nation's nuclear weapons stockpile in the absence of nuclear testing. Principal activities are thedevelopment of computational capabilities that cansimulate weapons explosions and perform other important computations, and experimental facilities to simulate andtest various aspects of weapons behaviorwithout resorting to a full scale explosion. For the last four years, nuclear weapons stewardship R&D wascalled stockpile stewardship. This year, as DOE'sdefense programs were absorbed by the newly created National Nuclear Security Administration (NNSA), DOEreorganized the activity, eliminating both thestockpile stewardship and maintenance designations, and creating four new programs: directed stockpile work,campaigns, readiness in technical base andfacilities, and construction. Weapons R&D falls across all four programs. For FY2001, DOE requested a 3.0% increase for weapons R&D. The House approved a slight increase of 0.2% above the request. The House also directed DOEto consolidate its inertial confinement fusion and defense modeling and computing activities within the campaignsprogram, and approved a transfer of funds fromthe readiness in technical base and facilities program to campaigns to this effect. The Senate approved a 4.9%increase above the request for weapons R&D. It isconcerned about the slow pace of the stockpile stewardship program and believes that significantly more fundingis needed if it is to meet its goals. The final billincluded $2.454 billion for weapons R&D, 12.5% above the request. Nearly all of the increase above theSenate-approved amount was assigned to the NIF project(see below). The national security budget for FY2001 was prepared for the first time under the rubric of the NNSA, the new organization created by Congress ( P.L. 106-65 , H.Rept. 106-301 ) to manage most of DOE's defense activities in the wake of security concerns uncovered in 1998. Implementation of the NNSA has been quitecontroversial, and several in Congress have expressed displeasure about the way DOE is undertaking this task. TheHouse noted that it has been citing DOEmanagement problems for some time and expressed its desire that the new director of the NNSA take theopportunity afforded by the reorganization to makemajor changes in the current DOE management structure. The Senate expressed hope that NNSA can resolve theserious concerns the Senate has with the currentstockpile stewardship program. The conferees expressed their support of efforts to staff the NNSA and agreed thatsuch actions should not be affected by a changein administration. A major problem that has emerged is the large cost overrun on the National Ignition Facility (NIF). Currently, DOE estimates the total project cost to be about$3.26 billion compared to the original estimate of $2.03 billion. GAO estimates the cost to be $3.9 billion. Theoverrun is due primarily to significantmanagement and technical problems that emerged during NIF construction. (1) DOE has not amended its FY2001 budget request for NIF, which was $74millionfor construction plus about $85 million in related costs. With the FY2000 appropriations, Congress had directedDOE to provide a new cost baseline by June 1,2000, or provide an estimate of termination costs. The House noted DOE's failure to meet the deadline, and statedthat it would reserve judgment about the NIFproject until September. In the meantime it approved funding the original DOE request for NIF for FY2001. The Senate bill included an amendment that would cap funding for NIF at $74.1 million until the results of a study by the National Academy of Sciences on theproject was delivered. The study was to be completed by September 1, 2001, and would, among other things,examine the contribution of NIF to the StockpileStewardship program (SSP) and determine whether existing technical problems are likely to add to the project's costand whether a smaller version of NIF wouldsuffice. In conference, the funding of $199 million for NIF for FY2001 was agreed to. Of this amount, $65 million would come from funds transferred from otherweapons programs and $134.1 million would be in new appropriations. The final appropriations bill limits theamount available to DOE for NIF to $130 millionat the start of FY2001, releasing the remaining funds after March 31, 2001 and only after certification by the NNSAthat several conditions have been met. Theseconditions include, among other things, a review of alternative construction options; certification that projectmilestones, schedule and costs are being met;completion of a study on whether a full-scale NIF is needed to meet the goals of the SSP; and a five-year plan forthe SSP that describes how NIF is to be paid forin the out years. In the meantime, DOE completed the new baseline on September 15, 2000, and now estimates thetotal NIF project cost at $3.45 billion. Another issue raised by the House concerned the amount and use of Laboratory Directed Research and Development (LDRD) funds. For FY2000, the Congresshad reduced the LDRD funding level to 4% of funds appropriated for labs from 6%. DOE requested restoring thelevel to 6% for FY2001, but the House retainedthat 4% level and further directed DOE to submit a specific request for these funds within each program in futurebudget submissions. In an amendment adoptedon the floor, the Senate approved a level of 8% and included funds from the Environmental Management programs. The conferees adopted a level of 6% forLDRD for the laboratories and 2% for the weapons production plants. The House requirement that DOE producea financial accounting report of these funds wasalso adopted. Nonproliferation and National Security Programs. DOE's nonproliferation and national security programsprovide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weaponsworldwide. Also included are CooperativeThreat Reduction programs to reduce nuclear, chemical, and biological weapon dangers in Russia and othercountries of the former Soviet Union, and armscontrol treaty verification programs. Some intelligence programs are also included. These nonproliferation andnational security programs are to be included inthe newly established National Nuclear Security Administration (NNSA). Some of these activities are also fundedin the Department of Defense. (See CRSreport RL30505: Appropriations for FY2001: Defense.) The Administration's FY2001 request for these programs was $865.6 million, an increase of $36.5 million over FY2000. The House approved $861.5 millionfor DOE nuclear nonproliferation programs in the Energy and Water appropriations bill for FY2001. The Senatebill funded the activity at $909.0 million, and thefinal bill appropriated $874.2 million. The FY2001 request for nonproliferation and national security programs included $100 million for a new long-term nonproliferation program with Russia. Thenew program, part of the Administration's Expanded Threat Reduction Initiative, is the result of several years ofnegotiations aimed at ending Russia's continuing production of plutonium that can be used to make nuclear weapons. The funds would be used to store Russiannuclear waste instead of reprocessing it to recoverplutonium, and to accelerate efforts to improve the safety and security of nuclear materials in Russia. The Houseand Senate bills funded some of these activities,but included the funding in existing programs rather than as a new initiative. The final bill continued this pattern. Environmental Management. DOE's Environmental Management Program (EM) is responsible for cleaning upenvironmental contamination and disposing of radioactive waste at DOE nuclear sites. The FY2001 enacted levelfor the program is $6.4 billion, nearly the fullrequest, excluding the Uranium Enrichment Decontamination and Decommissioning Fund. The House had voteda $300 million reduction from the budgetrequest, and the Senate had cut about $100 million. The enacted measure cuts all but $65 million of the $539 million request for the "privatization" of major DOE waste management projects, primarily a project tosolidify high-level radioactive waste at Hanford, Washington. Because DOE decided in spring 2000 that theHanford project would not be "privatized" after all,the conferees transferred $377 million from the privatization account to the Office of River Protection at Hanford,where the waste solidification effort will bemanaged under a more routine DOE contract. The conferees also approved a rescission of $97 million that hadpreviously been appropriated for the contract. The FY2001 EM budget request was based on the program's accelerated cleanup strategy, which attempts to maximize the number of sites that can be completelycleaned up by the end of FY2006. DOE managers contend that substantial long-term savings can be gained byfocusing on completing work at those sites,allowing the earliest possible termination of infrastructure costs. Major sites scheduled for shutdown during thatperiod are included in the "defense facilitiesclosure projects" account, for which $1.1 billion is included in the enacted bill, the same as the Administrationrequest. The largest facilities under that accountare the Rocky Flats site in Colorado and the Fernald site in Ohio. Another $981.5 million is provided for"site/project completion," about $65 million above therequest, for cleanup activities to be finished by 2006 at DOE sites that will remain in operation. Despite the 2006 cleanup goal, the bulk of EM's funding is in the "post-2006 completion" account, including the Office of River Protection at Hanford. Thisaccount includes cleanup projects that are expected to continue sometime after 2006. The FY2001 appropriationsact provides $3.46 billion for post-2006completion projects, including the $377 million transfer for the Hanford waste solidification project from theprivatization account. The Administration hadsought $2.97 billion. The Hanford waste project, called the Tank Waste Remediation System (TWRS), consists of a pilot vitrification plant that would turn liquid high-level waste intoradioactive glass logs for eventual disposal. The $450 million sought by DOE for TWRS was by far the largest itemin EM's FY2001 privatization fundingrequest. TWRS suffered a severe setback in spring 2000 after contractor BNFL Inc. announced that costs wouldtotal $15.2 billion, more than twice thepreviously estimated level. DOE announced in May 2000 that it would select a new contractor and switch totraditional financing methods for the project. TheHouse had cut DOE's FY2001 appropriations request for TWRS to $194 million, and the Senate had voted $259million. Another major privatized project is a facility to treat "mixed" radioactive and hazardous waste at the Idaho National Engineering and Environmental Laboratory,for which $65 million was requested and included in the enacted bill. The Idaho project, the Advanced MixedWaste Treatment Project, is opposed by someresidents of Wyoming who are concerned about radioactivity from a planned incinerator. In response to thatopposition, Energy Secretary Bill Richardson haltedfurther work on the incinerator on March 27, 2000, and established a panel to recommend alternatives. However,the construction of the rest of the treatmentproject is to proceed. The EM privatization effort is intended to reduce costs by increasing competition for cleanup work and shifting a portion of project risks from the federalgovernment to contractors. Profits to contractors would depend on their success in meeting project schedules andholding down costs; potentially, profits could besubstantially higher or lower than under traditional DOE contracting arrangements. In a typical non-privatized DOE project, a contractor would be hired to build and operate a facility with government funds. DOE would approve and pay all thecontractor's costs, and then award the contractor a profit based on performance. Under the privatization initiative,a contractor would be expected to raise almostall funding for necessary facilities and equipment for a project. The contractor would recover that investment andearn a profit by charging previously negotiatedfees to DOE for providing services under the contract, such as solidification of radioactive waste. With a privatized project, the contractor could earn higher profits by reducing costs, but the contractor could lose money if project costs were higher than expectedor the required services were not delivered. If DOE cancelled the project, the federal government would repay thecontractor's expenses to that date. To coverthat contingency, DOE needs enough funding to be appropriated as construction proceeds. If the project were tobegin operating as planned, the accumulatedappropriations would be used to pay for waste treatment under the contract. In the case of the Hanford TWRSproject, however, DOE concluded that the risksinvolved would cause the private sector to charge excessive prices to the government, negating the potential costsavings. DOE's $295 million request for decontamination and decommissioning of uranium enrichment plants and mill sites would have provided a 21% boost over theFY2000 appropriation, and the final bill provided a further increase to $345 million. Much of DOE's proposedincrease was targeted toward environmentalcleanup activities at DOE's uranium enrichment plants at Paducah, Kentucky, and Portsmouth, Ohio, which arecurrently leased to a private firm. Recentcontroversy has focused on environmental hazards posed by the plants, particularly contamination resulting fromthe past enrichment of reprocessed uranium atPaducah. The enacted measure provides an additional $42 million above the request for reimbursing the miningindustry for cleaning up uranium and thoriummill waste. The House had voted to cut the request to $260 million because of "severe funding constraints,"according to the Appropriations Committee report,while the Senate had approved $298 million. Civilian Nuclear Waste. The enacted bill provides up to $401million for the civilian nuclear waste program inFY2001 - nearly $30 million below the budget request but a $50 million increase over the FY2000 level. The Househad voted to provide $413 million, while theSenate had voted $351 million. As required by the Nuclear Waste Policy Act, DOE is studying Yucca Mountain,Nevada, as the site for a national wasterepository, currently scheduled to open in 2010. A final Environmental Impact Statement for the proposed YuccaMountain repository is to be completed inFY2001. DOE contends that increased funding will be needed to prepare a site recommendation report for thePresident in FY2001, and to work on a licenseapplication to be sent to the Nuclear Regulatory Commission (NRC) in 2002, but the House AppropriationsCommittee report contended that DOE could meet itsobjectives with a smaller increase. Funding for the program comes from two sources. Under the FY2001 budget request, $318.6 million was to be provided from the Nuclear Waste Fund, whichconsists of fees paid by nuclear utilities, and $112 million from the defense nuclear waste disposal account, whichpays for disposal of high-level waste generatedby the nuclear weapons program. The House voted to appropriate $213 million from the Nuclear Waste Fund and$200 million for the defense disposal account. The House also voted to rescind $85 million appropriated in FY1986 for interim nuclear waste storage - fundingthat was contingent on the passage of legislationthat was vetoed by the President. The Senate approved $292 million from the defense disposal account and $59million from the Nuclear Waste Fund, and alsoincluded the rescission of $85 million for interim storage. The final act provides $191 million from the NuclearWaste Fund and $200 million from the defenseaccount. It also rescinds $75 million from the previously appropriated $85 million for interim storage, andauthorizes DOE to use the remaining $10 million if itis needed to complete the Yucca Mountain site recommendation report on time, for a total of $401 million. The 2010 target for opening a permanent repository is 12 years later than the Nuclear Waste Policy Act deadline of January 31, 1998, for DOE to begin takingwaste from nuclear plant sites. Nuclear utilities and state utility regulators, upset over DOE's failure to meet the1998 disposal deadline, have won two federalcourt decisions upholding the Department's obligation to meet the deadline and to compensate utilities for anyresulting damages. Utilities have also won severalcases in the U.S. Court of Federal Claims, although specific damages have not yet been determined. In August2000, a U.S. appeals court ruled that utilities couldsue DOE for damages without first pursuing administrative remedies. Power Marketing Administrations. DOE's Power Marketing Administrations (PMAs) developed out of theconstruction of dams and multi-purpose water projects during the 1930s that are operated by the Bureau ofReclamation and the Army Corps of Engineers. Theoriginal intention behind these projects was conservation and management of water resources, including irrigation,flood control, recreation and other objectives. However, many of these facilities generated electricity for project needs. The PMAs were established to market theexcess power; they are the Bonneville PowerAdministration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA),and Western Area Power Administration(WAPA). The power is sold at wholesale to electric utilities and federal agencies "at the lowest possible rates ... consistent with sound business practice," and priority onPMA power is extended to "preference customers," which include municipal utilities, co-ops and other "public"bodies. The PMAs do not own the generatingfacilities, but they generally do own transmission facilities, except for Southeastern. The PMAs are responsible forcovering their expenses and repaying debt andthe federal investment in the generating facilities. The 104th Congress debated sale of the PMAs and did, in 1995, authorize divestiture of one PMA, the Alaska Power Administration. The future of the remainingPMAs may rest on decisions yet to be made about the treatment of public power in the broader context of electricutility restructuring. BPA receives no annual appropriation. The Administration's request for the other three PMAs for FY2001 was $199.6 million, a reduction of 25% from theFY2000 appropriation. The savings stemmed from the Administration's proposal that, beginning in FY2000,customers of SEPA, WAPA, and SWPA would beresponsible for making their own power purchases and transmission arrangements from any suppliers other thanthe PMA to satisfy their needs. Under thePurchase Power and Wheeling Program (PPW), the PMAs have purchased electricity and transmission capability,which is repaid by PMA customers, tosupplement federal generation. The premise behind the proposed elimination of the PPW program was thatderegulation should make it less expensive and lesscomplicated for PMA customers to make these arrangements. Another possible reason is that the moneyappropriated to the PMAs under PPW is repaid to theTreasury rather than to DOE. This means that the PPW appropriation is fully scored against the caps ondiscretionary domestic spending with which DOE mustcomply. Both the House and the Senate kept close to the Administration's proposed funding; the final billappropriated $200.7 million for the three PMAs. Independent agencies that receive funding from the Energy and Water Development bill include the NuclearRegulatory Commission (NRC), the AppalachianRegional Commission (ARC), and the Denali Commission. The House voted not to fund the Denali Commissionfor FY2001 or the proposed Delta RegionalAuthority. However, the Senate voted $20 million for the Delta Regional Authority and $30 million for the DenaliCommission, and that funding survived in thefinal bill. Table 7. Energy and Water Development Appropriations Title IV: Independent Agencies (in millions ofdollars) *Includes appropriations from the Nuclear Waste Fund, and excludes the NRC Inspector General's Office Nuclear Regulatory Commission. The final bill includes the full request by the Nuclear Regulatory Commission(NRC) for $481.9 million in FY2001, an increase of $16.9 million over FY2000. Major activities conducted byNRC include safety regulation of commercialnuclear reactors, licensing of nuclear waste facilities, and oversight of nuclear materials users. The funding requestprovides an additional $6.2 million for theNRC inspector general's office, which the enacted measure cuts to $5.5 million. Both the House and Senate hadtaken the same action. The House and Senate Appropriations Committees sharply criticized NRC in 1998 for allegedly failing to overhaul its regulatory system in line withimprovements in nuclear industry safety. The committees contended, among other problems, that NRC's regionaloffices were inconsistent with one another, thatNRC was inappropriately interfering with nuclear plant management, and that numerous NRC review processeswere outdated and unnecessary. But the panelspraised NRC for making improvements during the FY2000 budget cycle, and the House Appropriations Committeecontinued the positive tone in its FY2001report. For the past decade, NRC's budget has been offset 100% by fees on nuclear power plants and other licensed activities, including the DOE nuclear waste program. The nuclear power industry has long contended that the existing fee structure requires nuclear reactor owners to payfor a number of NRC programs, such asforeign nuclear safety efforts, from which they do not directly benefit. To account for that concern, the final billincludes an NRC proposal to phase down theagency's fee recovery to 90% during the next 5 years - two percentage points per year. The Senate had approveda similar phasedown plan. CRS Issue Briefs CRS Issue Brief IB88090. Nuclear Energy Policy CRS Issue Brief IB92059. Civilian Nuclear Waste Disposal . CRS Issue Brief IB10041. Renewable Energy: Tax Credit, Budget, and Electricity Restructuring Issues CRS Issue Brief IB10036. Restructuring DOE and Its Laboratories: Issues in the 106th Congress. CRS Issue Brief IB10019. Western Water Issues . CRS Reports CRS Report RL30307(pdf) . Department of Energy Programs: Programs and Reorganization Proposals . CRS Report 97-464. The National Ignition Facility and Stockpile Stewardship . CRS Report 96-212. Civilian Nuclear Spent Fuel Temporary Storage Options . CRS Report RL30445. Department of Energy Research and Development Budget for FY2001: Description and Analysis .
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The Energy and Water Development appropriations bill includes funding for civil projects of the Army Corps of Engineers, the Department of the Interior'sBureau of Reclamation (BuRec), most of the Department of Energy (DOE), and a number of independent agencies. The Administration requested $22.7 billionfor these programs for FY2001 compared with $21.2 billion appropriated in FY2000. The House bill, H.R. 4733 , passed on June 28, 2000, allocated$21.74 billion. The Senate passed its version of H.R. 4733 September 7, appropriating $22.5 billion. Theconference bill, reported September 27,appropriated a total of $23.3 billion. That bill was vetoed, largely for non-fiscal reasons, and the Senate October12 added a new version of the conference bill,with essentially the same funding but without the veto-drawing measure, to the VA/HUD appropriations measure, H.R. 4635 . On October 18, H.R. 5483 was introduced in the House, containing the Energy and Water appropriations provisions includedin the Senate-passed version. On thesame day the conference report to H.R. 4635 was filed, including the provisions of H.R. 5483 . TheHouse and the Senate agreed to theconference report on October 19, and the President signed the bill October 27 ( P.L. 106-377 ). Key issues involving Energy and Water Development appropriations programs include: authorization of appropriations for major water/ecosystem restoration initiatives for the Florida Everglades and California"Bay-Delta"; reform or review of Corps study procedures and agency management practices; spending for solar and renewable energy to address global climate change issues; a pending decision by DOE on the electrometallurgical treatment of nuclear spent fuel for storage and disposal, a process that opponentscontend raises nuclear proliferation concerns; implementation of the new National Nuclear Security Administration (NNSA); an expanded Threat Reduction Initiative aimed at ending Russia's production of plutonium that can be used to make nuclear weapons;and DOE management of its Spallation Neutron Source Project (SNS). Key Policy Staff Division abbreviation: RSI = Resources, Science, and Industry.
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I n January 2017, the House and Senate adopted a budget resolution for FY2017 ( S.Con.Res. 3 ), which reflects an agreement between the chambers on the FY2017 budget and sets forth budgetary levels for FY2018-FY2026. S.Con.Res. 3 also includes reconciliation instructions directing specific committees to develop and report legislation that would change laws within their respective jurisdictions to reduce the deficit. These instructions trigger the budget reconciliation process, which may allow certain legislation to be considered under expedited procedures. The reconciliation instructions included in S.Con.Res. 3 direct two committees in each chamber to report legislation within their jurisdictions that would reduce the deficit by $1 billion over the period FY2017-FY2026. In the House, the Committee on Ways and Means and the Energy and Commerce Committee are directed to report. In the Senate, the Committee on Finance and the Committee on Health, Education, Labor, and Pensions are directed to report. On March 6, 2017, the Committee on Ways and Means and the Energy and Commerce Committee independently held markups. Each committee voted to transmit its budget reconciliation legislative recommendations to the House Committee on the Budget. On March 16, 2017, the House Committee on the Budget held a markup and voted to report a reconciliation bill, H.R. 1628 , American Health Care Act (AHCA) of 2017. On March 22, the House Rules Committee held a hearing on the AHCA, and on March 24, the Rules Committee reported H.Res. 228 , providing for the consideration of the AHCA. H.Res. 228 , which was agreed to by the House on March 24, provided for four hours of debate on the AHCA and automatically amended the AHCA to incorporate five "manager's amendments" described as making technical and policy changes to the version of AHCA as reported by the House Budget Committee. After debate occurred on the bill, the Speaker pro tempore postponed further consideration of the bill. On April 6, 2017, the House Rules Committee reported H.Res. 254 , which provided that should the House return to consideration of the AHCA, an additional amendment would be automatically agreed to upon adoption of the resolution. H.Res. 254 was subsequently tabled, however, and as a result is no longer available to be considered by the House. On May 3, the House Rules Committee reported H.Res. 308 , providing for further debate of the AHCA, as amended by H.Res. 228 . H.Res. 308 , which was agreed to by the House on May 4, provided for one hour of further debate on the AHCA and automatically amended the AHCA (as amended by H.Res. 228 ) to incorporate three further amendments (one of which previously had been included in H.Res. 254 ). The House subsequently passed the AHCA on May 4, 2017, by a vote of 217 to 213. This CRS report includes information on the AHCA as passed by the House (which incorporates each of the eight amendments referenced in H.Res. 228 and H.Res. 308 , as noted above). The AHCA would repeal or modify several requirements for private health insurance plans established under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended). The bill would repeal the ACA's cost-sharing subsidies for lower-income individuals who purchase health insurance through the exchanges, and it would substitute the ACA's premium tax credit for a tax credit with different eligibility rules and calculation requirements. The bill effectively would eliminate the ACA's individual and employer mandates. In addition, the AHCA includes new programs and requirements that are not related to the ACA. For example, the bill would establish a late-enrollment penalty for certain individuals who do not maintain health insurance coverage, and it would create a new fund to provide funding to states for specified activities intended to improve access to health insurance and health care in the state. The AHCA also includes a number of changes to the Medicaid program. The bill would repeal some parts of the ACA related to Medicaid, such as the changes the ACA made to presumptive eligibility and the state option to provide Medicaid coverage to non-elderly individuals with income above 133% of the federal poverty level (FPL). The bill would amend the enhanced matching rates for the ACA Medicaid expansion and the ACA Medicaid disproportionate share hospital (DSH) allotment reductions. In addition, the AHCA includes a number of new Medicaid provisions that are not specific to aspects of the ACA. The most significant new provision would convert Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) starting in FY2020. One provision under the per capita cap would reduce the target amount for New York if certain local contributions to the state share are required. Also, states would have the option to receive block grant funding (i.e., a predetermined fixed amount of federal funding) instead of per capita cap funding for non-elderly, nondisabled, non-expansion adults and children starting in FY2020. The AHCA includes a provision that would permit states to require nondisabled, non-elderly, nonpregnant adults to satisfy a work requirement to receive Medicaid coverage. The AHCA could restrict federal funding for the Planned Parenthood Federation of America (PPFA) and its affiliated clinics for a period of one year, and it would appropriate an additional $422 million for FY2017 to the Community Health Center Fund. The bill also would repeal all funding for the ACA-established Prevention and Public Health Fund (PPHF). The AHCA would repeal many of the new taxes and fees established under the ACA, and it includes several provisions that would modify the rules governing health savings accounts (HSAs). The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) issued a cost estimate for the AHCA, as passed by the House on May 4, 2017. According to the estimate, the AHCA would reduce federal deficits by $119 billion over the period FY2017-FY2026. With respect to effects on health insurance coverage, CBO and JCT project that, in CY2018, 14 million more people would be uninsured under the AHCA than under current law, and in CY2026, 23 million more people would be uninsured than under current law. This report contains three tables that, together, provide an overview of the AHCA provisions, as amended by the five manager's amendments and the amendment referenced in H.Res. 254 . Table 1 includes provisions that apply to the private health insurance market, Table 2 includes provisions that affect the Medicaid program, and Table 3 includes provisions related to public health and taxes. Each table contains a column identifying whether the AHCA provision is related to an ACA provision (e.g., whether the AHCA provision repeals an ACA-related provision). In addition to the three tables, the report includes more detailed summaries of each AHCA provision and two graphics showing the effective dates of AHCA provisions. Figure 1 covers AHCA provisions related to the private health insurance market, public health, and taxes. Figure 2 covers AHCA provisions related to the Medicaid program. A table identifying key CRS policy staff appears at the end of the report. ACA Section 4002 established the Prevention and Public Health Fund (PPHF), to be administered by the Secretary of the Department of Health and Human Services (HHS), and provided the PPHF with a permanent annual appropriation. Amounts for each fiscal year are available to the HHS Secretary beginning October 1, the start of the respective fiscal year. Congress may explicitly direct the distribution of PPHF funds and did so for FY2014 through FY2017. Under the ACA, the PPHF's annual appropriation would increase from $500 million for FY2010 to $2 billion for FY2015 and each subsequent fiscal year. Congress has amended the provision two times, using a portion of PPHF funds as an offset for the costs of other activities. Annual appropriations to the PPHF in current law are as follows: $500 million for FY2010; $1.0 billion for each of FY2012 through FY2017; $900 million for each of FY2018 and FY2019; $1.0 billion for each of FY2020 and FY2021; $1.5 billion for FY2022; $1.0 billion for FY2023; $1.7 billion for FY2024; and $2.0 billion for FY2025 and each fiscal year thereafter. Section 101 would amend ACA Section 4002(b) by repealing all PPHF appropriations for FY2019 and subsequent fiscal years. It also would rescind any unobligated PPHF balance remaining at the end of FY2018. ACA Section 10503 created the Community Health Center Fund, which provided mandatory appropriations to the health center program from FY2011 through FY2015. These appropriations provided in subsection (a)(1)—of $3.6 billion annually—subsequently were extended through FY2017 by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ), Section 221(a). Prior to the ACA, the health center program had received only discretionary appropriations, which made up the entirety of the program's appropriated funds. Since the Community Health Center Fund's creation, the fund has made up an increasing percentage of the health center program's appropriation, ranging from 39% for FY2011 to 71% for FY2016. Under current law, for FY2018, the Community Health Center Fund will not receive a mandatory appropriation. Section 102 would provide an additional $422 million for FY2017 to the Community Health Center Fund. The Planned Parenthood Federation of America (PPFA) is an umbrella organization supporting 59 independent affiliates that operate approximately 661 health centers across the United States. Government funding—which includes federal, state, and local funds—constitutes the PPFA's largest source of revenue, an estimated 43% in the year ending June 30, 2015. The Congressional Budget Office (CBO) estimates that federal funds accounted for about one-third of PPFA's total revenue in 2013. PPFA receives federal grants (either directly or through another entity, such as a state) and reimbursements for providing services to beneficiaries enrolled in federally funded programs (e.g., Medicaid). It does not receive a direct annual appropriation of any kind. CBO and the U.S. Government Accountability Office (GAO) found that PPFA's largest source of federal funding is reimbursements for covered services provided to Medicaid beneficiaries. Specifically, CBO estimated that PPFA's federal Medicaid revenue was approximately $390 million in 2013. GAO examined FY2012 PPFA reimbursements and expenditures and found that PPFA had either received reimbursements or expended funds from discretionary programs and from direct spending (as defined in the Balanced Budget and Emergency Deficit Control Act of 1985, 2 U.S.C. 900(c)(8)). Direct spending refers to budget authority provided by laws other than through appropriations acts, entitlement authority, and the Supplemental Nutrition Assistance Program (SNAP). PPFA's reimbursements or expenditures from direct spending include reimbursements from Medicaid, Medicare, and the State Children's Health Insurance Program (CHIP) (listed in order of the amount of reimbursements received, according to GAO), as well as certain expenditures from the Social Service Block Grant, the Crime Victims Assistance Program (administered by the Department of Justice), the Personal Responsibility and Education Program, and SNAP (administered by the Department of Agriculture). PPFA also received funds from a number of discretionary programs, either directly or through another entity (e.g., a state). For example, in FY2012, GAO found that PPFA had expended discretionary funds from the Maternal and Child Health Block Grants programs, which are provided to states; some states provided these funds to PPFA entities to provide services. Under federal law, federal funds generally are not available to pay for abortions, except in cases of rape, incest, or endangerment of a mother's life. This restriction is the result of statutory and legislative provisions such as the Hyde amendment, which has been added to the annual HHS appropriations measure since 1976. Similar provisions exist in the appropriations measures for foreign operations, the District of Columbia, the Department of the Treasury, and the Department of Justice. Other codified restrictions limit the use of funds made available to the Department of Defense and the Indian Health Service. Section 103 would prohibit federal funds made available to a state through direct spending from being provided to a prohibited entity (as defined), either directly or through a managed care organization, for a one-year period beginning upon enactment of the AHCA. The provision specifies that this prohibition would be implemented notwithstanding certain programmatic rules (e.g., the Medicaid freedom of choice of provider requirement, which requires enrollees to be able to receive services from any willing Medicaid-participating provider and stipulates that states cannot exclude providers solely on the basis of the range of services they provide). Section 103 does not explicitly specify that certain federal funds would not be made available to PPFA or its affiliated entities; instead it refers to and defines a prohibited entity as an entity that meets the following criteria at enactment: (1) it is designated as a not-for-profit by the Internal Revenue Service (IRS); (2) it is described as an essential community provider that is primarily engaged in family planning services, reproductive health, and related medical care; (3) it is an abortion provider that provides abortion in cases that do not meet the Hyde amendment exception for federal payment; and (4) it received more than $350 million in Medicaid expenditures (both federal and state) in FY2014. When evaluating nearly identical language included in H.R. 3762 during the 114 th Congress, CBO determined that the prohibited entity likely would be PPFA because few other health care providers would meet the bill's definition. Prior to the enactment of the ACA, states were permitted to enroll certain groups (e.g., children, pregnant women, certain women with breast and cervical cancer, and individuals eligible for family planning services) for a limited period of time before completed Medicaid applications were filed and processed, based on a preliminary determination of likely Medicaid eligibility by certain specified Medicaid providers (i.e., qualified entities ). Qualified entities had to be certified by the state Medicaid agency as entities that were capable of making presumptive-eligibility determinations. The type of entity that could make presumptive-eligibility determinations depended on the beneficiary's Medicaid eligibility category. For example, certain providers of clinic and outpatient hospital services could determine presumptive eligibility for pregnant women. Agencies that served low-income children under federal programs, such as the Special Supplemental Nutrition Program for Women, Infants, and Children or school lunch programs (under the Richard B. Russell National School Lunch Act) could make presumptive-eligibility determinations for children. Individuals who were determined to be presumptively eligible for Medicaid then had to formally apply for coverage within a given time frame to continue receiving Medicaid benefits. The ACA expanded the types of entities that are permitted to make Medicaid presumptive-eligibility determinations as well as the groups of individuals for whom presumptive-eligibility determinations may apply. Specifically, the ACA allowed states to permit all hospitals that participate in Medicaid to elect to make presumptive-eligibility determinations for all Medicaid eligibility groups, beginning January 1, 2014. In addition, states that elected the option to provide a presumptive-eligibility period to children or pregnant women are permitted to provide a presumptive-eligibility period for (1) the ACA Medicaid expansion group, (2) the mandatory coverage group for individuals currently or formerly in foster care who are under the age of 26, (3) low-income families eligible under Section 1931 of the Social Security Act (SSA), or (4) the state option for coverage for individuals with income that exceeds 133% of the federal poverty level (FPL). Section 111(1)(A) would no longer allow hospitals that participate in Medicaid to elect to make presumptive-eligibility determinations effective January 1, 2020, and would terminate hospitals' ability to make such an election after that date by modifying SSA Section 1902(a)(47)(B). On January 1, 2020, Section 111(3) would terminate the authority of certain specified states (i.e., those that elected to provide a presumptive-eligibility period to children or pregnant women) to elect to make presumptive-eligibility determinations for the ACA Medicaid expansion group or the state option for coverage for individuals with income that exceeds 133% of FPL by modifying SSA Section 1920(e). The provision would not modify the authority of such states to elect to make presumptive-eligibility determinations for the mandatory foster care group under the age of 26 or for low-income families eligible under SSA Section 1931 based on a preliminary determination of likely Medicaid eligibility by a specified Medicaid provider. Eligibility for Medicaid is determined by federal and state law. States set individual eligibility criteria within federal standards. Individuals must meet both categorical (e.g., elderly, individuals with disabilities, children, pregnant women, parents, certain non-elderly childless adults) and financial (i.e., income and sometimes asset limits) criteria. In addition, individuals must meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them; others are optional. States are permitted to apply to the Centers for Medicare & Medicaid Services (CMS) for a waiver of federal law to expand health coverage beyond the mandatory and optional groups listed in federal statute. The ACA changed the mandatory Medicaid income eligibility level for poverty-related children aged 6 through 18 from 100% of FPL to 133% of FPL, beginning January 1, 2014. These children sometimes are referred to as stairstep children . For the 21 states that transitioned these children from the State Children's Health Insurance Program (CHIP) to Medicaid due to the ACA, coverage continues to be financed with states' CHIP annual allotment funding (i.e., state-specific annual limits) at the higher enhanced federal medical assistance percentage (E-FMAP), which is the CHIP federal matching rate. Section 111(1)(B) would repeal the stairstep children provision by amending SSA Section 1902(l)(2)(C) to specify the end date to the requirement to cover children up to 133% of FPL effective December 31, 2019. After that date, states would still be required to cover children in this group with household incomes of up to 100% of FPL. Medicaid is jointly financed by the federal government and the states. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP) rate, which varies by state and 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). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. The ACA Section 2401 established the Community First Choice option under SSA Section 1915(k), which allows states to offer community-based attendant services and supports as an optional Medicaid state plan benefit and receive a six-percentage-point increase to the FMAP rate for covered services. The Community First Choice option provides community-based attendant services and supports to assist eligible aged and disabled Medicaid beneficiaries in accomplishing activities of daily living, instrumental activities of daily living, and health-related tasks. In addition, states may provide transition expenses when a beneficiary moves from a nursing facility to a community-based setting or other services that increase independence. According to CMS, eight states have received approval for this option (California, Connecticut, Maryland, Montana, New York, Oregon, Texas, and Washington) as of January 2017. CMS also is providing technical assistance to states that are considering offering the Community First Choice option. Section 111(2) would repeal the increased FMAP rate for the Community First Choice option on January 1, 2020, by modifying SSA Section 1915(k)(2). Eligibility for Medicaid is determined by federal and state law. States set individual eligibility criteria within federal standards. Individuals must meet both categorical (e.g., elderly, individuals with disabilities, children, pregnant women, parents, certain non-elderly childless adults) and financial (i.e., income and sometimes asset limits) criteria. In addition, individuals must meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them; others are optional. States are permitted to apply to the CMS for a waiver of federal law to expand health coverage beyond the mandatory and optional groups listed in federal statute. The ACA established 133% of FPL as the new mandatory minimum Medicaid income-eligibility level for most non-elderly adults beginning January 1, 2014. On June 28, 2012, the U.S. Supreme Court issued its decision in National Federation of Independent Business v. Sebelius , finding that the enforcement mechanism for the ACA Medicaid expansion violated the Constitution, which effectively made the ACA Medicaid expansion optional for states. On January 1, 2014, 24 states and the District of Columbia implemented the ACA Medicaid expansion. Since then, seven additional states have decided to implement the expansion. Section 112(a)(1)(A)(i) and (iii) would codify the ACA Medicaid expansion as optional for states after December 31, 2019, by specifying the end date of the ACA Medicaid expansion (at SSA Section 1902(a)(10)(A)(i)(VIII)) as December 31, 2019, and adding a new Medicaid optional eligibility group (at SSA Section 1902(a)(10)(a)(ii)(XXIII)) beginning January 1, 2020. In addition to the ACA Medicaid expansion, the ACA created an optional Medicaid eligibility category for all non-elderly individuals with income above 133% of FPL up to a maximum level specified in the Medicaid state plan (or waiver), effective January 1, 2014. As of January 2017, the District of Columbia is the only state that has implemented this option. Section 112(a)(1)(A)(ii) would repeal the state option to extend coverage to non-elderly individuals above 133% of FPL (SSA Section 1902(a)(10)(A)(ii)(XX)) by specifying an end date of December 31, 2017. Under the ACA, an expansion enrollee is defined as an individual who is a non-elderly, nonpregnant adult with annual income at or below 133% of FPL and who is not entitled to or enrolled for benefits in Medicare Part A or enrolled for benefits under Medicare Part B. Section 112(a)(1)(B) would incorporate the existing ACA expansion enrollee definition for the purposes of the new optional Medicaid eligibility group for expansion enrollees. It also would define a grandfathered expansion enrollee as an expansion enrollee who was enrolled in Medicaid (under the state plan or a waiver) as of December 31, 2019, and does not have a break in eligibility for more than one month after that date. The provision also would apply these definitions to existing provisions in Medicaid statute that currently reference the ACA Medicaid expansion group (i.e., SSA Section 1902(a)(10)(A)(i)(VIII)), including provisions related to payments to states, medical assistance, alternative benefit plan coverage, presumptive eligibility, and so on. The ACA added a few FMAP exceptions, including the newly eligible federal matching rate (i.e., the matching rate for individuals who are newly eligible for Medicaid due to the ACA Medicaid expansion). The newly eligible individuals are defined as expansion enrollees who would not have been eligible for Medicaid in the state as of December 1, 2009 (or were eligible under a waiver but were not enrolled because of limits or caps on waiver enrollment). States received 100% federal matching rate (i.e., full federal financing) for the cost of providing Medicaid coverage to newly eligible individuals, from CY2014 through CY2016. The rate for newly eligible individuals phases down to 95% in CY2017, 94% in CY2018, 93% in CY2019, and 90% for CY2020 and subsequent years. Section 112(a)(2)(A) would maintain the current structure of the newly eligible matching rate for expenditures before January 1, 2020, for states that covered newly eligible individuals as of March 1, 2017. However, after December 31, 2019, the newly eligible matching rate would apply only to expenditures for newly eligible individuals who are enrolled in Medicaid as of December 31, 2019, and do not have a break in eligibility for more than one month after that date (i.e., grandfathered expansion enrollees). The ACA added a few FMAP exceptions, including the expansion state federal matching rate, which is the federal matching rate available for expansion enrollees without dependent children in expansion states who were eligible for Medicaid on March 23, 2010. The expansion state federal matching rate varies from state to state. The formula used to calculate the expansion state federal matching rates is based on each state's regular FMAP rate and annual transition percentages set in statute. The annual transition percentages for the expansion state matching rate formula are 50% in CY2014, 60% in CY2015, 70% in CY2016, 80% in CY2017, 90% in CY2018, and 100% for CY2019 and subsequent years. Table 4 shows the range for the expansion state matching rate. From CY2014 through CY2018, the expansion state federal matching rate is lower than the newly eligible federal matching rate and higher than each state's regular FMAP rate. The expansion state federal matching rate phases up until CY2019, when the expansion state federal matching rate will match the newly eligible federal matching rate for CY2019 and subsequent years. Section 112(a)(2)(B) would amend SSA Section 1905(z)(2) by amending the formula for the expansion state matching rate so that the matching rate would stop phasing up after CY2017 and the transition percentage would remain at the CY2017 level for each subsequent year. In addition, after December 31, 2019, the expansion state matching rate would apply only to expenditures for eligible individuals who were enrolled in Medicaid as of December 31, 2019, and do not have a break in eligibility for more than one month after that date (i.e., grandfathered expansion enrollees). As an alternative to providing all the mandatory and selected optional benefits under traditional Medicaid, the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) gave states the option to enroll state-specified groups (with exceptions for selected special-needs subgroups) in what previously was referred to as benchmark or benchmark-equivalent coverage but currently is called alternative benefit plans (ABPs). States that choose to implement the ACA Medicaid expansion are required to provide ABP coverage (with exceptions for selected special-needs subgroups), rather than traditional Medicaid, to the individuals eligible for Medicaid through the ACA Medicaid expansion. In addition, states have the option to provide ABP coverage to other subgroups. The ACA made significant changes to both ABP design and ABP requirements. Among these changes, the ACA required such packages to provide at least the 10 essential health benefits (EHB), which are (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services, including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatric services, including oral and vision care. Section 112(b) would specify that SSA Section 1937(b)(5) would not apply after December 31, 2019. This means that Medicaid ABP coverage would no longer be required to include the EHB after that date. SSA Section 1923 requires states to make Medicaid disproportionate share hospital (DSH) payments to hospitals treating large numbers of low-income patients. This provision is intended to recognize the disadvantaged financial situation of those hospitals because low-income patients are more likely to be uninsured or Medicaid enrollees. Hospitals often do not receive payment for services rendered to uninsured patients, and Medicaid provider payment rates generally are lower than the rates paid by Medicare and private insurance. Whereas most federal Medicaid funding is provided on an open-ended basis, federal Medicaid DSH funding is capped. Each state receives an annual DSH allotment, which is the maximum amount of federal matching funds that each state is permitted to claim for Medicaid DSH payments. The ACA reduced the number of uninsured individuals in the United States through its health insurance coverage provisions. Built on the premise that with fewer uninsured individuals there should be less need for Medicaid DSH payments, the ACA included a provision directing the HHS Secretary to make aggregate reductions in Medicaid DSH allotments for FY2014 through FY2020. However, multiple subsequent laws have amended these reductions. Under current law, the aggregate reductions to the Medicaid DSH allotments are to impact FY2018 through FY2025. After FY2025, allotments will be calculated as though the reductions never occurred, which means the allotments will include the inflation adjustments for the years during the reductions. Section 113 would amend SSA Section 1923(f) by eliminating the Medicaid DSH allotment reductions after FY2019. This would mean that the aggregate reductions to the Medicaid DSH allotments would impact FY2018 and FY2019. Under Section 113, after FY2019, allotments would be calculated as though the reductions never occurred, which means the allotments would include the inflation adjustments for the years during the reductions. In addition, non-expansion states would be exempt from the ACA Medicaid DSH allotment reductions. For this provision, expansion state would be defined as a state that provides eligibility under the ACA Medicaid expansion or the state option for coverage for individuals with incomes that exceed 133% of FPL as of July 1 of the previous fiscal year. A non-expansion state would be defined as a state that is not an expansion state. Internal Revenue Code (IRC) Section 36B, as established under the ACA, provides premium assistance tax credits for individuals to purchase coverage through the health insurance exchanges, among other purposes. IRC Section 36B includes a definition of household income, based on modified adjusted gross income (MAGI), which is used to determine eligibility for various federal health programs, including Medicaid. As of January 1, 2014, MAGI rules are used in determining eligibility for most of Medicaid's non-elderly populations, including the ACA Medicaid expansion. Medicaid's MAGI income-counting rule is set forth in law and regulation. Under the Medicaid MAGI counting rule, the state looks at each individual's MAGI, deducts 5%, which the law provides as a standard disregard for individuals at the highest income limit for coverage, and compares that income to the income standards set by the state in coordination with CMS. For Medicaid, MAGI is defined as the IRC's adjusted gross income (AGI, which reflects a number of deductions, including trade and business deductions, losses from sale of property, and alimony payments) increased by certain types of income (e.g., tax-exempt interest income received or accrued during the taxable year and the nontaxable portion of Social Security benefits). In addition, under Medicaid regulations certain types of income are subtracted (e.g., certain scholarships and fellowships) to arrive at MAGI. Also under Medicaid regulations, irregular income received as a lump sum (e.g., state income tax refund, lottery or gambling winnings, one-time gifts or inheritances) is counted as income only in the month received. In addition to specifying the types of household income that must be considered during eligibility determinations, the regulations also define household . The income of any person defined as a part of an individual's household must be counted when determining that individual's income level for purposes of a Medicaid eligibility determination. Medicaid program regulations make a distinction with regard to the budget period when determining income eligibility for applicants and new enrollees as compared to eligibility redeterminations for current enrollees. Specifically, income eligibility for applicants and new enrollees is based on current monthly household income. When redetermining eligibility for current Medicaid enrollees, states are permitted to use current monthly income and family size or projected annual income and family size for the remaining months of the calendar year. For states that choose the latter measure when redetermining eligibility, Medicaid requires the applicant to predict income and household size for the remaining months of the calendar year. Section 114(a) would amend SSA Section 1902(a)(17) to require states to consider "qualified lottery winnings" and/or "qualified lump sum income" received by an individual on or after January 1, 2020, when determining eligibility for Medicaid based on MAGI for each such individual. Such income would not be counted as household income when determining Medicaid eligibility for other members (aside from the individual's spouse) of the individual's household. Winnings and/or income in an amount less than $80,000 would be considered in the month that such winnings and/or income are received. Amounts greater than or equal to $80,000 but less than $90,000 would be prorated over a period of two months. Amounts greater than or equal to $90,000 but less than $100,000 would be prorated over a period of three months. For purpose of prorating winnings and/or income in amounts greater than or equal to $100,000, one additional month would be added for each increment of $10,000 received, not to exceed 120 months (or 10 years) for winnings and/or income of $1,260,000 or more. The provision would establish a state option for a hardship exemption for individuals for whom the denial of Medicaid eligibility based on such income would cause an undue medical or financial hardship as determined by criteria established by the HHS Secretary. In addition, it would require states to inform individuals in advance of their loss of Medicaid eligibility, as well as the date that such individual would be permitted to reapply. The provision would define qualified lottery winnings as winnings (including amounts awarded as a lump-sum payment) from a state-conducted sweepstakes, lottery, or pool, or from a lottery operated by a multistate or multi-jurisdictional lottery association. The bill would define qualified lump - sum income as income received as a lump sum (1) from monetary winnings from gambling (as defined by the HHS Secretary and including monetary winnings from gambling activities described in Section 1955(b)(4) of Title 18 of the United States Code ) or (2) as liquid assets from the estate of a deceased individual (as defined in Section 1917(b)(4) of SSA). The bill would specify that states may recover lottery winnings awarded to the individual to pay for Medicaid medical assistance furnished to the individual. Eligibility for Medicaid is determined by federal and state law. States set individual eligibility criteria within federal standards. Once an individual is determined eligible for Medicaid, coverage is effective either on the date of application or the first day of the month of application. Benefits must be covered retroactively for services provided in or after the third month before the month of application for individuals who are subsequently determined eligible, if the individual would have been eligible during that period had he or she applied (or had someone applied for him or her), regardless of whether the individual is alive when application for Medicaid is made. Coverage generally stops at the end of the month in which a person no longer meets the requirements for eligibility. Section 114(b) would amend SSA Sections 1902(a)(34) and 1905(a) to limit the effective date for retroactive coverage of Medicaid benefits to the month in which the applicant applied. This provision would apply to Medicaid applications made (or deemed to be made) on or after October 1, 2017. DRA established SSA Section 1917(f), which required limitations on the amount of home equity that an applicant could shield from asset limits that otherwise would disqualify the applicant from Medicaid eligibility for nursing facility services or other Medicaid-covered long-term services and supports (LTSS). Prior to enactment of the DRA, Medicaid deferred to asset-counting rules under the Supplemental Security Income (SSI) program and excluded the entire value of an applicant's home for the purposes of Medicaid LTSS eligibility. Under current law, Medicaid bars eligibility if the applicant's equity interest in the home exceeds a statutorily determined limit, which is annually adjusted. Initially, the minimum and maximum home-equity dollar limits specified in statute were $500,000 and $750,000, respectively. Beginning in 2011, these dollar amounts were updated annually to reflect the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U), rounded to the nearest $1,000. In 2017, the minimum home-equity limit is $560,000. However, a state may elect to substitute an amount that exceeds $560,000 but does not exceed $840,000 in 2017. In doing so, states may choose to apply a higher home-equity limit to specific geographic areas within a state. Individuals who have a spouse, child under the age of 21, or child who is blind or disabled (under SSI or as defined by SSA Section 1614) and lawfully residing in the individual's home are able to exempt the home as a countable asset. Also, states can choose not to apply this rule if the state determines that doing so would cause an undue hardship in a given case. In addition to the District of Columbia, the following 10 states choose a home-equity limit that is above the minimum amount: California, Connecticut, Hawaii, Idaho, Maine, Massachusetts, New Jersey, New Mexico, New York, and Wisconsin. Section 114(c) would repeal the authority for states to elect to substitute a higher home-equity limit amount that is above the statutory minimum amount (SSA Section 1917(f)(1)(B)). It would apply to Medicaid eligibility determinations that are made more than 180 days after enactment. In situations where the HHS Secretary determines that state legislation would be required to amend the state plan, then states would have additional time to comply with these requirements. On January 1, 2014, when the ACA Medicaid expansion went into effect, 24 states and the District of Columbia included the expansion as part of their Medicaid programs. Since then, seven additional states have implemented the expansion at different times: Michigan (April 1, 2014), New Hampshire (July 1, 2014), Pennsylvania (January 1, 2015), Indiana (February 1, 2015), Alaska (September 1, 2015), Montana (January 1, 2016), and Louisiana (July 1, 2016). For the most part, states establish their own payment rates for Medicaid providers. Federal statute requires that these rates are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that covered benefits will be available to Medicaid enrollees at least to the same extent they are available to the general population in the same geographic area. In some cases, states make supplemental payments to Medicaid providers that are separate from, and in addition to, the standard payment rates for services rendered to Medicaid enrollees. Medicaid DSH payments are one type of supplemental payment, and federal statute requires that states make Medicaid DSH payments to hospitals treating large numbers of low-income patients. Section 115 would add a new Section 1923A to the SSA to establish safety-net funding for non-expansion states. For FY2018 through FY2022, each state (defined as the 50 states and the District of Columbia) that has not implemented the ACA Medicaid expansion (through the state plan or a waiver) as of July 1 of the preceding year may receive safety-net funding to adjust payment amounts for Medicaid providers. For these payment adjustments using the safety-net funding, non-expansion states would receive an increased matching rate of 100% for FY2018 through FY2021 and 95% for FY2022. The maximum amount of safety-net funding for all non-expansion states would be $2.0 billion for each year, for a total of $10 billion from FY2018 through FY2022. Each non-expansion state's allotment for each year would be determined according to the number of individuals in the state with income below 138% of FPL in 2015 relative to the total number of individuals with income below 138% of FPL for all the non-expansion states in 2015. The 2015 American Community Survey one-year estimates as published by the Bureau of the Census would be used to determine the portion of each state's population that is below 138% of FPL. The payment adjustments to providers may not exceed the provider's costs incurred to furnish health care services for Medicaid enrollees or the uninsured. The provider's costs would be determined by the Secretary, and the costs would be net of other Medicaid payments and payments from uninsured patients. If a non-expansion state implements the ACA Medicaid expansion, the state would no longer be treated as a non-expansion state for safety-net funding for subsequent years. As of January 1, 2014, SSA Section 1902(e)(14) requires states to determine income eligibility based on MAGI for most of Medicaid's non-elderly populations, including the ACA Medicaid expansion and the state option for coverage for individuals with income that exceeds 133% of FPL. For such individuals, states are required to redetermine Medicaid eligibility once every 12 months, except in the case where the Medicaid agency receives information about a change in a beneficiary's circumstances that may affect eligibility. In this case, the Medicaid agency must redetermine Medicaid eligibility at the appropriate time based on such changes. Beginning October 1, 2017, Section 116(a) would amend SSA Section 1902(e)(14) to require states to redetermine Medicaid eligibility at least every six months (or sooner in the case where the Medicaid agency receives information about a change in a beneficiary's circumstances that may affect eligibility) for individuals eligible for Medicaid through (1) the ACA Medicaid expansion or (2) the state option for coverage for individuals with income that exceeds 133% of FPL. Medicaid is jointly financed by the federal government and the states. The federal government's share of a state's expenditures for most Medicaid services is called the FMAP rate, which varies by state and 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). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. Most administrative activities receive a 50% federal matching rate. Section 116(b) would increase the federal match for the administrative activities attributable to carrying out the increased frequency of Medicaid eligibility redeterminations required under Section 116(a) by five percentage points. This increased federal match would be available from October 1, 2017, through December 31, 2019. Medicaid is a program that pays for certain medical services furnished to low-income individuals. It is jointly financed by the federal government and participating states. Generally, participating states must have a state medical assistance plan that complies with SSA Section 1902. Among other things, Section 1902(a)(10)(A)(i) identifies specific categories of beneficiaries that must be covered under a state plan, as well as a requirement in Section 1902(a)(10)(B) that medical assistance offered to any individual in such a mandatory eligibility group may not be less in amount, duration, or scope than assistance made available to any other person under the state plan. The Medicaid statute does not appear to expressly address whether a state plan may permissibly impose work requirements as a condition of receiving benefits for most beneficiaries. However, SSA Section 1931 authorizes states to terminate Temporary Assistance for Needy Families (TANF) recipients' eligibility for medical assistance under Medicaid if the individuals' TANF benefits are denied for failing to comply with work requirements imposed under the TANF program. Section 117(a) would modify SSA Section 1902 by adding a new Section at 1902(oo) to permit states, effective October 1, 2017, to require nondisabled, non-elderly, nonpregnant adults to satisfy a work requirement as a condition for receipt of Medicaid medical assistance. The provision would define work requirements as an individual's participation in work activities for a specified period of time as administered by the state. The provision would incorporate, by reference, the definition of work activities as they appear in SSA Section 407(d) under Part A of Title IV (Block Grants to States for TANF), and would include unsubsidized employment; subsidized private-sector employment; subsidized public-sector employment; work experience (including work associated with the refurbishing of publicly assisted housing) if sufficient private-sector employment is not available; on-the-job training; job search and job readiness assistance; community service programs; vocational educational training (not to exceed 12 months with respect to any individual); job skills training directly related to employment; education directly related to employment, in the case of a recipient who has not received a high school diploma or a certificate of high school equivalency; satisfactory attendance at secondary school or a course of study leading to a certificate of general equivalence, in the case of a recipient who has not completed secondary school or received such a certificate; and the provision of child-care services to an individual who is participating in a community service program. Participating states would be required to exempt the following groups from participation in the work requirement: (1) pregnant women (for the duration of the pregnancy and through the end of the month in which the 60-day postpartum period ends); (2) individuals under 19 years of age; (3) an individual who is the sole parent or caretaker relative in the family of (a) a child who is under the age of 6 or (b) a child with disabilities; or (4) an individual who is less than 20 years of age, who is married or a head of household and who (a) maintains satisfactory attendance at secondary school or the equivalent or (b) participates in education directly related to employment. Medicaid is jointly financed by the federal government and the states. The federal government's share of a state's expenditures for most Medicaid services is called the FMAP rate, which varies by state and 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). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. Most administrative activities receive a 50% federal matching rate. Section 117(b) would increase the federal match for administrative activities to implement the work requirement under Section 117(a) by five percentage points in addition to any other increase to such federal matching rate. 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 FY2015, Medicaid is estimated to have provided health care services to 70 million individuals at a total cost of $552 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. In addition, there are several waiver and demonstration authorities that allow states to operate their Medicaid programs outside of federal rules. 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. The federal government's share of most Medicaid expenditures is called the 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). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. After a state has made Medicaid expenditures, it can draw down federal matching funds. CMS makes quarterly grant awards to states to cover the federal share of Medicaid expenditures based on the quarterly estimates states submit to CMS on the Form CMS-37. Each state must submit a Form CMS-64 no later than 30 days after the end of each quarter with the state's accounting of actual recorded expenditures. CMS then reviews the expenditures reported on the Form CMS-64 to reconcile the states' estimates from the CMS-37 with the actual documented expenditures to ensure that the reported expenditures are allowable under the Medicaid statute and the Medicaid state plan. 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. Federal Medicaid funding to states is open-ended. Section 121 would reform federal Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) starting in FY2020. Specifically, each state's spending in FY2016 would be the base to set targeted spending for each enrollee category in FY2019 and subsequent years for that state. Each state's targeted spending amounts would increase annually by the applicable annual inflation factor, which varies by enrollee category. Starting in FY2020, any state with spending higher than its specified targeted aggregate amount would receive reductions to its Medicaid funding for the following fiscal year. One provision would reduce the target amount for New York if certain local government contributions to the state share are required. States would have the option to receive block grant funding (i.e., a predetermined fixed amount of federal funding) instead of per capita cap funding for non-elderly, nondisabled, non-expansion adults and children starting in FY2020. Some statutory requirements would not apply under the block grant option. States would elect this option for a 10-year period. Section 121(1) would add references to the new SSA Section 1903A (explained below) in SSA Section 1903, which is the section of statute that lays out how the federal government makes payments to states for the Medicaid program. Section 121(2) would add a new SSA Section 1903A. The following provides a description of what would be the new SSA Section 1903A. Section (a). Application of Per Capita Cap on Payments for Medical Assistance Expenditures Under Section (a) of the new SSA Section 1903A, beginning in FY2020, if a state has excess aggregate medical assistance expenditures for a fiscal year, the state's quarterly Medicaid payments from the federal government for the following fiscal year would be reduced by one-quarter of the excess aggregate medical assistance payments for the previous fiscal year. This section would be applicable to the 50 states and the District of Columbia. Excess aggregate medical assistance expenditures for the state and fiscal year would be the amount by which the adjusted total medical assistance expenditures (defined under Section (b) of the new SSA Section 1903A) exceeds the amount of target total medical assistance expenditures (defined under Section (c) of the new SSA Section 1903A). Excess aggregate medical assistance payments would be the product of the excess aggregate medical assistance expenditures and the federal average medical assistance matching percentage. The federal average medical assistance matching percentage for each state and fiscal year would be the ratio of (1) the amount of federal payments made to the state under SSA Section 1903(a)(1) for medical assistance expenditures in the fiscal year prior to any potential reduction applied under this section to (2) the amount of the state's total medical assistance expenditures for the fiscal year (including both federal and state expenditures). Section (b). Adjusted Total Medical Assistance Expenditures Under Section (b), there would be two formulas for adjusted total medical assistance expenditures : one formula for FY2016 and another formula for FY2019 and subsequent years. Both formulas for adjusted total medical assistance expenditures would exclude expenditures for Medicaid DSH payments under SSA Section 1923, Medicare cost-sharing payments under SSA Section 1905(p)(3), and safety-net provider payment adjustments in non-expansion states. The FY2016 formula for adjusted total medical assistance expenditures would be the product of (1) the amount of medical assistance expenditures for a state reduced by the amount of any excluded expenditures in FY2016 and (2) the 1903A FY2016 population percentage , which is the HHS Secretary's calculation of the percentage of actual medical assistance expenditures attributable to 1903A enrollees in a state in FY2016 (discussed below, under Section (e)). The FY2019 or subsequent fiscal years formula for adjusted total medical assistance expenditures for a state and fiscal year would be the amount of medical assistance expenditures attributable to 1903A enrollees reduced by any excluded expenditures. Medical assistance expenditures would be defined as medical assistance payments as reported under the medical services category on the Form CMS-64 quarterly expense report (or successor to such form) for which payment is made pursuant to SSA Section 1903(a)(1). The language specifies that the medical assistance expenditures for FY2019 and subsequent years would include non-DSH supplemental payments (including certain waiver expenditures for delivery system reform incentive pools, uncompensated care pools, and designated state health programs). The medical assistance expenditures for FY2019 and subsequent years would not include expenditures for the Vaccines for Children program. Section (c). Target Total Medical Assistance Expenditures Under Section (c) of the new SSA Section 1903A, target total medical assistance expenditures for a state and fiscal year would be the sum of the following formula for each 1903A enrollee category (defined under Section (e) of the new SSA Section 1903A): (1) target per capita medical assistance expenditures for the enrollee category times (2) the number of 1903A enrollees for such 1903A enrollee category. For FY2020, the target per capita medical assistance expenditures for each 1903A enrollee category would be the provisional FY2019 target per capita amount (defined in Section (d) of the new SSA Section 1903A) for such enrollee category for the state increased by the applicable annual inflation factor. For subsequent years, the target per capita medical assistance expenditures for each 1903A enrollee category would be the target per capita medical assistance expenditures for the previous year for such enrollee category for the state increased by the applicable annual inflation factor. The applicable inflation factor would vary by 1903A enrollee category. For the children; expansion enrollee; and other non-elderly, nondisabled, non-expansion adult categories, the applicable inflation factor would be the percentage increase in the medical care component of the CPI-U from September of the previous fiscal year to September of the fiscal year involved. For the elderly and disabled categories, the applicable inflation factor would be the percentage increase in the medical care component of the CPI-U from September of the previous fiscal year to September of the fiscal year involved plus one percentage point. Beginning in FY2020, there would be a decrease in the target total medical assistance expenditures for states that (1) have a Medicaid DSH allotment in FY2016 that was more than six times the national average and (2) require political subdivisions within the state to contribute funds toward medical assistance or other expenditures under Medicaid (including under a waiver) for the fiscal year involved. The decrease would be the amount that political subdivisions in the state are required to contribute under Medicaid without reimbursement from the state other than the following required contributions: (1) from political subdivisions with a population of more than 5 million that impose local income tax upon their residents and (2) for certain administrative expenses required to be paid by the political subdivision as of January 1, 2017. Section (d). Calculation of FY2019 Provisional Target Amount for Each 1903A Enrollee Category The HHS Secretary would calculate for each state the provisional FY2019 per capita target amounts for each 1903A enrollee category. The formula for the provisional FY2019 per capita target amounts would be the average per capita medical assistance expenditures for the state for FY2019 for such enrollee category multiplied by the ratio of (1) the product of the FY2019 average per capita amount for the state and the number of 1903A enrollees for the state in FY2019 to (2) the amount of FY2019 adjusted total medical assistance expenditures for the state. This calculation would be subject to treatment of states expanding coverage after FY2016 (discussed in Section (f) of the new SSA Section 1903A). The average per capita medical assistance expenditures for FY2019 for each 1903A enrollee category would be the FY2019 adjusted total medical assistance expenditures for the state divided by the number of 1903A enrollees for the state in FY2019. The FY2019 adjusted total medical assistance expenditures would exclude non-DSH supplemental expenditures (including certain waiver expenditures for delivery system reform incentive pools, uncompensated care pools, and designated state health programs) for FY2019 and would be increased by the non-DSH supplemental payment percentage for FY2016, which is the ratio of the total amount of non-DSH supplemental payments for FY2016 to adjusted total medical assistance expenditures for FY2016. For each state, the FY2019 average per capita amount would be the FY2016 average per capita medical assistance expenditures increased by the percentage increase in the medical care component of the CPI-U from September 2016 to September 2019. The FY2016 average per capita medical assistance expenditures would be the amount of the FY2016 adjusted total medical assistance expenditures (discussed in Section (b)) divided by the number of 1903A enrollees for the state in FY2016. Section (e). 1903A Enrollee; 1903A Enrollee Category This section would define 1903A enrollees as Medicaid enrollees (i.e., individuals eligible for medical assistance under Medicaid and enrolled under the Medicaid state plan or waiver) for the month in a state that is not covered under the block grant option and does not fall into one of the following categories: individuals covered under a CHIP Medicaid expansion program (SSA Section 2101(a)(2)), individuals who receive medical assistance through an Indian Health Service facility (the third sentence under SSA Section 1905(b)), individuals entitled to medical assistance coverage of breast and cervical cancer treatment due to screening under the Breast and Cervical Cancer Early Detection Program (SSA Section 1902(a)(10)(A)(ii)(XVIII)), or the following partial-benefit enrollees: unauthorized (illegally present) aliens eligible for Medicaid emergency medical care (SSA Section 1903(v)(2)), individuals eligible for Medicaid family planning options (SSA Section 1902(a)(10)(A)(ii)(XXI)), individuals infected with tuberculosis (SSA Section 1902(a)(10)(A)(ii)(XII)), dual-eligible individuals eligible for coverage of Medicare cost sharing (SSA Section 1905(p)(3)(A)(i) or (ii)), or individuals eligible for premium assistance (SSA Section 1906 or 1906A). The enrollment count would be based on the average monthly amount reported through the Form CMS-64 as required under Section (h). The 1903A enrollee categories would be (1) elderly; (2) blind and disabled; (3) children; (4) expansion enrollees; and (5) other non-elderly, nondisabled, non-expansion adults. Section (f). Special Payment Rules Section (f) of the new SSA Section 1903A would provide special payment rules for (1) payments made under Section 1115 waivers or Section 1915 waivers, (2) states that did not have ACA Medicaid expansion in FY2016 and later implement the expansion, and (3) states that fail to satisfactorily submit data in accordance with Section (h)(1) of the new SSA Section 1903A. Section (g). Recalculation of Certain Amounts for Data Errors Section (g) of the new SSA Section 1903A would allow for the recalculation of certain amounts for data errors. Any adjustment under this section would not result in an increase of the target total medical assistance expenditures exceeding 2%. Section (h). Required Reporting and Auditing of CMS-64 Data; Transitional Increase in Federal Matching Percentage for Certain Administrative Expenses In addition to the required reporting for ACA Medicaid expansion on the Form CMS-64 report as of January 1, 2017, Section (h) of the new SSA Section 1903A would impose additional reporting requirements on states starting October 1, 2018. The additional reporting requirements would include data on medical assistance expenditures within categories of services and categories of enrollees (including each 1903A enrollee category and the enrollment categories excluded from the definition of 1903A enrollees). In addition, Section (h) would require reporting of the number of enrollees within each enrollee category. The HHS Secretary would determine the specific reporting requirements. The HHS Secretary also would conduct audits of each state's enrollment and expenditures reported on the Form CMS-64 for FY2016, FY2019, and subsequent years. These audits may be conducted on a representative sample, as determined by the HHS Secretary. This section would provide a temporary increase to the federal matching percentage for the administrative activities related to improving data reporting systems. The temporary increases would impact expenditures on or after October 1, 2017, and before October 1, 2019. Section (i). Flexible Block Grant Option for States Section (i) would provide states with an option to receive block grant funding instead of per capita cap funding for a portion of their Medicaid program starting in FY2020. States would elect this option for a 10-year period. When a state uses the block grant option, the enrollees covered under the block grant would not be counted as 1903A enrollees for the per capita limitations. If the block grant option were not extended after the 10-year period, then the per capita limitations would apply as if the block grant option had never taken place. The block grant funds could be used only to provide coverage of the health care assistance specified in the block grant state plan, and the coverage provided to the enrollees under the block grant option would be instead of other Medicaid coverage. No payment would be made through the block grant option unless the state has an approved block grant state plan. A block grant state plan would be deemed approved by the HHS Secretary unless within 30 days of receipt the Secretary finds the plan incomplete or actuarially unsound. For the block grant state plan, some statutory requirements would not apply. These requirements are as follows: statewide operation, which requires a state pan to be in effect throughout the state, with certain exceptions (SSA Section 1902(a)(1)); comparability, which means services available to the various population groups must be equal in amount, duration, and scope within a state (SSA Section 1902(a)(10)(B)); reasonable standards for income and resources, meaning states must use eligibility standards and methodologies that are reasonable and consistent with the objectives of Medicaid, with certain exceptions (SSA Section 1902(a)(17)); and freedom of choice, which means enrollees must be able to obtain services from any qualified Medicaid provider that undertakes to provide services to them, with certain exceptions (SSA Section 1902(a)(23)). The block grant state plan would be required to specify who is covered under the block grant, the conditions of eligibility for the block grant, and the services covered under the block grant. Under their block grant, states could cover either children and other non-elderly, nondisabled, non-expansion adults or only other non-elderly, nondisabled, non-expansion adults. Under the block grant option, states would be able to specify the conditions of eligibility. However, states would be required to provide coverage to pregnant women that are currently required to be covered by Medicaid programs under SSA Section 1902(a)(10)(A)(i). If children are included in a state's block grant, the state would be required to provide coverage to children that are currently required to be covered by Medicaid programs under SSA Section 1902(a)(10)(A)(i) and SSA Section 1902(e)(4). This would include the poverty-related populations of pregnant women with income up to 133% of FPL, children aged 0 through 5 with income up to 133% of FPL, and children aged 6 through 18 with income up to 100% of FPL. In addition, this would include deemed newborns, foster care children, and former foster care children up to the age of 26, among others. States using the block grant option would be able to determine the types of items and services covered under the block grant (with the exception of some required services) in addition to the amount, duration, and scope for those services. Also, states would be able to specify the cost-sharing and delivery model for the block grant. This coverage could differ from the Medicaid coverage provided outside of the block grant, but states would be required to provide coverage of the following services under the block grant: hospital care; surgical care and treatment; medical care and treatment; obstetrical and prenatal care and treatment; prescribed drugs, medicines, and prosthetic devices; other medical supplies and services; and health care for children under the age of 18. The block grant funding for the initial fiscal year in the 10-year period would be equal to the sum of the following formula for each block grant category (i.e., children or other, non-elderly, nondisabled, non-expansion adults). The formula for each block grant category would be (1) the target per capita medical assistance expenditures for such state and fiscal year times (2) the number of 1903A enrollees for the state for FY2019 times (3) the federal average medical assistance percentage for the state for FY2019. For subsequent fiscal years within the 10-year period, the block grant amount would be equal to the previous year's block grant amount increased by the annual increase in the CPI-U for the fiscal year involved. Block grant funds for a fiscal year would remain available to a state in the succeeding fiscal year as long as the state is still using the block grant option in the succeeding fiscal year. The federal payment to states under the block grant option would be made from the block grant amount. Quarterly payments would be made to states using the enhanced FMAP (E-FMAP) rate used for CHIP as the matching rate for block grant expenditures. The state would be responsible for the balance of the funds necessary to carry out the block grant state plan. As a condition of receiving funds under the block grant option, a state would be required to contract with an independent entity to conduct annual audits of its expenditures made with respect to the activities under the block grant to ensure that the block grant funds are used consistent with the block grant requirements. The audits would need to be made available to the HHS Secretary upon request. ACA Section 1402 authorized subsidies to eligible individuals to reduce the cost-sharing expenses for health insurance plans offered in the individual market through health insurance exchanges. Cost-sharing assistance is provided in two forms. The first form of assistance reduces the out-of-pocket limit applicable for a given exchange plan; the second reduces actual cost-sharing requirements (e.g., lowers the deductible or reduces a co-payment) applicable to a given exchange plan. Both types of assistance provide greater subsidy amounts to individuals with lower household incomes. Individuals who meet applicable eligibility requirements may receive both types of cost-sharing subsidies. Section 131 would repeal ACA Section 1402, terminating the cost-sharing subsidies (and payments to issuers for such reductions), effective for plan years beginning in 2020. Over the years, Congress has taken different actions intended to provide financial assistance for individuals with high-cost medical needs. For example, Congress made appropriations available to fund high-risk pools (HRPs) through legislation enacted prior to the ACA. Prior to the ACA, 35 states established HRPs to provide health insurance options to individuals who sought coverage in the individual market; many such individuals were denied coverage, offered coverage with premiums that exceeded those found in the HRPs, or offered coverage that excluded services to treat preexisting health conditions. The coverage provided through state HRPs generally reflected coverage available in the private individual insurance market in those states. Congress first authorized and provided appropriations for state grants, for the purpose of funding HRPs, during the 107 th Congress. Additional appropriations were made available during the 109 th , 110 th , and 111 th Congresses. Congress also made appropriations available for HRPs under the ACA. The ACA required the HHS Secretary to establish a temporary HRP, known as the Pre-Existing Condition Insurance Plan (PCIP). The intent of the PCIP was to provide transitional coverage for uninsured individuals with preexisting conditions until January 1, 2014, when most private health insurance plans would be prohibited from having preexisting condition exclusions. The ACA provided appropriations, beginning in 2010, to fund the PCIP program, which terminated at the end of 2013. In another example, Congress established a transitional reinsurance program under the ACA, which was designed to provide payment to non-grandfathered individual market plans that enrolled high-risk enrollees for 2014 through 2016. Under the program, the HHS Secretary collected reinsurance contributions from health insurance issuers and from third-party administrators on behalf of group health plans. The HHS Secretary then used those contributions to make reinsurance payments to issuers who enrolled high-cost enrollees in their non-grandfathered individual market plans both inside and outside of the exchanges. (Statutes required the HHS Secretary to determine how high-risk enrollees are identified, and the HHS Secretary in turn defined high-risk enrollees as high-cost enrollees.) The program covers a portion of the claims costs for these enrollees based on payment parameters set by the HHS Secretary. Section 132 would add a new Title XXII to the SSA. Section 2201 of the new title would establish the Patient and State Stability Fund, which is to be administered by the CMS Administrator. The fund's purpose is to provide funding to the 50 states and the District of Columbia from January 1, 2018, to December 31, 2026. Per Section 2202(a) of the new title, states may use payments allocated from the Patient and State Stability Fund for any of the following activities: a new or existing mechanism that provides financial assistance to certain high-risk individuals who do not have access to employer-sponsored insurance to enroll in the individual market; providing incentives to entities to enter into arrangements with the state for the purpose of stabilizing premiums in the individual market; reducing health insurance costs in the individual and small-group markets for individuals who have or are projected to have high health care utilization (as measured by cost) and individuals who face high costs of health insurance coverage due to low population density in the state; promoting health insurance issuer participation and increasing insurance options in the individual and small-group markets; promoting access to preventive, dental, or vision services, or any combination of such services; maternity coverage and newborn care; prevention, treatment, or recovery services for individuals with mental or substance abuse disorders that focus on inpatient or outpatient clinical care of treatment of addiction and mental illness and early identification and intervention for children and young adults with mental illness; providing payments, directly or indirectly, to health care providers for the provision of services specified by the CMS Administrator; and providing assistance to reduce out-of-pocket costs (including premiums) for individuals with health insurance coverage in the state. Section 2203 of the new title would specify the application process for states to become eligible to receive payments from the Patient and State Stability Fund. The application would include a description of how payments would be used for allowed activities; a certification that states would make required contributions for allowed activities; and other information as required by the CMS Administrator. A state would need to apply only once to be treated as providing applications for subsequent years. Section 2204(b)(2)(A) of the new title would specify a formula for allocations to states for 2018 and 2019 for one or more of the allowed activities. The formula relies on the medical claims incurred by health insurance issuers in the state, the number of uninsured individuals in the state whose income is below 100% of FPL, and the number of issuers offering coverage through the state's exchange. For 2020 through 2026, Section 2204(b)(2)(B) of the new title would authorize the CMS Administrator to develop a method by which Patient and State Stability Fund payments would be allocated among the states, requiring that the Administrator take into account medical claims incurred by issuers in the state, the number of uninsured individuals in the state whose income is below 100% of FPL, and the number of issuers participating in the state's insurance market. The CMS Administrator would be required to consult with various stakeholders (e.g., health care consumers, issuers, state insurance commissioners) prior to establishing the allocation method for 2020-2026, and the method is to reflect the goals of improving the health insurance risk pool, promoting competition, and increasing choice for health care consumers. Section 2203(b) would provide that if a state does not have an approved application for the allowed activities for a year, the CMS Administrator, in consultation with the state insurance commissioner, is to use the state's allocation for the year for market stabilization payments to issuers offering coverage in the individual and small-group markets in the state. These payments would be paid to such issuers for claims that exceed $50,000 but do not exceed $350,000 in 2018 and in 2019, in an amount equal to 75% of the claims. The dollar thresholds and the payment percentage are to be specified by the CMS Administrator for years 2020 through 2026. Section 2204(c) would provide for the reallocation of unused funds to states. Section 2204(e) would require states, as a condition of receipt of Patient and State Stability Fund allocations, to make contributions toward the activities or programs for which the application was approved. The state contributions would equal a certain percentage of the fund allocation. For those states carrying out allowed activities, the contributions begin at 7% in 2020 and increase annually to 50% in 2026. For those states with market-stabilization programs, state contributions begin at 10% in 2020, increase to 50% by 2024, and remain at 50% through 2026. Section 2204(a) would authorize appropriations for the Patient and State Stability Fund and provide specific appropriation amounts. For 2018 and 2019, the appropriation would be $15 billion each year, and states would be able to use appropriated funds for any of the allowed activities. For 2020-2026, the appropriation would be $10 billion each year for any allowed activities. Amounts appropriated and allocated to states are to remain available for expenditure through December 31, 2027. Section 2204(a) also would provide for two additional appropriations for specified activities. For 2020, there would be an additional $15 billion appropriated that states could use only for maternity coverage and newborn care and prevention, treatment, or recovery services for individuals with mental or substance abuse disorders. For 2018-2023, there would be an additional $8 billion that could be allocated to certain states. The only states that could receive funds from the $8 billion would be those with a waiver in effect under new Public Health Service Act (PHSA) Section 2701(b)(1)(C), as would be established by AHCA Section 136. The new PHSA Section 2701(b)(1)(C) would allow states to waive the continuous coverage penalty, as would be implemented under AHCA Section 133, and instead allow issuers to use health status as a factor when developing premiums for individuals subject to an enforcement period. The additional $8 billion would be allocated to states with these waivers in effect according to a methodology specified by the HHS Secretary. States would be required to use the allocations to provide assistance in reducing premiums or out-of-pocket costs for individuals in the state subject to an increase in premiums as a result of the state's waiver. Section 2204(e)(3) would prohibit the CMS Administrator from making an allocation to a state if the state were to use the allocation for purposes not permitted under SSA Section 2105(c)(7), related to abortion. Section 2205 of the new title would establish a Federal Invisible Risk Sharing Program within the Patient and State Stability Fund. Like the fund, the program is to be administered by the CMS Administrator. The purpose of the Federal Invisible Risk Sharing Program would be to provide payments to health insurance issuers to help them offset the medical claims costs of high-cost enrollees (referred to as eligible individuals ). The CMS Administrator would be required to establish the parameters for the Federal Invisible Risk Sharing Program, including defining eligible individuals ; developing and using health status statements for eligible individuals; identifying health conditions that would automatically qualify individuals as eligible individuals at the time they apply for health insurance; creating a process health insurance issuers could use to voluntarily qualify enrollees who do not automatically qualify as eligible individuals; determining a percentage of an enrollee's paid premiums that would be collected for the program's use; and determining the program's attachment point—the dollar amount of claims for an eligible individual after which the program would make payments to the issuer—and determining the portion of such claims the program would pay. The CMS Administrator must establish the parameters of the Federal Invisible Risk Sharing Program for plan year 2018 no later than 60 days after enactment, and the CMS Administrator must establish a process for state operation of the program beginning in plan year 2020. Section 2205 of the new title would appropriate $15 billion to be used for the Federal Invisible Risk Sharing Program from January 1, 2018, to December 31, 2026. IRC Section 5000A, as added by ACA Section 1501, created an individual mandate, a requirement for most individuals to maintain health insurance coverage or pay a penalty for noncompliance. To comply with the mandate, most individuals need to maintain minimum essential coverage , which includes most types of private (e.g., employer-sponsored) coverage and public coverage (e.g., Medicare and Medicaid). Certain individuals are exempt from the mandate and its associated penalty. Section 2701 of the PHSA, as amended by ACA Section 1201, provided that premiums for certain plans offered in the individual and small-group markets may vary only by self-only or family enrollment, geographic rating area, tobacco use (limited to a ratio of 1.5:1), and age (limited to a ratio of 3:1 for adults). The age rating ratio means that a plan may not charge an older individual more than three times the premium that the plan charges a 21-year-old individual. PHSA Section 2702, as amended by ACA Section 1201, provides that most plans offered in the individual, small-group, and large-group markets must be offered on a guaranteed-issue basis. In general, guaranteed issue in health insurance is the requirement that a plan accept every applicant for health coverage, as long as the applicant agrees to the terms and conditions of the insurance offer (e.g., the premium). PHSA Section 2704(a), as amended by ACA Section 1201, prohibits most private health insurance plans from excluding coverage of preexisting health conditions. Plans cannot exclude benefits based on health conditions for any individual. 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. As described elsewhere in this report, Section 204 would effectively eliminate the annual penalty associated with IRC Section 5000A, the individual mandate, retroactively beginning CY2016. Section 133 would add a new Section 2710A to the PHSA. Under the new section, issuers offering plans in the individual market are to assess a penalty on applicable policyholders by increasing monthly premiums by 30% during an enforcement period. (In essence, the penalty is a variation in premiums.) The requirement would apply to enrollments beginning in plan year 2019, and it also would apply to enrollments that occur in special enrollment periods in plan year 2018. Applicable policyholders are (1) individuals who had a gap in creditable coverage, as currently defined in PHSA Section 2704(c), that exceeded 63 days in the 12 months prior to enrolling in current coverage and (2) individuals who aged out of their dependent coverage (i.e., young adults up to the age of 26) and did not enroll in coverage during the first open enrollment period following the date they aged out of their coverage. The enforcement period, with respect to enrollment beginning plan year 2019, is a 12-month period beginning the first day an individual enrolls in a plan. The enforcement period, with respect to enrollments during a special enrollment period in 2018, is the first month the individual is enrolled in coverage and ends in the last month of the plan year. ACA Section 1302 required certain plans offered in the individual and small-group markets to meet a generosity level. The generosity level (i.e., actuarial value, or AV) is a summary measure of a plan's generosity of coverage. It is expressed as the percentage a given health insurance plan will pay for covered medical expenses, for a standard population. Plans must meet one of the following AV levels: bronze (60% AV), silver (70% AV), gold (80% AV), or platinum (90% AV). On average, as AV increases, consumer cost sharing decreases. For example, for a silver-level plan, on average, a plan pays for 70% of covered services and a consumer pays for 30% of covered services out-of-pocket. Section 134 would amend ACA Sections 1302(a)(3) and 1302(d) to provide that plans offered after December 31, 2019, no longer need to meet a certain generosity level. PHSA Section 2701(a)(1), as amended by ACA Section 1201, provided that premiums for certain plans offered in the individual and small-group markets may vary only by self-only or family enrollment, geographic rating area, tobacco use (limited to a ratio of 1.5:1), and age (limited to a ratio of 3:1 for adults). The age rating ratio means that a plan may not charge an older individual more than three times the premium that the plan charges a 21-year-old individual. PHSA Section 2701(a)(5), as amended by ACA Section 10103, provides that if a state permits large-group coverage to be sold through the state's health insurance exchange, then the rating restrictions apply to all fully insured plans offered in the state's large-group market. Section 135 would amend PHSA Section 2701(a)(1)(A)(iii) and establish that for plan years beginning on or after January 1, 2018, the HHS Secretary may implement, through rulemaking, an age rating ratio of 5:1 for adults. That is, a plan would not be able to charge an older individual more than five times the premium that the plan would charge a 21-year-old individual. States would have the option to implement a ratio for adults that is different from the 5:1 ratio. Current federal law includes a number of restrictions related to the factors that can be used for determining an individual's eligibility for private health insurance coverage and the premium for such coverage. As described earlier, PHSA Section 2701(a)(1), as amended by ACA Section 1201, provided that premiums for certain plans offered in the individual and small-group markets may vary only by self-only or family enrollment, geographic rating area, tobacco use (limited to a ratio of 1.5:1), and age (limited to a ratio of 3:1 for adults). Premiums for such plans cannot vary for any other factors, such as gender or health status. PHSA Section 2704(a), as amended by ACA Section 1201, prohibited most private health insurance plans from excluding coverage of preexisting health conditions. Plans cannot exclude benefits based on health conditions for any individual or group. 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. PHSA Section 2705(a), as amended by ACA Section 1201, prohibited most private health insurance plans from basing eligibility for coverage on health status-related factors. Such factors include health status, medical condition (including both physical and mental illness), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), disability, and any other health status-related factor determined appropriate by the HHS Secretary. PHSA Section 2705(b)(1) prohibited private health insurance plans from requiring an individual to pay a larger premium than any other similarly situated enrollees of the plan on the basis of a health status-related factor of the individual or any of the individual's dependents. PHSA Section 2705(b)(2) provided that such plans may offer premium discounts or rewards based on enrollee participation in wellness programs. PHSA Section 2705(b)(3) prohibited all group plans from adjusting premiums for the covered group on the basis of genetic information. ACA Section 1302 required certain plans offered in the individual and small-group markets to offer a core package of health care services, known as the EHB. The ACA did not specifically define this core package. Instead, ACA Section 1302(b) listed 10 categories from which benefits and services must be included and required the HHS Secretary to further define the EHB. The 10 categories are ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory service; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. ACA Section 1252 required all standards and requirements adopted by a state pursuant to Title I of the ACA, or any amendments to Title I, to apply uniformly within applicable health insurance markets in the state. ACA Section 1324(a) provides that private health insurance issuers are not subject to federal or state laws (specified under ACA Section 1324(b)) if the laws do not apply to qualified health plans offered under ACA Section 1322 (Consumer-Operated and Oriented Plan [CO-OP] Program) or ACA Section 1334 (Multistate Plan [MSP] Program). Section 136 would amend PHSA Section 2701 by adding a new subsection (b) that would allow states to apply for waivers from certain federal health insurance requirements. The new subsection (b)(1) would allow states to apply for a waiver for one or more of the following purposes. States could apply for a waiver to implement an age rating ratio for individuals aged 21 and older for plans purchased in the individual and small-group markets that is higher than the ratio specified in PHSA Section 2701(a)(1)(A)(iii), as would be amended by AHCA Section 135. This waiver could apply to plan years beginning on or after January 1, 2018. States could apply for a waiver from the EHB as specified in ACA Section 1302(b), and instead the state could specify its own EHB for plans purchased in the individual and small-group markets. This waiver could apply to plan years beginning on or after January 1, 2020. States could apply for a waiver of the continuous coverage penalty, as would be implemented under AHCA Section 133. The continuous coverage penalty would require issuers offering coverage in the individual market to assess a penalty on individuals who have a gap in health insurance coverage (i.e., are subject to an enforcement period). A state could apply to waive the application of the penalty and instead allow issuers to use health status as a factor when developing premiums for individuals subject to an enforcement period. Specifically, the new subsection (b)(1)(C)(ii) would provide that PHSA Section 2701(a) would be applied as if health status were included as a factor and PHSA Section 2705(b) would not apply. To obtain this type of waiver, a state must have a program in effect that carries out at least one of the purposes described in (1) or (2) of SSA Section 2202(a) (as would be added under AHCA Section 132) or the state must participate in the Federal Invisible Risk Sharing Program established under SSA Section 2205 (as would be added under AHCA Section 132). This waiver could apply to coverage obtained during special enrollment periods for plan year 2018 and for all coverage beginning plan year 2019. The new subsection (b)(3) would specify the waiver application requirements. The HHS Secretary would determine the timing and manner for submitting waiver applications. A state's application would be required to explain how approval of the application would provide for one or more of the following outcomes in the state: reducing average premiums for health insurance, increasing enrollment in health insurance, stabilizing the health insurance market, stabilizing premiums for individuals with preexisting conditions, or increasing the choice of health plans. The application also would have to include information about what the state would put in place of the waived provision. For example, if the state applied for a waiver to define the EHB, the application would have to specify the EHB that would be put in place in the state under the waiver. Per new subsection (b)(2), a state's application for a waiver would be approved unless the HHS Secretary notifies the state that the waiver has been denied (and provides the reason for denial) no later than 60 days after the application is submitted. New subsection (b)(4)(A) would provide that a state's waiver cannot extend longer than 10 years unless a state requests continuation. If a state requests continuation, such a request would be granted unless the HHS Secretary denies the request or asks the state for additional information within 90 days of the state's submission of a continuation request. New subsection (b)(5)(A) would provide that the waivers allowed under the new PHSA Section 2701(b) cannot apply to the following ACA sections: 1301, regarding requirements for qualified health plans (QHPs), to the extent it applies to QHPs offered under ACA Section 1322 (CO-OP program) or ACA Section 1334 (MSP program); 1312(d)(3)(D), regarding health insurance coverage for Members of Congress; 1331, regarding the Basic Health Program; 1332, regarding state innovation waivers; 1333, regarding health care choice compacts; and 1334, regarding the MSP program. New subsection (b)(5)(B) would provide that any standards and requirements a state adopts pursuant to an approved waiver would be deemed compliant with ACA Sections 1252 and 1324(a). Section 137 would provide that nothing in the AHCA is to be construed as allowing issuers to vary health insurance rates by gender or as permitting issuers to limit access to coverage for individuals with preexisting conditions. Section 1005 of the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152 ) established the Health Insurance Reform Implementation Fund (HIRIF) within HHS and appropriated $1 billion to the HIRIF to help cover the federal administrative costs of implementing the ACA. Through the end of FY2016, a total of $994.9 million had been obligated from the HIRIF. The obligated amounts, by agency, are as follows: IRS, $542.8 million; HHS, $440.9 million; Office of Personnel Management, $6.1 million; Department of Labor, $4.5 million; and Social Security Administration, $0.6 million. Section 141 would establish an American Health Care Implementation Fund within HHS to be used to implement the following AHCA provisions: per capita allotment for medical assistance (Section 121); Patient and State Stability Fund (Section 132); additional modifications to the premium tax credit (Section 202); and refundable tax credit for health insurance coverage (Section 214). Section 141 would appropriate $1 billion to the American Health Care Implementation Fund. IRC Section 36B, as added by ACA Section 1401, and related amendments authorized premium tax credits to help eligible individuals pay for health insurance. The tax credits apply toward premiums for qualified health plans (QHPs) offered in the individual market through health insurance exchanges. QHPs are allowed to be offered outside of exchanges (off-exchange plans), but the premium credits may not be used toward the purchase of such plans. The premium credit is refundable, so individuals may claim the full credit amount when filing their taxes, even if they have little or no federal income tax liability. The credit also is advanceable, so individuals may choose to receive the credit on a monthly basis to coincide with the payment of insurance premiums. ACA Section 1411 generally makes the premium tax credit available to those who do not have access to subsidized public coverage (e.g., Medicaid) or employer-sponsored coverage that meets certain standards. The amount of the premium tax credit varies from individual to individual. The ACA specifies formulas for calculation of the premium tax credit amount and the amount that the individual (or family) must contribute toward the premium. That latter amount—the required premium contribution—is calculated according to a formula that incorporates a certain percentage ( applicable percentage ) of a given individual's (or family's) household income (MAGI) and the premium for the standard plan (i.e., the second-lowest-cost silver plan) in that individual's (or family's) local area. The required premium contribution is capped according to MAGI, with such income measured relative to FPL. A smaller cap applies to lower-income individuals—compared to the cap applicable to higher-income persons—meaning such individuals generally receive greater tax assistance. ACA Section 1412 establishes an advance payment program, for making the credits available during the year. The advanced amounts are reconciled when individuals file income-tax returns for the actual year in which they receive the credits. If a tax filing unit's income decreases during the tax year, and the filer should have received a larger credit, this additional credit amount will be included in the tax refund for the year. By contrast, any excess amount that was overpaid in credits to the filer will have to be repaid to the federal government as a tax payment. IRC Section 36B(f)(2)(B) imposes limits on the excess amounts to be repaid under certain conditions. For households with incomes below 400% of FPL, the specific limits apply to single and joint filers separately. ACA Section 1414 authorizes the disclosure of taxpayer information by amending IRC Section 6103(l). IRC Section 6055, as added by ACA Section 1502, requires every entity (including employers, insurers, and government programs) that provides minimum essential coverage (including QHPs) to an individual to report that information to the IRS and provide a statement to the covered individual. Section 201 would not apply IRC Section 36B(f)(2)(B), relating to limits on the excess amounts to be repaid with respect to the ACA premium tax credits, to taxable years beginning after December 31, 2017, and before January 1, 2020. In other words, for tax years 2018 and 2019, any individual who was overpaid in premium tax credits would have to repay the entire excess amount, regardless of income. Section 202 would disregard certification, plan choice, and regulatory compliance requirements applicable to QHPs and the requirement for QHPs to be offered through an exchange for ACA premium tax credit purposes. Advance payments of the credit, however, would not be allowed for plans offered outside of exchanges. Section 202 would allow the ACA credits to be applied toward the purchase of catastrophic plans but not grandfathered plans, grandmothered plans, or abortion coverage (except if necessary to save the life of the mother or if the pregnancy is the result of rape or incest). The section would allow an individual to purchase abortion-only coverage or a plan that includes abortion coverage, and would allow a health insurer to offer such coverage or plan, but would prohibit ACA premium tax credits to be used to pay for either. Section 202 would amend IRC Section 6055, relating to the reporting of minimum essential coverage, to require an entity that offers an off-exchange QHP to report certain specified information. With respect to the formula for calculating required premium contributions, Section 202 would specify age and income-adjusted applicable percentages for tax year 2019. The applicable percentages would range from 2% for those in the lowest income band to 11.5% for those in the highest income band and the oldest age band, which generally would provide greater tax assistance to lower-income individuals. Beginning in tax year 2019, the applicable percentages would be adjusted to take into account premium growth in comparison with other specified economic measures. Section 202 would go into effect beginning tax year 2018, unless otherwise specified. Section 45R of the IRC, as added by ACA Section 1421, provided for a small business health insurance tax credit. The credit is intended to help make the premiums for small-group health insurance coverage more affordable for certain small employers. The credit generally is available to nonprofit and for-profit employers with fewer than 25 full-time-equivalent employees with average annual wages that fall under a statutorily specified cap. To qualify for the credit, employers must cover at least 50% of the cost of each of their employees' self-only health insurance coverage. As of 2014, small employers must obtain insurance through a Small Business Health Options Program (SHOP) exchange to receive the credit, and the credit is available for two consecutive tax years only. The two-year period begins with the first year an employer obtains coverage through a SHOP exchange. For example, if an employer first obtains coverage through a SHOP exchange in 2017, the credit will be available to the employer only in 2017 and 2018. Beginning in tax year 2018, Section 203 would amend IRC Section 45R to indicate that the small business health insurance tax credit amount is to be determined based on QHPs that do not include coverage for abortion, except abortions necessary to save the life of the mother or abortions for pregnancies that are a result of rape or incest. The provision further states that an employer would not be prohibited from purchasing for its employees separate coverage for abortion, so long as no tax credit under IRC Section 45R is allowed with respect to employer contributions for such coverage. Section 203 would provide that the small business health insurance tax credit would not be available beginning tax year 2020. IRC Section 5000A, as added by ACA Section 1501, created an individual mandate, a requirement for most individuals to maintain health insurance coverage or pay a penalty for noncompliance. To comply with the mandate, most individuals need to obtain minimum essential coverage , which includes most types of private (e.g., employer-sponsored) coverage and public coverage (e.g., Medicare and Medicaid). Certain individuals are exempt from the mandate and its associated penalty. The individual mandate went into effect in 2014. Individuals who are not exempt from the mandate are required to pay a penalty for each month of noncompliance. The annual penalty is the greater of a percentage of income or a flat dollar amount (but not more than the national average premium of a specified health plan). The percentage of income increased from 1.0% in 2014 to 2.5% in 2016 and beyond. The flat dollar amount increased from $95 in 2014 to $695 in 2016 and is adjusted for inflation thereafter. Section 204 would effectively eliminate the annual penalty associated with IRC Section 5000A, the individual mandate, by reducing the percentage of income to 0% and the flat dollar amount to $0, retroactively beginning CY2016. IRC Section 4980H, as added by ACA Section 1513, required that employers either provide health coverage or face potential employer tax penalties. The potential employer penalties apply to all common-law employers, including government entities (such as federal, state, local, or Indian tribal government entities) and nonprofit organizations that are exempt from federal income taxes. The penalties are imposed on firms with at least 50 full-time-equivalent employees if one or more of their full-time employees obtain a premium tax credit through a health insurance exchange. The total penalty for any applicable large employer is based on the employer's number of full-time employees (averaging 30 hours or more per week) and whether the employer offers affordable health coverage that provides minimum value. Section 205 would modify the tax penalty associated with IRC Section 4980H, effectively eliminating it by reducing the penalty to $0 retroactively beginning in CY2016. IRC Section 4980I, as added by ACA Section 9001, created a new excise tax on high-cost employer-sponsored coverage (the so-called Cadillac tax). Under the ACA, the tax was scheduled to take effect in 2018; however, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) delayed implementation of the tax until 2020. When it is implemented, the tax is to be imposed at a 40% rate on the aggregate cost of employer-sponsored health coverage that exceeds a specified dollar limit. If a tax is owed, it is levied on the entity providing the coverage (e.g., the health insurance issuer or the employer). Section 206 would delay implementation of IRC Section 4980I (the so-called Cadillac tax) until taxable periods beginning January 1, 2026. Under the IRC, taxpayers may use several different types of tax-advantaged health accounts to pay or be reimbursed for qualified medical expenses: health flexible spending accounts (health FSAs), health reimbursement accounts (HRAs), Archer Medical Savings Accounts (MSAs), and health savings accounts (HSAs). ACA Section 9003 amended the relevant IRC provisions (IRC Sections 106, 220, and 223) to provide that, for each of these accounts, amounts paid for medicine or drugs are qualified expenses only in the case of prescribed drugs and insulin. Section 207 would repeal the language in IRC Sections 106, 220, and 223 stipulating that a medicine or drug must be a prescribed drug or insulin to be considered a qualified expense in terms of spending from a tax-advantaged health account. The provision would be generally effective beginning tax year 2017. ACA Section 9004 imposed a 20% tax on distributions from Archer MSAs and HSAs that are used for purposes other than paying for qualified medical expenses. Prior to the ACA, IRC Section 220 applied a 15% rate on such distributions if made from an Archer MSA and IRC Section 223 applied a 10% rate on such distributions if made from an HSA. Section 208 would amend IRC Sections 220 and 223 to reduce the applicable rate to 15% and 10% for Archer MSAs and HSAs, respectively. The lower rates would apply to distributions made after December 31, 2016. IRC Section 125 allowed employers to establish cafeteria plans , benefit plans under which employees may choose between receiving cash (typically additional take-home pay) and certain normally nontaxable benefits (such as employer-paid health insurance) without being taxed on the value of the benefits if they select the latter. (A general rule of taxation is that when given a choice between taxable and nontaxable benefits, taxpayers will be taxed on whichever they choose because they are deemed to be in constructive receipt of the cash.) ACA Section 9005 amended IRC Section 125(i) to provide that a health FSA cannot be a nontaxable benefit under a cafeteria plan unless the cafeteria plan provides that an employee may not elect for any taxable year to have a salary reduction contribution in excess of $2,500 made to such arrangement. Also, the $2,500 limit is indexed for cost-of-living adjustments for plan years beginning after December 31, 2013. Section 209 would repeal IRC Section 125(i), the contribution limit for health FSAs, effective beginning tax year 2017. Section 1405 of the HCERA created a new excise tax that is imposed on the sale of certain medical devices. The tax is codified in IRC Section 4191. The tax is equal to 2.3% of the device's sales price and generally is imposed on the manufacturer or importer of the device. The tax took effect on January 1, 2013. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) provided a two-year moratorium on the tax. The tax does not apply to sales in the period beginning January 1, 2016, and ending December 31, 2017. Section 210 would provide that the medical device excise tax does not apply to sales after December 31, 2016. Employers that provide Medicare-eligible retirees with prescription drug coverage that meets or exceeds set federal standards are eligible for federal subsidy payments. The subsidies are equal to 28% of plans' actual spending for prescription drug costs in excess of $400 and not to exceed $8,250 (for 2017). The subsidies were created as part of the Medicare Part D prescription drug program (Medicare Modernization Act of 2003; P.L. 108-173 ) to provide employers with an incentive to maintain drug coverage for their retirees. Employers are allowed to exclude qualified retiree prescription drug plan subsidies from gross income for the purposes of corporate income tax. Prior to implementation of the ACA, employers also were allowed to claim a business deduction for their qualified retiree prescription drug expenses, even though they also received the federal subsidy to cover a portion of those expenses. ACA Section 9012 amended IRC Section 139A, beginning in 2013, to require employers to coordinate the subsidy and the deduction for retiree prescription drug coverage. The amount allowable as a deduction for retiree prescription drug coverage is reduced by the amount of the federal subsidy received. Section 211 would repeal the ACA change to IRC Section 139A and reinstate business-expense deductions for retiree prescription drug costs without reduction by the amount of any federal subsidy. The change would be effective for taxable years beginning after December 31, 2016. Under IRC Section 213, taxpayers who itemize their deductions may deduct qualifying medical expenses. The medical-expense deduction may be claimed only for expenses that exceed 10% of the taxpayer's adjusted gross income (AGI), which was reduced for taxable years ending before January 1, 2017, to 7.5% if the taxpayer or spouse was aged 65 or older. The 10% threshold was imposed by ACA Section 9013. Prior to the ACA, the AGI threshold was 7.5% for all taxpayers. Section 212 would amend IRC Section 213(a) to reduce the AGI threshold to 5.8% for all taxpayers, effective tax year 2017. ACA Sections 9015 and 10906 imposed a Medicare Hospital Insurance (HI) surtax at a rate equal to 0.9% of an employee's wages or a self-employed individual's self-employment income. The surtax, which is found in IRC Sections 1401 and 3101, applies only to taxpayers with taxable income in excess of $250,000 if married filing jointly; $125,000 if married filing separately; and $200,000 for all other taxpayers. The tax is in addition to the regular Federal Insurance Contributions Act and Self-Employment Contributions Act taxes that generally apply (i.e., Social Security and Medicare taxes). Section 213 would amend IRC Sections 1401(b) and 3101(b) to repeal the 0.9% Medicare surtax, effective for remuneration received and taxable years beginning after December 31, 2022. The federal tax code currently allows two credits to help eligible individuals and dependents pay for health insurance that meets specified standards. The Health Coverage Tax Credit, codified in IRC Section 35, was reauthorized under the Trade Preferences Extension Act of 2015 with a sunset date of January 1, 2020. In addition, the ACA authorized a premium tax credit for eligible individuals enrolled in exchange coverage, codified in IRC Section 36B, with no sunset date. Section 214 would amend IRC Section 36B by replacing the text with completely new language, effective beginning tax year 2020. It would establish a refundable, advanceable tax credit for health insurance purposes. To be eligible for the tax credit, an individual would be required to be covered under a state-certified QHP; to not be eligible for private or public coverage as specified in the section; to be a citizen, national, or qualified alien of the United States; and to not be incarcerated (except incarceration pending disposition of charges). For tax credit purposes, a QHP would be any coverage offered in the individual health insurance market; such coverage would exclude grandfathered plans, grandmothered plans, abortion coverage (except if necessary to save the life of the mother or if the pregnancy is the result of rape or incest), and coverage that consists substantially of either excepted benefits or short-term limited-duration insurance (as defined under current law). Qualifying family members would include only the individual's spouse, any dependent of the individual, and any child (aged 26 or younger) of the individual who is enrolled in the same QHP as the individual (or other parent). A qualifying spouse must file a joint tax return with the eligible individual if married to that individual at the end of the tax year (with exceptions). A credit would be allowed for a dependent only by the individual who claims such a dependent for income-tax purposes. The credit amount would be the lesser of flat credit amounts adjusted by age for an eligible individual and that individual's qualifying family members or the amounts equal to the premiums paid by an eligible individual and that individual's qualifying family members for a QHP. The age-adjusted credit amounts for 2020 would be $2,000 for eligible individuals under the age of 30; $2,500 for those between 30 and 39 years of age; $3,000 for those between 40 and 49 years of age; $3,500 for those between 50 and 59 years of age; and $4,000 for those who aged 60 and older. The calculation of a given family's credit would take into account the age-adjusted credit amounts applicable to the five oldest individuals only. The total credit amount would be reduced (but not below zero) by 10% of any amount that MAGI (as defined in the section) exceeds $75,000, or $150,000 for a joint tax return (MAGI limitation). The maximum tax credit amount allowed for an eligible individual and qualifying family members for a given tax year ( aggregate dollar limitation ) would be $14,000. Beginning in 2021, the age-adjusted credit amounts, the dollar amounts under the MAGI limitation, and the aggregate dollar limitation would be adjusted annually by the CPI-U, as specified. If an eligible individual or qualifying family member has a qualified small - employer health - reimbursement arrangement , the age-adjusted credit amount would be reduced (but not below zero) by the permitted benefit provided under such an arrangement. For any month in which an individual elects to receive the Health Coverage Tax Credit, authorized under IRC Section 35, such an individual would not be eligible to receive the tax credit authorized under IRC Section 36B. The current deduction allowed for health insurance premiums paid by self-employed individuals for coverage for such individuals (and their families), authorized under IRC Section 162(l), would be reduced (not below zero) by the new tax credit amounts (including advance payments) provided to such individuals. An individual who makes an erroneous claim for an excessive tax credit amount would be liable for a penalty equal to 25% of the excessive amount. Section 214 would amend ACA Section 1412, relating to the advance payment program, to require the HHS Secretary and the Treasury Secretary to promulgate regulations that they deem necessary relating to protection of taxpayer information, verification of eligibility, proper and timely payments, and program integrity. Section 214 would go into effect beginning tax year 2020. IRC Section 223 provided for HSAs, which are tax-exempt trusts or custodial accounts established for paying the health-related expenses of an account beneficiary. HSAs are established and owned by individuals. Eligible individuals can establish and fund HSAs when they have a qualifying high-deductible health plan (HDHP) and no other health plan, with some exceptions. To be HSA-qualified, the HDHP must have a minimum deductible, it must limit out-of-pocket expenditures for covered benefits to no more than a certain maximum level, and only preventive care services can be covered prior to the deductible being met. The minimum deductible amounts and out-of-pocket limits are set by statute and adjusted for inflation. For 2017, the minimum deductible is $1,300 for single coverage and $2,600 for family coverage. The out-of-pocket limit is $6,550 for single coverage and $13,100 for family coverage. Contributions to HSAs are subject to an annual limit, which is adjusted for inflation. In 2017, the contribution limit is $3,400 for account holders enrolled in self-only coverage and $6,750 for account holders enrolled in family coverage. HSA contributions are either deductible as an above-the-line deduction or excluded from an account holder's gross income. Section 215 would increase the HSA annual contribution limits for self-only and family coverage to match the out-of-pocket limits for HSA-qualified HDHPs for self-only and family coverage. The change would go into effect beginning in tax year 2018. IRC Section 223 established HSAs, which are tax-exempt trusts or custodial accounts established for paying the health-related expenses of the account beneficiary. Eligible individuals can establish and contribute to HSAs when they have a qualifying HDHP and no other health plan, with some exceptions. Contributions to HSAs may be made by eligible individuals, as well as by other individuals or entities on their behalf. Thus, individuals may contribute to accounts of eligible family members, and employers may contribute to accounts of eligible employees. HSA contributions are deductible as an above-the-line deduction if made by individuals. Contributions made by employers, including through salary-reduction agreements, are excluded from income, Social Security, and Medicare taxes. The aggregate contributions to HSAs are subject to an annual limit, which is adjusted for inflation each year. In 2017, the contribution limit is $3,400 for self-only coverage and $6,750 for family coverage. Individuals aged 55 and older who are not yet eligible for Medicare are allowed to contribute an additional $1,000 each year. This "catch-up" contribution is not adjusted for inflation. IRC Section 223(b)(5) established contribution rules for married couples. In the case of a married couple, if either spouse has HSA-qualified family coverage and both spouses have their own HSAs, then both spouses are treated as if they have only one family plan for purposes of the HSA contribution limit. In other words, the spouses' aggregate contributions to their respective HSAs cannot be more than the annual contribution limit for family coverage. Their annual contribution limit is first reduced by any amount paid to Archer MSAs of either spouse for the taxable year, and then the remaining contribution amount is divided equally between the spouses unless they agree on a different division. Each spouse is allowed to make catch-up contributions to his or her respective HSA, provided each spouse is eligible to do so. Section 216 would amend IRC Section 223(b)(5) to provide that, with respect to the contribution limit to an HSA, married persons do not have to take into account whether their spouse is also covered by an HSA-qualified HDHP. In other words, spouses' aggregate contributions to their respective HSAs could be more than the annual contribution limit for family coverage. Their annual contribution limit would be reduced by any amount paid to Archer MSAs of either spouse for the taxable year, and then the remaining contribution amount would be divided equally between the spouses unless they agreed on a different division. If both spouses are eligible to make catch-up contributions before the close of the taxable year, then each spouse's catch-up contribution is included when dividing up the contribution amounts between the spouses. This provision would effectively allow both spouses to make catch-up contributions to one HSA and would apply to taxable years beginning in 2018. In general, withdrawals from HSAs are exempt from federal income taxes if used for qualified medical expenses described in IRC Section 213(d), except for health insurance. However, withdrawals from HSAs are not exempt from federal income taxes if used to pay qualified medical expenses incurred before the HSA was established. Section 217 would amend IRC Section 223(d)(2) to provide a circumstance under which HSA withdrawals can be used to pay qualified medical expenses incurred before the HSA was established. If an HSA were established within 60 days of when an individual's coverage under an HSA-qualified plan begins, then the HSA would be treated as having been established on the date the coverage begins for purposes of determining whether an HSA withdrawal is used for a qualified medical expense. Section 217 would apply to coverage beginning after December 31, 2017. ACA Section 9008 imposed an annual tax on covered entities engaged in the business of manufacturing or importing branded prescription drugs. In general, the tax is imposed on covered manufacturers and importers with aggregated branded prescription drug sales of more than $5 million to specified government programs or pursuant to coverage under these programs. Section 221 would amend ACA Section 9008 to provide that the tax would not be imposed effective calendar year 2017. ACA Section 9010 imposed an annual fee on certain health insurers beginning in 2014. The ACA fee is based on net health care premiums written by covered issuers during the year prior to the year that payment is due. The aggregate ACA fee is set at $8.0 billion in 2014, $11.3 billion in 2015 and in 2016, $13.9 billion in 2017, and $14.3 billion in 2018. After 2018, the fee is indexed to the annual rate of U.S. health insurance premium growth. Each year, the IRS apportions the fee among affected insurers based on (1) their net premiums written in the previous calendar year as a share of total net premiums written by all covered insurers and (2) their dollar value of business. Covered insurers are not subject to the fee on their first $25 million of net premiums written. The fee is imposed on 50% of net premiums above $25 million and up to $50 million, and it is imposed on 100% of net premiums in excess of $50 million. Certain types of health insurers or insurance arrangements are not subject to the fee, including self-insured plans; voluntary employees' beneficiary associations; and federal, state, or other governmental entities, including Indian tribal governments and nonprofit entities incorporated under state law that receive more than 80% of their gross revenues from government programs that target low-income, elderly, or disabled populations. In addition, only 50% of net premiums written by tax-exempt entities are included in determining an entity's market share. ACA Section 9010(j) made these provisions effective for calendar years beginning after December 31, 2013. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) provides a one-year moratorium on the tax for calendar year 2017. Section 222 would amend ACA Section 9010 to provide that the annual fee would not be imposed effective calendar year 2017. ACA Section 10907 created a new excise tax on indoor tanning services. The tax is equal to 10% of the amount paid for such services. The provision is codified in Chapter 49 of the IRC. Section 231 would repeal the tax on indoor tanning services (IRC Chapter 49), effective for services performed after June 30, 2017. Generally, employers may deduct the remuneration paid to employees as "ordinary and necessary" business expenses under IRC Section 162, subject to any statutory limitations. ACA Section 9014(b) added a statutory limitation for certain health insurance providers. Under the provision, which is codified at IRC Section 162(m)(6), covered health insurance providers may not deduct the remuneration paid to an officer, director, or employee in excess of $500,000. Section 241 would terminate IRC Section 162(m)(6), effective beginning tax year 2017. HCERA Section 1402 imposed a net investment tax on high-income taxpayers. The tax, which is codified in Chapter 2A of Subtitle A of the IRC, applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts with income above amounts specified in the statute. Section 251 would repeal the net investment tax (Chapter 2A of IRC Subtitle A), effective beginning tax year 2017. ABPs: Alternative benefit plans ACA: Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended) AGI: Adjusted gross income AHCA: American Health Care Act ( H.R. 1628 ) AV: Actuarial value CBO: Congressional Budget Office CHIP: State Children's Health Insurance Program CMS: Centers for Medicare & Medicaid Services CO-OP: Consumer Operated and Oriented Plan CPI-U: Consumer Price Index for All Urban Consumers CY: Calendar year DSH: Disproportionate share hospital E-FMAP : Enhanced federal medical assistance percentage EHB: Essential health benefits FMAP : Federal medical assistance percentage FPL: Federal poverty level FQHCs: Federally Qualified Health Centers FY: Fiscal year GAO: U.S. Government Accountability Office HCERA: Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ) HDHP : High-deductible health plan H ealth FSAs : Health flexible spending accounts HHS: Health and Human Services HI: Hospital Insurance HIRIF: Health Insurance Reform Implementation Fund HRAs: Health reimbursement accounts HRPs: High-risk pools HSA: Health savings account IRC: Internal Revenue Code IRS: Internal Revenue Service JCT: Joint Committee on Taxation LTSS: Long-term services and supports MACRA : The Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ) MAGI: Modified adjusted gross income MSAs : Medical savings accounts MSP : Multistate plan PCIP: Pre-Existing Condition Insurance Plan PHSA: Public Health Service Act PPFA: Planned Parenthood Federation of America PPHF: Prevention and Public Health Fund QHPs: Qualified health plans SHOP: Small Business Health Options Program SNAP: Supplemental Nutrition Assistance Program SSA: The Social Security Act SSI: Supplemental Security Income TANF: Temporary Assistance for Needy Families
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In January 2017, the House and Senate adopted a budget resolution for FY2017 (S.Con.Res. 3), which reflects an agreement between the chambers on the budget for FY2017 and sets forth budgetary levels for FY2018-FY2026. S.Con.Res. 3 also includes reconciliation instructions directing specific committees to develop and report legislation that would change laws within their respective jurisdictions to reduce the deficit. These instructions trigger the budget reconciliation process, which may allow certain legislation to be considered under expedited procedures. The reconciliation instructions included in S.Con.Res. 3 direct two committees in each chamber to report legislation within their jurisdictions that would reduce the deficit by $1 billion over the period FY2017-FY2026. In the House, the Committee on Ways and Means and the Energy and Commerce Committee are directed to report. In the Senate, the Committee on Finance and the Committee on Health, Education, Labor, and Pensions are directed to report. In response to the reconciliation instructions, there was activity in four different House committees—Ways and Means, Energy and Commerce, Budget, and Rules—during the first quarter of 2017. The result of this activity was H.R. 1628, the American Health Care Act (AHCA) of 2017. The version of the AHCA as passed by the House on May 4, 2017 (which incorporated eight amendments referenced in H.Res. 228 and H.Res. 308), is the topic of this report. The bill includes a number of provisions that would repeal or modify parts of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended). For example, the bill would repeal the ACA's cost-sharing subsidies for lower-income individuals who purchase health insurance through the exchanges, and it would substitute the ACA's premium tax credit for a tax credit with different eligibility rules and calculation requirements. The bill also would repeal some of the ACA's Medicaid provisions, such as the changes the ACA made to presumptive eligibility and the state option to provide Medicaid coverage to non-elderly individuals with income above 133% of the federal poverty level (FPL). The AHCA also includes a number of provisions that do not specifically relate to aspects of the ACA. For example, the bill would establish a late-enrollment penalty for certain individuals who do not maintain health insurance coverage, and it would create a new fund to provide funding to states for specified activities intended to improve access to health insurance and health care in the state. The bill would convert Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) starting in FY2020, and states would have the option to receive block grant funding (i.e., a predetermined fixed amount of federal funding) instead of per capita cap funding for non-elderly, nondisabled, non-expansion adults and children starting in FY2020. This report contains three tables that, together, provide an overview of all the AHCA provisions. Table 1 includes provisions that apply to the private health insurance market, Table 2 includes provisions that affect the Medicaid program, and Table 3 includes provisions related to public health and taxes. Each table contains a column identifying whether the AHCA provision is related to an ACA provision (e.g., whether the AHCA provision repeals an ACA-related provision). In addition to the three tables, the report includes more detailed summaries of each AHCA provision and two graphics showing the effective dates of AHCA provisions. Figure 1 covers AHCA provisions related to the private health insurance market, public health, and taxes. Figure 2 covers AHCA provisions related to the Medicaid program. The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) issued a cost estimate for the AHCA, as passed by the House on May 4, 2017. According to the estimate, the AHCA would reduce federal deficits by $119 billion over the period FY2017-FY2026. With respect to effects on health insurance coverage, CBO and JCT project that, in CY2018, 14 million more people would be uninsured under the AHCA than under current law, and in CY2026, 23 million more people would be uninsured than under current law.
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The Carl D. Perkins Career and Technical Education Act of 2006 (Perkins IV; P.L. 109-270 ) is the most recent federal law supporting career and technical education (CTE) services offered within the states at the secondary and postsecondary education levels. CTE, which has historically been known as vocational education, comprises organized educational activities that provide individuals with the knowledge and skills needed to prepare for the labor market in general and for careers in current or emerging professions in particular. Traditionally, CTE has also included preparation of students for roles outside the paid labor market. The stated purpose of Perkins IV is to support the development of career and technical, as well as academic, skills among secondary and postsecondary education students enrolled in CTE programs. Perkins IV was authorized by statute through FY2012 and was automatically extended through FY2013 by the General Education Provisions Act (GEPA). Most recently, Perkins IV was funded at $1.1 billion for FY2016. As of April 2016, the House has had one hearing on reauthorization of Perkins IV in the 114 th Congress. It was held by the Subcommittee on Early Childhood, Elementary, and Secondary Education of the Education and the Workforce Committee on October 27, 2015, and entitled "Improving Career and Technical Education to Help Students Succeed in the Workforce." This report is divided into four major sections. The first section provides an overview of career and technical education, including student participation levels. This is followed by a brief legislative history of the federal government's involvement in CTE. The third section discusses Perkins IV in detail, including an overview of appropriations levels and state performance. The final section summarizes some of the more significant findings from the National Assessment of Career and Technical Education, which was completed in 2015. For the purposes of Perkins IV, CTE includes organized educational activities that impart technical or occupational skills at the secondary and postsecondary levels and lead to an industry-recognized credential, a certificate, or an associate's degree. CTE courses are usually distinguished from courses in the liberal arts by being more directly tied to specific professions or occupational fields. CTE programs in a wide variety of occupations are offered at both the secondary and postsecondary levels of education. Practitioners of CTE have organized its occupations into career clusters and career pathways in order to help students understand potential sequences of academic and CTE courses they need to take in order to be best prepared for specific careers. Figure 1 shows the different career clusters and student participation in those clusters at the secondary and postsecondary levels. CTE at the secondary level has several main goals. One of these is preparing students for roles outside the paid labor market, such as family and consumer sciences education. Another is providing students with general employment skills, such as word processing and other basic computer skills, as well as so-called soft skills, which include communication, teamwork, and leadership. Finally, CTE at the secondary level also teaches skills that are specific to particular occupations or career clusters. Depending on the field, occupational CTE may prepare students for immediate entry into the workforce or for continuation of education at the postsecondary level. Secondary CTE providers typically include public and private high schools, including Bureau of Indian Education schools; CTE-specific schools, area CTE schools, and career academies within comprehensive high schools, which are all focused on providing occupational preparation; detention centers and correctional facilities; and cooperative programs with community or technical colleges. CTE courses are widely available to high school students. Nearly all public high school students (95% of ninth graders in 2009) attended a school that offered CTE courses, either at the school itself or at a partnering institution. A vast majority (88.5%) of public high school graduates in 2009 attained at least one CTE credit, and 19% earned at least three CTE credits in a single occupational area, satisfying the Department of Education's (ED's) non-regulatory guidance for the definition of a CTE concentrator. CTE at the postsecondary level is largely made up of programs designed to prepare students for specific careers and occupational fields. Completing a postsecondary CTE program may lead to an associate's degree, an industry-recognized credential or certificate, noncredit courses to improve knowledge and skills, noncredit training customized for a particular employer, or continuing education credits required for maintaining a license or credential. Postsecondary CTE providers typically include community and technical colleges; private two-year colleges; public and private four-year universities; vocational schools; employers, labor organizations, and other industry organizations that provide apprenticeship and pre-apprenticeship programs; adult workforce education centers; and correctional facilities. In program year (PY) 2011-2012, over 75% of the 8.4 million undergraduate students seeking sub-baccalaureate CTE credentials were attending two-year institutions. In the same program year, 5,767 institutions of higher education (IHEs), or 80% of all postsecondary institutions, offered a postsecondary certificate or associate's degree in a CTE field. The federal government has a long history of supporting workforce development, including CTE. At the secondary level, the historical goals of federal legislation included providing relevant skills for students in order to keep them enrolled in high schools, as well as attracting and retaining qualified CTE teachers with real-world professional experience. CTE at the postsecondary level has historically been aimed at providing students in sub-baccalaureate programs with skills relevant to the requirements of specific occupations or careers, and providing an alternative to a postsecondary education with a focus on liberal arts. The Morrill Act of 1862 (7 U.S.C. 301 et seq.) and the Second Morrill Act of 1890 (7 U.S.C. 312 et seq.) were the federal government's first legislative forays into workforce development. The acts provided for the donation of federal land and funds to help establish land-grant colleges, with the expressed goal of teaching the agricultural and mechanical arts to lower- and middle-class students. The Smith-Hughes Act of 1917 (P.L. 64-347) provided for the development of vocational education programs in agriculture, trade, industry, and home economics. It also provided funding for the preparation and salaries of teachers in those fields. The Vocational Education Act of 1946 (P.L. 79-586) assigned specific allocations of funds to each subject within vocational education at the time. It specified that funds could be used for salaries, teacher training, development of training programs, counseling, and equipment and supplies. Under the act, states were required to match federal funds at the state and local levels. The Vocational Education Act of 1963 (VEA; P.L. 88-210), which is the precursor of Perkins IV, and the subsequent Vocational Education Amendments of 1968 (P.L. 90-576) greatly expanded the federal role in vocational education. The VEA created vocational programs to serve special populations and expanded postsecondary and adult vocational education programs. It also increased support for dedicated vocational education schools, including providing funds for their construction. Additionally, these laws provided funding for research and program development and for demonstration programs related to vocational education. Within a year of the enactment of VEA, federal appropriations for vocational education were five times greater than they had been prior to the act's passage. The amendments also established a National Advisory Council on Vocational Education with the goals of advising the Commissioner of Education on administration and design of programs relating to vocational education and of collecting and disseminating information about the effectiveness of such programs. The Carl D. Perkins Vocational Education Act of 1984 (Perkins I, P.L. 98-524 ) placed a focus on vocational education programs for special populations, including students with disabilities, economically disadvantaged students, adult students, single parents and homemakers, and students in correctional institutions. Specifically, Perkins I required each state to spend 57% of its basic grant funds on activities targeting the vocational education of special populations. The remainder was to be spent on improvement of vocational education programs. The Carl D. Perkins Vocational and Applied Technology Education Act Amendments of 1990 (Perkins II, P.L. 101-392 ) made several revisions to the Perkins program. Notably, the act created the Tech Prep program designed to coordinate secondary and postsecondary vocational education activities into a coherent sequence of courses. The law also required that at least 75% of state funds be allocated to local recipients and eliminated most of the set-asides for special populations from Perkins I. Additionally, Perkins II required states to develop and implement performance standards and measures, including measures of gains in learning and in program performance as measured, for example, by program completion or job placement rates. The Carl D. Perkins Vocational and Technical Education Act of 1998 (Perkins III, P.L. 105-332 ) increased the share of state funds distributed to the local level to 85%, of which up to 8.5% could be reserved for programs in rural and other high-need areas. Perkins III also expanded state accountability, introducing core indicators of performance and adjusted levels of performance on each core indicator, to be negotiated between the state and the Secretary of Education. Sanctions based on states failing to meet performance levels were also introduced, as were incentive grants to states for exceeding performance levels. The Carl D. Perkins Career and Technical Education Act of 2006 (Perkins IV; P.L. 109-270 ) was signed into law by President George W. Bush on August 12, 2006. The act was authorized through FY2012, which ended on September 30, 2012. The authorization was extended through FY2013 under the General Education Provisions Act, although the act continues to receive appropriations in FY2016. While maintaining the overall structure of its predecessors, Perkins IV introduced the following major changes: The act was renamed "career and technical," replacing "vocational and technical," education; separate core indicators of performance for the Basic State Grants (BSG) program were introduced for the secondary and postsecondary levels, requiring grantees to meet at least 90% of their adjusted levels of performance on each core indicator; state improvement plans were required if the 90% target is not met on the BSG adjusted level of performance for at least one core indicator; CTE provisions were explicitly linked with the academic standards required under the Elementary and Secondary Education Act (ESEA), as authorized by the No Child Left Behind Act ( P.L. 107-110 ); each state was required to develop and describe programs of study, or suggested nonduplicative sequences of secondary and postsecondary courses that lead to an industry recognized credential; each local BSG grantee was required to offer at least one state-recognized program of study; and states were able to consolidate funding under the Tech Prep program with their Basic State Grants funding. Perkins IV authorizes funding for five separate programs: the Basic State Grants program; Tech Prep; National Programs; the Tribally Controlled Postsecondary Career and Technical Institutions (TCPCTI) Program; and Occupational and Employment Information. Perkins IV provides the main source of direct federal funding for CTE programs. The stated purpose of Perkins IV is to develop more fully the academic and career and technical skills of CTE students in secondary and postsecondary education. The Basic State Grants (BSG) program is a formula grant program that typically makes up over 90% of the funds appropriated under Perkins IV. The uses of BSG funds are closely aligned with the stated purpose of Perkins IV and include, for example, developing students' CTE skills, developing and expanding CTE programs, providing professional development for CTE instructors, acquiring equipment and supplies, integrating academic and CTE standards, and linking CTE education at the secondary and postsecondary levels through nonduplicative programs of study and career pathways. The following sections of this report describe the BSG program funding allocation formulas, planning activities at the state and local levels, uses of funds, and reporting and accountability requirements. After several set-asides for outlying territories and Native American and Native Hawaiian programs, funds are allocated to states according to a formula based primarily on states' average per capita incomes and populations of individuals aged between 15 and 65 years. Each state subsequently determines the portion of its allocation that goes to CTE programs at the secondary level and the portion that goes to postsecondary CTE programs. Additional formulas, discussed later in this report, determine the size of subgrants awarded to grantees at the local level. Of the funds appropriated for the BSG program, the Secretary is required to make several reservations of funds before the rest is allocated to the states by formula. The total set-aside for outlying areas is 0.13% of the amount appropriated for BSG. Of these, Guam receives an initial allotment of $660,000; American Samoa and the Northern Mariana Islands receive $350,000 each; and the Republic of Palau receives $160,000. The remainder of the set-aside is divided equally among the outlying areas. Since FY2008, the levels of appropriations have been insufficient for meeting these initial allotments. When this is the case, a ratable reduction is triggered. The final, ratably reduced, allotments to the outlying areas are shown in the state allotment table in Appendix B . The Secretary is required to reserve 1.25% of BSG funds for the Native American Career and Technical Education Program (NACTEP). Eligible entities for NACTEP funds include federally organized Indian tribes, tribal organizations, Alaska Native entities, and consortia of such. NACTEP funds may be used to carry out CTE programs and services or to provide direct assistance to CTE students. The Native Hawaiian Program, which receives a 0.25% reservation, requires the Secretary to award grants to community-based organizations serving Native Hawaiians to plan and administer CTE programs that benefit Native Hawaiians. After reservations for outlying areas and the Native American and Native Hawaiian CTE Programs, Basic State Grants funds are awarded to the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The state allocation formula awards proportionally larger grants to states with larger populations in the age range traditionally targeted by CTE programs (15 to 19 years old) and to states with lower than average per capita incomes (PCI). In the calculation of initial state allocations, 58.8% of the funds are distributed in proportion to each state's share of the national population of individuals aged 15 to 19; 23.5% in proportion to each state's share of individuals aged 20 to 24; and 17.6% in proportion to each state's share of individuals aged 25 to 65. These population-based allotments are adjusted based on states' PCI, with the allotment ratios bounded between 0.4 (for states with PCIs substantially higher than the national average) and 0.6 (for states with PCIs significantly lower than the national average). In accordance with statutory provisions, a state's PCI is defined as that state's average PCI over the most recent three years for which data are available. Incorporated into the formula are certain features that guarantee minimum funding levels. The first one of these features is a FY1998 hold harmless provision, which ensures that states receive at least the amount they were awarded in FY1998. Additionally, each state grant must be no less than a minimum equal to 0.5% of the total amount available for state grants, subject to a special rule adjustment. The special rule calculates two quantities for each state: 1. 150% of its prior-year grant, and 2. the state population of 15- to 65-year-olds in the prior year multiplied by 150% of the national average per pupil payment (NAPPP) for the current year. Based on these calculations, an adjusted 0.5% minimum is calculated for each state as the lesser of the 0.5% minimum or the smaller of the two amounts calculated under the special rule. The larger of a state's adjusted minimum or its FY1998 hold harmless amount becomes that state's minimum allocation. Because of this adjusted 0.5% minimum, some states receive allocations that are lower than 0.5% of the total amount available for state grants. See Appendix B for the FY2016 BSG state allocations. Perkins IV requires states to allocate at least 85% to the local level, up to 10% for state leadership activities, and up to 5% or $250,000 (whichever is greater) for program administration. Additionally, up to 10% of the funds distributed to the local level may be awarded to local CTE providers that are in rural areas, areas with high percentages of CTE students, and areas with high numbers of CTE students. The statute does not specify how the states are to allocate these reserve funds to eligible recipients. Under Perkins IV, states decide the split of local level funds between CTE providers at the secondary and postsecondary levels. Eligible recipients of funds at the secondary education level are LEAs, including public charter schools that operate as LEAs, Bureau of Indian Education (BIE)-funded schools, area CTE schools providing secondary education, educational service agencies, or consortia of such. The formula for distributing money to the secondary level is 70% of the funds are allocated based on each local recipient's share of individuals aged 5 through 17 living below the poverty line, compared to the total population of individuals aged 5 through 17 living below the poverty line in the entire state, and 30% of the funds are allocated based on each local recipient's share of all individuals aged 5 through 17. If a state chooses to distribute 15% or less of its total allocation to the secondary education level, that state may allocate funds on a competitive basis or using any alternative method. If a secondary level local recipient's calculated allotment is less than $15,000, the recipient has to form a consortium with other eligible secondary level recipients in order to meet the minimum grant requirement. This requirement can be waived if the recipient is unable to enter into a consortium and is either located in a rural, sparsely populated area or is a public charter school operating a CTE program. Eligible recipients of funds at the postsecondary education level are public or nonprofit IHEs, LEAs providing postsecondary education, area CTE schools providing postsecondary education, tribally controlled colleges and universities, educational service agencies, and consortia of such. Funds are distributed to eligible local recipients at the postsecondary level based on their share of recipients of Pell Grants and recipients of assistance from the BIE who are enrolled in CTE programs. The minimum grant amount is $50,000. If a state chooses to distribute 15% or less of its total allocation to the postsecondary level, that state may allocate funds on a competitive basis or using any alternative method. In order to receive funding, each state eligible agency must submit a six-year state plan to the Secretary of Education. The plan must be developed through public hearings and consultation with stakeholders, including CTE teachers, faculty, and administrators; career guidance and academic counselors; eligible recipients; parents and students; representatives of special populations; representatives of business and industry; and representatives of labor organizations in the state. The plan contents must include such information as the description of supported CTE activities, and how these activities will help the state meet its performance targets; CTE programs of study to be offered by the state; professional development, recruitment, and retention strategies for CTE teachers, faculty, administrators, and career and guidance counselors; efforts to facilitate the successful transition of CTE students from sub-baccalaureate programs into baccalaureate degree programs at IHEs; the process for improving the academic skills of CTE students; how the state will annually evaluate the effectiveness of its CTE programs; and the state's CTE programs aimed at members of special populations. As an alternative to the state plan described above, a state may submit a state plan as part of the combined plan submitted under Section 103 of the Workforce Innovation and Opportunity Act (WIOA; P.L. 113-128 ). The state plan is approved by the Secretary unless it does not meet the requirements of Perkins IV or if the state's proposed levels of performance on the core indicators of performance are not approved. States may reserve up to 10% of their allotments for state leadership activities. Of these funds, up to 10% (or 1% of the total state allotment) must be used for individuals in state correctional institutions or institutions serving individuals with disabilities. Additionally, between $60,000 and $150,000 must be reserved for services preparing individuals for nontraditional fields. There are nine required uses of state leadership funds: provide assessment of CTE programs; improve and expand the use of technology in CTE; provide professional development opportunities for CTE teachers, administrators, and counselors; support programs that improve students' academic and technical skills through the integration of academics with CTE; provide preparation for nontraditional employment; support partnerships among local providers of CTE and others, such as employers and labor organizations, to enable students to achieve state academic standards and CTE skills, or to complete CTE programs of study; serve individuals in state institutions, such as correctional institutions and institutions for individuals with disabilities; support programs for special populations that lead to high-skill, high-wage, or high-demand occupations; and provide technical assistance to local providers. In addition to these required activities, there are several permissible state leadership activities outlined in Section 124. These include support for academic and career guidance counseling, establishment of articulation agreements between secondary and postsecondary education providers, support for career and technical student organizations, incentive grants for local providers, and enhancing data collection systems to collect data on education and employment outcomes. State leadership funds may not be used for program administration. Another state leadership activity is the development of programs of study. In order to receive Perkins funding, an eligible recipient at the local level must submit a local plan to the state eligible agency. The local plan contents must include such information as the description of CTE programs that are to be carried out, and how these programs will support meeting the state and local adjusted levels of performance; at least one state-approved CTE program of study that will be adopted; the integration of academics with CTE courses in order to ensure improved student learning and attainment of technical skills and academic proficiency; professional development activities for CTE teachers, administrators, and career guidance and academic counselors; how students will gain experience in and knowledge of all aspects of an industry; efforts to improve CTE outcomes of members of special populations and individuals in nontraditional fields; and any other requirements established by the state eligible agency. As they do at the state level, eligible grant recipients at the local level have a list of required uses of funds (outlined in Section 135). Funds must be used by eligible recipients to strengthen academic and technical skills of CTE students; link CTE at the secondary and postsecondary levels, including by offering the relevant elements of at least one state-approved program of study; provide students with experience in and understanding of all aspects of an industry; develop, improve, or expand the use of technology in CTE; provide professional development programs for CTE personnel; develop and implement evaluations of CTE programs; and provide CTE activities for members of special populations to prepare them for high-skill, high-wage, or high-demand occupations. In addition to required uses, Section 135 outlines a number of permissible uses for Perkins funds at the local level. These include the use of funds to support efforts to involve business and labor organizations and parents in the design, implementation, and evaluation of CTE programs; career guidance and academic counseling; work-related experiences for students, such as internships and job shadowing; career and technical student organizations; the purchase or upgrade of equipment; and dual and concurrent enrollment programs. Each eligible recipient may use up to 5% of its local funds for administrative costs. Under Perkins IV, states and local CTE providers that receive Perkins funds are required to satisfy certain accountability requirements based on student outcomes. The accountability requirements are intended to enhance the return on investment of federal CTE funds. The Perkins accountability system, first introduced in Perkins II and enhanced in Perkins III and IV, requires that states and local providers meet goals or targets on a set of core indicators of performance. There are six indicators at the secondary level and five at the postsecondary level listed in Section 113. The core indicators of performance at the secondary level are student attainment of state academic performance standards on the mathematics, language arts, and science assessments, as determined by the state in accordance with Title I of the Elementary and Secondary Education Act (ESEA); student attainment of career and technical skill proficiencies; rates of student attainment of secondary school diplomas; GED credentials or other state-recognized equivalents; and proficiency credentials, certificates, or degrees, in conjunction with a secondary school diploma; student graduation rates, as described in Title I of ESEA; student placement in postsecondary education or advanced training, in military service, or in employment; and student participation in, and completion of, CTE programs that lead to nontraditional fields. The core indicators of performance at the postsecondary level are student attainment of career and technical skill proficiencies; student attainment of an industry-recognized credential, a certificate, or a degree; student retention in postsecondary education or transfer to a baccalaureate degree program; student placement in military service, apprenticeship programs, or employment; and student participation in, and completion of, CTE programs that lead to nontraditional fields. ED issued nonregulatory guidance describing suggested ways to calculate values for each of the core indicators of performance in order to help align definitions. In addition to these required indicators, states may use other indicators of performance as well. Local and state recipients of funds under Perkins IV have to establish annual targets or goals for each of the core indicators of performance. These goals are called adjusted levels of performance and are described in Section 113 of Perkins IV. At the state level, they are established through negotiations between the state and the Secretary of Education, with input from local recipients. The adjusted levels of performance are required to reflect continual progress toward improved performance by the state's CTE students. Initially, the state and the Secretary must reach agreement on adjusted levels of performance for the first two program years. New adjusted levels of performance are to be agreed upon prior to the third and fifth years of the program. The levels of performance on additional indicators do not require approval from the Secretary. In exceptional circumstances, such as extreme demographic shifts or economic hardship, a state may request a revision of its adjusted levels of performance. Each eligible recipient at the local level may either accept the state adjusted levels of performance or negotiate with the state to establish new local adjusted levels of performance. Additionally, each local provider may establish local levels of performance for each of the state's additional indicators of performance. States must annually report to the Secretary on the levels of performance achieved by their CTE students on each of the core indicators of performance, as well as on the additional indicators of performance. Each indicator must be disaggregated by special populations and by ESEA Title I subgroups. The annual state reports, known as Consolidated Annual Reports, are publicly disseminated by the Secretary. State performance data are also included in the annual report to Congress produced by the Secretary in accordance with Section 114 of Perkins IV. While state performance data are reported with disaggregation by subgroup, only the aggregate performance levels for each core indicator of performance are used for accountability purposes. States that do not meet 90% of a state adjusted level of performance for any of the core indicators of performance in a given year are required to develop and implement a program improvement plan during the following program year. The plan is to be developed with input from various stakeholders. The Secretary must provide technical assistance to the state if it is determined that the state is not making substantial progress. The Secretary may withhold all, or a portion of, a state's leadership and administrative funds if any of the following occurs: the state fails to implement a program improvement plan; the state fails to make any improvement in meeting any of the adjusted levels of performance for the core indicators in the first year of the implementation of the program improvement plan; or the state fails to meet at least 90% of an adjusted level of performance for the same core indicator of performance for three consecutive years. The Secretary must use the withheld funds to provide technical assistance or other improvement assistance to the state. The Secretary may waive these sanctions due to exceptional or uncontrollable circumstances. Similarly, a local provider that does not meet at least 90% of its adjusted performance levels on at least one core indicator of performance must also develop a program improvement plan. If no improvement occurs, the state may take away some or all of the local provider's funding and use it to provide CTE services for the affected students through alternative means. Perkins IV authorizes the Secretary to carry out the following national activities: collect performance information on the state of CTE and on the effectiveness of state and local CTE programs; provide an annual report to Congress on the state of CTE and on state and local performance of Perkins CTE programs; direct the National Center for Education Statistics (NCES) to collect information on CTE for a nationally representative sample of students as part of its regular assessments; carry out research, development, dissemination, evaluation, and assessment of CTE activities under Perkins IV based on a single plan developed by the Secretary; conduct an "independent evaluation and assessment" of programs under this act and submit a report to Congress summarizing all studies related to the assessment; appoint an independent advisory panel to conduct an analysis of the findings and recommendations resulting from the assessment described above; collect and disseminate information regarding state efforts to meet their performance standards; establish a national center for research on career and technical education; and carry out demonstration CTE programs and disseminate information about best practices for providing CTE programs under this act. Section 117 authorizes grants to provide support for the education and training of Indian students attending tribally controlled postsecondary career and technical institutions that are not eligible for assistance under Title I of the Tribally Controlled Colleges and Universities Assistance Act of 1978 or the Navajo Community College Act. There are two IHEs that qualify for funding under TCPCTIP: the United Tribes Technical College in North Dakota and the Navajo Technical College in New Mexico. These two IHEs are also the only recipients of funds from the Department of Interior's Tribal Technical Colleges program. Funds provided under TCPCTIP may be used by recipients for expenses associated with CTE programs for Indian students, including program development costs; operations and maintenance of facilities; equipment, transportation, daycare, and family support programs for students; and student stipends. Section 118 of Perkins IV authorizes the Secretary to provide assistance to state-designated entities that collect and disseminate occupational and employment information. Funds under this section may be used to support career guidance and academic counseling and to improve access to information and resources related to career preparation, as well as information on occupational supply and demand. Funds may also be used to improve coordination and communication among administrators of Perkins IV programs and by Section 15 of the Wagner-Peyser Act to avoid duplication of efforts and promote the sharing of information and data. Section 118 has not been funded under Perkins IV. The Tech Prep program, originally introduced in Perkins II, is a separate formula grant program authorized in Title II of Perkins IV. Tech Prep aims to encourage collaborations between secondary and postsecondary institutions by awarding funds to consortia that include at least one participant from each level. Consortia use their Tech Prep funds to develop coherent sequences of CTE courses spanning the last two years of secondary education and two years of postsecondary education, known as the "2+2" model. Secondary level institutions that are eligible to be members of consortia under Tech Prep are the same as eligible secondary level local providers under the Basic State Grants program. Eligible postsecondary level providers are nonprofit IHEs that offer a two-year associate's degree, two-year certificate, or two-year apprenticeship program; or proprietary IHEs that offer a two-year associate's degree program. A consortium may also include IHEs that grant baccalaureate degrees, employers and other members of the business community, and labor organizations. The secondary and postsecondary consortium members have to participate in an articulation agreement that includes a credit transfer agreement. The "2+2" program developed by a consortium has to lead to an associate's degree or a postsecondary certificate in a specific occupational field and meet state academic standards. Additionally, Tech Prep programs are required to provide professional development programs for teachers, faculty, administrators, and counselors. Tech Prep funds are allocated to the states using the same formula as that used by the Basic State Grants program in Title I, but without the minimum state grant provisions. States may choose to operate Tech Prep as a separate program, or to combine Tech Prep funds with their Basic State Grants funds. Tech Prep was last funded in FY2010. Title III of Perkins IV specifies general provisions, including federal and state administrative provisions. The following subsections describe a few key provisions. The Supplement Not Supplant provision requires states and local education providers to supplement, not supplant, non-federal funds to carry out CTE activities. Supplanting occurs if a state or an eligible recipient uses Perkins IV funds to provide services that the state or recipient is required to provide under other federal, state, or local laws; provided with nonfederal funds in the prior year; or provides with nonfederal funds for non-CTE students but charges to Perkins IV funds. These criteria may be rebutted if the state or eligible recipient can demonstrate that it would not have provided the services in question with nonfederal funds if the Perkins IV funds had not been available. The Maintenance of Effort (MOE) provision states that, in order to receive Perkins funds, a state's CTE expenditures per student or aggregate CTE expenditures for the preceding fiscal year must be equal to or greater than the corresponding expenditures from the fiscal year before that. However, if total appropriations for Perkins IV decrease by a certain percentage, states may decrease their CTE expenditures by the same percentage. The Secretary may reduce the MOE requirement by at most 5% for one fiscal year in case of exceptional circumstances. Section 315 prohibits Perkins IV funds from being used to provide CTE programs for students prior to the 7 th grade. This section requires state and local CTE providers to include, "to the extent practicable upon written request," teachers and other personnel at nonprofit private schools in local CTE professional development activities. Similarly, this section allows for the "meaningful participation" of students attending nonprofit private schools in local CTE programs funded by Perkins IV. Perkins IV contains five separate authorizations of funds: Basic State Grants, National Programs, Tribally Controlled Postsecondary Career and Technical Institutions (TCPCTIP), Occupational and Employment Information, and Tech Prep. The authorized appropriations level in Perkins IV for each of these activities is such sums as may be necessary for each of FY2007-FY2012. As shown in Table 1 , total appropriations for Perkins IV have gradually decreased from a high of $1.304 billion in FY2007 to a low of $1.080 billion in FY2013, before rebounding slightly to $1.133 billion for FY2014 and FY2015. The Basic State Grants receive two separate appropriation amounts: an appropriation for the current fiscal year (funds that are to be obligated during FY2015 are appropriated in the FY2015 appropriations act); and an advance appropriation for the subsequent fiscal year (e.g., appropriated funds that are to be obligated in FY2015 are appropriated in the FY2014 appropriations act). The Tech Prep program was funded at around $100 million through FY2010, but it has not been funded since. The Occupational and Employment Information program has not been funded under Perkins IV. Table 2 shows state performance on the core indicators of performance for PY2011-2012. For the secondary education level core indicators of performance, 24 states met or exceeded 90% of their adjusted performance levels for all indicators. This means that 31 states needed to submit program improvement plans for the following program year for at least one secondary core indicator of performance. States were most successful on the core indicator for student graduation rates, with all 55 states that reported data achieving at least 90% of their adjusted performance levels, and 49% meeting or exceeding 100% of their adjusted performance levels on that indicator. States were least successful on nontraditional completion. Forty-two states reached 90% of their nontraditional completion adjusted performance levels. At the postsecondary education level, 28 states met or exceeded 90% of their adjusted performance levels for all indicators, meaning that 27 states had to submit program improvement plans. All 55 states reached 90% of their adjusted performance levels for the technical skill attainment core indicator. States were least successful on the postsecondary core indicator for credential, certificate, or degree attainment, with only 41 states attaining 90% of their adjusted performance levels on that indicator. Section 114(d)(2) of Perkins IV authorized funds to conduct an independent evaluation and assessment of CTE programs under the act. Results of this study were published by the Department of Education in 2014 as the National Assessment of Career and Technical Education (NACTE). This section of the report provides a concise summary of some NACTE findings about the state of CTE in the United States and the implementation of Perkins IV. Several of these findings have received considerable attention in the CTE researcher and practitioner communities. Federal appropriations for Perkins IV have fallen since the 2006 reauthorization. Adjusting for inflation, total Perkins funding declined by 24% from FY2007 to FY2014. Declines in allocations for individual states have ranged from 6% to 30%. In PY2008-2009, the most common uses of Perkins funds reported by local providers were purchasing equipment and providing career guidance and academic counseling to students. When surveyed about the implementation of programs of study (POS) in Perkins IV, nearly half of all state secondary and postsecondary CTE directors (23 of each) reported in PY2008-2009 that CTE teachers and faculty did not have a good understanding of POS, suggesting that the POS concept was unclear to the instructors of CTE. Flexibility in the Perkins IV definitions of core indicators of performance and the resulting variety of definitions used by the states precludes the ability to use performance data reported by the states for valid comparison of performance between states or for aggregating data across states to examine national progress and trends in CTE over time. The percentage of high school graduates completing four-year college preparatory coursework nearly doubled from 1990 to 2009, and CTE students showed larger increases than did non-CTE students. This trend can be interpreted to indicate that participating in CTE programs can increase students' chances of completing college preparatory coursework. However, this may reflect changes in who participated in CTE rather than the impact of CTE. College-going and completion rates varied considerably by CTE concentration field, as did continuation in the same CTE field at the postsecondary level. For example, as of 2006, college-attendance rates for 2004 high school graduates, examined by CTE concentration field, ranged from 84% for CTE students who had concentrated in computer and information sciences to 52% for concentrators in repair and transportation. Appendix A. Basic State Grants Allocation Formula This appendix provides a detailed description of the formula used for allocating Perkins IV Basic State Grant funds to the states after set-asides for the outlying areas, the Native American CTE Program, and the Native Hawaiian CTE Program have been reserved. Initial Allocation After reservations for outlying areas and the Native American and Native Hawaiian CTE Programs, Basic State Grants funds are award ed to the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The base formula for state allocations was historically designed to target funds toward states with higher proportions of aged 15 to 19. States with lower per capita incomes are also targeted by the initial allocation formula. The base formula depends on three population groups in each state: persons aged 15 to 19, 20 to 24, and 25 to 65. Each of these populations is then weighted in the calculation of initial allocations. The largest weight (0.5) is assigned to the 15 to 19 age group. The 20 to 24 age group is weighted 0.2, while the 25 to 65 age group is weighted 0.15. Note that these weights differ from those stated in the body of the report, because this section provides a higher level of detail about the formula calculations. The second factor for calculating the initial allocation is the state's allotment ratio. This is calculated by dividing a state's per capita income (PCI) by the national average PCI. That quotient is then multiplied by 0.5 and subtracted from 1. This calculation results in higher allotment ratio values for states with low PCIs and lower allotment ratio values for states with high PCIs. No state may have an allotment ratio higher than 0.6 or lower than 0.4. Allotment ratios for states with higher or lower calculated ratios are set to either 0.6 or 0.4, respectively. Each state's initial allocation is then calculated by adding four quantities based on weighted populations in the three age groups and allotment ratios. The first three components of the sum are calculated by multiplying a state's allotment ratio by its population in the given age group, and then dividing the result by the sum of all such products across all the states. That number is then multiplied by the weight corresponding to the particular age group: where 0.5 is the weight factor associated with the 15 to 19 population group. Correspondingly, the allocations associated with the 20 to 24 and 25 to 65 population groups are calculated as follows: where 0.2 is the weight factor associated with the age 20 to 24 population group, and where 0.15 is the weight factor associated with the 25 to 65 population group. The fourth component of a state's initial allocation, Allocationprop in the above formula, is calculated as that state's proportion of the total funding determined by the sum of the first three formulas. This last component is given a weight of 0.15. As a result, Allocationprop is calculated as follows: To recap, the largest proportion (50%) of each state's initial allocation under the Basic State Grants formula is assigned based on the number of persons aged 15 to 19, which is the traditional target population for CTE programs. The inclusion of PCI in the formula helps states with lower PCIs receive a greater share of available funds. Thus, states with lower PCIs and higher numbers of persons aged 15 to 19 will get the highest initial allocations. Perkins IV has two different formulas for adjusting state initial allocations. The determination of which formula is used is based on how the total amount of funding available for state grants compares with the amount available in FY2006, which was $1,115,902,206. Formula for Funding at FY2006 Level or Lower Under Perkins IV, there are actually two formulas that are authorized for use in making state grant allocations. The first formula applies if the total amount of funding available for Basic State Grants is equal to or less than the amount that was available in FY2006. This formula has been used to calculate state allocations each year from FY2007 to FY2016. Under this formula, the initial state allocations can be altered to ensure that each state's allocation meets certain minimum state grant provisions. There are three separate possible minimum grant conditions calculated for each state: 1. 0.5% of the total allocated to states; 2. 150% of a state's prior-year grant; 3. 150% of a state's population aged 15 to 65 multiplied by the national average per pupil payment (NAPPP). The NAPPP is calculated by dividing the total amount allocated to all states by the total national population of persons aged 15 to 65. The smallest of these three possible minimum grant amounts is then compared with the state's FY1998 allocation. The larger of these two amounts is then considered the state's minimum grant amount. If a state's initial allocation is lower than its minimum grant amount, that state's allocation is increased to equal its minimum grant amount. For any state whose initial allocation exceeds its minimum grant amount, its initial allocation is ratably reduced to ensure that all states have met their minimum grant amounts. If the resulting allocations put some of the states whose allocations were ratably reduced below their minimum grant amounts, then additional ratable reductions can take place until every state has met its minimum grant amount. Figure A-1 summarizes the process of determining state allocations when appropriations are at the FY2006 level or lower. Formula for Funding at Higher than FY2006 Level A different formula for state allocations of Perkins IV Basic State Grants funds applies when total appropriations are greater than those from FY2006. Under that formula, initial allocations are calculated in the same way as in the formula described in the previous section of this report. Once initial allocations are calculated, state grants are adjusted using only one of the three possible minimum grant rules: the state minimum grant equal to 0.5% of total allocations. Additionally, a special rule is introduced for the distribution of "new money," which is defined as the amount by which the current year's funding available to states exceeds the total funding available to states in FY2006. The formula for state allocations when total funding exceeds FY2006 levels would allot up to one-third of the new money to bring states with allocations below 0.5% of total allocations up to the 0.5% level. The new money would be allotted in such a way that states that are furthest below the 0.5% mark would receive proportionately larger shares of the new money than states that are closer to, but still below, the 0.5% minimum. As a result, none of the states with initial allocations below 0.5% of the total could end up with final allocations above 0.5%. If total appropriations are sufficiently high, then each state should be able to reach the 0.5% minimum allocation. The remaining funds—at least two-thirds of the new money and the funds left over from bringing the smaller states up to the 0.5% minimum—would be allocated to the remaining states in proportion to their initial allocations, except that no state, including those at or below the 0.5% minimum, would receive a grant less than its FY1998 allocation. Appendix B. Basic State Grants Allocation Table
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The Carl D. Perkins Career and Technical Education Act of 2006 (Perkins IV; P.L. 109-270) is the main federal law supporting the development of career and technical skills among students in secondary and postsecondary education. Perkins IV aims to improve academic outcomes and preparedness for higher education or the labor market among students enrolled in career and technical education (CTE) programs, previously known as vocational education programs. The federal government has a long history of supporting programs to develop students' career and technical skills, dating back to the 19th century. Perkins IV, the most recent federal law targeting CTE, was passed in 2006 and authorized through FY2012. The authorization was extended through FY2013 under the General Education Provisions Act, and Perkins IV has continued to receive fairly constant appropriations through FY2016. The total appropriations for Perkins IV in FY2016 were approximately $1.1 billion. This report provides a summary of Perkins IV. The largest program authorized by Perkins IV is the Basic State Grants program. Key features of this program include the following: formula grants to the states to develop and improve CTE programs at the secondary and postsecondary levels; a state allocation formula that allocates money based on population and per capita income factors; a distribution of at least 85% of the funds from the states to the local level; state flexibility in deciding the allocation of state funds between secondary and postsecondary local CTE providers; requirements for states to develop and implement programs of study, which are nonduplicative sequences of courses that span the secondary and postsecondary levels and lead to an industry-recognized credential, certificate, or postsecondary degree; core indicators of performance for accountability purposes, with target levels of performance negotiated between each state and the Secretary of Education; disaggregation of performance data by special populations and subgroups defined in Title I of the Elementary and Secondary Education Act of 1965, as amended by the Every Student Succeeds Act of 2015; and the requirement for states to prepare and implement program improvement strategies if the target levels on core indicators of performance are not met. Perkins IV also authorizes additional programs: Tech Prep, National Programs, Tribally Controlled Postsecondary Career and Technical Institutions (TCPCTI), and Occupational Employment Information. Of these, only National Programs and TCPCTI received funding for FY2011-FY2016.
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DOE is responsible for managing defense nuclear waste and cleaning up contamination at sites involved in the past production of nuclear weapons. Among these challenges are the management and disposal of radioactive waste stored in underground tanks at sites in three states: Hanford in Washington, Savannah River in South Carolina, and the Idaho National Laboratory (INL). The production of radioactive materials for nuclear weapons generated 53 million gallons of radioactive waste stored in 177 tanks at Hanford, 37 million gallons in 49 tanks at Savannah River, and nearly 1 million gallons in 11 tanks at the INL. Some of these tanks are deteriorating and are known or suspected to have leaked, contaminating soil and groundwater. Of greatest concern are the tanks at Hanford, 67 of which are known or suspected to have leaked radioactive waste that has migrated through groundwater into the Columbia River. However, recent monitoring data indicate that the level of radionuclides in the Columbia River meets federal and state water quality standards. There are similar concerns about the possible contamination of the Snake River in Idaho and the Savannah River in South Carolina. How to decommission (i.e., close) the tanks in a cost-effective and timely manner that mitigates environmental risk and potential exposure of workers has been the subject of controversy. DOE has argued that removing all of the waste in the tanks would take too long to respond to environmental risks from leaking tanks. DOE favors removal of the "pumpable" liquid waste and immobilizing (i.e., binding up) the sludge-like residual waste by filling the tanks with a cement grout to prevent leaks. The waste removed from the tanks classified as "high-level" would be stored for future disposal in a deep geologic repository (see below). Potentially affected states and environmental organizations raised questions regarding how much waste would be left in the tanks and whether the grout would thoroughly mix with the residual waste to solidify and contain it safely. Although the sludge-like consistency of the residual waste likely would not be as prone to leakage because of its semisolid form, whether pockets or layers of liquid waste may exist within the sludge-like residues and present greater risk of leakage is uncertain. Although removing all of the waste in the tanks would eliminate the risk of contamination, this alternative poses other risks and challenges. DOE has argued that methods to extract the residual waste after the pumpable liquid waste is removed would generate a new hazardous waste stream that would need to be managed and disposed of safely to protect the environment. DOE also asserts that there would be significant risks of exposure to workers who would remove the residues and manage and dispose of the resulting new waste stream. Once a tank is cleaned, there would be additional risks to workers who would extract the tank from the ground, and there would be environmental risks from the management and disposal of the contaminated tank metal. How to dispose of the tank waste is further complicated by the legal issue of how much of the waste is "high-level." Under the Nuclear Waste Policy Act of 1982 (NWPA), high-level radioactive waste must be disposed of in a deep geologic repository. Consequently, the tank waste classified as high-level must be removed from the tanks, processed, and stored for disposal in such a repository. In July 1999, DOE issued internal agency Order 435.1 to classify residual tank waste as "waste incidental to reprocessing," rather than as high-level. In effect, this order would exempt the residual tank waste from NWPA requirements for disposal in a geologic repository. DOE proposed to dispose of the residual tank waste at Hanford, Savannah River, and the INL by grouting it in place, as discussed above. Sealing a tank using this method would depend on state concurrence, as DOE must obtain approval from the state where the tank is located before it can be closed with no further action to be taken. DOE grouted residual waste in two tanks at the Savannah River site in 2000, with state concurrence. In 2002, DOE issued a Record of Decision to apply Order 435.1 to the closure of the remaining 49 tanks at the site, and to grout the residual waste it classified as incidental to reprocessing. The Natural Resources Defense Council (NRDC) legally challenged DOE's authority to dispose of the waste in this manner. The state of South Carolina and others filed as "friends of the court," due to concern that states would not have a role under Order 435.1 in determining how much of the residual waste would be left in the tanks. In 2003, a federal district court determined that DOE does not have the authority to classify any of the waste in the tanks as other than high-level, nor to dispose of it permanently on site through grouting or other means. DOE appealed the 2003 ruling, and in 2004, the U.S. Court of Appeals for the Ninth Circuit reversed the above district court opinion, ruling that the challenge to Order 435.1 was not "ripe" for review. The court noted that DOE had planned to implement Order 435.1 to grout the 49 tanks, but had not yet done so. Thus, the court determined that DOE had not violated the NWPA because it had not yet taken such action. The circuit court opinion resulted in allowing DOE to pursue activities under Order 435.1, and NRDC or others then could bring suit if they believed actions taken by DOE violate the law. Prior to the appeals court decision, DOE had asked Congress to enact legislation to clarify its authority for Order 435.1 and allow it to proceed with grouting the waste in tanks at Hanford, Savannah River, and the INL. After considerable debate, the 108 th Congress included provisions in Section 3116 of the Ronald W. Reagan National Defense Authorization Act for FY2005 ( P.L. 108-375 ) authorizing DOE to classify some of the tank waste in South Carolina and Idaho as incidental to reprocessing and to grout it in place. Congress did not provide this authority in Washington State, where most of the leaking tanks are located. Although this targeted authority is permanent, unless repealed by Congress, funding to implement it is subject to annual authorization and appropriation. An examination of provisions in Section 3116 of P.L. 108-375 follows. Section 3116(a) authorized the Secretary of Energy, in consultation with the Nuclear Regulatory Commission (NRC), to classify tank waste in South Carolina and Idaho as other than high-level, upon making certain determinations. These determinations are (1) that the waste "does not require permanent isolation in a deep geological repository," as is required for high-level waste, and (2) that highly radioactive radionuclides have been removed from the waste to the "maximum extent practical." Assuming these requirements are met, the Secretary must determine if the radioactivity of the waste will exceed concentration limits for Class C low-level waste. However, the waste could be disposed of according to Class C performance objectives for human exposure , regardless of whether the concentration exceeds allowable limits. If the concentration does exceed allowable limits, the Secretary must consult with the NRC to develop a plan for the disposal of such waste. In any case, disposal also would be subject to a state-approved closure plan and state permit authorized under other law. The performance objectives for Class C waste require "reasonable assurances" that concentrations of radioactive materials that may be released into the environment do not result in human exposure to specific levels of radiation. The ability of the grout to accomplish this objective would depend primarily on the extent to which it mixes with the residual waste to prevent leaks from the tank. However, even if a tank leaks, the performance objectives could still be met if the radioactivity decays to allowable levels before contamination migrates and results in human exposure. The objectives also require that protection of individuals from inadvertent intrusion be ensured after institutional controls are removed. Sealing the tanks with a cement grout could provide a barrier to intrusion, and institutional control of the grouted tanks, presumably would continue as long as the Savannah River site and the INL remain federal facilities. Although grouting of the residual waste would be subject to state approval, the authority of states is limited to the hazardous component of the waste. Thus, South Carolina and Idaho presumably would not have the authority to prevent the grouting of a tank based solely on objections to the radioactivity left in the tank, as long as Class C performance objectives are met. In effect, Section 3116(a) authorizes DOE to grout the residual waste in tanks in Idaho and South Carolina, if it consults with the NRC in making the determination that the waste is not high-level and if it meets the performance objectives for disposing of Class C waste. Section 3116(b) requires the NRC to monitor DOE's implementation of this authority, in coordination with Idaho and South Carolina. If the NRC determines that DOE is not in compliance, it is directed to inform DOE, the state, and the congressional committees with relevant jurisdiction. Section 3116(c) clarified that the waste classification authority in subsection (a) would not apply to any material transported outside of covered states, which are defined as Idaho and South Carolina in Section 3116(d). In effect, the law does not allow DOE to reclassify waste shipped out of South Carolina or Idaho as "incidental to reprocessing" and to dispose of it as low-level waste in other states. Section 3116(e) addressed the effect of the entire section on other laws and regulations and their application within Idaho and South Carolina. This provision stated that the authority in Section 3116(a) shall not "impair, alter, or modify the full implementation of any Federal Facility Agreement and Consent Order or other applicable consent decree" for a DOE site. These documents specify federal and state requirements applicable to waste disposal and cleanup, and establish legally binding time frames for disposal and cleanup actions. Thus, it appears that Section 3116 leaves the existing agreements for Savannah River and the INL intact, and would not permit DOE to leave more waste in the tanks than previously agreed to. Other provisions in Section 3116(e) clarified that the authority in subsection (a) is binding only in Idaho and South Carolina and that it does not override certain other statutes relevant to waste disposal. Section 3116(f) clarified the availability of judicial review under the Administrative Procedure Act (APA), for "any determination made by the Secretary or any other agency action taken by the Secretary pursuant to this section," and for any failure of the NRC to carry out its monitoring and reporting responsibilities. Although Section 3116 does not require public notice of actions taken pursuant to it, DOE may be required to provide notice under other federal laws, such as the National Environmental Policy Act and the APA. The disposal of the tank waste is also subject to a state-approved closure plan, the preparation of which may provide opportunity for public notice under state law. In implementing the authority in Section 3116, DOE must first determine what portion of the tank waste is classified as other than high-level and is therefore not subject to disposal in a geologic repository. In November 2006, DOE determined in consultation with the NRC how much waste would be left in the tanks at the INL, but DOE has not made such a determination at Savannah River, where the removal of the tank waste is not as far along. However, in January 2006, DOE did determine the portion of the retrievable waste at Savannah River that would be classified as other than high-level. This waste would be solidified and disposed of in vaults on site rather than in a geologic repository. Although the NRC concurred with DOE in issuing these waste determinations, the two agencies have disagreed about their respective roles in making future determinations of the tank waste that has yet to be classified for disposal. To inform decisions to dispose of the tank waste, Section 3146 of P.L. 108-375 authorized DOE to arrange for the National Academy of Sciences (NAS) to study disposal alternatives at Savannah River, the INL, and Hanford. The NAS released its final report in April 2006. The NAS concluded that DOE's "overall approach" to remove most of the waste from the tanks and to grout the residual waste in place is "workable." However, the NAS noted that "clear, definitive" answers to certain questions were not possible because of insufficient information and technical, economic, and regulatory uncertainties, such as the lack of explicit authority for grouting tank waste in Washington State. The NAS acknowledged that using a cement grout is likely the most effective method currently available to immobilize the waste left in the tanks after all retrievable waste is removed, but noted that the long-term performance of the grout to safely contain the waste left in the tanks is uncertain and necessitates further research. However, the ability to reliably predict performance until all radioactivity decays to harmless levels appears doubtful, likely leaving some uncertainty for a substantial period of time, despite efforts to assess performance over the long-term. The NAS also noted that many of the facilities to process the retrieved waste are not constructed or have ongoing problems, and that the regulatory deadlines for tank closure are years away, from 2016 to 2032. The NAS concluded that enough time likely remains to explore ways to remove more of the waste from the tanks before closing them. The NAS recommended that DOE delay the grouting of tanks with greater amounts of residual waste to allow for the development of technologies to retrieve a larger portion of the waste. Accordingly, the NAS recommended $50 million annually over 10 years for a research program to develop more effective methods to remove the waste from the tanks and to ensure the immobilization of residues left in them upon closure. The John Warner National Defense Authorization Act for FY2007 ( P.L. 109-364 , H.R. 5122 ) authorized $10 million for DOE to establish such a program, subject to appropriations. DOE estimates that the cleanup of the Savannah River site will be complete in 2025 at a cost of $32.1 billion, the INL in 2035 at a cost of $15.3 billion, and Hanford also in 2035 at a cost of $60.0 billion. The disposal of the tank waste at these sites is among the greater challenges to completing cleanup, along with remediation of existing soil and groundwater contamination. The authority in Section 3116 of P.L. 108-375 has implications in terms of cost and pace of cleanup at both Savannah River and the INL. Based on a 2002 assessment, DOE estimated that grouting residual tank waste at Savannah River would cost between $3.8 million and $4.6 million per tank, compared with a cost of greater than $100 million per tank to remove and dispose of all of the waste and to clean and remove the tank. The per tank closure costs at the INL likely would be lower because the tanks there contain less waste than those at Savannah River. DOE continues to assess alternatives and costs for the disposal of the tank waste at Hanford under other authorities, but a final decision has not been made. Grouting the tank waste also has implications in terms of environmental risk. If the grout is effective in solidifying the residual waste and containing it safely, this disposal method could provide a less costly and faster means of addressing risks. On the other hand, the possibility of future leaks and resulting environmental contamination remains if the grout does not mix thoroughly with the residual waste to solidify it completely, as potentially affected states and environmental organizations have noted. Whether contamination resulting from tank leaks could migrate and present a potential risk of human exposure would depend on many factors, including the hydrological conditions of the site and the effectiveness of any engineered or natural geologic barriers to migration. If a grouted tank leaked and contamination resulted, the federal government would remain liable for cleanup according to applicable federal and state requirements. Depending on the extent of contamination, potential risk of human exposure, and remedial actions selected to address such risk, the time and costs to clean up contamination from tank leaks could offset the initial savings from grouting the residual waste.
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How to safely dispose of wastes from producing nuclear weapons has been an ongoing issue. The most radioactive portion of these wastes is stored in underground tanks at Department of Energy (DOE) sites in Idaho, South Carolina, and Washington State. There have been concerns about soil and groundwater contamination from some of the tanks that have leaked. DOE proposed to remove the "pumpable" liquid waste, classify the sludge-like remainder as "waste incidental to reprocessing," and seal it in the tanks with a cement grout. DOE has argued that closing the tanks in this manner would be a cost-effective and timely way to address environmental risks. Questions were raised as to how much waste would be left in the tanks and whether the grout would contain the waste and prevent leaks. After considerable debate, the 108th Congress included provisions in the Ronald W. Reagan National Defense Authorization Act for FY2005 (P.L. 108-375) authorizing DOE to grout some of the waste in the tanks in Idaho and South Carolina. Congress did not provide such authority in Washington State. This report provides background information on the disposal of radioactive tank waste, analyzes the waste disposal authority in P.L. 108-375, discusses the implementation of this authority, and examines relevant issues.
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This report provides an overview of the development of the process for appointing the Director of the Federal Bureau of Investigation (FBI), briefly discusses the history of nominations to this position from 1973 through 2017, and identifies related congressional hearing records and reports. Federal statute provides that the Director of the FBI is to be appointed by the President by and with the advice and consent of the Senate. When there is a vacancy or an anticipated vacancy, the President begins the appointment process by selecting and vetting his preferred candidate for the position. The vetting process for presidential appointments includes an FBI background check and financial disclosure. The President then submits the nomination to the Senate, where it is referred to the Committee on the Judiciary. The Committee on the Judiciary usually holds hearings on a nomination for the FBI Director. The committee may then vote to report the nomination back to the Senate favorably, unfavorably, or without recommendation. Once reported, the nomination is available for Senate consideration. If the Senate confirms the nomination, the individual is formally appointed to the position by the President. Prior to the implementation of the current nomination and confirmation process, J. Edgar Hoover was Director of the FBI for nearly 48 years. He held the position from May 10, 1924, until his death on May 2, 1972. The current process dates from 1968, when the FBI Director was first established as a presidentially appointed position requiring Senate confirmation in an amendment to the Omnibus Crime Control and Safe Streets Act of 1968. The proposal for a presidentially appointed Director had been introduced and passed in the Senate twice previously, but had never made it through the House. Floor debate in the Senate focused on the inevitable end of Hoover's tenure (due to his advanced age), the vast expansion of the FBI's size and role under his direction, and the need for Congress to strengthen its oversight role in the wake of his departure. In 1976, the 10-year limit for any one incumbent was added as part of the Crime Control Act of 1976. This provision also prohibits the reappointment of an incumbent. As with the previous measure, the Senate had introduced and passed this provision twice previously, but it had failed to pass the House. From 1973 through 2017, eight nominations for FBI Director were confirmed, and two other nominations were withdrawn. Due to a 2011 statute allowing for the reappointment of a specific incumbent, two of the eight confirmed nominations were of the same person, Robert S. Mueller III. Each of these nominations is shown in Table 1 and discussed below. L. Patrick Gray III. On the day after the death of long-time Director J. Edgar Hoover, L. Patrick Gray was appointed acting Director. President Richard M. Nixon nominated Gray to be Director on February 21, 1973. Over the course of nine days, the Senate Committee on the Judiciary held hearings on the nomination. Although Gray's nomination was supported by some in the Senate, his nomination ran into trouble during the hearings as other Senators expressed concern about partisanship, lack of independence from the White House, and poor handling of the Watergate investigation. The President withdrew the nomination on April 17, and Gray resigned as acting Director on April 27, 1973. Clarence M. Kelley. Clarence M. Kelley was the first individual to become FBI Director through the nomination and confirmation process. A native of Missouri, Kelley was a 21-year veteran of the FBI, becoming chief of the Memphis field office. He was serving as Kansas City police chief when President Nixon nominated him on June 8, 1973. During the three days of confirmation hearings, Senators appeared satisfied that Kelley would maintain nonpartisan independence from the White House and be responsive to their concerns. The Senate Committee on the Judiciary approved the nomination unanimously the following day. He was sworn in by the President on July 9, 1973. Kelly remained FBI Director until his retirement on February 23, 1978. Frank M. Johnson Jr. With the anticipated retirement of Clarence Kelley, President Jimmy Carter nominated U.S. District Court Judge Frank M. Johnson Jr. of Alabama, on September 30, 1977. Johnson faced serious health problems around the time of his nomination, however, and the President withdrew the nomination on December 15, 1977. William H. Webster. In the aftermath of the withdrawn Johnson nomination, President Carter nominated U.S. Court of Appeals Judge William H. Webster to be Director on January 20, 1978. Prior to his service on the U.S. Court of Appeals for the Eighth Circuit, Webster had been U.S. Attorney and then U.S. District Court Judge for the Eastern District of Missouri. After two days of hearings, the Senate Committee on the Judiciary unanimously approved the nomination and reported it to the Senate. The Senate confirmed the nomination on February 9, 1978, and Webster was sworn in on February 23, 1978. He served as Director of the FBI until he was appointed as Director of the Central Intelligence Agency (CIA) in May 1987. William S. Sessions. On September 9, 1987, President Ronald W. Reagan nominated William S. Sessions, Chief Judge of the U.S. District Court of Western Texas, to replace Webster. Prior to his service on the bench, Sessions had worked as chief of the Government Operations Section of the Criminal Division of the Department of Justice and as U.S. Attorney for the Western District of Texas. Following a one-day hearing, the Senate Committee on the Judiciary unanimously recommended confirmation. The Senate confirmed the nomination, without opposition, on September 25, and Sessions was sworn in on November 2, 1987. Sessions was the first of two FBI Directors to be removed from office. President William J. Clinton removed Sessions from office on July 19, 1993, citing "serious questions ... about the conduct and the leadership of the Director," and a report on "certain conduct" issued by the Office of Professional Responsibility at the Department of Justice. Some Members of Congress questioned the dismissal, but they did not prevent the immediate confirmation of Sessions's successor. Louis J. Freeh. President Clinton nominated former FBI agent, federal prosecutor, and U.S. District Court Judge Louis J. Freeh of New York as FBI Director on July 20, 1993, the day following Sessions's removal. The Senate Committee on the Judiciary held one day of hearings and approved the nomination. The nomination was reported to the full Senate on August 3, and Freeh was confirmed on August 6, 1993. He was sworn in on September 1, 1993, and served until his voluntary resignation, which became effective June 25, 2001. Robert S. Mueller III. On July 18, 2001, President George W. Bush nominated Robert S. Mueller III to succeed Freeh. The Senate Committee on the Judiciary held two days of hearings, and the nomination was reported on August 2, 2001. The nomination was confirmed by the Senate on the same day by a vote of 98-0. Mueller had served as the U.S. Attorney for the Northern District of California in San Francisco, and as the Acting Deputy U.S. Attorney General from January through May 2001. The former marine had also been U.S. Attorney for Massachusetts and served as a homicide prosecutor for the District of Columbia. Under President George Bush, Mueller was in charge of the Department of Justice's criminal division during the investigation of the bombing of Pan Am Flight 103 and the prosecution of Panamanian leader Manuel Noriega. From 1973 through 2016, Mueller was the only FBI Director to be appointed to more than one term. P.L. 112-24 , enacted on July 26, 2011, allowed the incumbent Director to be nominated for, and appointed to, an additional two-year term. After the bill was signed, Mueller was nominated for this second term by President Barack Obama, and he was confirmed the following day by a vote of 100-0. Mueller's two-year term expired on September 4, 2013. James B. Comey Jr. As Mueller's unique two-year term drew to a close, President Obama nominated James B. Comey Jr. to succeed him. Comey had previously served as U.S. Attorney for the Southern District of New York, from January 2002 to December 2003, and as Deputy Attorney General, from December 2003 to August 2005. The President submitted Comey's nomination on June 21, 2013. The Senate Committee on the Judiciary held a hearing on the nomination on July 9 and voted unanimously to report the nomination favorably to the full Senate on July 18. The Senate confirmed the nomination by a vote of 93-1 on July 29. Comey began his term of office on September 4, 2013. Comey was removed from office by President Donald J. Trump on May 9, 2017. Christopher A. Wray. Seven weeks after Comey was removed from office, President Trump nominated Christopher A. Wray to succeed him. From 1997 until 2005, Wray served in several leadership positions at the Department of Justice, including Principal Associate Deputy Attorney General and Assistant Attorney General for the Criminal Division. He later worked in private practice at a law firm. The President submitted Wray's nomination on June 26, 2017. The Senate Committee on the Judiciary held a hearing on the nomination on July 12 and voted unanimously to report the nomination favorably to the full Senate on July 20. The Senate confirmed the nomination by a vote of 92-5 on August 1. Wray began his term of office on August 2, 2017. U.S. Congress. Senate Committee on the Judiciary. Nomination of Louis Patrick Gray III, of Connecticut, to be Director, Federal Bureau of Investigation . Hearings. 93 rd Cong., 1 st sess., February 28, 1973; March 1, 6, 7, 8, 9, 12, 20, 21, and 22, 1973. Washington: GPO, 1973. —.—. Executive Session, Nomination of L. Patrick Gray, III to be Director, Federal Bureau of Investigation. Hearing. 93 rd Cong., 1 st sess., April 5, 1973. Unpublished. —.—. Nomination of Clarence M. Kelley to be Director of the Federal Bureau of Investigation . Hearings. 93 rd Cong., 1 st sess., June 19, 20, and 25, 1973. Washington: GPO, 1973. —.—. Nomination of William H. Webster, of Missouri, to be Director of the Federal Bureau of Investigation . Hearings. 95 th Cong., 2 nd sess., January 30 and 31, 1978; February 7, 1978. Washington: GPO, 1978. —.—. Nomination of William S. Sessions, of Texas, to be Director of the Federal Bureau of Investigation . Hearings. 100 th Cong., 1 st sess., September 9, 1987. S.Hrg. 100-1080. Washington: GPO, 1990. —.—. Nomination of Louis J. Freeh, of New York, to be Director of the Federal Bureau of Investigation . Hearings. 103 rd Cong., 1 st sess., July 29, 1993. S.Hrg. 103-1021. Washington: GPO, 1995. —.—. Confirmation Hearing on the Nomination of Robert S. Mueller, III to be Director of the Federal Bureau of Investigation . Hearings. 107 th Cong., 1 st sess., July 30-31, 2001. S.Hrg. 107-514. Washington: GPO, 2002. —.—. Confirmation Hearing on the Nomination of James B. Comey, Jr., to be Director of the Federal Bureau of Investigation . Hearings. 113 th Cong., 1 st sess., July 9, 2013. S.Hrg. 113-850. Washington: GPO, 2017. —.—. Subcommittee on FBI Oversight. Ten-Year Term for FBI Director . Hearing. 93 rd Cong., 2 nd sess., March 18, 1974. Washington: GPO, 1974. U.S. Congress. Senate Committee on the Judiciary. Ten-Year Term for FBI Director . Report to accompany S. 2106 . 93 rd Cong., 2 nd sess. S.Rept. 93-1213. Washington: GPO, 1974. —.—. William H. Webster to be Director of the Federal Bureau of Investigation . Report to accompany the nomination of William H. Webster to be Director of the Federal Bureau of Investigation. 95 th Cong., 2 nd sess., February 7, 1978. Exec. Rept. 95-14. Washington: GPO, 1978. —.—. William S. Sessions to be Director of the Federal Bureau of Investigation . Report to accompany the nomination of William Sessions to be Director of the Federal Bureau of Investigation. 100 th Cong., 1 st sess., September 15, 1987. Exec. Rept. 100-6. Washington: GPO, 1987. —.—. A Bill to Extend the Term of the Incumbent Director of the Federal Bureau of Investigation . Report to accompany S. 1103 . 112 th Cong., 1 st sess., June 21, 2011. S.Rept. 112-23 . Washington: GPO, 2011.
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The Director of the Federal Bureau of Investigation (FBI) is appointed by the President by and with the advice and consent of the Senate. The statutory basis for the present nomination and confirmation process was developed in 1968 and 1976, and has been used since the death of J. Edgar Hoover in 1972. From 1973 through 2017, eight nominations for FBI Director were confirmed, and two other nominations were withdrawn by the President before confirmation. The position of FBI Director has a fixed 10-year term, and the officeholder cannot be reappointed, unless Congress acts to allow a second appointment of the incumbent. There are no statutory conditions on the President's authority to remove the FBI Director. From 1973 through 2017, two Directors were removed by the President. President William J. Clinton removed William S. Sessions from office on July 19, 1993, and President Donald J. Trump removed James B. Comey from office on May 9, 2017. Robert S. Mueller III was the first FBI Director to be appointed to a second term, and this was done under special statutory arrangements. He was first confirmed by the Senate on August 2, 2001, with a term of office that expired in September 2011. In May 2011, President Barack Obama announced his intention to seek legislation that would extend Mueller's term of office for two years. Legislation that would allow Mueller to be nominated to an additional, two-year term was considered and passed in the Senate and the House, and President Obama signed the bill into law (P.L. 112-24) on July 26, 2011. Mueller subsequently was nominated and confirmed to the two-year term, and he served until September 4, 2013. This report provides an overview of the development of the process for appointing the FBI Director, briefly discusses the history of nominations to this position from 1973-2017, and identifies related congressional hearing records and reports.
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One of the most important and contentious issues of any post-conflict operation is who willundertake what security tasks. The importance of immediately ensuring adequate security is aconstant theme of post-conflict literature. There is considerable acknowledgment that a failure toprovide enough properly equipped troops and police, with an appropriate use of force mandate, cancomplicate post-conflict operations enormously and usually prolong them. Most importantly, afailure to guarantee stability is often viewed as a serious impediment the establishment of alegitimate and effective government. (4) Accordingto one analyst, "the security dilemma remains amajor problem, both in the short term during the transition from war to building shared politicalinstitutions, and later, as the new government tries to cope with its very substantial problems." (5) In Iraq, some citizens have already expressed disillusionment with the United States, faulting the U.S. military for failing to assign personnel immediately to prevent the looting and killings ofIraqis by Iraqis that accompanied the coalition takeovers of Baghdad and some other major cities. (6) In the weeks before the coalition action in Iraq, many analysts pointed to a need to place a highpriority on providing security in a post-conflict Iraq. One "think tank" report on Iraq stated thatsecurity needs in the post-war period "cannot be underestimated." (7) Another stated that U.S. andcoalition forces would need "to pivot quickly from combat to peacekeeping operations in order toprevent post-conflict Iraq from descending into anarchy." (8) Lack of adequate security has been cited as a key problem in many peacekeeping operations. Most recently, many analysts have faulted the ad hoc coalition peacekeeping force in Afghanistan,where a vice president was assassinated in July 2002. There, many analysts argue, the legitimacyof the interim government of Hamid Karzai has been substantially eroded as the relatively smallpeacekeeping force of 7,000 troops (from a fluctuating group of about 20 nations) deployed only inand around Kabul, has been unable to protect the Afghani population against bandits and warlords. Earlier, the lack of adequate military force, complicated by the lack of a mandate to use force exceptin self-defense, also has been cited as an important factor in the failure of the 1992-1995 U.N.peacekeeping operation in Bosnia, (9) where Serbianforces slaughtered Muslims who had soughtrefuge in UN-established "safe havens." The lack of security, in particular a lack of constabularyforces (i.e., military police or policemen with military training) is also cited as a problem with thecurrent NATO peacekeeping operations in Bosnia and Kosovo. (10) In post-conflict situations, military forces -- including U.S. forces -- have performed many different kinds of security tasks, (11) most of whichwould apply to Iraq. At least 12 broad tasks (eachof which has many different components) have been cited as necessary to ensure security in postconflict settings. About five of these are considered largely military tasks, including to 1) protecthumanitarian relief workers; (2) disarm and demobilize unwanted or unneeded military personnel;(3) de-mine national territory; (4) protect borders against intruders; and (5) contain the ambitionsfor power of armed local, regional, religious, or ethnic leaders (known in some cases as "warlords")who would seek to disrupt the establishment of the new regime. The remaining seven tasks are viewed as mainly requiring police skills, although military might, influence, organizational structure, materiél, and skills are often required to carry them out in theimmediate aftermath of conflict, when violence is still high. (12) Of these, the three that most oftenrequire a combination of military and police attributes are to: (1) block reprisal killings andrecrimination actions, the latter of which may require crowd control; (2) control arms and confiscateillegal weapons; and (3) arrest and try war criminals. Four other tasks which usually fall to thepolice, although military intelligence and trainers may assist in their performance, are: (1) dismantlecriminal networks (sometimes involving local police and government officials); (2) undertake policeand security force reform; (3) promote concepts of human rights, and (4) protect civilians andproperty from common crime. (13) Especially inearly post-conflict situations, protecting civilians andproperty from common crime may require a mix of military and policing skills. Analysts cite most of these tasks as necessary for maintaining security in post-conflict Iraq. The exception, thus far, is that no one has reported the existence within the Iraq security forces and inHussein's Baath political party of the type of organized criminal network that exists in Bosnia. There, some political leaders and alleged war criminals are believed to belong to the network, whichengages in counterband smuggling. Also, at times, local police have refused requests to act againstcriminals because, some analysts believe, the police are accomplices. This linkage between politicaland criminal groups did not develop, or at least surface, however, until after Bosnia's nationalistleaders had attained power. Only now, over seven years after NATO forces initiated peacekeepingoperations in Bosnia, are the intelligence and legal systems in place to begin to crack this network. (14) One crucial issue for U.S. policymakers will be who is to perform these tasks, particularly if U.S. armed forces do not? The Bush Administration's repeated assertions that the U.S. military willremain only as long as necessary, preferably for a limited period, and the possibility that U.S. forcesmight be needed in other theaters, raises the question of whether the United States military mightleave while a military force is still required. Related questions are when and to what degree Iraqimilitary and police, and possibly U.S. contracted or international police, partner with U.S. forces ortake over the various security tasks. (Within days after the fall of Baghdad, the United States calledfor Iraqi police to register themselves for a possible return to duty after vetting.) Military Forces. In past occupations and peace operations, these security tasks have been handled in different ways. In Germany and Japan, forinstance U.S. and allied military forces provided total security at the outset, gradually handingpolicing tasks over to vetted indigenous police forces, who took over both normal policing andconstabulary roles. Over the past decade, however, there has been some controversy over the useof U.S. forces in peacekeeping operations for any tasks except the protection of humanitarian reliefworkers and the containment of warlords. (15) In the early 1990s, the United Nations organized peacekeeping forces with troop (and later police) contributions from member states to undertake several of these tasks. The UN's inability toestablish a stable environment in several operations, most particularly in the Balkans in the early1990s, led most analysts to conclude that the United Nations, as currently structured, lacks thecapacity to carry out the type of military activities that are necessary to keep the peace in hostile andpotentially hostile environments. Since 1995, operations in such environments have been carried out by the military forces of NATO, as in Bosnia and Kosovo, or "coalitions of the willing," i.e., U.N. sanctioned multilateralforces, as in Afghanistan. Some analysts have suggested that NATO might take on a security rolein Iraq. Given international tensions surrounding U.S. military action in Iraq, particularlydisagreements with NATO members France and Germany, however, other nations may proveunwilling, even in the long-term, to provide troops to supplement or replace U.S. forces in thepost-war period. Police Forces. The potential disadvantages of a continuing use of military forces have led military planners to give special consideration todetermining the point when conditions existed for constabulary and police forces to begin to assumesecurity tasks. While military forces are viewed as necessary in the early post-conflict periods, theycan sometimes prove counterproductive. "If a single soldier errs by using excessive force, the entiremission can be placed in jeopardy because local consent may be squandered," wrote one militaryofficer. (16) According to another analyst, an"excessive security presence or the wrong type ofpresence can be provocative and dangerous. After violence has been contained the visibility ofarmed security forces indicates problems and dysfunction." (17) Over the past decade, experiences in peacekeeping operations have been combed for lessons that might be learned regarding the appropriate timing and mix of forces to use to perform securitytasks. Increasingly, those analyzing and planning peacekeeping operations have argued for a rangeof different kinds of forces carrying out different roles. In the words of one analyst: "Military forcesare effective at guaranteeing security against military opposition. They are much less effectiveagainst riots and civilian disturbances like the ones experienced in Bosnia as the refugees tried to gohome....They are impotent in the face of bricks through windows or threatening calls in the night. So we need a spectrum of forces to bring violence under control." (18) In addition to the military forces and military police contributed by many countries to peacekeeping operations, several other types of forces have been used to provide security. Two typesof international forces have been important: (1) the constabulary forces of other countries, inparticular the carabineri of Italy and the gendarmes of France, and (2) the U.N. CIVPOLs,i.e.,police contributed through the U.N. civilian police mechanism that recruits active duty or retiredpolicemen from member states to serve in an international police force. (International CIVPOLs monitor, assist, mentor and train local police. On occasion, they may mediate local disputes, andensure public order. They may call on military forces when necessary.) Often, vetted local policeforces have also been used to provide security under international oversight, (19) and sometimesreconstructed military forces have also been used. Studies and experiences suggest the importance of a coordinated, overlapping sharing of powers among military, paramilitary, and international and domestic police forces, with the first threephasing out as levels of violence diminish. (20) Inparticular, the need to provide constabulary forcesto handle crowds of civilians became more and more recognized in peacekeeping operations."Organized in platoons and companies along military lines, [such] paramilitary forces deal withlarge-scale civil disturbances and with armed and organized criminal elements. To avoid embroilingheavily armed troops in crowd control, the U.N. Transitional Authority in Eastern Slavonia(UNTAES) included a Polish riot-control company [i.e., military unit]. In Bosnia, the NATOpeacekeeping Stabilization Force (SFOR) developed the Multinational Specialized Unit (MSU) [aparamilitary unit] including police and paramilitary Italian Carabinieri. " (21) Subsequently, in Kosovo,a similar unit was incorporated into NATO's Kosovo peacekeeping force (KFOR), and the UnitedNations deployed civilian constabulary Special Police Units (SPU). (22) These experiences also have led many analysts to argue for the strengthening of the UNCIVPOL, or CIVPOL-like units to carry out tasks that are widely viewed as difficult or eveninappropriate for military forces, and which local police forces may not be able to carry out. TheNational Defense University's Institute for International and Strategic Studies (IISS) in 1998identified a security "deployment gap" resulting from an inadequate law enforcement presence onthe ground in several peacekeeping operations. This gap left military forces as the only source ofenforcing order early in an intervention, and made CIVPOL dependent for credibility as a capableforce on a military backup. The IISS report attributed this gap to the lack of "significant surgecapability, international mobility, or experience in operating beyond national borders." It suggestedremedies to "narrow" the gap. These included (1) strengthening the capacity of the internationalcommunity to mobilize CIVPOL personnel, either by creating a standby force of trained CIVPOLpersonnel and making adjustments in training and organization to make them more effective, and(2) preparing the military to discharge police functions during a transition period "until the securityenvironment has been sufficiently stabilized and the CIVPOL contingent has become operational." (23) Recent recommendations for post-conflict policy in Iraq include military constabulary forces, specialpolice constabulary units, and U.N. CIVPOLS as components of security forces. (24) Recent publications note continuing problems with CIVPOL deployments, including "a shortage of properly trained and experienced police officers and the lack of adequate logisticalsupport." (25) Presidential Decision Directive 71,issued by the Clinton Administration in February2000 but never put into effect, attempted to provide a framework for strengthening U.S. andinternational CIVPOL capabilities and related police and justice institutions. H.R. 1414, introducedby Representatives McGovern and Houghton on March 25, 2003, proposes that the United Statesencourage negotiations with the United Nations and U.N. member states to establish a U.N. civilianpolice corps. The size of a military occupation force, and the length of time that it should remain in place in support of an occupation government depends on many factors. The situation in Iraq is not yet clear,but two decisive factors may be the range and scope of tasks that military forces will be assigned,and the degree to which the Iraqi citizenry, police forces, and remaining military forces are willingto cooperate with the occupiers. Numerous estimates of the size of the necessary occupation force have been put forward over the last several months. A February 2003 U.S. Army War College publication cites an initialprojection of 100,000 troops, although it cautions that projections "of actual troop numbers remainhighly speculative until the actual postwar situation becomes clear." (26) This figure conforms to amid-2002 estimate of the U.S. Army Center of Military History that100,000 troops would be neededfor a peacekeeping force in Iraq if the peacekeepers were to carry out the full range of tasks of anoccupation force such as was provided in Germany and Japan after World War II, throughout thecountry. (27) These tasks would include providingemergency humanitarian relief, assisting withreconstruction, and administering Iraq on an interim basis. Conditions were somewhat different inGermany and Japan than they may be in Iraq, however, as there was virtually no resistance to theU.S. occupation, and cooperation from local police forces was high. Other estimates span a wide range above and below that figure. In testimony before the Senate Foreign Relations Committee (August 1, 2002), retired U.S. Army Colonel Scott Feil suggested75,000 as the number of forces that should remain. The Heritage Foundation, which argues that U.S.troops should be deployed only to secure three circumscribed war aims, estimates that the UnitedStates should contribute 40,000 troops to a 60,000-member coalition occupation force. (28) Intestimony before the Senate Armed Services Committee (February 25, 2003), General Eric Shinseki,Chief of Staff of the U.S. Army, estimated that "something on the order of several hundred thousandsoldiers" would probably be required for an occupation force to control Iraq. Department of Defensecivilian officials rebutted that estimate, some citing 100,000 as the appropriate number. (29) TheCongressional Budget Office (CBO) has estimated the annual cost of maintaining a militaryoccupation force of 75,000-200,000 at $17 billion to $46 billion per year, based on the average costof maintaining a U.S. Army peacekeeper. (30) Several factors will be important in determining the size of the U.S. and coalition occupation forces in Iraq and the amount of time the forces will remain. With regard to internal security,important factors will be the degree to which the Iraqi population accepts them, whether and howmany troops from other nations and U.S. or international civilian policemen are deployed, and theextent to which the United States has confidence in Iraqi police to handle the task. (As of late April, the State Department was reportedly seeking bids for a contract to send 1,000 former police officers and lawyers to work with the Iraqi police, as well as the justice and prisonsystems. (31) Several other countries, mostlyEuropean, have pledged to send small numbers of troopsto perform security, patrolling, and humanitarian tasks. (32) ) Among other factors are the perceived threat from one or more of Iraq's neighbors, which may be manifested as threats to territorial integrity through incursions across Iraq's borders, requiringconsiderable forces patrolling those borders, or more likely, as attempts to influence political eventsin Iraq by funding armed Iraqi groups. Such external "spoilers" have been identified as at leastpartially responsible for the breakdown of the U.N. peacekeeping operation in Bosnia and of severaloperations in Africa. The difficulty of disarming and demobilizing Iraqi military, paramilitary, and Baath party forces may be another significant determinant of the size of the occupying force and the length of time itremains. Demobilization, disarmament, and reintegration (often referred to as DDR) processes inpeacekeeping operations have been cited as complex and costly, but essential to the success of anypeace mission. (33) According to one analyst, largenumbers of forces can be required to accomplishthe task, but still may not be sufficient to guarantee a successful operation. (34) Some believe that theDDR problems presented in Iraq will surpass the problems elsewhere. For example, in his SenateForeign Relations Committee testimony, Col. Feil testified that DDR "requirements will dwarfprevious efforts" because of the huge size of Iraqi security forces. (35) One recent report estimated,"based on historical precedents," that U.S. military planners should allow at least four months fora "demilitarization" phase (apparently corresponding to demobilization and disarmament), duringwhich "aggressive re-training" and reintegration would begin. (36) The size of a coalition force and length of time it must remain will also depend on the degree to which the United States believes local security forces can be used. (Two recent reports recommended retaining Iraqi security forces in some form and using them, after retraining, inconjunction with U.S. and international forces in the post-war period. (37) ) The use of such forces hasvaried in previous peacekeeping operations. As the United States proceeds to establish an interim Iraqi regime, three issues have emergedregarding the transition to a permanent Iraqi government. (38) These are: (1) the appropriate role forthe United Nations in the transition; (2) the feasibility of establishing democracy in Iraq; and (3) theappropriate time frame and stages in which a transition to full Iraqi rule would occur, particularlythe length of time in which the U.S. military would head an occupation government. Even as the United States begins to organize the new structures that will govern Iraq, policymakers are debating the appropriate caretakers for an interim period, and the appropriatemeans to create Iraq's permanent governing structures. For now, governmental authority in Iraq isexercised by U.S. Army General Tommy Franks, the commander-in-Chief of the U.S. CentralCommand which directed the war. Retired U.S. Army general, Jay Garner, who heads theDepartment of Defense's national reconstruction office for Iraq, has assumed the position of civilianadministrator, responsible for civilian government functions. The Bush Administration's early plans,as of February 2003, called for a transition phase, during which control of Iraqi governmentministries would be gradually transferred from occupation military and civilian administrators toIraqis. In a final phase Iraqis would draft and ratify a new constitution, which would provide thebasis for free elections. In February, Bush Administration officials stated that, under propitiouscircumstances, the occupation government would last two years. (39) Currently, however, the BushAdministration is promoting the organization of an interim Iraqi "authority," to be put in place withina short period of time. Its powers and status vis-a-vis the occupation authorities are unclear. Some policymakers have argued that the United Nations should play a central if not the lead role in designing Iraq's future government. The process of peacebuilding that the United Statesenvisions for Iraq, with the goal of forming a democratic government, is arguably similar, in a broadbrush way, to the democratization processes of the U.S. military occupations of Japan and Germany. Some argue, however, that in key ways it may more closely resemble the multidimensionalpeacebuilding operations that the United Nations has conducted in several countries since the early1990s -- among them, most recently, Kosovo, Afghanistan, and East Timor, as well as the earliercases of Namibia, Cambodia, Mozambique, and El Salvador. Unlike the current situation in Iraq,U.N. peacebuilding missions have involved guiding countries from civil war towards a stable peace. Iraq does, however, share some characteristics of the nations involved in many of the peacebuildingmissions, i.e., sectarian divisions, which some analysts fear may give way to violence in the absenceof a strong, central, Iraqi authority, and a lack of experience with democracy. The Bush Administration envisions a role for the United Nations in post-war Iraq, but argues that the United States should continue to play a lead role, if not the lead role, in shaping Iraq's futuregovernment. As of April 2003, the only role that President Bush had identified for the U.N.regarding a future Iraqi government was a "participation" in the selection -- which some analystsinterpreted as meaning endorsement -- of members of an interim Iraqi government. The debate on the appropriate role for the United Nations is influenced by (1) considerations as to whether the United Nations Security Council's resistance to endorsing coalition military actionagainst Iraq is a significant indicator of its behavior in post-Hussein Iraq, (2) the comparativeadvantages of the United Nations and of the United States in harnessing international support fora future government, and (3) the United Nations' performance in past and current peacebuildingoperations. Proponents of a continuing U.S. lead in Iraq's political development believe that the United Nations has previously demonstrated a lack of the political will necessary to deal with securitythreats posed by the Hussein regime, and would prove an obstacle to securing U.S. security goals ifit were to play a deciding role in Iraq's political future. (40) Some also voice doubts about the UnitedNations' institutional ability to handle a complex transitional administration for a population of 24million, many times larger than the other two areas in which it currently runs transitionaladministrations, i.e., Kosovo (five million) and East Timor (approx. 950,000). They would alsodiscount this option based on the United Nations' reputation, especially throughout the 1990s, ashaving at best mixed results in its various peacekeeping and peacebuilding enterprises, and argue thatthe U.N. lacks the capacity to coordinate its operations effectively. Proponents of a lead U.N. role argue that U.S. interests in creating a stable and democratic Iraq would be better served if the United Nations were to assume control of the governmental aspects ofa peace operation through a transitional authority. (41) For one, they argue that only the United Nationsnow possess the high degree of international legitimacy that the United States enjoyed whenoccupying Japan and a sector of Germany in 1945. (42) Such legitimacy is necessary, they argue, toreap the high levels of international support, including financial assistance for reconstruction thatIraq will need for many years to come. (43) (Inaddition, some doubt that US policymakers would beable to muster enough political support domestically to provide the large amounts of assistance theybelieve will be needed for a lengthy reconstruction process.) A U.N. authority also would provide,proponents argue, assurances to both Iraqis and the international community of greater impartialityin such intrusive enterprises as purging and reshaping government institutions than would a U.S.occupational authority. (44) The perception ofimpartiality might affect the degree to which a broadmajority of Iraqis might be willing to support new governmental institutions, and a democratic ethos,proponents believe. Proponents also argue that while problems remain and reforms must be made, (45) the UnitedNations' has learned from past experiences in running complex peacebuilding operations, and thatseveral operations that seemed highly problematic several years ago have, with time, begun to seemmarkedly positive. (46) Some analysts also arguethat while some problems of U.N. peacebuildingoperations have been due to actions, or lack thereof, of U.N. personnel, the greatest problems havebeen the result of an insufficient mandate and a lack of resources, which can be attributed to a lackof political will on the part of member countries. (47) Strong differences exist over whether a Western-style democracy in Iraq is feasible. (48) Theestablishment of a democratic government in Iraq, which could provide a model for the Middle East,has long been advanced as a goal of Bush Administration officials, and was stated early on as onegoal of U.S. military action. Whether Iraq contains inherent institutional and cultural obstacles todemocratization, and if so, whether it can overcome them, is subject to debate. Some policymakersand analysts assert the majority of Iraqis aspire to democracy, and many have the education, skillsand modern outlook to create, with international assistance, durable democratic institutions. Others,however, point to Iraq's lack of significant prior experience with democratic institutions as aliability. Many analysts perceive significant differences among the Iraqi ethnic and tribal groupsthat may lead to continuing violence in a post-war Iraq, and are skeptical of the possibility ofbuilding democratic institutions and practices on such a shaky foundation in the short, or even thelong run. Some also warn of possible anti-democratic attitudes about the character of leadership,and other possible social, cultural, and psychological impediments to democracy. (49) Since the early 1980s, there has been a growing international interest in assisting the development of democratic institutions and practices, of which assistance through peacebuildingoperations has been a recent manifestation. (50) Literature on democratization and peacebuildingoperations highlights the difficulty of establishing democracies in societies with deep and bitterethnic and religious divisions. Three places currently in the midst of extensive internationalpeacekeeping/peacebuilding operations following civil conflict, with aspirations to create functioningdemocracies, are Afghanistan (since December 2001), Kosovo (since July 1999), and Bosnia (mostintensively since 1996). The continuing ethnic, criminal and terrorist violence in these regions provides examples of the durability of such problems. Even without sectarian differences, establishing the institutions and mores of democratic practices in states with conflictive and authoritarian histories, which often involve overcomingcultures of dependency and mistrust, is a formidable undertaking. One of the stated rationales forU.S. interventions around the turn of the 20th century in the Philippines and throughout the Caribbeanregion was the establishment of democracy. The United States encouraged democratic constitutionalmodels and laws, and the holding of elections, but real and enduring democracies, in most cases, didnot take root. After World War II, the United States was successful in creating democracies duringthe occupations of Germany and Japan, but conditions there were substantially different than in Iraqtoday. Despite concerns of policymakers during wartime planning for the occupations that theGerman and Japanese cultures were inherently anti-democratic, U.S. occupation forces found thepopulations receptive to the creation of a democratic model and able to build on previousexperiences with democratic politics and government, particularly in Germany, to replace thedefeated, authoritarian governments. Once on the ground, occupation planners soon becameconvinced that a primary threat to democracy came from the devastated economies of the defeatedcountries, where material want and misery might make strongman leaders again attractive. Recent experiences with conflict resolution and peacebuilding, which emphasize the necessity of a comprehensive approach encompassing all levels of society and politics, may point to some ofthe inadequacies of early U.S. democracy-building efforts. Since the early 1990s, analysts ofinternational efforts to encourage democracies have increasingly asserted a need to put into place awide array of institutions, practices, and attitudes, as well as a functioning economy capable ofabsorbing demobilized soldiers, (51) to makedemocracy work. One author emphasizes the profoundchanges necessary to create a culture in which peacebuilding operations can succeed: "If apeacekeeping operation is to leave behind a legitimate and independently viable political sovereign,it must help transform the political landscape by building a new basis for domesticpeace....successful contemporary peacebuilding not only changes behavior but, more important, alsotransforms identities and institutional context. More than reforming play in an old game, it changesthe game." (52) Other analysts of peacebuilding efforts warn that some early attempts at democratization in post-conflict states were counterproductive, generating conditions for renewed warfare. Oneobservation on the vulnerability of such states to the "societal tensions that naturally arise from theprocess of democratization and marketization" (53) may be relevant to Iraq, where some suggest thata sense of national community is at best tenuous and new sources of discord, such as possiblegrowing income disparities, may exacerbate existing frictions. Depending on how Iraq's post-conflict situation evolves, "lessons learned" from the implementation of peacebuilding programs in five areas may be of particular interest topolicymakers in considering how best to create conditions for success in Iraq. These areas are: (1)guarantees of the rule of law; (2) the role of civic society and local participation; (3) the appropriatetiming and conditions for elections; (4) the utility of powersharing arrangements, and (5) theestablishment of international norms. Guaranteeing the Rule of Law. In addition to the security tasks listed in the previous section, some analysts of peacekeeping and peacebuildingoperations cite the immediate creation of institutions to guarantee the rule of law as essential to theestablishment of a secure climate in which democracy can prosper. While the rule of law starts witha democratic constitution, and requires a representative parliament, analysts have found that theinstitutions which most directly touch the lives of the citizens, ensuring their rights day-to-day anddeeply affecting their perception of their government, are often those which most urgently need tobe built or rebuilt in post-conflict situations. An analysis of seven peacekeeping experiences -- Cambodia, El Salvador, Mozambique, Somalia, Haiti, Bosnia, and Panama, -- identified two crucial rule of law "gaps" that could createextreme difficulties. The first was an "enforcement gap," i.e., a lack of police forces capable ofdealing with serious lawlessness and violent domestic disorder, as discussed earlier. The second,was an "institutional gap," i.e., the lack of an adequate number of impartial and competent judges,humane prisons and jailers, and a fair and coherent legal code, in post-conflict societies. (54) Former U.S. Ambassador William G. Walker, who has played a prominent role in three peace operations, suggests the complexities, and long-term nature, of efforts to strengthen the rule of lawby developing the above-mentioned institutions. "All parts of a legal system -- the judiciary, theprosecutors, the bar, the police, the prison system, the codes -- must work properly and insynchronization. If a single component is left unreformed, the system will continue to generateinjustice. Decades are required to produce a new police, not to mention a transformed judiciary,composed of officials not schooled in the behavior of the past. Few international donors have thepatience, long-term commitment, or resources necessary to assume such a burden." (55) For Iraq, analysts have recommended a variety of means to help assure the rule of law. In addition to recommendations regarding the police, discussed earlier, analysts have recommended avariety of forms of legal assistance, such as teams of international legal specialists -- includinglawyers, judges, court administrators and corrections officers -- to monitor, train, and supplementIraqi personnel. (56) As of late April, 2003, theUnited States Army had begun to assess the judicialsystem in Iraq, (57) and as mentioned earlier, theState Department has begun the bidding process onassistance for the police, and justice and prison systems. A recent review of rule of law assistance programs since the 1980s indicates that their contribution to strengthening democracy is uncertain. "Rule of law aid practitioners can probablyprescribe rule-of-law programs with a safe belief that these initiatives may well be helpful to botheconomic development and democratization," according to one analyst, "but they really do not knowto what extent there are direct causal connections at work and whether similar resources directedelsewhere might produce greater effect on economic or political conditions." (58) The extent to which such assistance would help Iraq establish institutions imbued with a democratic ethos may well depend on how deeply Iraqis desire democratization. In an assessmentof many democratization programs since 1989, the same analyst found that the degree of successcorrelated with a country's overall progress towards democracy. Concluding that "no dramaticresults should be expected from democracy promotion effort" as they "can do little to change thefundamental social, economic, and political structures and conditions that shape political life in othercountries," this author argued that nonetheless the United States should not abandon its commitmentto advancing democracy, but instead approach democracy promotion "as a long-term, uncertainventure." (59) Role of Civic Society and Local Participation. Increasingly, analysts have come to view the establishment of appropriate governmental institutionsas a necessary, but insufficient condition for the creation of a well functioning democracy. Alsoimportant, many believe, is the development of a culture which fosters tolerance, the exchange ofideas, respect for human rights, and active citizen participation. International democratization effortsinclude support for an increasing variety of "civic society" groups, non-governmental institutions,the press, particular interest organizations (such as unions, business, professional, and legalassociations, and human rights groups). Such efforts were an important component of the U.S.democracy building efforts after World War II in Japan, where such organizations were created orstrengthened, and in Germany, where they were revitalized. Recent peacekeeping literatureemphasizes the need for a high level of "civil society" participation, particularly at the local level,in the creation of representative institutions from the "bottom up." (60) International donors arecurrently providing assistance to such groups in Afghanistan, where few such organizations existed.Support for such group has also played a role in post-conflict democratization efforts in SouthAfrica, and in the transitions from communism or authoritarianism to democracy in Eastern Europeand Latin America. One policy institution recently cited a need for the international community to "focus on" the many local groups in Iraq, which may, or may not, provide a basis for local level democratization. (61) Its analysis found that it is still too early to determine whether existing local organizations based ontraditional and hierarchical sources of power, such as tribal and religious structures, will contributeto or hinder the development of a Western-style democracy there. It also noted, however, that Iraq"already has a wide range of professional and trade associations that can serve as building blocs formore open and transparent consultations and provide a counterweight to more traditional,ethnic-religious groups." (62) Some analysts,however, believe that these groups have been dominatedby the Baath party, and thus may not be appropriate vehicles for democratization efforts. As described by analysts of peace operations, civil society is important in several ways to furthering democratic processes. (63) One waysupport for such groups promotes democracy is that itenables populations to take "ownership" of the process, building cooperation at a grass-roots level,and providing checks on government. Another is that local civil society institutions can address "keyissues such as reconciliation, justice, and human rights...that go to the heart of what many considerto be the root causes of civil wars." (64) A third isthat such institutions can foster a culture thatpromotes democratic governance. Whether international assistance to support civil society in Iraq would similarly contribute to democratization is unknown. While it is difficult to judge the effects of democratization aid ingeneral, judging the degree to which assistance to such groups can promote democracy is even moreproblematic. One extensive study of such groups stated that it could not reach a definitive answerregarding the effect of civil society assistance on overall political change, but found that "evidencefairly consistently indicated that such assistance alone is unlikely to be a major factor" in promotingdemocratization. (65) Still, despite noting numerousproblems with civil society aid and suggestingreforms, the authors recounted several benefits of such aid, including the establishment of "theimportant idea that civil society has a rightful role in governance." (66) Appropriate Conditions for and Timing of Elections. Carefully structured and internationally supervised elections, at alllevels, have been the centerpiece of most peacebuilding and democratization efforts since the early1990s. They have also been established as the end points of international and U.S. "exit strategies"for peacekeeping and peacebuilding operations. While the Bush Administration and otherpolicymakers are now indicating that elections are the appropriate path to democracy in Iraq, pastexperience suggests caution concerning the timing and objectives of elections. According to some,elections that are held too soon after a conflict has ended become disruptive rather than contributingto stability. In the words of one analyst: "Paradoxically, to proceed precipitously with elections mayturn out to be the least productive way to build peace and ensure the emergence of democracy." (67) Unlike the cases on which this assessment is based, Iraq is not emerging from a civil war. Given, however, the probable weakness of any political alternatives to the Baath party, the observedtendency of elections to consolidate the power of existing organizations and leaders, and to preventthe emergence of new ones, may prove just as problematic in post-Hussein Iraq as it has in countriesemerging from civil wars. According to some analysts, early post-conflict elections have entrenchedleaders of extremist factions: "not infrequently, early elections influence the balance of societalforces in ways that are inimical to the consolidation of peace. In Bosnia, the elections held underthe Dayton accords consolidated and formalized nationalist divisions within society and served tocomplicate an already complex and highly contentious peace process." (68) In addition, some analystssuggest that the political competition inherent to democracy can exacerbate frictions or conflict indeeply divided societies. (69) Nevertheless, oneanalyst believes that even "with all their real andperceived flaws," elections are, in the long run, "imperative," as they provide the necessarylegitimacy "to implement rehabilitation and reconciliation policies." (70) To ensure that elections are held under the most propitious circumstances, one study suggests that elections be delayed until certain preconditions can be met, most of which may still be lackingin Iraq. These preconditions are: (1) the "existence of a state capable of performing the essentialfunctions expected of it," (2) a "working consensus...about national boundaries, the structure andfunctioning of the government, and relations between national and subnational units," (3) a"demonstrable political commitment on the part of the major conflicting parties to carry out theagreed-upon peace accord or pact," and (4) "significant progress toward demobilization andreintegration of ex-combatants." (71) In the interim,the authors of this study suggest the adoption ofcoalition arrangements and reconciliation measures that confer legitimacy on a temporarygovernment. (72) Utility of Powersharing Arrangements. Potential problems with elections as the vehicle to representative government in post-conflict situations hasled to new thinking about the utility of powersharing arrangements. Although some analysts willargue that the 1995 Dayton accord's permanent geographical powersharing arrangements in Bosnia,which divided the country into two regions along ethnic lines, were a mistake, temporary solutionshave been looked to as providing a bridge to an eventual elected government. In Afghanistan, afterthe coalition forces ousted the ruling Taliban forces in November 2001, interim powersharingarrangements were put in place to govern Afghanistan through the mediation of the United Nations. In December 2001, delegates of the major Afghan factions signed an agreement in Bonn, Germany,to form an interim administration that would govern for six months, while a traditional nationalassembly ( loya jirga ) was being organized to choose a national government. In June 2002, the loyajirga selected Hamid Karzai, head of the interim administration, to head a national government untilelections are held in two years, and it endorsed Karzai's cabinet, which contained leaders andrepresentatives from the various factions. Some analysts now argue that the Afghan arrangementscan provide a model for the formation of a government in Iraq. (73) Although the concept of such arrangements may seem anti-democratic to many observers, some analysts have seen powersharing arrangements as an essential element in settling or avoiding somecivil wars in countries where there sharp division among ethnic or religious groups. And, onefundamental requirement for such effective peacekeeping, according to some analysts, is that suchoperations include all "local stakeholders -- including those who have been the victims of war aswell as those who have been the perpetrators of war -- [and put them] at the center of externalsupport for rebuilding..." (74) In Iraq, too,powersharing arrangements may be useful in gaininglegitimacy for a new government and in curbing potential strife or violence among contendingfactions. (Such arrangements may also help to retain capable people in government. Many analystsstate that the continuation of Iraqi governmental functions will depend on the retention ofbureaucrats, some of whom, particularly at the upper levels, are Baath party members, if notloyalists.) Still, as in the case of Afghanistan, where political violence continues to occur and someanalysts believe threatens to undermine the new government, a powersharing arrangement alone maynot guarantee a successful transition. According to one study that looked at the settlement of civilwars, third-party security guarantees and enforcement are often necessary as well. (75) Some analysts have also suggested that some form of power-sharing formula be integrated into an electoral formula as one means of insuring stability in peacebuilding operations. As argued byone analyst, power-sharing provisions for winners and losers in elections can be helpful in somecircumstances: "There need to be positions for both winners and losers in a new government. Winner-take-all elections are seen as zero-sum contests. Unless there is some form of compensation,the loser will have strong incentives to take up arms and turn to a renewed campaign of violence inpursuit of political objectives." (76) Nevertheless,this analyst also notes tensions betweenpowersharing arrangements and the achievement of other goals, such as ensuring human rights andpromoting justice. (77) In addition, one analystpoints out that, in some situations, such arrangementsmay provide only weak incentives to moderate extremist positions, thus making democracyvulnerable to such positions. (78) Establishing International Norms. Even among analysts of peace operations who acknowledge the difficulties of establishing democracies, someargue that the only solutions to differences are reached through the establishment of democraticpractices. Arguing for international organizations to adopt norms and practices that promotedemocracy, one analyst argued that "Sustained peace in deeply divided societies requires a formulafor the recognition and tolerance of ethnic differences, strong legal protections for individual andgroup rights, and political institutions that encourage bargaining, compromise, and inclusivecoalitions." He urged the continued development of international mediation and monitoringpractices, and the establishment of new international norms on democracy, "such as an internationalright to local freedom of choice." (79) Some urgeinternational donors to fund and improve such effortsdespite some failures. (80) The Bush Administration has not announced any comprehensive plans for peacebuilding activities in Iraq, although it has recently contracted for one peacebuilding activity (see the sectionson police and on the rule of law, above). Recent evaluations of peacebuilding missions suggest thata time frame longer than two years may be necessary to put in place and consolidate the basicstructures of democracy in an enduring framework. Much will depend, however, on Iraqis' abilityto control sectarian differences, hasten economic recovery and growth, and retain experienced peoplein government, as well as the length of time it takes Iraqis to agree on a political structure. In examining several U.N. peacekeeping/peacebuilding missions, one analyst judged the one to two year transition periods (in Angola, Bosnia, Cambodia, El Salvador and Mozambique) to be "too short to record significant progress on even the reforms prescribed by the peace accords, letalone those that are necessary to consolidate the peace but are not mandated by the accords...." (81) She pointed out that time constraints, such as restrictions on the length of mandates, were often dueto resource constraints and created difficulties in retaining high quality staff, among otherproblems. (82) Another analyst who also notes thatthe one to three year length of U.N. missions typicalof more recent operations has been too short, recommends linking the termination of peaceoperations to the accomplishment of specific objectives. He estimates a decade as "probably aminimum in most circumstances." (83) In any case,although the variety of views and precedents, andthe unique conditions in Iraq as it other societies, makes it difficult to forecast precise outcomes andtimeframes with certainty, the study of past experiences can nonetheless provide valuable guidelinesfor initiating peacebuilding activities an evaluating their progress.
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In the immediate aftermath of the coalition victory in Iraq, U.S. policymakers face a number of decisions regarding security and government in post-war Iraq. While there are significantdifferences between the Iraq situation and other post-war experiences, observations and "lessonslearned" from such experiences might be relevant. This report will discuss six security andgovernance issues raised by previous experiences, with particular reference to U.S. post-World WarII occupation experiences and also peacekeeping experiences in the Balkans and Afghanistan. It maybe updated as new issues arise for which assessments of previous experiences might be useful. Previous experience suggests three key decisions on security in post-war Iraq which policymakers must take. These are: (1) what security tasks must be performed, (2) who shouldperform them, and (3) how large should an occupation military force be, and how long should itremain? Many tasks must be performed in order to guarantee the security of citizens and propertyin the post-conflict environment, several of which require "constabulary" forces, i.e., thosepossessing both military and policing skills. In previous major U.S. occupations, U.S. soldiersinitially performed most policing tasks, turning them over to indigenous police as the situationallowed. In the 1990s, peacekeepers increasingly assumed policing functions as the need toguarantee security for property and citizens in the aftermath of conflict became apparent. Manyanalysts have argued that policing functions are not appropriate for U.S. forces, as they can erodewarfighting and many also believe that appropriately trained civilian police are often preferable. The lack of such personnel, however, has been a problem in current peacekeeping operations. Thesize of an occupation force, and the length of time that it should remain in place during anoccupation government depends on many factors, including in particular the tasks it undertakes andthe cooperation it receives from Iraqis. Policymakers must also decide what type of assistance to provide Iraq in creating a new government and supporting institutions to fill the power vacuum left by the fall of the Husseingovernment. Three issues are: (1) who should form a post-war government for Iraq, (2) what arethe possibilities of and means to achieving democracy in Iraq, and (3) how long is a peacebuildingpresence necessary? While the U.S. government has taken charge of the formation of a new Iraqigovernment, with the intent of encouraging the creation of democratic institutions and practices,some analysts believe that the possibilities for creating a viable and democratic Iraqi governmentwould be enhanced if the United Nations were to assume that role. Some senior U.S. officials hadcontemplated an occupation of some two years, which some experience suggests may be inadequateto create stable institutions. Studies of past peacekeeping experiences point to the special need forconsiderable attention to building capacities to assure the rule of law, conducting elections at anappropriate time, and possibly providing for interim powersharing arrangements. Some have alsoadvocated creating or supporting channels for political participation by civic society and localgroups.
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On September 30, 2008, the President signed H.R. 2638 , the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, into law as P.L. 110-329 . This act included the Military Construction and Veterans Affairs Appropriations Act, 2009 (MILCON-VA Appropriations Act of 2009), as its Division E. The House passed H.R. 2638 on September 24 and the Senate passed it on September 27. The MILCON-VA Appropriations Act of 2009 provides a total of $40.9 billion for the Veterans Health Administration (VHA) for FY2009 (see Table 1 ), a $1.7 billion increase over the Administrations request and a $3.7 billion over the FY2008 enacted amount. P.L. 110-329 did not include any bill language authorizing fee increases as requested by the Administration's budget proposal for the VHA for FY2009. This report provides a brief background on the veterans health care system, followed by a discussion of the FY2009 VHA budget request, House and Senate Appropriations Committee action, and the final enacted appropriations for VHA. The report concludes with a discussion of major VHA budget proposals included in the President's budget request for FY2009. The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans who meet certain eligibility rules, including disability compensation and pensions, education, training and rehabilitation services, hospital and medical care, assistance to homeless veterans, home loan guarantees, and death benefits that cover burial expenses. The VA carries out its programs nationwide through three administrations and the Board of Veterans Appeals (BVA). The Veterans Health Administration (VHA) is responsible for health care services and medical research programs. The Veterans Benefits Administration (VBA) is responsible for, among other things, providing compensations, pensions, and education assistance. The National Cemetery Administration (NCA) is responsible for maintaining national veterans cemeteries; providing grants to states for establishing, expanding, or improving state veterans cemeteries; and providing headstones and markers for the graves of eligible persons, among other things. The VA's budget includes both mandatory and discretionary spending accounts. Mandatory funding supports disability compensation, pension benefits, vocational rehabilitation, and life insurance, among other benefits and services. Discretionary funding supports a broad array of benefits and services including medical care. In FY2008 discretionary budget authority accounted for about 49% of the total VA budget authority of approximately $88 billion with about 86% of this discretionary funding going toward supporting VA health care programs. The VHA operates the nation's largest integrated direct health care delivery system. The VA's health care system is organized into 21 geographically defined Veterans Integrated Service Networks (VISNs). Although policies and guidelines are developed at VA headquarters to be applied throughout the VA health care system, management authority for basic decision making and budgetary responsibilities are delegated to the VISNs. Recently, VA's Inspector General (IG) for Health Care Inspections has stated that the current VISN management structure is ineffective. According to the IG's statement "VHA has an organizational bias in favor of local decision makers over national leaders which impedes the provision of one standard of excellent medical care for all eligible veterans. The lack of a standard organizational structure leads to differences in financial systems, medical data systems, and management and committee structures from VISN to VISN." Congressionally appropriated medical care funds are allocated to the VISNs based on the Veterans Equitable Resource Allocation (VERA) system, which generally bases funding on patient workload. Prior to the implementation of the VERA system, resources were allocated to facilities primarily on the basis of their historical expenditures. Unlike other federally funded health insurance programs, such as Medicare and Medicaid, which finance medical care provided through the private sector, the VHA provides care directly to veterans. In FY2008, VHA operated 153 medical centers, 135 nursing homes, 795 ambulatory care and community-based outpatient clinics (CBOCs), 6 independent outpatient clinics, and 232 Readjustment Counseling Centers (Vet Centers). The VHA also pays for care provided to veterans by private-sector providers on a fee basis under certain circumstances. Inpatient and outpatient care are also provided in the private sector to eligible dependents of veterans under the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). The VHA also provides grants for construction of state-owned nursing homes and domiciliary facilities and collaborates with the Department of Defense (DOD) in sharing health care resources and services. During FY2008, the VHA had an estimated total enrolled veteran population of 7.9 million and provided medical care to about 5.2 million unique veteran patients (see Tables 2 and 3 ). According to VHA estimates, the number of unique veteran patients is estimated to increase by approximately 69,000, from 5.189 million in FY2008 to 5.258 million in FY2009. As shown in Table 3 , there would be a 1.6% increase in the total number of unique patients (both veterans and non-veterans), from 5.681 million in FY2008 to approximately 5.771 million in FY2009. This number includes veterans from Operation Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF). In FY2009, VHA estimates that it will treat 333,275 OIF and OEF veterans, an increase of 39,930 patients, or 13.6%, over the FY2008 level. In FY2009, VA would be treating over 513,000 non-veterans, an increase of over 21,000, or 4.3%, over the FY2008 level. The total number of outpatient visits, including visits to Vet Centers, reached 63 million during FY2007 and is projected to increase to approximately 65 million in FY2008 and 70.4 million in FY2009. In FY2008, the VHA estimates that it will spend approximately 63.7% of its medical services obligations on outpatient care. To understand some of the issues discussed in this report, it is important to understand eligibility for VA health care, the VA's enrollment process, and its enrollment priority groups. Unlike Medicare or Medicaid, VA health care is not an entitlement program. Contrary to numerous claims made concerning "promises" to military personnel and veterans with regard to "free health care for life," not every veteran is automatically entitled to medical care from the VA. Prior to eligibility reform in 1996, provisions of law governing eligibility for VA care were complex and not uniform across all levels of care. All veterans were technically "eligible" for hospital care and nursing home care, but eligibility did not by itself ensure access to care. The Veterans' Health Care Eligibility Reform Act of 1996, P.L. 104-262 , established two eligibility categories and required the VHA to manage the provision of hospital care and medical services through an enrollment system based on a system of priorities. P.L. 104-262 authorized the VA to provide all needed hospital care and medical services to veterans with service-connected disabilities, former prisoners of war, veterans exposed to toxic substances and environmental hazards such as Agent Orange, veterans whose attributable income and net worth are not greater than an established "means test," and veterans of World War I. These veterans are generally known as "higher priority" or "core" veterans (see Appendix A , discussed in more detail below). The other category of veterans are those with no service-connected disabilities and with attributable incomes above an established means test (see Appendix C ). P.L. 104-262 also authorized the VA to establish a patient enrollment system to manage access to VA health care. As stated in the report language accompanying P.L. 104-262 , "the Act would direct the Secretary, in providing for the care of 'core' veterans, to establish and operate a system of annual patient enrollment and require that veterans be enrolled in a manner giving relative degrees of preference in accordance with specified priorities. At the same time, it would vest discretion in the Secretary to determine the manner in which such enrollment system would operate." Furthermore, P.L. 104-262 was clear in its intent that the provision of health care to veterans was dependent upon the available resources. The committee report accompanying P.L. 104-262 states that the provision of hospital care and medical services would be provided to "the extent and in the amount provided in advance in appropriations acts for these purposes. Such language is intended to clarify that these services would continue to depend upon discretionary appropriations." As stated previously, P.L. 104-262 required the establishment of a national enrollment system to manage the delivery of inpatient and outpatient medical care. The new eligibility standard was created by Congress to "ensure that medical judgment rather than legal criteria will determine when care will be provided and the level at which care will be furnished." For most veterans, entry into the veterans' health care system begins by completing the application for enrollment. Some veterans are exempt from the enrollment requirement if they meet special eligibility requirements. A veteran may apply for enrollment by completing the Application for Health Benefits (VA Form 10-10EZ) at any time during the year and submitting the form online or in person at any VA medical center or clinic, or mailing or faxing the completed form to the medical center or clinic of the veteran's choosing. Once a veteran is enrolled in the VA health care system, the veteran remains in the system and does not have to reapply for enrollment annually. However, those veterans who have been enrolled in Priority Group 5 (see Appendix A , discussed in more detail below) based on income must submit a new VA Form 10-10EZ annually with updated financial information demonstrating inability to defray the expenses of necessary care. Eligibility for VA health care is based primarily on "veteran's status" resulting from military service. Veteran's status is established by active-duty status in the military, naval, or air service and an honorable discharge or release from active military service. Generally, persons enlisting in one of the armed forces after September 7, 1980, and officers commissioned after October 16, 1981, must have completed two years of active duty or the full period of their initial service obligation to be eligible for VA health care benefits. Servicemembers discharged at any time because of service-connected disabilities are not held to this requirement. Also, reservists that were called to active duty and who completed the term for which they were called, and who were granted an other than dishonorable discharge, are exempt from the 24 continuous months of active duty requirement. National Guard members who were called to active duty by federal executive order are also exempt from this two-year requirement if they (1) completed the term for which they were called and (2) were granted an other than dishonorable discharge. When not activated to full-time federal service, members of the reserve components and National Guard have limited eligibility for VA health care services. Members of the reserve components may be granted service-connection for any injury they incurred or aggravated in the line of duty while attending inactive duty training assemblies, annual training, active duty for training, or while going directly to or returning directly from such duty. In addition, reserve component service members may be granted service-connection for a heart attack or stoke if such an event occurs during these same periods. The granting of service-connection makes them eligible to receive care from the VA for those conditions. National Guard members are not granted service-connection for any injury, heart attack, or stroke that occurs while performing duty ordered by a governor for state emergencies or activities. After veteran's status has been established, the VA next places applicants into one of two categories. The first group is composed of veterans with service-connected disabilities or with incomes below an established means test. These veterans are regarded by the VA as "high priority" veterans, and they are enrolled in Priority Groups 1-6 (see Appendix A ). Veterans enrolled in Priority Groups 1-6 include veterans in need of care for a service-connected disability; veterans who have a compensable service-connected condition; veterans whose discharge or release from active military, naval, or air service was for a compensable disability that was incurred or aggravated in the line of duty; veterans who are former prisoners of war (POWs); veterans awarded the Purple Heart; veterans who have been determined by VA to be catastrophically disabled; veterans of World War I; veterans who were exposed to hazardous agents (such as Agent Orange in Vietnam) while on active duty; and veterans who have an annual income and net worth below a VA-established means test threshold. The VA looks at applicants' income and net worth to determine their specific priority category and whether they have to pay copayments for nonservice-connected care. In addition, veterans are asked to provide the VA with information on any health insurance coverage they have, including coverage through employment or through a spouse. The VA may bill these payers for treatment of conditions that are not a result of injuries or illnesses incurred or aggravated during military service. Appendix B provides information on what categories of veterans pay for which services. The second group of veterans is composed of those who do not fall into one of the first six priority groups—primarily veterans with nonservice-connected medical conditions and with incomes and net worth above the VA-established means test threshold. These veterans are enrolled in Priority Group 7 or 8. Appendix C provides information on income thresholds for VA health care benefits. The National Defense Authorization Act (NDAA), FY2008 was signed by the President ( P.L. 110-181 ) on January 28, 2008. This act extended the period of enrollment for VA health care from two to five years for veterans who served in a theater of combat operations after November 11, 1998 (generally, OEF and OIF veterans who served in a combat theater). According to the VA, currently enrolled combat veterans will have their enrollment eligibility period extended to five years from their most recent date of discharge. New servicemembers discharged from active duty on or after January 28, 2003, could enroll for a period of up to five years after their most recent discharge date from active duty. Veterans who served in a theater of combat, and who never enrolled, and were discharged from active duty between November 11, 1998 and January 27, 2003, may apply for this enhanced enrollment opportunity through January 27, 2011. Generally, new OEF and OIF veterans are assigned to Priority Group 6, unless eligible for a higher Priority Group, and are not charged copays for medication and/or treatment of conditions that are potentially related to their combat service. Veterans who enroll in the VA health care system under this extended enrollment authority will continue to be enrolled even after the five-year eligibility period ends. At the end of the five-year period, veterans enrolled in Priority Group 6 may be re-enrolled in Priority Group 7 or 8, depending on their service-connected disability status and income level, and may be required to make copayments for nonservice-connected conditions. The above criteria apply to National Guard and Reserve personnel who were called to active duty by federal executive order and served in a theater of combat operations after November 11, 1998. The VHA is mandated to provide priority care for non-emergency outpatient medical care for any condition of a service-connected veteran rated 50% or more, or for a veteran's service-connected condition. According to VHA policies, patients with emergency or urgent medical needs must be provided care, or must be scheduled to receive care as soon as practicable, independent of service-connected status, and whether care is purchased or provided directly by the VA. Veterans who are service-connected 50% or more need to be scheduled to be seen within 30 days of the desired date for any condition. Veterans who are rated less than 50% service-connected disabled, and who require care for a service-connected condition, need to be scheduled to be seen within 30 days of the desired date. When VHA staff are in doubt as to whether the request for care is for a service-connected condition, they are required to assume, on behalf of the veteran, that the veteran is entitled to priority access and schedule within 30 days of the desired date. Veterans in other priority groups are to be scheduled to be seen within 120 days of the desired date. According to VHA policies, all outpatient appointment requests must be acted on as soon as possible, but no later than seven calendar days from the date of the request. The VHA also requires that priority scheduling of any veteran must not affect the medical care of any other previously scheduled veteran. Furthermore, VHA guidelines state that veterans with service-connected conditions cannot be prioritized over other veterans with more acute health care needs. Each year, VHA reviews the demand for health care services from veterans and projects an estimate of the cost to deliver care against that demand. It utilizes the VA Enrollee Health Care Demand Model (Demand Model) to develop estimates of veteran enrollment, expected utilization of 55 health care services by those enrollees, and the costs associated with that utilization. The 55 health care services include such services as inpatient medical, surgical, and psychiatric care; ambulatory care; pharmacy, including over the counter medications; and hearing aids and prosthetics. The Demand Model does not include projected expenditures for long-term care services, CHAMPVA, readjustment counseling provided primarily through Vet Centers, the Spina Bifida program, or care for non-veterans. Because of the unique characteristics of these programs, the budget estimates for these programs are developed by the respective program offices. The Demand Model also makes risk adjustments to reflect veteran enrollee's mortality, morbidity, and changing health care needs. It also takes into account the veterans' reliance on VA health care (that is, how much care veteran enrolles receive from VA versus other sources such as Medicare and private health insurance). Based on private sector health care utilization benchmarks, the Demand Model projects future use of health care services by veteran enrollees. These benchmarks are adjusted for unique demographics of veterans enrolles, and health care characteristics of the VA health care system. According to the VA, the model also generates future trend data for health care utilization, cost, and intensity of medical services. These trend data reflect historical and future changes in the entire health care industry and are adjusted to reflect the unique attributes of the VA health care system. Figure 1 provides a conceptual overview of the Demand Model. While the VHA actuarial model works well in a steady state environment, it does not perform as well in a dynamic environment, such as when veterans are returning from combat theaters and enrolling in the VA health care system. According to VHA officials, VHA has added higher enrollee estimates to the Demand Model to ensure it has enough resources. However, in the long term, the Demand Model still has limitations, because the changes in the nation's economy and future military conflicts could have a profound impact on predicting future veterans enrollments and expenditures. The VHA is funded through multiple appropriations accounts that are supplemented by other sources of revenue. Although the appropriations account structure has been subject to change from year to year, the appropriation accounts used to support the VHA traditionally include medical care, medical and prosthetic research, and medical administration. In addition, Congress also appropriates funds for construction of medical facilities through a larger appropriations account for construction for all VA facilities. In FY2004, "to provide better oversight and [to] receive a more accurate accounting of funds," Congress changed the VHA's appropriations structure. The Department of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act, 2004 ( P.L. 108-199 , H.Rept. 108-401 ), funded VHA through four accounts: (1) medical services, (2) medical administration, (3) medical facilities, and (4) medical and prosthetic research. Provided below are brief descriptions of these accounts. The medical services account covers expenses for furnishing inpatient and outpatient care and treatment of veterans and certain dependents, including care and treatment in non-VA facilities; outpatient care on a fee basis; medical supplies and equipment; salaries and expenses of employees hired under Title 38, United States Code; and aid to state veterans homes. In its FY2008 budget request to Congress, the VA requested the transfer of food service operations costs from the medical facilities appropriations to the medical services appropriations. The House and Senate Appropriations Committees have concurred with this request. In its FY2009 budget request to Congress, the Administration requested the consolidation of the medical services and medical administration account. While the House Appropriations Committee did not concur with this request, the Senate Appropriations Committee has consolidated the medical services and medical administration accounts (see discussion under Senate Committee Action below). The medical support and compliance account provides funds for the expenses in the administration of hospitals, nursing homes, and domiciliaries, billing and coding activities, public health and environmental hazard program, quality and performance management, medical inspection, human research oversight, training programs and continuing education, security, volunteer operations, and human resources. The medical facilities account covers, among other things, expenses for the maintenance and operation of VHA facilities; administrative expenses related to planning, design, project management, real property acquisition and deposition, construction, and renovation of any VHA facility; leases of facilities; and laundry services. This account provides funding for VA researchers to investigate a broad array of veteran-centric health topics, such as treatment of mental health conditions; rehabilitation of veterans with limb loss, traumatic brain injury, and spinal cord injury; organ transplantation; and the organization of the health care delivery system. VA researchers receive funding not only through this account but also from the DOD, the National Institutes of Health (NIH), and private sources. In addition to direct appropriations for the above accounts, the Committees on Appropriations include medical care cost recovery collections when considering the amount of resources needed to provide funding for the VHA. The Consolidated Omnibus Budget Reconciliation Act of 1985 ( P.L. 99-272 ), enacted into law in 1986, gave the VHA the authority to bill some veterans and most health care insurers for nonservice-connected care provided to veterans enrolled in the VA health care system, to help defray the cost of delivering medical services to veterans. This law also established means testing for veterans seeking care for nonservice-connected conditions. However, P.L. 99-272 did not provide the VA with specific authority to retain the third-party payments it collected and VA was required to deposit these third-party collections in the General Fund of the U.S. Treasury. The Balanced Budget Act of 1997 ( P.L. 105-33 ) gave the VHA the authority to retain these funds in the Medical Care Collections Fund (MCCF). Instead of returning the funds to the Treasury, the VA can use them for medical services for veterans without fiscal year limitations. To increase the VA's third-party collections, P.L. 105-33 also gave the VA the authority to change its basis of billing insurers from "reasonable costs" to "reasonable charges." This change in billing was intended to enhance VA collections to the extent that reasonable charges result in higher payments than reasonable costs. In FY2004, the Administration's budget requested consolidating several medical existing collections accounts into one MCCF. The conferees of the Consolidated Appropriations Act of 2004 ( H.Rept. 108-401 ) recommended that collections that would otherwise be deposited in the Health Services Improvement Fund (former name), Veterans Extended Care Revolving Fund (former name), Special Therapeutic and Rehabilitation Activities Fund (former name), Medical Facilities Revolving Fund (former name), and the Parking Revolving Fund (former name) should be deposited in MCCF. The Consolidated Appropriations Act of 2005; ( P.L. 108-447 , H.Rept. 108-792 ) provided the VA with permanent authority to deposit funds from these five accounts into the MCCF. The funds deposited into the MCCF would be available for medical services for veterans. These collected funds do not have to be spent in any particular fiscal year and are available until expended. The conferees of the FY2006 Military Construction, Military Quality of Life and Veterans Affairs Appropriations Act ( P.L. 109-114 , H.Rept. 109-305 ) required the VA to establish a revenue improvement demonstration project. The purpose of this pilot project is to provide a "comprehensive restructuring of the complete revenue cycle including cash-flow management and accounts receivable." The conferees included this provision because the Appropriations Committees were concerned that the VHA was collecting only 41% percent of the billed amounts from third-party insurance companies. Currently, the VHA has established a pilot Consolidated Patient Account Center (CPAC) in VISN 6. There are eight VA medical centers under the CPAC management initiative. In a report issued in June 2008, the Government Accountability Office (GAO) stated that VA had ineffective controls over medical center billings. As shown in Table 4 , MCCF collections increased by 45%, from $1.5 billion in FY2003 to $2.2 billion in FY2007. During this same period, first-party collections increased by 33.6%, from $685 million to $915 million. In FY2007, first-party collections represented approximately 41% of total MCCF collections. On February 5, 2007, the President submitted his FY2008 budget proposal to Congress. The total amount requested by the Administration for the VHA for FY2008 was $34.6 billion, a 1.93% increase in funding compared with the FY2007 enacted amount. The total amount of funding that would have been available for the VHA under the President's budget proposal for FY2008, including collections, was approximately $37.0 billion (see Table 7 and Appendix E ). For FY2008, the Administration requested $27.2 billion for medical services, a $1.2 billion, or 4.8%, increase in funding over the FY2007 enacted amount. The Administration's budget proposal also requested $3.4 billion for medical administration, $3.6 billion for medical facilities, and $411 million for medical and prosthetic research (see Table 7 and Appendix E ). As in FY2003, FY2004, FY2005, FY2006, and FY2007, the Administration' FY2008 budget request included several cost-sharing proposals. On June 6, 2007, the House Appropriations Committee recommended $37.1 billion for the VHA for FY2008, a 9.3% increase over the FY2007 enacted amount of $34.0 billion and 7.3% above the President's request. The Military Construction and Veterans Affairs appropriations bill for FY2008 ( H.R. 2642 , H.Rept. 110-186 ) was reported out of committee on June 11. On June 15, 2007, the House passed H.R. 2642 . As amended, H.R. 2642 provided $29.0 billion for medical services. The MILCON-VA appropriations bill, as amended, also provided: $3.5 billion for the medical administration account, $68.6 million above the FY2008 request and $82.6 million above the FY2007 enacted amount; $4.1 billion for medical facilities, a 14% increase over the President's request; and $480 million for medical and prosthetic research, a 17% increase over the President's request of $411 million (see Table 7 ). On June 14, 2007, the Senate Appropriations Committee approved its version of the MILCON-VA appropriations bill. The bill was reported to the Senate on June 18 ( S. 1645 , S. Rept.110-85). S. 1645 , as reported, provided a total of $37.2 billion for the VHA. On September 6, 2007, the Senate passed H.R. 2642 with an amendment in the nature of a substitute to reflect the Senate Appropriations Committee-approved measure ( S. 1645 , S. Rept.110-85). As amended by the Senate, H.R. 2642 provided $29.1 billion for medical services—a $3.2 billion (12.3%) increase over the FY2007 enacted amount and $1.9 billion over the FY2008 budget request—and $3.5 billion would have been available for medical administration, $75 million above the FY2008 Administration's request. H.R. 2642 , as passed by the Senate, provided $4.1 billion for medical facilities—a 14.0% increase over the FY2008 request and 1.7% less than the FY2007 enacted amount—and $500 million for medical and prosthetic research—a 12% increase over the FY2007 enacted amount, a 22.0% increase over the FY2008 request, and 4.2% above the House-passed amount (see Table 7 ). At the end of 2007, Congress passed the Consolidated Appropriations Act for FY2008 ( H.R. 2764 ), an omnibus measure that combined the 11 outstanding appropriations bills for FY2008. H.R. 2764 was passed by the House on December 17, 2007; the Senate passed the measure the next day, December 18, with an amendment (McConnell Amendment—adding funding for the Iraq war). The House agreed to the McConnell Amendment on December 19. The bill was signed into law ( P.L. 110-161 ) on December 26. Division I of H.R. 2764 included the Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2008 (MILCON-VA Appropriations Act). The MILCON-VA Appropriation Act provided $37.2 billion for VHA for FY2008, which is $2.6 billion above the Administration's request for FY2008 (see Table 7 ). Of this amount $2.6 billion (the amount above the Administration's request) was designated as contingent emergency funding, and was to be available for obligation only after the President submitted a budget request to Congress. On January 17, 2008, the President submitted a budget request to Congress, requesting this additional amount and designating it as an emergency requirement. On June 30, 2008, the President signed into law the Supplemental Appropriation Act of 2008. Among other things, this act provided $396.4 million for the construction major projects account to complete planned construction of Level I polytrauma rehabilitation centers identified by VA's capital planning process. A new polytrauma center is under design for construction in San Antonio, Texas, and is expected to be opened in 2011. On February 4, 2008, the President submitted his FY2009 budget proposal to Congress. The Administration requested a total of $39.2 billion (excluding collections) for VHA. This is a 5.3% increase, or a $2.0 billion increase, over the FY2008 enacted level. Including total available resources (including medical collections) the Administration's budget would have provided $41.1 billion for VHA. The President's FY2009 budget submission also proposed to abolish the medical administration account and consolidate these activities in the medical services account. Under this account structure the Administration requested $34.1 billion for the medical services account which is approximately $5 billion above the FY2008 enacted amount ( Table 7 ). The VHA estimated an overall medical inflation rate of 4.63% for FY2009. The major cost drivers for VHA medical care are increases in costs of goods and services beyond the control of the VHA, as well as increases in utilization of services by existing patients, and increases in intensity of care (more complex care). The President's budget proposal also requested $4.7 billion for the medical facilities account, an increase of $561 million over the FY2008 enacted level. The Administration's budget proposal for FY2009 requested $442 million for the medical and prosthetic research account, a 7.9% decrease ($38 million) below the FY2008 enacted level. According to the Senate Committee on Veterans' Affairs, the President's proposal would have resulted in the loss of 49 full time positions and 294 research projects. As in FY2003, FY2004, FY2005, FY2006, FY2007, and FY2008. the Administration included several cost-sharing proposals. These legislative proposals are discussed in detail in the key budget issues section at the end of this report. On March 7, 2008, the House ( H.Con.Res. 312 ) and Senate ( S.Con.Res. 70 ) reported their respective budget resolutions. The House budget resolution provided $48.2 billion in funding for discretionary veterans programs and $45.1 billion in mandatory spending for FY2009. The House budget resolution also rejected health care enrollment fees and prescription drug copayment increases as proposed by the President. Similar to the House amounts, the Senate budget resolution provided $48.2 billion for discretionary veterans programs including health care, and $45.1 billion for mandatory programs. The House passed its budget resolution on March 13 and the Senate passed its version the following day. After negotiations between the House and Senate, the House agreed to an amended version of S.Con.Res. 70 (Conference Report; H.Rept. 110-659 ). The Senate adopted H.Rept. 110-659 on June 4 and the House adopted the conference agreement the next day. The conference agreement provides $48.2 billion for FY2009 for discretionary veterans' programs, including medical care. This amount is $4.9 billion more than the FY2008 enacted level, and $3.3 billion more than the President's budget proposal for FY2009. The conference agreement also provides $45.1 billion in mandatory funding for veterans programs. On June 12, 2008, the House Committee on Appropriations, Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, marked up a draft Military Construction and Veterans Affairs Appropriations bill. On June 24, the House Appropriations Committee marked up the Military Construction and Veterans Affairs Appropriations bill ( H.R. 6599 ; H.Rept. 110-775 ), for FY2009 (MILCON-VA Appropriations bill). On August 1, the House passed H.R. 6599 . The House-passed bill provided $40.8 billion for VHA, a $1.6 billion increase over the Administration's FY2009 request, and $3.6 billion over the FY2008 enacted amount. This amount included $31billion for the medical services account. The committee did not concur with the President's proposed account structure of consolidating the medical administration account with the medical services account. The House -passed amount for the medical services account was 6% above the FY2008 enacted amount ( Table 7 ). H.R. 6599 included bill language stipulating that VA must spend at least $3.8 billion on specialty mental health care, including Post-Traumatic Stress Disorder (PTSD). The MILCON-VA Appropriations bill provided $4.4 billion for the medical support and compliance account (previously known as the medical administration account). This amount is 25% above the FY2008 enacted amount. H.R. 6599 also provides approximately $5 billion for the medical facilities account, a $368 million increase over the Administration's request, and $929 million above the FY2008 enacted level. This increase includes funding for non-recurring maintenance. The Committee directed the VHA to use these funds to address life/safety and suicide prevention deficiencies in mental health wards. Lastly, the House MILCON-VA appropriations bill provided $500 million for the medical and prosthetic research account, a 13.1 % increase over the FY2009 request, and a 4.2 % increase over the FY2008 enacted amount ( Table 7 ). The MILCON-VA appropriations bill ( H.R. 6599 ) provided $923 million for the construction major account, a 58% increase over the FY2009 request and a 37 % decrease from the FY2008 enacted level. H.R. 6599 also provided $991.5 million for the construction minor projects account, an increase of 200% over the FY2009 request and 57% above the FY2008 enacted amount. Of the amount provided for the construction minor projects account, $7 million was for the installation of alternative fueling stations at 35 VA medical centers. In total (excluding grants for construction of state veterans cemeteries), the House-passed bill has provided $2.1 billion for VA construction projects, including construction projects identified under the Capital Asset Realignment for Enhanced Services (CARES) initiative, and grants for construction of state extended care facilities. This level of funding is a 108% increase in funding over the FY2009 request, and a 8% decrease when compared to the FY2008 enacted amount ( Table 8 ). On July 17, 2008, the Senate Appropriations Committee marked up its version of the FY2009 Military Construction and Veterans Affairs and Related Agencies Appropriations bill ( S. 3301 , S.Rept. 110-428 ). The Senate Appropriations Committee recommended $41.1 billion (excluding collections) for VHA for FY2009 (see Table 7 ). This is a 4.8% increase over the FY2009 request, and $294 million above the House Appropriations Committee-recommended amount. The Senate Appropriations Committee concurred with the President's proposal to merge the medical services account with the medical administration account. The Committee stated that the "current account structure has created bureaucratic confusion at the medical center level often slowing effective delivery of health care." The Committee recommended merging the medical services account with the medical administration account in order to provide more spending flexibility to medical center directors. Under the proposed new account structure the Committee recommended $35.6 billion for the medical services account, a 4.4% ($1.5 billion) increase over the FY2009 request. S. 3301 , as marked up by the Committee, also provided $5.0 billion for medical facilities. This is a 21% increase compared to the FY2008 enacted amount, 6.4% above the FY2009 request, and $68 million below the House Committee-recommended amount (see Table 7 ). The Senate marked up MILCON-VA appropriations bill also provided $527 million for the medical and prosthetic research account. This is a 19.2% increase over the FY2009 request and 9.8% above the FY2008 enacted amount. The Committee-recommended bill ( S. 3301 ) provides $1.2 billion for the construction major projects account, a 109% increase over the FY2009 request and 32% above the House Appropriations Committee-recommended amount. S. 3301 also provided $729 million for the construction minor projects account, a 26% decrease from the House Committee recommended amount (see Table 8 ). In total, S. 3301 provided $2.2 billion for VA construction projects (excluding grants for state veterans cemeteries), including projects identified under the CARES initiative. Prior to the start of FY2009, a compromised version of H.R. 6599 and S. 3301 was included as Division E in the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( H.R. 2638 ). The bill was signed into law on September 30, 2008, as P.L. 110-329 . The MILCON-VA Appropriations Act of 2009 provides a total of $40.9 billion (excluding collections) for VHA (see Table 7 ). This includes $30.9 billion for the medical services account, a 6.4% increase over the FY2008 enacted amount and 20% over the FY2007 enacted amount. Of the amount allocated to the medical services account not less than $3.8 billion is required to be spent on mental health care, and $250 million for the rural health outreach initiatives. The final MILCON-VA Appropriations Act also provides $4.4 billion for the medical support and compliance account (previously known as the medical administration account). This amount is 26.5% above the FY2008 enacted amount and 29.8% over the FY2007 enacted amount. P.L 110-329 also provides $5 billion for the medical services account, a $368 million over the FY2009 request and $929 million over the FY2008 enacted amount. Lastly, the MILCON-VA Appropriations Act provides $510 million for the medical and prosthetic research account. P.L. 110-329 provides $1.8 billion for VA construction projects (excluding grants for construction of state veterans cemeteries) (See Table 8 ). This amount includes $923 million for the construction major projects account, $741 million for the construction minor projects account, and $175 million for grants for construction state extended care facilities. The mental health care of servicemembers and veterans returning from current OEF and OIF operations has become a major area interest to congressional committees. The final MILCON-VA Appropriations Act of 2009 includes bill language requiring the VA to spend at least $3.8 billion for mental health care. Table 5 provides a break down of VA spending for mental health care, including suicide prevention, PTSD treatment, and substance abuse treatment by both treatment site and program. VA estimates that it will spend approximately $3.9 billion in FY2009 for VA mental health care. This is would be a 19% increase in spending from the FY2007 funding level. The FY2009 estimated spending level includes $319 million for PTSD treatment and $15.5 million for suicide prevention initiatives. The House and Senate Appropriations Committees have expressed concern with regard to the diagnosis and treatment of Traumatic Brain Injuries (TBI). The Senate Appropriations Committee has noted that many soldiers returning from Iraq and Afghanistan have faced a combination of PTSD and TBI, and that the relationship between the two injuries is not well understood. It has included report language encouraging the VA to increase the level of funding for the National Centers for Post-Traumatic Stress Disorder by least $2 million above the requested amount, to expand programs that would ensure the proper understanding of the combined impact of PTSD and TBI. Table 6 provides VA spending levels for TBI. In FY2009, of the total amount allocated for TBI, about 88% would be spent on treatment of non-OIF and OIF veterans with TBI because they make-up the majority of TBI patients using the VA health care system. The Veterans Health Care Eligibility Reform Act of 1996 ( P.L. 104-262 ) included language that stipulated that medical care to veterans will be furnished to the extent appropriations were made available by Congress on an annual basis. Based on this statutory authority, the Secretary of Veterans Affairs announced on January 17, 2003 that VA would temporarily suspend enrolling Priority Group 8 veterans. Those who were in VA's health care system prior to January 17, 2003 were not affected by this suspension. The House Appropriations Committee, in its report to accompany H.R. 6599 ( H.Rept. 110-775 ) states that the VA "should do everything possible to increase access to medical care for all our veterans, but not in a manner that will negatively impact the medical care [provided to] currently enrolled patients." The Committee is directing the VA to increase Priority Group 8 enrollment by 10%, and has provided $568 million above the Administration's request for this purpose. Likewise the Senate Appropriations Committee has included $350 million within the medical services account so that the VA could "raise the income threshold to an amount commensurate with the increased level of funding" in order to enroll more Priority Group 8 veterans. The final MILCON-VA Appropriations Act of 2009 ( P.L. 110-329 ) provides $375 million within the medical services account to increase the enrollment of Priority Group 8 veterans whose incomes exceed the current VA means test and geographic means test thresholds by 10% or less. In general, the beneficiary travel program reimburses certain veterans for the cost of travel to VA medical facilities when seeking health care. P.L. 76-432, passed by Congress on March 14, 1940, mandated VA to pay either the actual travel expenses, or an allowance based upon the mileage traveled by any veteran traveling to and from a VA facility or other place for the purpose of examination, treatment, or care. P.L. 85-857, signed into law on September 2, 1958, authorized VA to pay necessary travel expenses to any veteran traveling to or from a VA facility or other place in connection with vocational rehabilitation counseling or for the purpose of examination, treatment, or care. However, this law changed VA's travel reimbursement into a discretionary authority by stating that VA "may pay" expenses of travel. Due to rapidly increasing costs of the beneficiary travel program, on March 12, 1987, VA published final regulations that sharply curtailed eligibility for the beneficiary travel program. Under these regulations beneficiary travel payments to eligible veterans were paid when specialized modes of transportation, such as ambulance or wheelchair van, were medically required. In addition, payment was authorized for travel in conjunction with compensation and pension examinations, as well as travel beyond a 100-mile radius from the nearest VA medical care facility. It also authorized the VA to provide transportation costs, when necessary, to transfer any veteran from one health care facility (either a VA or contract care facility) to another in order to continue care paid for by the VA. The following transportation costs were not authorized under these regulations: Cost of travel by privately owned vehicle in any amount in excess of the cost of such travel by public transportation unless public transportation was not reasonably accessible or was medically inadvisable. Cost of travel in excess of the actual expense incurred by any person as certified by that person in writing. Cost of routine travel in conjunction with admission for domiciliary care, or travel for family members of veterans receiving mental health services from the VA except for such travel performed beyond a 100-mile radius from the nearest VA medical care facility. Travel expenses of all other veterans were not authorized unless the veterans were able to present clear and convincing evidence to show the inability to pay the cost of transportation; or except when medically-indicated ambulance transportation was claimed and an administrative determination was made regarding the veteran's ability to bear the cost of such transportation. The Veterans' Benefits and Services Act of 1988 ( P.L. 100-322 , section 108), in large part restored VA travel reimbursement benefits. It required that if VA provides any beneficiary travel reimbursement under Section 111 of Title 38 U.S.C. in any given fiscal year, then payments must be provided in that year in the case of travel for health care services for all the categories of beneficiaries specified in the statute. In order to limit the overall cost of this program, the law imposed a $3 one-way deductible applicable to all travel, except for veterans otherwise eligible for beneficiary travel reimbursement who are traveling by special modes of transportation such as ambulance, air ambulance, wheelchair van, or to receive a compensation and pension examination. In order to limit the overall impact on veterans whose clinical needs dictate frequent travel for VA medical care, an $18-per-calendar-month cap on the deductible was imposed for those veterans who are pre-approved as needing to travel on a frequent basis. Veterans may qualify for travel reimbursement if (1) they have a service-connected disability rated 30% or more; (2) they are traveling for treatment of a service-connected disability; (3) they receive a VA pension; (4) their income does not exceed the maximum annual VA pension rate; or (5) they are traveling for a scheduled compensation or pension examination. The FY2008 Appropriations Act ( P.L. 110-161 ) provided funding for VA to increase the beneficiary travel mileage reimbursement rate from 11 cents per mile to 28.5 cents per mile. The increase went into effect on February 1, 2008. While increasing the payment, VA, as mandated by law, also increased proportionately the deductible amounts applied to certain mileage reimbursements. The new deductibles are $7.77 for a one way trip, $15.54 for a round trip, with a maximum of $46.62 per calendar month. However, these deductibles can be waived if they cause a financial hardship to the veteran. Under current regulations 38 CFR 17.144 (b) when it is determined that charging a deductible would cause a severe financial hardship to the veteran, the VA could waive the deductible requirement. Currently, VA determines severe financial hardship as (1) annual income for the year immediately preceding the application for benefits does not exceed the maximum annual rate of pension which would be payable if the person were eligible for pension; or (2) the person is able to demonstrate that due to circumstances such as loss of employment, or incurrence of a disability, income in the year of application will not exceed the maximum annual rate of pension which would be payable if the person were eligible for pension. With the rise in gasoline prices, the House and Senate Appropriations Committees included report language to further increase the mileage reimbursement rate. The House Appropriations Committee provided an additional $100 million to increase the beneficiary travel reimbursement mileage rate to 41.5 cents per mile from the current rate of 28.5 cents per mile. The Senate Appropriations Committee included an additional $138 million above the Administration's request to raise the mileage reimbursement rate to 50.5 cents per mile, which raises VA's reimbursement rate to conform with the General Services Administration's (GSA) rate at which federal employees are reimbursed when using private automobiles for official business. The final MILCON-VA Appropriations Act of 2009 provided an additional $133 million to increase the mileage reimbursement rate to 41.5 cents a mile and included an administrative provision to freeze the deductible at the FY2008 levels (i.e. $7.77 for a one way trip, $15.54 for a round trip, with a maximum of $46.62 per calendar month). The Veterans' Mental Health and Other Care Improvements Act of 2008 ( S. 2162 , P.L. 110-387 ), which was signed into law on October 10, contained a provision that would require the VA to raise its current reimbursement rate to conform with the GSA rate at which federal employees are reimbursed when using private automobiles for official business. The provision would also amend current law that allows the VA to raise or lower the deductible for reimbursements in proportion to a change in the mileage rate. The VA will no longer be able to increase the deductible rate unless new deductible rates are mandated by Congress. Also it would reinstate the amount of the deductible for the beneficiary travel reimbursement program to the amount in effect prior to February 1, 2008, when VA increased the deductible rate (i.e $3 for a one way trip, $6 for a round trip, with a maximum of $18 per calendar month). In its FY2009 budget request, the Administration has put forward several legislative proposals. These proposals are similar to previous ones included in the Administration's budget requests for FY2003, FY2004, FY2005, FY2006, FY2007, and FY2008 and rejected by Congress each year. Similar to the FY2008 budget proposals, revenue from the proposals in the FY2009 budget request would not be deposited in the Medical Care Collections Fund (MCCF), but would be classified as mandatory receipts to the Treasury. None of these proposals have received any consideration by the House and Senate Appropriation Committees. The President's FY2009 budget request includes three major policy proposals: Assess a tiered annual enrollment fee for all Priority 7 and 8 veterans based on the family income of the veteran. Increase pharmaceutical copayments from $8 to $15 (for each 30-day prescription) for all enrolled veterans in Priority Groups 7 and 8. Bill veterans receiving treatment for nonservice-connected conditions for the entire copayment amount. A detailed description of these budget proposals follows. The Administration is proposing a tiered annual enrollment fee, which is structured to charge $250 for Priority 7 and 8 veterans with family incomes from $50,000 to $74,999; $500 for those with family incomes from $75,000 to $99,999; and $750 for those with family incomes equal to or greater than $100,000. The VA has estimated that this proposal would contribute more than $129 million to the Treasury annually, beginning in FY2010, and will increase revenue by $1.1 billion over 10 years. The Administration proposes increasing the pharmacy copayments from $8 to $15 for all enrolled Priority Group 7 and Priority Group 8 veterans whenever they obtain medication from the VA on an outpatient basis for the treatment of a nonservice-connected condition. The Administration put forward this proposal in its FY2004, FY2005, FY2006, FY2007, and FY2008 budget requests as well, but did not receive any approval from Congress. At present, veterans in Priority Groups 2-8 pay $8 for a 30-day supply of medication, including over-the-counter medications. The Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) authorized the VA to charge most veterans $2 for each 30-day supply of medication furnished on an outpatient basis for treatment of a nonservice-connected condition. The Veterans Millennium Health Care and Benefits Act of 1999 ( P.L. 106-117 ) authorized the VA to increase the medication copayment amount and establish annual caps on the total amount paid, to eliminate financial hardship for veterans enrolled in Priority Groups 2-6. When veterans reach the annual cap, they continue to receive medications without making a copayment. On November 15, 2005, the VHA issued a directive stating that effective January 1, 2006, the medication co-payment will be increased to $8 for each 30-day supply of medication furnished on an outpatient basis for treatment of a nonservice-connected condition, and that the annual cap for veterans enrolled in Priority Groups 2-6 will be $960. There is no cap for veterans in Priority Groups 7 and 8 (see Appendixes B and C ). The VA estimates that if the current proposal to raise the copayment were enacted, it would contribute $355 million to the Treasury in FY2009 and will increase revenue by $3.7 billion over 10 years. According to the VA, in FY2009, as many as 444,000 veterans would choose not to enroll in the VA health care system and 146,000 unique veteran patients would not seek VA health care if enrollment fees are imposed and pharmacy copays are increased. The Administration is requesting that Congress amend the VA's statutory authority by eliminating the practice of reducing first-party copayment debts with third-party health insurance collections. The VA asserts that this proposal would align the VA with the DOD health care system for military retirees and with the private sector. With the enactment of P.L. 99-272 in 1986, Congress authorized the VA to collect payments from third-party health insurers for the treatment of veterans with nonservice-connected disabilities; it also established copayments from veterans for this care. Under current law, the VA is authorized to collect from third-party health insurers to offset the cost of medical care furnished to a veteran for the treatment of a nonservice-connected condition. If the VA treats an insured veteran for a nonservice-connected disability, and the veteran is also determined by the VA to have copayment responsibilities, the VA will apply the payment collected from the insurer to satisfy the veteran's copayment debt related to that treatment. Under the current copayment billing process, in cases where the cost of a veteran's medical care for a nonservice-connected condition appears to qualify for billing under reimbursable insurance and copayment, the VA medical facilities sends the bill to the insurance provider. The veteran's copayment obligation is placed on hold for 90 days pending payment from the third-party payer. If no payment is received from the third-party payer within 90 days, a bill is sent to the veteran for the full copayment amount. However, when insurers reimburse the VA after the 90-day period, the VA must absorb the cost of additional staff time for processing a refund if the veteran has already paid the bill. On all insurance policies, the entire amount of the claim payment is applied first to the copayment. The veteran is then billed only for the portion of the copayment not covered by the insurance reimbursement and the portion of the copayment for services not covered by the veteran's insurance plan (see Figure 2 ). Under the Administration's proposal, veterans receiving medical care services for treatment of nonservice-connected disabilities will receive a bill for their entire copayment, and the copayment will not be reduced by collection recoveries from third-party health plans. This proposal would apply to all veterans who make copayments. According to VA estimates, this proposal will increase revenue by $44 million in FY2009 and $415 million over 10 years. The House and Senate Appropriations Committees have not addressed this issue because it is an issue in the purview of the authorizing committees. Appendix A. Priority Groups and Their Eligibility Criteria Appendix B. Copayments for Health Care Services: 2008 OEF/OIF Combat Veterans Enhanced Eligibility for Health Care Benefits : Combat veterans discharged from active duty on or after January 28, 2003, are eligible for enrollment in Priority Group 6 for five years following discharge unless eligible for a higher enrollment priority. Combat veterans discharged from active duty before January 28, 2003, who apply for enrollment on or after January 28, 2008, are eligible for enrollment in Priority Group 6 until January 27, 2011. After the special eligibility period ends, these veterans will be reassigned to the appropriate priority group and will be subject to copayments if applicable. Copayments are applicable for Priority Group 6 combat veteran enrollees for care related to a condition that is congenital or developmental (e.g., scoliosis) that existed before military service (unless aggravated by combat service) or has a specific etiology that began after military service, such as a common cold, etc. Appendix C. Financial Income Thresholds for VA Health Care Benefits, Calendar Year 2008 Appendix D. VHA Appropriations for FY2005 and FY2006 Appendix E. VHA Appropriations for FY2007 and FY2008
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The Department of Veterans Affairs (VA) provides benefits to veterans who meet certain eligibility rules. Benefits to veterans range from disability compensation and pensions to hospital and medical care. The VA provides these benefits through three major operating units: the Veterans Health Administration (VHA), the Veterans Benefits Administration (VBA), and the National Cemetery Administration (NCA). The VHA is primarily a direct service provider of primary care, specialized care, and related medical and social support services to veterans through the nation's largest integrated health care system. On February 4, 2008, the President submitted his FY2009 budget proposal to Congress. The Administration requested a total of $39.2 billion (excluding collections) for VHA. This is a 5.3% increase (or $2.0 billion) over the FY2008 enacted level. Including total available resources (including medical collections) the Administration's budget would have provided $41.1 billion for VHA. On March 7, 2008, the House (H.Con.Res. 312) and Senate (S.Con.Res. 70) reported their respective budget resolutions. After negotiations between the House and Senate, the House agreed to an amended version of S.Con.Res. 70 (Conference Report; H.Rept. 110-659). The conference agreement provided $48.2 billion for FY2009 for discretionary veterans' programs, including medical care, and provided $45.1 billion in mandatory funding for veterans programs. On June 24, the House Appropriations Committee marked up the Military Construction and Veterans Affairs Appropriations bill (H.R. 6599; H.Rept. 110-775) for FY2009. On August 1, the House passed H.R. 6599. The House-passed measure provided $40.8 billion (excluding collections) for VHA. On July 17, 2008, the Senate Appropriations Committee marked up its version of the FY2009 Military Construction and Veterans Affairs and Related Agencies Appropriations bill (S. 3301; S.Rept. 110-428). The Senate Appropriations Committee recommended $41.1 billion (excluding collections) for VHA for FY2009. On September 30, the President signed the H.R. 2638, the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, into law as P.L. 110-329. This act included the Military Construction and Veterans Affairs Appropriations Act, 2009. In total H.R. 2638 provides a total of $40.9 billion (excluding collections) for VHA. P.L. 110-329 does not include bill language authorizing fee increases as requested by the Administration's budget proposal for the VHA for FY2009. P.L. 110-329 has provided additional funding to increase Priority Group 8 enrollment in FY2009, and to increase the mileage reimbursement rate to 41.5 cents per mile. With the passage of H.R. 2638 (P.L. 110-329), the appropriation process for funding VHA for FY2009 was completed by Congress. This report will not be updated.
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This report provides a brief history and analysis of general revenue sharing (GRS). GRS is commonly defined as a program of federal transfers to state and local governments that does not impose specific or categorical spending requirements on the recipient government. The United States implemented a GRS program in 1972 that expired on September 30, 1986. Congress looked to the bygone GRS program once before as an option designed to address the fiscal year 2003 (FY2003) and FY2004 state budget shortfalls ($21.5 billion and $72.2 billion, respectively). Some observers have suggested that a revenue sharing program that provided states with grants to forestall spending cuts and tax increases in 2009 may deter pro-cyclical actions by states and produce national fiscal stimulus. The budget gaps for is estimated to be $31.0 billion for the remainder of FY2009 and for FY2010 it is estimated to be $64.7 billion. An examination of the GRS program that existed from 1972 to 1986 could provide some historical perspective if policy makers were to consider a revised GRS program in 2009. The first section provides a brief overview of GRS as authorized by the State and Local Fiscal Assistance Act of 1972 (P.L. 92-512, the 1972 Act) and the three extensions. The second section analyzes the economic rationale for GRS. The third section analyzes GRS in the context of its possible use for stimulus of the nation's economy in 2009 including estimated distribution to the states based on the original GRS formula. The Appendix provides a more detailed legislative history of the GRS program created by the 1972 Act and its three extensions. General revenue sharing (GRS) is typically defined as unconditional federal grants to state and local governments. These grants are intended to provide state and local governments with spending flexibility. The total grant amount is fixed annually, sometimes called "closed-ended," and allocated to the recipient governments by formula. GRS has not been explicitly identified as a primary tool to provide counter-cyclical assistance. The GRS program created by the 1972 Act exemplifies how a GRS program can work. Over the almost 15-year life of the GRS program (1972 through 1986), over $83 billion was transferred from the federal government to state and local governments. To achieve a comparable magnitude of assistance today, approximately $313 billion (in 2008 dollars) would need to be distributed over the next 15 years. Table 1 provides detailed information on the 17 entitlement periods for the GRS grants (as provided for in the 1972 Act and subsequent extensions, both in nominal dollars and adjusted to 2008 dollars). The estimates provided in Table 1 for 2008 can be thought of as the relative value of a commitment made in the past in current dollars. For example, a $1 commitment in 1972 would be equivalent to a $5.08 commitment in 2008. The payment periods in the 1972 Act were designed to roughly follow the budget calendars of state and local governments. The grants in subsequent extensions tracked the federal budget calendar. Note that after FY1980, only local governments, not states were entitled to GRS grants. GRS allocations were determined by a formula that used a combination of the following variables: tax effort, population, and per capita income. Generally, the greater the tax effort and population, the larger the grant. In contrast, the higher the per capita personal income, the smaller the grant. More specifically, section 106 of the GRS legislation stipulates that under the three-part formula, each state shall receive: an amount which bears the same ratio to the amount appropriated under that section for that period as the amount allocable to that State under subsection (b) bears to the sum of the amounts allocable to all States under subsection (b) The three-factor formula can be summarized symbolically: State " i " Share of GRS = where: A us = total appropriation, = population of state " i ", = total personal income of state " i ", , or state " i " relative income factor, and , or state " i " general tax effort factor. The two ratios in the formula, the relative income factor (RIF) and the general tax effort factor (GTEF), were intended to adjust the state allocations based on the state's "ability-to-pay" and tax structure. The RIF for a state is the pre capita income for the U.S. divided by the per capita income of the state. If the state's RIF is greater than one, then it is considered relatively low income. Analogously, a RIF less than one indicates a state has relatively high income. In the three-part GRS formula, the higher a state's RIF, the greater the share of revenue. The GTEF was considered important for GRS because it created a disincentive for states to reduce taxes and rely more on the federal government for revenue over time. The GTEF is total state tax collections as a share of state personal income. In the GRS formula, the larger the GTEF component, the greater the share of revenue. Under the original GRS, the first step in the allocation procedure was to calculate each state's share based on the three variable formula. After each state's share was determined, one-third of the total amount was allocated to the state government and two-thirds to local general purpose governments within the state. The two-thirds portion was then distributed to each geographically defined county (parish) area within the state using the same three variable formula used to determine the state share. Each government within the county area then received an amount equal to the ratio of taxes it collected to total taxes collected by all general purpose governments in the county. The allocation formula was criticized for generating inequitable treatment of local governments. Generally, the arguments arose from "similar governments within a state receiv[ing] different revenue sharing payments, primarily because of their geographic location." According to a GAO report, "These inequities are created primarily by tiering allocation procedures whereby revenue sharing funds are first allocated to county geographic areas." Table 2 below employs the three-part formula to allocate a hypothetical appropriation of $40 billion and $20 billion using data for 2007, the latest year where data for the full years is available. Only states are eligible in the example provided in Table 2 . From the time the active debate surrounding GRS began in the 1960s, through eventual passage of the 1972 Act and subsequent extensions, general economic conditions and the political environment changed dramatically. Thus, the proponents and opponents of GRS modified their political and economic arguments depending on the current political and economic conditions. Because of this turbulence, the rationale behind GRS cannot be traced to a single political or economic objective. This section of the report summarizes three frequently mentioned economic rationales behind GRS: to initiate an intergovermental fiscal reallocation, to address state and local government liquidity crises, and to synchronize federal and state-local fiscal policy. Fiscal reallocation has two components. Generally, under a GRS program, state and local tax regimes are partly replaced by the federal tax regime. Also, the federal spending objectives are replaced, in part, by state and local spending priorities. Proponents of reallocation cite the more "progressive," and thus desirable, structure of federal taxes. However, an assessment of the merits of a more progressive tax structure require subjective claims of what is "fair" taxation. Even if there is agreement that a more progressive structure is needed for fairness, it is unclear that GRS on the relatively small scale of the previously implemented program could achieve that objective. GRS would also shift government spending decisions for the grant amount from the federal government to state and local governments. The rationale for such a shift can be traced to the assertion that state and local governments are better able to understand and satisfy the preferences of their residents. A reallocation through GRS could also address the "assignment" issue. The assignment issue arises when the revenue productivity of a government does not match the spending requirements for the public services assigned to that level of government. Although these observations may be true for some publicly provided goods and services, it is not clear that nationally, the net gain in spending efficiency alone would justify a GRS program. And, the small relative size of a GRS program relative to overall tax collections would limit any gains in government spending efficiency. The arguments for and against fiscal reallocation are subjective because they rely on measuring fairness. Some would argue that a more progressive tax system is patently unfair, while others would argue that a tax system that redistributes income is more equitable and desirable. Fiscal reallocation would change the structure of government fiscal relationships, but analysis of the degree to which it does and the desirability of such a shift are beyond the scope of this report. State, and more specifically, local governments, often face fiscal liquidity problems that arise from revenues that fluctuate more dramatically with the business cycle than do expenditures. As the economy slows, revenue falls more sharply than expenditures, creating a budget deficit. Governments without sufficient reserves are then compelled to reduce expenditures or raise taxes to balance their budgets. State and local governments cannot use debt to close deficits because of state constitutional or statutory restrictions requiring a balanced budget. In contrast, the federal government can issue more debt when expenditures exceed revenue. A countercyclical GRS program could help alleviate these relatively short-term liquidity problems for states. Opponents of federal assistance to state and local governments during economic slowdowns suggest that poor state-local fiscal management creates deficit problems. State and local governments could "save" surplus revenue during economic expansions to then use when the economy contracts and revenue falls. If the rise and fall of revenue is symmetric, then the revenue saved should be sufficient to cover revenue shortfalls when the economy slows. However, research has shown that state government budgets are generally asymmetric over the business cycle. State and local governments tend to save less during expansions for a variety of reasons. Political pressure from voters to reduce taxes when large budget surpluses accrue is a commonly cited reason. This objective is related to the liquidity objective discussed above. However, the rationale for a long-term GRS program designed for economic stabilization is somewhat different than a one-time grant to remedy a temporary fiscal imbalance. The federal government will typically employ monetary and fiscal policy to help stabilize consumption patterns and the price level as the economy cycles between periods of growth and recession. Generally, stimulative fiscal policy is implemented through tax reductions or increased government spending. In theory, tax reductions and/or increased government spending stimulates the demand for goods and services. The increased demand for goods and services then leads to economic expansion and recovery. This fiscal policy counters the economic downturn and is thus termed countercyclical fiscal policy. However, state and local governments may mitigate countercyclical federal fiscal policy if they are forced to raise taxes and reduce expenditures during recessions. Such a "pro-cyclical" state and local government response could undermine any federal fiscal stimulus. During economic downturns, this rationale played a more prominent role for proponents of general revenue sharing. While debating the 1976 extension, Senator Muskie offered the following rationale for GRS: we at the Federal level are trying to speed up economic recovery by cutting taxes, [while] state and local governments are being forced to raise their own taxes, thus delaying the impact of the Federal effort. The economic situation in the early to mid 1970s, about the time of initial passage of GRS, may seem similar to today's economic situation. However, the 1973-1975 recession was much deeper and longer and coincided with a sharp oil supply shock that the current downturn has not experienced. Nevertheless, the debate surrounding countercyclical aid to the states today is reminiscent of the 1975-1976 debate. This section analyzes how GRS might affect the economy if implemented in 2009. The first subsection describes the potential size of GRS compared to current state deficits. The second section analyzes implementation issues that may arise if a new GRS program were authorized, including a discussion of how states might use new federal grants. The principal question is: "Will the supposed pro-cyclical state actions in the absence of federal assistance dampen the effect of federal fiscal policy?" From a national economic perspective, closing the remaining state FY2009 budget gaps with revenue sharing would likely have little if any effect on the national economy. The National Conference of State Legislatures reported that the remaining FY2009 gap for 38 states of $31.0 billion (as of November 2008) is approximately 0.22% of the U.S. GDP of $14.4 trillion, hardly enough to effectuate a stimulative response. The same NGA study, however, notes projected shortfalls of $64.7 billion for FY2010. The budget gaps for FY2009 are after closing a $40.3 billion budget shortfall before enacting the FY2009 budget. A one-time GRS type grant to states that closed the estimated FY2009 fiscal imbalance of $31 billion and forestalled anticipated state spending cuts and tax increases for FY2010 of $64.7 billion could provide significant fiscal stimulus. This assumes other federal spending would not be reduced and the states spent the federal grants immediately. The degree of stimulus would be tempered by the net spending response of the recipient government. Research has generally shown that for every $1 lump sum transfer, only a portion is translated into new spending. For example, assume a state has planned spending of $100 to be paid with own source tax revenue of $100. Under this leakage theory, a $10 transfer from the federal government would not lead to $110 of spending. Instead, the state may lower own-source tax revenue $5 and use half the federal grant to cover the tax reduction. The result would be an increase in government spending of $5, not the full $10 transferred. The above discussion assumed that federal spending would flow seamlessly from the federal government through states to the designated spending program. Two factors may result in a drag on this flow. First, state government administration may increase the lag time and second, each state would use the grant for budget priorities of varying stimulative effect. Following is a brief analysis of these two important implementation factors. Time lags in implementation are the primary impediment to effective fiscal stimulus. Generally, the objective of fiscal policy during a recession is to boost aggregate demand and generate short term economic stimulus. However, if the stimulus comes too late, the increased spending may occur when the economy has already begun to revive and is approaching full employment. In that case, the stimulus becomes pro-cyclical and possibly inflationary. Policy makers should therefore use fiscal stimulus with caution because of the potential for mistimed action. GRS grants may be subject to two time lags, thus increasing the potential for mistimed fiscal policy. The first occurs at the federal level where policy makers must identify the need for stimulus then agree upon the size of the stimulus. Once the need and size are determined, Congress must then agree upon a grant allocation scheme that satisfies the competing goals of equity among jurisdictions and optimal stimulus. For example, suppose the grant allocation formula includes a component that provides greater assistance to states with greater need. If so, states that may have been more fiscally responsible would receive less, possibly violating the fairness criterion. However, from a broader macroeconomic perspective, aid that prevents more layoffs and state government budget cuts would seem to deliver greater short-term stimulus. Determining the structure of the allocation scheme could generate considerable debate, possibly delaying initial implementation efforts. The second time lag occurs at the state level. Federal grants that arrive before June 30, 2009, might avert some of the pro-cyclical state actions (e.g., budget cuts and tax increases) for many states. If the grants arrive too late for FY2009, state budget officials could simply add this revenue to the operating budget for FY2010 and perhaps avoid implementing tax increases and spending cuts that would otherwise begin on July 1, 2009. What could states do with unconditional revenue sharing grants? Generally, states have four options for federal grants (listed in order of stimulative response): increase government spending, reduce taxes (or rescind past tax increases), reduce debt (or not issue more debt), and/or contribute to a rainy day fund (or not draw down a rainy day fund). Increased spending would be the most stimulative in the short run, because the grant is immediately injected into the economy. This option for the states would include retaining state employees who would have been furloughed, maintaining current operations that would have been reduced, and not scaling back social programs such as education and healthcare. Theoretically, this fiscal stimulus works best when government spending is quickly multiplied through the economy. This means that each dollar of the federal transfer payment stimulates the economy the most if the entire dollar is spent by the recipient and then spent again. The degree of stimulative effect of avoided state actions, such as not furloughing workers, depends on this "multiplier effect." Thus, to achieve the greatest stimulus, the most contractionary state actions should be the first avoided. The National Conference of State Legislatures (NCSL) asked budget officials from all states to categorize their spending strategies to reduce or eliminate budget gaps remaining for FY2009. Changes in taxes are difficult to implement in the middle of a budget year and are not included. Table 3 below lists the strategies identified by NCSL and the number of states that proposed implementing those strategies for 2009. For FY2010, several state and local governments are likely going to increase taxes to help close budget gaps. The spending option for states that would produce the most relative stimulus for each dollar of spending would be to avoid net job losse s ( e.g. , layoffs, furloughs, and, to a degree, early retirement and hiring freezes ) . To see why this is true, consider what would happen if net job losses occurred. First, layoffs reduce aggregate demand because when workers are laid off, their income would fall steeply until they find new jobs, causing their consumption to fall. (Even though all of the federal spending is not entirely multiplied through the economy because of employment taxes and income taxes, the stimulative action is relatively effective because the federal government is essentially "paying" the state employees.) Second, since government services are included in GDP, measured economic activity would be directly reduced as long as resources (workers) lay idle. In an environment of rising unemployment, it is unlikely that all of these resources would quickly be put back to use through market adjustment. If GRS prevented net job losses, these negative effects on the economy could be avoided. The saving behavior of potentially separated employees would likely enhance the stimulative effect of avoiding job losses. (However, avoiding induced early retirement may provide less stimulus than avoiding furloughs and lay-offs.) If the employees are early in their careers and/or are in low skill positions—likely candidates for furloughs or lay-offs—it is likely that their incomes are lower than the median for state employees. Research has shown that low income workers save a smaller portion of their income than high income workers. Thus, preventing the employment separation of low income workers should provide more relative stimulus than the alternative of not offering early retirement. Across-the-board cuts would affect a variety of spending programs that do not easily conform to one succinct appraisal. The stimulative effect of avoiding across-the-board cuts would vary from state to state based on the state's spending pattern. Aid to local governments also falls into an uncertain category because of differing intergovernmental transfers across states. The stimulative effect of avoiding cuts in local aid would be positive, though the magnitude is uncertain. Generally, tax cuts are less stimulative than direct spending increases, because individuals are likely to save some of their tax cut. Analogously, a rescinded or avoided tax increase would also be less stimulative than spending increases because taxpayers would likely save some portion of the reduced tax payment. Debt reduction and contributing to a rainy day fund would offer little stimulus because such action would be equivalent to an increase in public saving. In the short run, increased public saving does not stimulate the economy. If the federal grants were used to avoid tapping into tobacco revenue, the saving effect would be similar to contributing to a rainy day fund. The combined effect of the various potential responses of state and local governments to federal grants is difficult to quantify a priori . Nevertheless, one could confidently assert that $1 of federal grants would not lead to a corresponding $1 increase in fiscal stimulus. While some state and local governments may spend all the federal grants and not change pre-grant taxing and spending priorities, some portions of the GRS grants would likely be used for non-stimulative purposes such as substituting for previously planned spending or tax increases. The 1972 Act The GRS grants authorized by the State and Local Fiscal Assistance Act of 1972 (the 1972 Act) were essentially unconditional. A trust fund was established and annual appropriations were dedicated to the trust fund. Even though the grants were identified at the time as general revenue sharing, the legislation did include a list of "priority expenditures" for which the shared revenue sent to local governments could be used. (The grants to states were unconditional.) GRS grants could be used by local governments for the following acceptable operating expenditures: (1) public safety; (2) environmental protection; (3) public transportation; (4) health; (5) recreation; (6) libraries; (7) social services for the poor or aged; and (8) financial administration. "Ordinary and necessary capital expenditures" were also allowed. The grants could not be used for education. Note that the priority expenditure list was discontinued by the 1976 extension. In addition to the priority expenditure list, the 1972 Act also disallowed the use of GRS for matching federal grants. That restriction was also dropped in the 1976 extension. Congress believed GRS was necessary for a variety of reasons. The most prominent reason at the time was the perceived need for reallocation of government responsibilities arising from the changing citizen demands for government services (fiscal reallocation as cited earlier). The congressional sentiment behind the 1972 Act that created general revenue sharing is summarized well in the following passage from the Senate report accompanying the 1972 Act: Today, it is the States, and even more especially the local governments, which bear the brunt of our more difficult domestic problems. The need for public services has increased manyfold and their costs are soaring. At the same time, State and local governments are having considerable difficulty in raising the revenue necessary to meet these costs. The Nixon Administration seemed to have a similar perspective. When President Nixon signed the legislation, the President remarked that the GRS program would "place responsibility for local functions under local control and provide local governments with the authority and resources they need to serve their communities effectively." However, the shift in the demand for and provision of government services was not the only justification for GRS. Observers at the time cited these additional reasons for implementing a revenue sharing program: to stabilize or reduce state and local taxes, particularly the property tax; to decentralize government; to equalize fiscal conditions between rich and poor states and localities; and to alter the nation's overall tax system by placing greater reliance on income taxation (predominantly federal) as opposed to property and sales taxation. Counteracting cyclical economic problems, such as state and local budget deficits induced by a slowing economy, was not explicitly mentioned as justification for GRS in the 1972 Act. However, when the debate began in 1974 on extending GRS beyond 1976, the countercyclical potential of revenue sharing apparently became important to policymakers. The counter cyclical arguments were likely initiated by the relatively severe recession that lasted from November 1973 through March 1975. The 1976 Extension The State and Local Fiscal Assistance Act of 1976 extended the GRS program through FY1980 with minor modifications. In the Senate report accompanying the legislation, Congress identified the following two reasons for the extension: (1) "Rapidly rising services costs coupled with sluggish declining tax bases has meant that State and local governments have had to raise tax rates and/or cut services," and (2) "A chronic problem State and local governments face is that the demand for public services is more elastic than the availability of revenues to finance them." The Senate report suggested that the extension of the GRS program "not only serves to help solve the fiscal problems of individual state and local governments, but also serves to stabilize the economy." The 1976 extension also eliminated the priority expenditure categories for local governments and the prohibition on states from using the grants for federal matching grants. Policymakers recognized the fungibility of local revenues which initiated the elimination of the spending restrictions. Although the fiscal stimulus features were mentioned during the debate surrounding extension, the ultimate purpose of revenue sharing was characterized as a long-term restructuring of the intergovernmental transfers. The desire to use revenue sharing as a countercyclical fiscal policy tool was not directly addressed in the 1976 extension. However, the reference to revenue sharing's ability to "stabilize" the economy may have arisen due in part to the countercyclical merits of GRS as suggested during the debate leading up to the extension. The total size of the extension, $25.5 billion, was approximately 2.5% of total state and local own-source tax revenue collected over the FY1977 to FY1980 period. Nationally, the transfer averaged 0.29% of national gross domestic product (GDP) annually over the four-year period. The 1980 Extension The State and Local Fiscal Assistance Act Amendments of 1980 ( P.L. 96-604 ) extended the general revenue sharing program through September 30, 1983, but only for local governments. According to the House report accompanying act, the state share was eliminated as a means of helping to balance the Federal budget. The Committee believes that State governments are better able to adjust to the discontinuance of revenue sharing allocations than local governments. Until the 1980 Act, approximately one-third of the GRS grants had been allocated to the states. The 1980 Act reduced the GRS grants by one-third—from $6.850 billion to $4.567 billion—and only local governments received the grants (see Table 1 ). In addition to continuing GRS for local governments, the 1980 Act also authorized the creation of a "countercyclical assistance program" to be triggered by national economic downturns. The purpose of the program was to provide assistance to state and local governments during recessions. To achieve this, the program authorized $1 billion for each of the fiscal years, 1981, 1982, and 1983, subject to the trigger mechanism described in the House report accompanying the legislation: funding would be triggered when the national economy has experienced two consecutive quarterly declines in both real gross national product and real wages and salaries [emphasis added] (that is, corrected for inflation). Once a recession has been confirmed by these declines, funds would be provided for each recession quarter in relation to the severity of the recession. The program would be funded at a rate of $10 million for each one-tenth percentage point decline in real wages and salaries measured from the pre-recession base—the average of the real wages and salaries for the two quarters preceding the decline. The amount of money allocated in any one quarter would be limited to $300 million. After setting aside 1% of the funds for Puerto Rico, Guam, American Samoa, and the Virgin Islands, the remaining funds would then be split evenly between state governments and "county areas." The relative size of payments to states and county areas would have been based on the severity of the economic downturn in that area. The state portion would be adjusted by the state's tax effort. The greater the effort, the greater the grant. Apparently, the trigger threshold was never crossed. No grants were provided under the countercyclical fiscal assistance program. Table A-1 below reports the quarterly change in the real wage and real GNP for the second quarter of 1980 through the third quarter of 1983. The time periods reported in Table A-1 are the three federal fiscal years for which funding was authorized plus the two quarters before the first fiscal year of authorization. Note that for the 14-quarter time frame reported below, there were never two consecutive quarters where both the real GNP and real wage declined from the previous quarter. The 1980 Act is significant because the act discontinued revenue sharing for the states and formally introduced the concept of providing countercyclical fiscal assistance through federal grants to state and local governments as part of GRS legislation. Ultimately, the countercyclical assistance program was never funded and thus no countercyclical fiscal assistance was provided. Local governments generated $593.8 billion of own source revenue over the three fiscal years covered by the 1980 Act. GRS provided $13.7 billion in grants to local governments—approximately 2.3% of total own-source revenue. The grants to local governments probably had little effect on the national economy given they represented 0.14% of U.S. GDP over the three-year time frame. The $1 billion for each of 1981, 1982, and 1983 for countercyclical aid, authorized but never spent, would have produced a negligible effect on the economy, even if fully realized. The 1983 Extension The final installment of the GRS program was signed into law on November 30, 1983, as the Local Government Fiscal Amendments of 1983 ( P.L. 98-185 ). As with the 1980 Act, only local governments received grants. The 1983 extension was intended to stabilize the fiscal condition of local governments. The conference report accompanying the legislation stated that the tendency of State and Local governments to rely on relatively inelastic revenue sources, such as local property taxes, has limited their flexibility in responding to fiscal problems. To assist local governments in meeting the needs of their communities in a time of fiscal stringency, the Committee amendment extends the general revenue sharing program for three years. The final extension provided the same amount for local governments as did the 1980 Act ($13.7 billion) in three equal annual installments of $4.567 billion. This amount was equal to the amount received by local governments from 1977 through 1980. The countercyclical aid program was not extended. The GRS program ended September 30, 1986.
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This report provides background and analysis of the general revenue sharing program (GRS) as authorized in the State and Local Fiscal Assistance Act of 1972 (P.L. 92-512, the 1972 Act). The GRS program was extended three times before finally expiring on September 30, 1986. Over the almost 15-year life of the GRS program (1972 through 1986), more than $83 billion was transferred from the federal government to state and local governments. From 1972 to 1980, states received approximately one-third of the grants and local governments received two-thirds. State governments were excluded from GRS beginning in the 1981 fiscal year (FY). In 2003, policymakers suggested using the original GRS program as a model for a new, short-term, GRS program. The FY2004 budget resolution contained a proposal (H.Con.Res. 95, Sec. 605) expressing a sense of the Senate that $30 billion should be set aside over the next 18 months for state fiscal relief. Congress ultimately approved $20 billion in aid to states; $10 billion through Medicaid and $10 billion distributed by population. By comparison, in 1972, the federal government authorized $8.3 billion ($42.1 billion in 2008 dollars) for the first 18 months of the original GRS program. More recently, the recession that began in 2008 has prompted similar proposals. The rationale behind GRS in 1972 cannot be traced to a single political or economic objective, such as economic stimulus. The turbulent economic and political environment that characterized the 1960s and 1970s led proponents and opponents of GRS to modify their political and economic arguments as that environment changed. Generally, GRS could be implemented to (1) initiate intergovernmental fiscal reallocation; (2) address state and local government liquidity crises; and (3) synchronize federal and state-local fiscal policy. A revised GRS program intended to help close state budget deficits (estimated to be $31.0 billion for the remainder of FY2009 and estimated to be $64.7 billion for FY2010) has been advocated based on the last two objectives. The budget crisis facing state and local governments in 2009 has generated renewed concern at the state and local level. A GRS program designed as a countercyclical initiative would encounter two primary implementation issues: fiscal policy time lags and variability in the state response to GRS grants. In addition, as with all fiscal policy, the overall size of the additional federal spending is critical to the impact of the fiscal stimulus. This report provides general background and analysis and does not track current legislation. It will not be updated.
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Autism spectrum disorder (ASD) and autism are general terms for a group of developmental disabilities that cause impairments in social skills and communication, and are often characterized by certain atypical behaviors. Autism spectrum disorders include autistic disorder, Asperger disorder, and pervasive developmental disorder-not otherwise specified. These conditions have overlapping symptoms that differ in terms of onset, severity, and nature. ASDs are referred to as "spectrum disorders" because they encompass a range of behaviorally defined conditions. The complex nature of these conditions creates diagnostic challenges; there are no consistent genetic or biologic markers to facilitate diagnosis. Autism has been linked to abnormal biology and chemistry in the brain; however, the cause or causes of these abnormalities remain unknown. According to the Centers for Disease Control and Prevention (CDC), as many as 1 in 110 eight-year-olds currently have an autism spectrum disorder, with boys affected more than four times as often as girls. This represents an increase from past autism rates, and has generated public interest in the causes of autism. The increased prevalence has also focused attention on the demand for effective treatment and support services for individuals with these conditions. In addition, some have questioned whether the current rates of ASD reflect increased awareness and diagnosis, a true increase in the incidence of ASD, or a combination of these factors. For many, autism is a lifelong illness whose symptoms often manifest before age three. Autistic children and adults generally display a unique set of symptoms, but common traits associated with autism include difficulty talking, repeated behaviors, and aversion to loud noises. ASD impedes an individual's communication skills, making it difficult to learn or to integrate socially. There are no medical treatments for autism itself; however, medications and behavioral therapy can help mitigate certain symptoms. While there is currently no known cause or cure for autism, research to determine the cause or causes may identify risk factors, some of which may be modifiable. Other studies may determine optimal methods of screening and diagnosis, identify the most effective mental and behavioral health therapies, and find the best medical treatments for individuals with ASD. The federal government has a role in the financing (through Medicaid and State Children's Health Insurance Programs) and delivery (through funding of developmental disabilities programming in schools, Title V Maternal and Child Health funding, and other sources) of treatment for ASD. The number of cases and their appropriate diagnosis and treatment affect federal and state expenditures. As such, Congress has shown interest in financing research on ASD prevalence, causes, and optimal treatment for individuals with ASD. This interest in ASD surveillance and research has been demonstrated through inclusion of autism research provisions in the Children's Health Act (CHA, P.L. 106-310 ) in 2000, enactment of the Combating Autism Act in 2006 (CAA, P.L. 109-416 ), and the recent enactment of the Combating Autism Reauthorization Act (CARA, P.L. 112-32 ) by the 112 th Congress. This report presents an overview of the CAA and CARA, Department of Health and Human Services (HHS) funding and activities under the CAA and CARA, other federal activities related to autism, and selected issues for Congress. The precursor to the CAA was the Children's Health Act of 2000 (CHA), which addressed a number of child health issues. Title I of the CHA authorized the Secretary of HHS (the Secretary) to conduct certain activities relevant to autism and developmental disabilities. It established funding for autism surveillance at CDC and established the National Center on Birth Defects and Developmental Disabilities. Under the CHA, the National Institutes of Health (NIH) was authorized to expand and intensify its autism research efforts and to establish Centers of Excellence for autism research. The CHA also established an Autism Coordinating Committee to coordinate research within NIH, and authorized funds for HHS to establish and implement an information and education campaign for health care providers and the general public. Enacted in 2006 and subsequently reauthorized by the Combating Autism Reauthorization Act of 2011, the CAA is intended to address growing concern about the increasing prevalence of autism spectrum disorders, and to stimulate research into possible autism causes and treatments. It authorized funding from FY2007 through FY2011 for autism research, screening, early intervention, and education. CARA reauthorized this funding through FY2014. The CAA authorizes the Secretary to expand, intensify, and coordinate existing ASD research activities; to expand surveillance and epidemiological research; to increase awareness of ASD; and to provide access to screening and early intervention services. It authorizes expanded research activities at NIH, and created the Interagency Autism Coordinating Committee (IACC) to coordinate all federal autism research efforts (this expanded the mission of the Autism Coordinating Committee described above). At CDC, the CAA authorizes surveillance and establishes ASD awareness programs. At the Health Resources and Services Administration (HRSA), the CAA authorizes expanded federal efforts in autism education, early detection, and intervention. The CAA also required a report to Congress on implementation and progress four years after enactment, which was provided to Congress on January 7, 2011. CARA requires a report to Congress two years after enactment. The following sections summarize the programs and funding authorized under the CAA and subsequently reauthorized by CARA. The CAA authorizes CDC to award competitive grants for the collection, analysis, and reporting of state-level epidemiological data on ASD and other developmental disabilities. CDC must establish guidelines for reporting these data, in collaboration with other public and private entities. CDC is also required to coordinate the federal response to potential or alleged clusters of ASD or developmental disabilities (DD). The CAA also requires CDC to award grants or cooperative agreements for the establishment of regional centers of excellence in the epidemiology of ASD and other developmental disabilities. The purpose of the centers of excellence is to collect and analyze information on the number, incidence, correlates, and causes of ASD and other DD. The centers are required to collect and report data according to the guidelines established by CDC. In addition, centers are required to develop an area of special research expertise (such as genetics, epigenetics, or environmental epidemiology), and to identify suitable cases and controls for research into potential causes or risk factors for ASD. The CAA authorizes the Secretary to provide grants for projects designed to (1) increase awareness of ASD; (2) reduce barriers to screening and diagnosis; (3) promote evidence-based interventions for individuals with ASD or other developmental disabilities; (4) train health care professionals to use valid, reliable screening tools; and (5) provide early intervention if needed. The Secretary must use an interdisciplinary approach that also focuses on specific issues for children who are not receiving early diagnosis and interventions. These activities are carried out through HRSA. The Secretary must, subject to funding, provide information and education on ASD to increase public awareness of developmental milestones; promote research into the development and validation of reliable screening tools; promote early screening of high-risk individuals; increase the number of individuals who are able to diagnose or rule out ASD; increase the number of individuals who are able to provide evidence-based interventions; and promote the use of evidence-based interventions for high-risk individuals. The Secretary must, subject to funding, collaborate with a number of federal programs for low-income individuals to provide culturally competent information regarding ASD and developmental disabilities, in collaboration with the Department of Education and the Department of Agriculture. These programs include Head Start; Early Start; Healthy Start; programs under the Child Care and Development Block Grant Act of 1990; Medicaid, including the Early and Periodic Screening, Diagnosis, and Treatment Program (EPSDT); the State Children's Health Insurance Plan (CHIP); the Maternal and Child Health Block Grant; Individuals with Disabilities Education Act Parts B and C; and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). The CAA authorizes the Secretary to require states to designate a lead agency responsible for disseminating the information described above available to individuals in the state. This information may be provided through toll-free numbers, Internet websites, mailings, or other means, as determined by the governor of each state. In addition, the Secretary, through the states, must promote and assist the development and use of screening tools. The Secretaries of HHS and the Department of Education must provide for the collection, storage, coordination, and public availability of screening tools and educational materials. The CAA also authorizes the Secretary to fund grants to expand existing interdisciplinary training and leadership programs (authorized in Title V of the Social Security Act). The Secretary must also promote best practices in autism screening and diagnosis. The CAA authorizes the Secretary of HHS to expand, intensify, and coordinate ASD research activities at NIH, and to consolidate existing program activities if necessary. It directs NIH to investigate the cause, diagnosis, early detection, prevention, services, supports, intervention, and treatment of ASD. The CAA also authorizes the Interagency Autism Coordinating Committee (IACC) at NIH to coordinate all ASD research, screening, intervention, and education efforts within HHS. Members of the IACC are appointed for a term of four years and may be reappointed once. Members must include representatives of the following: Administration for Children and Families (ACF), CDC, Centers for Medicare and Medicaid Services (CMS), HRSA, NIH, HHS Office on Disability, Substance Abuse and Mental Health Services Administration (SAMHSA), and the Department of Education. No fewer than six members, or one-third of the committee (whichever is greater) must be non-federal public members, including people with autism, parents of people with autism, and leaders of national autism organizations. The IACC is required to meet at least twice per year in public session. It is responsible for formulating and annually updating the strategic plan for ASD research, and presenting those recommendations to the Secretary and to Congress. The IACC must also monitor all federal ASD activities, make recommendations to the Secretary and to NIH regarding changes to these activities, and make recommendations on public participation in decision making to the Secretary. Funding for CAA programs was authorized through FY2011; the Combating Autism Reauthorization Act (CARA), which extends funding at current levels through FY2014, was signed into law on September 30, 2011. CARA authorizes appropriations through FY2014 for CAA activities, but does not include funding or authorizations for an expansion of research and/or other services as some autism advocates had requested. Table 1 presents authorizations of appropriations for the provisions of the CAA and CARA. The table includes authorizations of appropriations from FY2007 through FY2014. Table 2 provides details of funding for CAA activities, as reported by HHS. Full-year appropriations for FY2013 have yet to be enacted and therefore are not included in Table 2 . However, the six-month FY2013 CR ( P.L. 112-175 , signed into law on September 28, 2012) provided funding at FY2012 levels, increased by 0.612%. As such, the funding levels for FY2013 are estimates. For CAA activities, FY2012 funding totaled $237 million. Funding for FY2013 activities is estimated at $238 million, a $1 million increase. CAA authorizations and funding are presented in two separate tables because funding for autism-related activities is not specifically limited to the authorizations shown in Table 1 , and may be more or less in a given year. In addition, agencies typically do not have disease-specific budget lines. Autism-related activities may also be funded at CDC and NIH through general authorizations. The information on agency level spending in Table 2 is compiled from the Moyer Report, a report published by the HHS Office of the Assistant Secretary for Financial Resources. The Moyer Report presents information as reported by the agencies on spending for selected diseases and conditions, including autism. Federally funded autism research not authorized under the CAA, including activities carried out by the Departments of Defense and Education, is discussed below in the section " Other Federal Activities Related to Autism Research ." The activities carried out by CDC, HRSA, and NIH under the CAA are summarized below. As discussed previously, CDC focuses on surveillance and epidemiological research, NIH on basic science and research coordination, and HRSA on autism education, detection, and early intervention. For further detail on agencies' autism-related activities and publications, refer to the IACC's Report to Congress on Activities Related to Autism Spectrum Disorder and Other Developmental Disabilities Under the Combating Autism Act of 2006. Under the Combating Autism Act, the CDC is responsible for ASD and developmental disabilities surveillance and epidemiological research. Under the CHA and CAA, CDC formed the National Center on Birth Defects and Developmental Disabilities, the Autism and Developmental Disabilities Monitoring Network (ADDM), and the Centers for Autism and Developmental Disabilities Research and Epidemiology (CADDRE), an ASD education campaign for caregivers and health professionals, and has collaborated on the International Autism Epidemiology Network (IAEN). CDC also coordinates with other agencies, including HRSA and the Department of the Army, on other epidemiologic ASD research. The National Center on Birth Defects and Developmental Disabilities established the ADDM network for the collection, analysis, and reporting of state-level epidemiological data on ASD and other developmental disabilities. ADDM monitors the prevalence of ASD among eight-year-olds at selected sites. The sites, which are regional or state-based public or private nonprofit entities, collect data on ASD prevalence using uniform surveillance methods, which include screening health and education records at multiple sources. Pilot surveillance sites were established with funding from the Children's Health Act; the program was expanded to additional sites under the CAA. ADDM has published two widely cited reports on ASD prevalence, one in 2007 and another in 2009. Under the CAA, CDC established a grant program for states or other entities (e.g., private nonprofits institutions, including institutions of higher education and hospitals) to establish regional centers of excellence in ASD. These centers, called the Centers for Autism Developmental Disabilities Research and Epidemiology (CADDRE), are part of a multi-site collaborative study examining the risk factors for ASD and other developmental disabilities. The CADDRE network is currently working on the Study to Explore Early Development (SEED), which seeks to characterize ASD-related traits. CDC has partnered with the autism advocacy organization Autism Speaks to compile statistics on the global prevalence of autism. This partnership is called the International Autism Epidemiology Network. The IAEN has produced a fact sheet that summarizes global autism prevalence from 2000 to 2008. In addition to research and surveillance activities, CDC has established a health communication campaign, entitled "Learn the Signs. Act Early," to improve early identification of children with ASD. The campaign is intended to educate parents, health care professionals, and early educators on the developmental milestones of early childhood. Under the CAA, the Maternal and Child Health Bureau of HRSA must ensure that children with ASD are screened, diagnosed, and receive appropriate treatment. It is also tasked with addressing the shortage of trained professionals who provide autism treatment. HRSA received funding to address the five following objectives: (1) to increase awareness of ASD; (2) to reduce barriers to screening and diagnosis; (3) to promote evidence-based interventions for individuals with ASD or other developmental disabilities; (4) to train health care professionals to use valid, reliable screening tools; and (5) to provide early intervention if needed. To address these objectives, HRSA established or increased support for four programs: Leadership Education in Neurodevelopmental Disabilities (LEND), Developmental Behavioral Pediatric training programs, state implementation programs, and research programs. HRSA has used CAA funding to support 43 LEND programs and 10 Developmental Behavioral Pediatric training programs by public and private nonprofit agencies in FY2011. The programs focus on the use of screening and diagnostic tools, and continuing education for health care providers that serve women, children, and families. These programs are designed to address the shortage of qualified professionals available to assess and assist autistic individuals. The governor of each state must designate a lead agency to coordinate the HRSA-funded activities in that state. HRSA state-level grantees have used their funds to implement state autism plans, promote autism awareness, and develop model systems of services for children with ASD and developmental disabilities. The primary focus of state implementation grants is to improve access to ASD and developmental disabilities screening and diagnostic services. HRSA has established Autism Intervention Research programs, focusing on interventions to improve the health and well-being of children and adolescents with ASD and other developmental disabilities. These grants are provided to develop research networks among public and non-profit private institutions that focus on evidence-based research and the development of best practices in physical health, behavioral health, and the general health and well-being of individuals with ASD. Autism Intervention Research programs develop evidence-based guidelines and test and validate tools for measuring treatment outcomes. CAA funding at NIH supports intramural and extramural research at multiple institutes and centers. Under the CAA, NIH-funded researchers are tasked with studying potential risk factors and causes of autism, and to coordinate and consolidate its research on ASD and other developmental disabilities with other agencies. NIH supports and coordinates the Autism Centers of Excellence Program, consisting of 11 research centers and networks that focus on identifying the causes of ASD and developing treatments. This includes research on biomarkers, genetic susceptibility, pharmacotherapy, language development, early intervention, and risk and protective factors. Another study, the Early Autism Risk Longitudinal Investigation, is looking into the interaction of environmental and genetic factors in ASD. NIH has sponsored a number of scientific workshops and symposia on ASD-related research. NIH also supports ASD research infrastructure, including biobanking (storage and archiving of biological samples) support, and the establishment of a common database (the National Database for Autism Research) to warehouse data collected in NIH-funded ASD studies. The Children's Health Act required NIH to form a committee to coordinate research among the Institutes. The CAA broadened the mission of the coordinating committee to include other entities, both within and outside of HHS. The Interagency Autism Coordinating Committee (IACC), chaired by the director of the National Institute for Mental Health, is intended to facilitate the exchange of information on autism activities among the member agencies, and coordinates HHS autism-related programs and initiatives. The CAA required the IACC to present a strategic plan for ASD research, focusing on gaps, opportunities, and new knowledge in the autism research field. The strategic plan must be updated annually. The 2011 IACC Strategic Plan, released on February 28, 2011, includes a new focus on interventions for non-verbal people with ASD, health promotion efforts, and safety. Federal funding for autism research is not limited to the Combating Autism Act, and is supported by the Department of Defense and the Department of Education in addition to HHS. Many of the stakeholders in the IACC do not receive funding under the CAA, but through their participation in autism research, these stakeholders have an interest and a guiding role. Following is a brief description of the autism-related research activities of the other federal participants in the IACC. Certain HHS agencies employ general authorities to direct funds as needed to address public health concerns. For example, CDC may provide funding for autism programs under its general authorities to fund public health activities. Other relevant activities may focus broadly on developmental disabilities and receive funding under different authorities. Within HHS, ACF, CMS, the Office on Disability, and SAMHSA conduct activities that contribute to the growing body of research on ASD. The CAA does not authorize appropriations for these agencies. ACF is the HHS agency responsible for federal programs that promote the economic and social well-being of families, including Head Start and Temporary Assistance for Needy Families. The agency participates in the IACC and provides services for children with ASD through funds authorized under the Developmental Disabilities Assistance and Bill of Rights Act of 2000 ( P.L. 106-402 ). ACF funds state Developmental Disabilities Councils; Protection and Advocacy Agencies; Centers for Excellence in Developmental Disabilities Education, Research, and Services; and Projects of National Significance. CMS administers the Medicare, Medicaid, and State Children's Health Insurance Program. The agency participates in the IACC and supports autism education, early detection, and intervention services under the CAA through Medicaid's EPSDT program. CMS has also conducted several studies on best practices in autism treatment, and is planning to issue a report of all state services available to individuals with ASD. The HHS Office on Disability is primarily a policy office that supports coordination of resources across HHS and federal agencies to support individuals with disabilities, including those with autism. Finally, SAMHSA is the HHS agency responsible for supporting mental health and substance abuse programs. The agency provides services to children with ASD through the Child Mental Health Initiative, a grant program mandated by Congress to serve children and youth with serious emotional disorders. This program provides grants for the development of coordinated support systems for children who are referred to the program. Federal autism activities are not limited to HHS agencies. Other federal entities use general authorities and previously established programs to address ASD. These entities include the Department of Defense (DOD) and the Department of Education. The DOD does not receive funds under the CAA. However, it maintains a congressionally directed research program for ASD research, which was first funded in FY2007. The program, which supports a range of scientific and clinical research on autism, received $41 million in total funding from FY2007 to FY2012. The Department of Education does not receive appropriations under the CAA. However, it funds a number of research programs and collects data on individuals served by special education programs. Programs and services in the Department of Education are geared toward individuals with disabilities in general, and not autism or developmental disabilities specifically. In 2010, the IACC conducted an analysis of autism research spending by private and federal entities that are represented on the IACC. Analysts found that private entities funded 24% of autism research in the United States in 2009, while the federal government funded 76%. The report also gauged the relevance of the funded projects to the topic areas that were identified in the IACC strategic plan. These objectives for 2009 were (1) When should I be concerned? (2) How can I understand what is happening? (3) What caused this to happen and can it be prevented? (4) Which treatments and interventions will help? (5) Where can I turn for services? (6) What does the future hold, particularly for adults? (7) What other infrastructure and surveillance needs must be met? The vast majority (95%) of ASD research aligned with research questions in the IACC strategic plan, with the largest proportion of research focused on the causes and prevention of ASD. Research on access to ASD-related services and lifespan issues received the least amount of funding. During CAA enactment and reauthorization, several issues were highlighted, some of which are of general interest to Congress when deciding whether to support disease-specific legislation. Specifically, concerns were raised about barriers to data sharing and confidentiality across state and federal government entities; the coordination of surveillance and research, across both agencies and diseases; and the pros and cons of Congress directing funding to specific diseases (or groups of diseases). These concerns apply not only to autism research policy, but can be applied broadly to any disease-specific legislation, and the consequent policy decisions may affect access to care and treatment for individuals with autism. Coordination of research and sharing of the resulting data is an ongoing interest of Congress. Researchers call for accurate case estimates in order to study common characteristics of autistic individuals and potential risk factors for autism. Federal and state-funded programs provided through health care providers and schools must provide certain services for individuals with ASD, and need accurate estimates to anticipate the need for those services. However, enumerating autism cases for researchers, health care providers, and schools has presented an ongoing challenge at the state, local, and federal levels. During the reauthorization process, some Members of Congress raised the concern that continuing to pass disease-specific legislation allows Congress to prioritize one disease (or group of diseases, in this case developmental disabilities) over another, and that priority-setting should be left to the agencies that perform the research. The issue of prioritizing one developmental disability over another has also been raised among researchers and families of children with developmental disabilities and other conditions. Advocates for CARA argued that allowing authorization of these programs to lapse would interrupt the progress made under the CAA. Autism services research, such as the development and adoption of new screening tools and implementation of best practices in autism therapy, has effects on both health care cost and coverage decisions made at the government and individual level. The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 ) includes provisions that may affect coverage for individuals with autism, including prohibitions on the cancellation of coverage by an insurer due to a preexisting condition, elimination of lifetime caps on insurance benefits and annual limits on coverage, and eligibility for tax subsidies to assist low- and middle-income individuals in the purchase of coverage from state health insurance exchanges. In addition, Medicaid eligibility will be broadened to include single adults. The long-range impact of health reform on individuals with ASD (specifically, the coverage of recommended treatments for ASD) is unknown.
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Autism spectrum disorder (ASD) and autism are general terms for a group of developmental disabilities that cause impairments in social skills and communication, and are often characterized by certain atypical behaviors. The federal government has a role in the financing (through Medicaid and State Children's Health Insurance Programs) and delivery (through funding of developmental disabilities programming in schools, Title V Maternal and Child Health funding, and other sources) of treatment for ASD. The number of autism cases and their appropriate diagnosis and treatment affect federal and state expenditures. As such, Congress has shown interest in financing research on ASD prevalence, causes, and optimal treatment for individuals with ASD. On September 26, 2011, the 112th Congress passed the Combating Autism Reauthorization Act (CARA, P.L. 112-32), which reauthorized funding for autism research authorized under the Combating Autism Act of 2006 (CAA, P.L. 109-416). The CAA was enacted to address public and congressional concern with growing rates of autism; to increase existing autism research funding authorizations; and to stimulate state-level coordination of health, education, and disability programs. The CAA authorizes funding for ASD surveillance, research, and education at the Department of Health and Human Services (HHS), at the Centers for Disease Control and Prevention (CDC), the Health Resources and Services Administration (HRSA), and the National Institutes of Health (NIH). The CAA authorizes funding for CDC to administer a grant program for states and other entities to conduct surveillance on ASD and developmental disabilities, and to establish regional centers of excellence in ASD epidemiology. The CAA also authorizes funding for HRSA to support autism education, intervention, and early detection. NIH is authorized under the CAA to conduct and fund basic scientific research on autism and other developmental disabilities. In addition, NIH is tasked with the coordination of all research, screening, intervention, and education efforts through the Interagency Autism Coordinating Committee. The Combating Autism Act authorized appropriations for these activities from FY2007 through FY2011. The Combating Autism Reauthorization Act of 2011 extends authorizations of appropriations at FY2011 levels for FY2012 through FY2014. Funding for research authorized by CARA is discretionary and subject to the annual appropriations process. Full-year appropriations for FY2013 have yet to be enacted. However, a six-month government-wide continuing resolution (CR) was signed into law on September 28, 2012 (P.L. 112-175), which generally maintained funding for discretionary programs at their FY2012 levels, increased by 0.612%. This report presents an overview of the CAA and CARA, HHS funding and activities under the CAA and CARA for FY2007 through FY2013, other federal activities related to autism, and selected issues for Congress.
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The recent unrest in the Middle East and North Africa (MENA), disruption in Libyan crude oil production, and rising crude oil prices have led to calls for releasing oil from the Strategic Petroleum Reserve (SPR). In late February, some House members advocated a release as a move to prevent price speculation. More recently, some Senate members formally wrote to the President to urge his exercise of emergency powers to release SPR oil. The Obama Administration is currently considering releasing SPR oil to help ease soaring oil prices and consumer fears over rising gasoline prices. Despite the rising prices, considerable spare capacity and substantial reserves exist worldwide. Up until the last quarter of 2010, the United States had experienced both a drop in crude oil demand and reduced refining output. Auctioning SPR oil may have a limited influence on crude oil prices and find less-than-enthusiastic bidders. From the mid-1970s through the present day, the United States has had to absorb a number of significant spikes in the price of crude oil and petroleum products. Whether driven by disruptions in the physical supply of crude or refined fuels, or by uncertainties owing to international conflicts and instabilities, these price increases have consequences for the United States. Elevated petroleum prices affect the balance of trade and siphon away disposable income that might be spent to support spending, investment, or savings. The U.S. Strategic Petroleum Reserve (SPR) originated in the disruption of the 1973 Arab-Israeli War. In response to the United States' support for Israel, the Organization of Arab Exporting Countries (OAPEC) imposed an oil embargo on the United States, the Netherlands, and Canada, and reduced production. While some Arab crude did reach the United States, the price of imported crude oil rose from roughly $4/barrel (bbl) during the last quarter of 1973 to an average price of $12.50/bbl in 1974. While no amount of strategic stocks can insulate any oil-consuming nation from paying the market price for oil in a supply emergency, the availability of strategic stocks can help blunt the magnitude of the market's reaction to a crisis. One of the original perceptions of the value of a strategic stockpile was also that its very existence would discourage the use of oil as a political weapon. The embargo imposed by the Arab producers was intended to create a very discernible physical disruption. This explains, in part, why the genesis of the SPR focused especially on deliberate and dramatic physical disruptions of oil flow, and on blunting the significant economic impacts of a shortage stemming from international events. In response to the experience of the embargo, Congress authorized the Strategic Petroleum Reserve in the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) to help prevent a repetition of the economic dislocation caused by the Arab oil embargo. In the event of an interruption, introduction into the market of oil from the Reserve was expected to help calm markets, mitigate sharp price spikes, and reduce the economic dislocation that had accompanied the 1973 disruption. In so doing, the Reserve would also buy time for the crisis to sort itself out or for diplomacy to seek some resolution before a potentially severe oil shortage escalated the crisis beyond diplomacy. The SPR was to contain enough crude oil to replace imports for 90 days, with a goal initially of 500 million barrels in storage. In May 1978, plans for a 750-million-barrel Reserve were implemented. Later authorization expanded it to 1 billion barrels, and the George W. Bush Administration would have expanded it to 1.5 billion barrels had it been successful in persuading Congress of the need. The Department of Energy (DOE) currently manages the program. Physically, the SPR comprises five underground storage facilities, hollowed out from naturally occurring salt domes, located in Texas and Louisiana. The caverns were finished by injecting water and removing the brine. Similarly, oil is removed by displacing it with water injection. For this reason, crude stored in the SPR remains undisturbed, except in the event of a sale or exchange. Multiple injections of water, over time, will compromise the structural integrity of the caverns. By 2005, the storage capacity of the SPR expanded to 727 million barrels, and its inventory had reached nearly 700 million barrels before Hurricanes Katrina and Rita in 2005. Following the storms, some crude was loaned to refiners and some was sold. Loans of SPR oil are "paid" by the return of larger amounts of oil than were borrowed. The SPR has since been filled to its 727 million barrel capacity through royalty-in-kind acquisition, which this report discusses further below. SPR oil is sold competitively. A "notice of sale" is issued, including the volume, characteristics, and location of the petroleum for sale; delivery dates and procedures for submitting offers; as well as measures for assuring performance and financial responsibility. Bids are reviewed by DOE and awards offered. The Department of Energy estimates that oil could enter the market roughly two weeks after the appearance of a notice of sale. The SPR could be drawn down initially at a rate of roughly 4.4 million barrels per day for up to 90 days; thereafter, the rate would begin to decline. Although fears were expressed periodically during the 1980s about whether the facilities for withdrawing oil from the Reserve were in proper readiness, the absence of problems during the first real drawdown in early 1991 (the Persian Gulf War) appeared to allay much of that concern. However, some SPR facilities and infrastructure were beginning to reach the end of their operational life. A life extension program, initiated in 1993, upgraded or replaced all major systems to ensure the SPR's readiness to 2025. The Arab oil embargo also fostered the establishment of the International Energy Agency (IEA) to develop plans and measures for emergency responses to energy crises. Strategic stocks are one of the policies included in the agency's International Energy Program (IEP). Signatories to the IEA are committed to maintaining emergency reserves representing 90 days of net imports, developing programs for demand restraint in the event of emergencies, and agreeing to participate in allocation of oil deliveries among the signatory nations to balance a shortage among IEA members. The calculation of net imports for measuring compliance with the IEA requirement includes private stocks. By that measure, the United States has more than 100 days' cushion. However, it is likely that less than 20% of the privately held stocks would technically be available in an emergency, because most of that inventory supports movement of product through the delivery infrastructure. At full capacity, the SPR might afford the United States roughly 70 days or more of net import protection, depending upon the pace of recovery of the domestic economy. These measures of days of protection assume a total cessation of oil supply to importing nations, a scenario that is highly unlikely. This would be especially true for the United States, given that Canada is currently the nation's principal source for crude oil. Some IEA member nations require a level of stocks to be held by the private sector or by both the public and private sectors. Including the U.S. SPR, roughly two-thirds of IEA stocks are held by the oil industry, whereas one-third is held by governments and supervisory agencies. The Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) authorized drawdown of the Reserve upon a finding by the President that there is a "severe energy supply interruption." This was deemed by the statute to exist if three conditions were joined: If "(a) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration; (b) a severe increase in the price of petroleum products has resulted from such emergency situation; and (c) such price increase is likely to cause a major adverse impact on the national economy." Congress enacted additional drawdown authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. 101-383 ) after the Exxon Valdez oil spill, which interrupted the shipment of Alaskan oil, triggering spot shortages and price increases. The intention was to provide for an SPR drawdown under a less rigorous finding than that mandated by EPCA. This section, 42 U.S.C. § 6241(h), has allowed the President to use the SPR for a short period without having to declare the existence of a "severe energy supply interruption" or the need to meet obligations of the United States under the international energy program. The Energy Policy Act of 2005 made the SPR authorities permanent. These authorities also provided for U.S. participation in emergency-sharing activities of the International Energy Agency without risking violation of antitrust law and regulation. Under the additional authorities authorized in P.L. 101-383 , a drawdown may be initiated in the event of a circumstance that "constitutes, or is likely to become, a domestic or international energy supply shortage of significant scope or duration" and where "action taken ... would assist directly and significantly in preventing or reducing the adverse impact of such shortage." This authority allows for a limited use of the SPR. No more than 30 million barrels may be sold over a maximum period of 60 days, and this limited authority may not be exercised at all if the level of the SPR is below 500 million barrels. This was the authority behind the Bush Administration's offer of 30 million barrels of SPR oil on September 2, 2005, which was part of the coordinated drawdown called for by the International Energy Agency. The same authority may have been the model for a swap ordered by President Clinton on September 22, 2000. From 1995 until the latter part of 1998, sales of SPR oil, not acquisition, were at the center of debate. However, the subsequent reduction and brief elimination of the annual federal budget deficit—as well as a precipitous drop in crude oil prices into early 1999—generated new interest in replenishing the SPR, either to further energy security objectives or as a means of providing price support to domestic producers who were struggling to keep higher-cost, marginal production in service. As an alternative to appropriations for the purchase of SPR oil, DOE proposed that a portion of the royalties paid to the government from oil leases in the Gulf of Mexico be accepted "in kind" (in the form of oil) rather than as revenues. The Department of the Interior (DOI) was reported to be unfavorably disposed to the royalty-in-kind (RIK) proposal, but a plan to proceed with such an arrangement was announced on February 11, 1999. (Legislation had also been introduced [ H.R. 498 ] in the 106 th Congress to direct the Minerals Management Service to accept royalty-in-kind oil.) Producers were supportive, maintaining that the system for valuation of oil at the wellhead is complex and flawed. While acquiring oil for the SPR by RIK avoids the necessity for Congress to make outlays to finance direct purchase of oil, it also means a loss of revenues in so far as the royalties are settled in wet barrels rather than paid to the U.S. Treasury in cash. Final details were worked out during the late winter of 1999. In mid-November of 2001, President Bush ordered fill of the SPR to 700 million barrels, principally through oil acquired as royalty-in-kind (RIK). At its inception, the RIK plan was generally greeted as a well-intended first step toward filling the SPR to its capacity of 727 million barrels. However, it became controversial when crude prices began to rise sharply in 2002. Some policymakers and studies asserted that diverting RIK oil to the SPR instead of selling it in the open market was putting additional pressure on crude prices. A number of industry analysts argued that the quantity of SPR fill was not enough to have driven the market. The Administration strongly disagreed with claims that RIK fill bore responsibility for the continuing spike in prices. Legislative attempts to suspend RIK fill began in 2004, during the 108 th Congress. The Energy Policy Act of 2005 ( P.L. 109-58 ), enacted in the summer of 2005, required the Secretary of Energy to develop and publish for comment procedures for filling the SPR that take into consideration a number of factors. Among these are the loss of revenue to the Treasury from accepting royalties in the form of crude oil, how the resumed fill might affect prices of both crude and products, and whether additional fill would be justified by national security. On November 8, 2006, DOE issued its final rule, "Procedures for the Acquisition of Petroleum for the Strategic Petroleum Reserve." The rule essentially indicated that DOE would take into account all the parameters required by P.L. 109-58 to be taken into consideration before moving ahead with any acquisition strategy. DOE rejected tying decisions to acquire oil to any specific, measurable differentials in current and historic oil prices. In the summer of 2007, DOE resumed RIK fill of the SPR. On May 19, 2008, with gasoline prices exceeding, on average, $3.60 gallon, and approaching $4.00/gallon in some regions, Congress passed P.L. 110-232 . However, a few days earlier, on May 16, DOE announced it would not accept bids for an additional 13 million barrels of RIK oil that had been intended for delivery during the second half of 2008. Through FY2007, royalty-in-kind deliveries to the SPR totaled roughly 140 million barrels and forgone receipts to the Department of the Interior an estimated $4.6 billion. DOE had estimated deliveries of 19.1 million barrels of RIK oil during FY2008 and $1.170 billion in forgone revenues. Opponents of RIK fill in the 110 th Congress were not necessarily opposed to the concept of an SPR. When the price of crude was much less of an issue, objections to RIK fill were also ideological. Opponents of RIK fill in principle contended that a government-owned strategic stock of petroleum was inappropriate under any circumstance—that it essentially saddled the public sector with the expense of acquiring and holding stocks, the cost for which might have otherwise been borne by the private sector. The existence of the SPR, this argument goes, has blunted the level of stocks held in the private sector. As already noted, RIK fill resumed in 2009 and ended in early 2010, pending establishment of additional storage. A site in Richton, MS, has been evaluated as a possible site for expansion of the SPR. However, while $25 million for expansion activities was included in the FY2010 budget, it is not apparent that expansion is a high priority. As already noted, legislation ( P.L. 110-232 ) enacted in May 2008 forbade DOE from initiating any new activities to acquire royalty-in-kind (RIK) oil for the SPR during the balance of 2008. The sharp decline in crude oil prices since spiking to $147/barrel in the summer of 2008 had spurred interest in resuming fill of the SPR. On January 2, 2009, the Bush Administration announced plans to purchase oil for the SPR, and to reschedule deferred deliveries. There were four components in the resumption of fill: (1) a purchase announced on January 16, 2009, of nearly 10.7 million barrels to replace oil that was sold after Hurricanes Katrina and Rita in 2005; (2) the return of roughly 5.4 million barrels of oil borrowed by refiners after Hurricane Gustav in 2008; (3) delivery of roughly 2.2 million barrels of RIK oil that had been deferred; and (4) resumption of RIK fill in May 2009 at a volume of 26,000 barrels per day, totaling over 6.1 million barrels to be delivered over a period from May 2009 to January 2010. These activities were intended to fill the SPR to its current capacity of 727 million barrels by early 2010. The government has not acquired oil for the SPR by outright purchase since 1994, when oil purchases ended. The SPR then held 592 million barrels. On September 16, 2009, Secretary of the Interior Ken Salazar announced a transitional phasing out of the RIK Program. As RIK oil and natural gas sales contracts expire, the oil and natural gas properties will revert to in-value status. As a result of the decision, an expansion of the SPR would require purchasing oil through the market at prevailing prices. The Northeast Home Heating Oil Reserve (NHOR) was established after a number of factors contributed to the virtual doubling in some Northeastern locales of home heating oil prices during the winter of 1999-2000. Drawing particular attention of lawmakers was the sharply lower level of middle distillate stocks—from which both home heating oil and diesel fuels are produced—immediately beforehand. EPCA includes authority for the Secretary of Energy to establish regional reserves as part of the broader Strategic Petroleum Reserve. With support from the Clinton Administration, Congress moved to specifically authorize and fund a regional heating oil reserve in the Northeast. The FY2001 Interior Appropriations Act ( P.L. 106-291 ) provided $8 million for the Northeast Home Heating Oil Reserve (NHOR). The regional reserve was filled by the middle of October 2000 at two sites in New Haven, CT, and terminals in Woodbridge, NJ, and Providence, RI. The NHOR is intended to provide roughly 10 days of Northeast home heating oil demand. There was controversy over the language that would govern its use. Opponents of establishing a regional reserve suspected that it might be tapped at times that some consider inappropriate, and that the potential availability of the reserve could be a disincentive for the private sector to maintain inventories as aggressively as it would if there were no reserve. The approach enacted predicated drawdown on a regional supply shortage of "significant scope and duration," or if—for seven consecutive days—the price differential between crude oil and home heating oil increased by more than 60% over its five-year rolling average. The intention was to make the threshold for use of the regional reserve high enough so that it would not discourage oil marketers and distributors from stockbuilding. The President could also authorize a release of the NHOR in the event that a "circumstance exists (other than the defined dislocation) that is a regional supply shortage of significant scope and duration," the adverse impacts of which would be "significantly" reduced by use of the NHOR. During mid- and late December 2000, the 60% differential was breached. However, this was due to a sharp decline in crude prices rather than to a rise in home heating oil prices. In fact, home heating oil prices were drifting slightly lower during the same reporting period. As a consequence, while the 60% differential was satisfied, other conditions prerequisite to authorizing a drawdown of the NHOR were not. A general strike in Venezuela that began in late 2002 resulted, for a time, in a loss of as much as 1.5 million barrels of daily crude supply to the United States. With refinery use lower than usual owing to less crude reaching the United States, domestic markets for home heating oil had to rely on refined product inventories to meet demand during a particularly cold winter. Prices rose, and there were calls for use of the NHOR; still, the price of heating oil fell significantly short of meeting the guidelines for a drawdown. In the 111 th Congress, S. 283 , introduced on January 21, 2009, would have permitted drawdown on the basis of price as well as supply. The bill would have mandated a release of 20% of the heating oil held in the Reserve if the average retail price for home heating oil in the Northeast exceeded $4.00 per gallon on November 1 of the fiscal year. An additional 20% would be released in four additional installments if the average retail price exceeded $4.00/gallon on the first of each month, December through March. S. 283 was the subject of a May 12, 2009, hearing before the Senate Committee on Energy and Natural Resources (S. Hrg. 111-67). The Energy Policy Act of 2005 (EPAct) requires, "as expeditiously as practicable," expansion of the SPR to its authorized maximum physical capacity of 1 billion barrels. Advocates for expansion argued that the SPR would need to be larger for the United States to be able to maintain stocks equivalent to 90 days of net imports. The FY2010 SPR budget, at $229 million, included $43.5 million for purchase of a cavern at Bayou Choctaw to replace a cavern posing environmental risks, as well as $25 million for expansion activities. However, it is not apparent that expansion remains a high priority. Bayou Choctaw has six storage caverns with a total capacity of 76 million barrels. One cavern, Bayou Choctaw Cavern 20, is within 60 ft of the edge of the salt dome and must be replaced for fear of breaching the salt dome with further use. The SPR oil stored at the Bayou Choctaw site is not in any immediate danger of leaking, however. Cavern 20 has passed all integrity tests. To limit any risk, DOE has reduced the oil stored in Cavern 20 from 7.5 million barrels to 3.2 million barrels by using only the upper portion of the cavern. DOE has temporarily stored the remaining oil in Big Hill and West Hackberry caverns in the brine cushion at the bottom of the cavern, which will eventually be needed to accommodate cavern creep (geological shrinkage). DOE is currently acquiring a 10-million-barrel replacement cavern in the Bayou Choctaw salt dome. The replacement cavern would be available for oil storage in December 2012 and would provide capacity for the 3.2 million barrels in Cavern 20 and the 4.3 million barrels temporarily stored at Big Hill and West Hackberry, plus provide an additional 2.5 million barrels of spare capacity. Cavern 20 is to be emptied and abandoned. The Energy Policy Act of 2005 (EPAct) required SPR expansion to its maximum authorized capacity of 1 billion barrels. DOE has evaluated a site in Richton, MS, as a possible location for an additional 160 million barrels of capacity. However, in its FY2011 request, the Obama Administration proposed to suspend spending in support of SPR expansion. The budget request proposed to redirect $71 million previously appropriated for expansion to "partially fund SPR non-expansion operations and maintenance activities." The Administration cited an Energy Information Administration projection that "U.S. petroleum consumption and dependence on imports will decline in the future and the current Reserve's projection will gradually increase to 90 days by 2025." The Administration reduced the FY2011 request for the SPR to $138.9 million, a sharp reduction from the $243.8 million appropriated for FY2010. The FY2012 SPR funding request is reduced further, to $121.7 million. Historically, the use of the SPR has been tied to a physical shortage of supply—which normally will manifest itself, in part, in an increase in price. However, price was deliberately kept out of the President's SPR drawdown authority because of concerns about what price level would trigger a drawdown, and that any hint of a price threshold could influence private sector and industry inventory practices. As has been noted, the original intention of the SPR was to create a reserve of crude oil stocks that could be tapped in the event of an interruption in crude supply. Debate over releasing SPR oil traces differences in opinion over just what constitutes a "severe energy supply interruption." The debate during the 1980s over when, and for what purpose, to initiate an SPR drawdown reflected the significant shifts that were taking place in the operation of oil markets after the experiences of the 1970s, and deregulation of oil price and supply. Sales of SPR oil authorized by the 104 th Congress—and in committee in the 105 th —renewed the debate for a time. The SPR Drawdown Plan, submitted by the Reagan Administration in 1982, provided for price-competitive sale of SPR oil. The plan rejected the idea of conditioning a decision to distribute SPR oil on any "trigger" or formula. To do so, the Administration argued, would discourage private sector initiatives for preparedness or investment in contingency inventories. Many analysts, in and out of Congress, agreed with the Administration that reliance upon the marketplace during the shortages of 1973 and 1979 would probably have been less disruptive than the price and allocation regulations that were imposed. But many argued that the SPR should be used to moderate the price effects that can be triggered by shortages like those of the 1970s or the tight inventories experienced during the spring of 1996, and lack of confidence in supply availability. Early drawdown of the SPR, some argued, was essential to achieve these objectives. The Reagan Administration revised its position in January 1984, announcing that the SPR would be drawn upon early in a disruption. This new policy was hailed as a significant departure, considerably easing congressional discontent over the Administration's preparedness policy, but it also had international implications. Some analysts began to stress the importance of coordinating stock drawdowns worldwide during an emergency lest stocks drawn down by one nation merely transfer into the stocks of another and defeat the price-stabilizing objectives of a stock drawdown. In July 1984, responding to pressure from the United States, the International Energy Agency agreed "in principle" to an early drawdown, reserving decisions on "timing, magnitude, rate and duration of an appropriate stockdraw" until a specific situation needed to be addressed. This debate was revisited in the aftermath of the Iraqi invasion of Kuwait on August 2, 1990. The escalation of gasoline prices and the prospect that there might be a worldwide crude shortfall approaching 4.5 million-5.0 million barrels daily prompted some to call for drawdown of the SPR. The debate focused on whether SPR oil should be used to moderate anticipated price increases, before oil supply problems had become physically evident. In the days immediately following the Iraqi invasion of Kuwait, the George H. W. Bush Administration indicated that it would not draw down the SPR in the absence of a physical shortage simply to lower prices. On the other hand, some argued that a perceived shortage does as much and more immediate damage than a real one, and that flooding the market with stockpiled oil to calm markets is a desirable end in itself. From this perspective, the best opportunity to use the SPR during the first months of the crisis was squandered. It became clear during the fall of 1990 that in a decontrolled market, physical shortages are less likely to occur. Instead, shortages are likely to be expressed in the form of higher prices, as purchasers are free to bid as high as they wish to secure scarce supply. Within hours of the first air strike against Iraq in January 1991, the White House announced that President Bush was authorizing a drawdown of the SPR, and the IEA activated the plan on January 17. Crude prices plummeted by nearly $10/barrel in the next day's trading, falling below $20/bbl for the first time since the original invasion. The price drop was attributed to optimistic reports about the allied forces' crippling of Iraqi air power and the diminished likelihood, despite the outbreak of war, of further jeopardy to world oil supply. The IEA plan and the SPR drawdown did not appear to be needed to help settle markets, and there was some criticism of it. Nonetheless, more than 30 million barrels of SPR oil was put out to bid, but DOE accepted bids deemed reasonable for 17.3 million barrels. The oil was sold and delivered in early 1991. The Persian Gulf War was an important learning experience about ways in which the SPR might be deployed to maximize its usefulness in decontrolled markets. As previously noted, legislation enacted by the 101 st Congress, P.L. 101-383 , liberalized drawdown authority for the SPR to allow for its use to prevent minor or regional shortages from escalating into larger ones; an example was the shortages on the West Coast and price jump that followed the Alaskan oil spill of March 1989. In the 102 nd Congress, omnibus energy legislation ( H.R. 776 , P.L. 102-486 ) broadened the drawdown authority further to include instances where a reduction in supply appeared sufficiently severe to bring about an increase in the price of petroleum likely to "cause a major adverse impact on the national economy." The original EPCA authorities permit "exchanges" of oil for the purpose of acquiring additional oil for the SPR. Under an exchange, a company borrows SPR crude and later replaces it, including an additional quantity of oil as a premium for the loan. There were seven exchanges between 1996 and 2005. The most recent one (with the exception of a test exchange in the spring of 2008) was in June 2006. ConocoPhillips and Citgo borrowed 750,000 barrels of sour crude for two refineries affected by temporary closure of a ship channel. A new dimension of SPR drawdown and sale was introduced by the Clinton Administration's proposal in its FY1996 budget to sell 7 million barrels to help finance the SPR program. While agreeing that a sale of slightly more than 1% of SPR oil was not about to cripple U.S. emergency preparedness, some in Congress vigorously opposed the idea, in part because it might establish a precedent that would bring about additional sales of SPR oil for purely budgetary reasons, as did indeed occur. There were three sales of SPR oil during FY1996. The first was to pay for the decommissioning of the Weeks Island site. The second was for the purpose of reducing the federal budget deficit, and the third was to offset FY1997 appropriations. The total quantity of SPR sold was 28.1 million barrels, and the revenues raised were $544.7 million. Fill of the SPR with RIK oil was initiated in some measure to replace the volume of oil that had been sold during this period. Prior to Hurricanes Ivan, Katrina, and Rita in 2005, growth in oil demand had begun to strap U.S. refinery capacity. A result has been an altering in a once-observed historic correlation between crude oil and refined oil product prices. In the past, changes in the price of crude had driven changes in the cost of refined products. The assumption that product prices are driven by, and follow the path of, crude prices, was at the center of debates from the 1980s until early in the decade of 2000 whether an SPR drawdown was warranted when prices spiked. However, beginning in the middle of the first decade of the new century, pressure on product supplies and the accompanying anxiety stoked by international tensions caused a divorce in that traditional correlation between crude and product prices. The increases in prices of gasoline and other petroleum products following Hurricanes Katrina and Rita, for example, were not a response to any shortage of crude oil, but to shortages of refined products owing to the shutdown of major refining capacity in the United States, and to an interruption of product transportation systems. The rise in crude prices to over $140/barrel by the summer of 2008 was attributable to many contributing factors, including increasing international demand, and concern that demand for crude might outstrip world production. Markets were described as "tight," meaning that there might be little cushion in terms of spare production capacity to replace any crude lost to the market, or to provide adequate supply of petroleum products. In such a market, where demand seems to be brushing against the limits to meet that demand, refinery outages, whether routine or unexpected, can spur a spike in crude and product prices, as can weekly reports of U.S. crude and petroleum stocks, if the numbers reported are not consistent with expectations. As prices continued to increase during 2007-2008, some argued that market conditions did not support the high prices. One market analyst remarked at the end of October 2007, "The market at this stage totally ignores any bearish news [that would soften the price of oil], but it tends to exaggerate bullish news." Significant and sustained increases in oil prices were observed in the absence of the sort of "severe energy supply interruption" that remains the basis for use of the SPR. Legislation in the 111 th Congress ( S. 1462 ) would have established a price basis for authorizing a drawdown of the SPR. However, a release from the SPR might not lower prices under every scenario. Some policymakers had urged the George W. Bush Administration to release oil from the SPR during the crude oil price run-up of spring and summer 2008. A review of the dynamics in the oil market during this period provides a demonstration of why an SPR release in the face of high prices will not necessarily foster a decline in petroleum prices. By mid-July 2008, U.S. gasoline prices were exceeding $4.00/gallon and diesel fuel was averaging $4.75/gallon. Crude oil prices had briefly exceeded more than $145/barrel, but declined late in the month to less than $128/barrel. Oil prices had risen in recent years in the absence of the normal association with the concept of "disruption" or "shortage." The escalation in prices to their observed peak in July 2008 was driven by several factors that are difficult to weigh. Chief among them was the existence of little or no spare oil production capacity worldwide, and a general inelasticity in demand for oil products despite high prices. Prices also generally prove sensitive to the ebb and flow of international tensions, the value of the U.S. dollar, and even the appearance of storms that could develop into hurricanes that might make landfall in the Gulf of Mexico. The political unrest that began in Tunisia and spread to Egypt and Libya in early 2011 has been tied to the surge in oil prices observed during the 1 st quarter of the year. To calm markets and to moderate prices, some have called for releasing oil from the SPR. By early March 2011, the price of West Texas Intermediate (WTI), trading on the New York Mercantile Exchange (NYMEX) for April delivery, was in excess of $100 per barrel. In Europe, the price of Brent crude oil exceeded $115 per barrel. These prices, approximately 20% higher than before the outbreak of political unrest, reflect at least two important factors: first, expectations that the unrest could spread to other countries, some of which could be major oil producers, and second, that actual Libyan exports have been curtailed, to an uncertain extent, but likely by at least one half. As an offset to the lost Libyan crude exports, Saudi Arabia has indicated that it will expand its exports to keep the world market supplied. If oil were released from the SPR, the key questions would be whether such a release could dampen expectations that are driving the market, and whether it would reduce prices in the short run, and where. The world is not currently experiencing a shortage of crude oil. Demand remains moderated by the recession, although it is recovering. On the supply side, Saudi Arabia, it is believed, has expanded production to replace the Libyan shortfall. However, a shortage does exist in the sense that Libyan exports of light, sweet crude oil, favored by European refiners to produce clean diesel fuel, have fallen. It is not likely that heavier, sour crude oil produced by Saudi Arabia is a perfect substitute for lost Libyan supplies. As a result, European prices of crude oil have risen more than U.S. prices. If the United States drew light, sweet crude oil from the SPR in sufficient volume, it is possible that competition between U.S. and European refiners for available oil supplies could moderate competing demands and have some effect on price. Since prices in Europe rose the most due to unrest in the MENA, it is likely that any moderating in price due to a release of light, sweet crude from the SPR would occur in the European market with only a smaller effect in the United States. It is not known what volume of SPR draw would be required for any specified price reduction, and it is worth noting that of the 727 million barrels in the SPR, less than half, about 293 million barrels, is light, sweet crude. If political unrest does spread to additional major oil exporting countries, for example Kuwait or Saudi Arabia, it is likely that a major increase in the world price of oil, based on deteriorating expectations, would occur. In that case, additional available oil on the market from reserve stocks would likely have little effect on futures markets, as price movements in those markets reflect availability of supply into the future, not current market conditions. Rather than more currently available oil, the futures markets would require a belief that more future oil production capacity was likely to become available. Over the last 25 years, the "API gravity of imported crude oils has been decreasing, while average sulfur content has been increasing. "API gravity, a measure developed by the American Petroleum Institute, expresses the "lightness" or "heaviness" of crude oils on an inverted scale. With a diminishing supply of light, sweet (low sulfur) crude oil, U.S. refineries have had to invest in multi-billion dollar processing-upgrades to convert lower-priced heavier, sour crude oils to high-value products such as gasoline, diesel, and jet fuel. Currently, 124 U.S. refineries process crude oil into fuel (this includes three refinery complexes that are each made up of two formerly independent refineries). The number is down from the 158 reportedly operating a decade ago. Although the number of refineries has decreased, operable refining capacity has increased over the past decade from 16.5 million barrels/day (bpd) to over 18 million barrels per day. Most of the country's gasoline is refined in the Gulf Coast region (Petroleum Administration for Defense District 3), which makes up nearly 45% of the U.S. refining capacity through 45 refineries processing more than 8 million barrels per day. These refineries also represent some of the largest and most complex refineries in the United States, if not the world. In the months prior to Hurricanes Gustav and Ike, there were some calls for an SPR drawdown despite the absence of any discernible shortage. On July 24, 2008, legislation ( H.R. 6578 ; 110 th Congress) to require a 10% drawdown of SPR oil failed to achieve a two-thirds majority in the House under suspension of the rules (226-190). The language was included in H.R. 6899 (110 th Congress), the Comprehensive American Energy Security and Consumer Protection Act, which passed the House on September 16 th (236-189). The bill would have required a sale of 70 million barrels of light grade petroleum from the SPR within six months following enactment. The bill stipulated that 20 million barrels must be offered for sale during the first 60 days. All oil from the sale would be replaced with "sour" crude to be acquired after the six-month sale period, with the replacement acquisition completed not later than five years after enactment. The genesis of the H.R. 6899 proposal lay partly in an analysis by the Government Accountability Office (GAO), which observed that the proportion of grades of oil in the SPR was not as compatible as it could be with the trend of refineries toward being able to handle heavier grades of crudes. GAO observed that 40% of the crude oil refined by U.S. refineries was heavier than that stored in the SPR. Refiners reported to GAO that running lighter crude in units designed to handle heavy crudes could impose as much as an 11% penalty in gasoline production and 35% in diesel production. The agency reported that other refiners indicated that they might have to shut down some of their units. Refineries that process heavy oil cannot operate at normal capacity if they run lighter oils. The types of oil currently stored in the SPR would not be fully compatible with 36 of the 74 refineries considered vulnerable to supply disruptions. (A majority of the refineries that have pipeline access to the SPR are located in the Gulf Coast region and the Midwest region.) GAO cited a DOE estimate that U.S. refining throughput would decrease by 735,000 barrels per day (or 5%) if the 36 refineries had to use SPR oil—a substantial reduction in the SPR's effectiveness during an oil disruption, especially if the disruption involved heavy oil. It was unclear what sort of effect a roughly 70 million barrel draw on the SPR would have on prices. In a market where there is no physical shortage, oil companies may have limited interest in SPR oil unless they have spare refining capacity to turn the crude into useful products, or want to build crude oil stocks. SPR oil is not sold at below-market prices. Bids on SPR oil are accepted only if the bids are deemed fair to the U.S. government. If the announcement itself that the SPR is going to be tapped does not prompt or contribute to a softening of prices, there may be limited interest on the part of the oil industry in bidding on SPR supply. Although the possibility exists that prices might decline if additional refined product is released into the market, it was impossible to predict what effect an SPR drawdown would have had on oil prices at any time in 2008, given the many other factors that bear on daily oil prices. There are additional considerations. A unilateral draw on U.S. stocks would probably have less impact on the world oil market than a coordinated international drawdown of the sort that occurred after Hurricanes Katrina and Rita in 2005. Some might argue that it would be unwise under any scenario for the United States to draw down its strategic stocks while other nations continue to hold theirs at current levels. Additionally, it is always possible that producing nations might reduce production to offset any SPR oil delivered into the market. In the setting of 2008, producing, exporting nations could have argued that the market was already well-supplied and that short-term supply concerns were not what was keeping prices relatively high. The SPR has been perceived as a defensive policy tool against high oil prices, but if it is used without a discernible impact on oil prices, it is possible that the SPR will lose some of whatever psychological leverage it exercises on prices when left as an untapped option. The Omnibus Appropriations Acts of 2009 ( P.L. 111-8 ) provided $205 million for necessary expenses for Strategic Petroleum Reserve facility development and operations and program management activities, of which $31.5 million was provided to initiate new site expansion activities, beyond land acquisition. The Northeast Home Heating Oil Reserve received $9.8 million for necessary operation and management expenses. The Supplemental Appropriations Act for 2009 ( P.L. 111-32 ) authorized a transfer of $21.6 million from the SPR petroleum account for site maintenance activities. The Energy and Water Appropriations Act for 2010 ( P.L. 111-85 ) provided $243.8 million for development and operations and program management activities at the Strategic Petroleum Reserve facility, and $11.3 million for the Northeast Home Heating Oil Reserve. Section 313 of the Appropriations Act prohibited expending SPR appropriations to anyone engaged in selling refined products valued at more than $1 million to Iran or contributing in any way to expansion of refining capacity in Iran. Firms providing, or insuring tankers carrying, refined product to Iran were also included in the prohibition. A bill to establish a National Strategic Gasoline Reserve ( H.R. 142 ) would authorize the Secretary of Energy to set aside 10 million barrels of refined gasoline products similar to the Northeast Home Heating Oil Reserve. Arguments in favor of establishing a refined product reserve are that U.S. oil imports include refined products and that it could be more efficient and calming to markets if it were not necessary to first draw down SPR crude and then refine it into needed products. The effect that SPR crude might have on moderating price increases could also be offset if refineries themselves or oil pipelines carrying crude to refineries were compromised. The availability of refined product reserves would address that scenario. Having a regional product reserve would also lessen the likelihood that delivery of crude or product from the stocks of IEA signatories might overwhelm U.S. port facilities; this happened in the wake of the European response that followed Hurricanes Rita and Katrina. Arguments against a product reserve include the prospect that the availability of supplemental supplies of gasoline from abroad may increase as European demand for diesel vehicles displaces gasoline consumption there. Additionally, storage of refined product is more expensive than for crude. Storage of crude in salt caverns is estimated to cost roughly $3.50/barrel while above-ground storage of product in tanks might cost $15-$18/barrel. Refined product will also deteriorate and would need to be periodically sold and replaced to assure the quality of the product held in the product reserve. Many states also use different gasoline blends, adding to the complexity of identifying which blends should be stored where, and in what volume. It would be simpler to hold conventional gasoline in a product reserve with the expectation that the Environmental Protection Agency (EPA) would waive Clean Air Act (CAA) requirements during an emergency. H.R. 1017 , introduced March 10, 2011, would provide for the sale of light grade petroleum from the Strategic Petroleum Reserve and replace the crude with refined petroleum product.
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Congress authorized the Strategic Petroleum Reserve (SPR) in the Energy Policy and Conservation Act (EPCA, P.L. 94-163) to help prevent a repetition of the economic dislocation caused by the 1973-1974 Arab oil embargo. The Department of Energy (DOE) manages the SPR, which comprises five underground storage facilities, solution-mined from naturally occurring salt domes in Texas and Louisiana. The Energy Policy Act of 2005 (EPAct) authorized SPR expansion to a capacity of 1 billion barrels, but physical expansion of the SPR has not proceeded beyond 727 million barrels—its inventory at the end of 2010. In addition, a Northeast Home Heating Oil Reserve (NHOR) holds 2 million barrels of heating oil in above-ground storage. EPCA authorized drawdown of the Reserve upon a finding by the President that there is a "severe energy supply interruption." Congress enacted additional authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. 101-383) to permit use of the SPR for short periods to resolve supply interruptions stemming from situations internal to the United States. The meaning of a "severe energy supply interruption" has been controversial. EPCA intended use of the SPR only to ameliorate discernible physical shortages of crude oil. The government had ended the practice of purchasing crude oil to fill the SPR in 1994. In 2000, the Department of Energy began acquiring SPR oil through royalty-in-kind (RIK) in lieu of cash royalties paid on production from federal offshore leases. In May 2008, Congress passed legislation (P.L. 110-232) ordering DOE to suspend RIK fill for the balance of the calendar year unless the price of crude oil dropped below $75/barrel. Crude oil prices spiked to $147/barrel in the summer of 2008 and then sharply declined, allowing a resumption of fill. These activities have brought the SPR essentially to its current 727 million barrel inventory. The current Secretary of the Interior recently announced his intention to terminate the RIK program. Congress approved $205 million for the SPR in FY2009, including $31.5 million to continue SPR physical expansion activities. DOE has evaluated a site in Richton, MS, as a possible location for an additional 160 million barrels of capacity, but set aside any further expansion plans. The FY2010 Energy and Water Appropriations Act (P.L. 111-85), which provides $243.8 million for the entire SPR program, included $25 million for expansion activities and $43.5 million for purchase of a cavern at Bayou Choctaw to replace a cavern posing environmental risks. The act also prohibits SPR appropriations from being expended to anyone engaged in providing refined product to Iran, or assisting Iran in developing additional internal capacity to refine oil. Historically, the use of the SPR has been tied to a physical supply shortage, which normally would manifest itself, in part, as a price increase. The original intention of the SPR was to create a reserve of crude oil stocks that could be tapped in the event of an interruption in crude supply. However, price was deliberately kept out of the President's SPR drawdown authority because of concerns about what price level would trigger a drawdown, and that any hint of a price threshold could influence private sector and industry inventory practices. The original intention of the SPR was to create a reserve of crude oil stocks that could be tapped in the event of an interruption in crude supply. The Government Accountability Office recently observed that the proportion of crude oil grades in the SPR has been growing less compatible with the heavier grades of crude oil that U.S. refineries have been upgrading to handle. This finding has raised questions about the SPR's effectiveness during a long-term oil disruption involving heavy oil.
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Congress uses an annual appropriations process to provide discretionary spending for federal government agencies. The responsibility for drafting legislation to provide such spending is currently divided among 12 appropriations subcommittees in each chamber, each of which is tasked with reporting a regular appropriations bill to cover all programs under its jurisdiction. The timetable currently associated with this process requires the enactment of these regular appropriations bills prior to the beginning of the fiscal year (October 1). If regular appropriations are not enacted by that deadline, one or more continuing resolutions (CRs) may be enacted to provide funds until all regular appropriations bills are completed or the fiscal year ends. During the fiscal year, supplemental appropriations may also be enacted to provide funds in addition to those in regular appropriations acts or CRs. Amounts provided in these appropriations acts are subject to limits, both procedural and statutory, that are enforced through respective mechanisms such as points of order and sequestration. The timing and focus of the FY2015 appropriations process was affected at the outset by at least three significant factors. First, the enactment of the Bipartisan Budget Act of 2013 ( P.L. 113-67 ) provided set levels for the FY2015 statutory discretionary spending limits on defense and nondefense spending. It also provided an alternative basis for procedural budget enforcement in the absence of a budget resolution. This agreement was enacted on December 26, 2013, about nine months ahead of the start of FY2015. At about the time of its enactment, some observers asserted that the earliness with which funding levels had been provided could contribute to the enactment of some or all of the FY2015 appropriations bills before the fiscal year began. In addition, in establishing levels for defense and nondefense spending, some observers suggested that the debate over FY2015 appropriations would be focused on the specifics of funding various agencies and programs instead of on overall levels of budgetary resources. The second and third significant factors that affected the start of the FY2015 appropriations process were the late enactment of FY2014 regular appropriations and the delays in the President's budget submission to Congress. Regular appropriations for FY2014 were not enacted until January 17, 2014, more than three months after the beginning of the fiscal year. The President's budget submission followed about six weeks later, roughly one month after it was due. The bulk of the submission occurred on March 4, with additional details provided the following week. The Overseas Contingency Operations/Global War on Terrorism (OCO/GWOT) portion of the submission was not provided until June 26. In response to these delays, the House and Senate Appropriations Committees conducted hearings on a condensed schedule to allow committee action on the draft appropriations bills to begin during the months of April and May. None of the FY2015 regular appropriations bills were enacted by the beginning of the fiscal year. In the 113 th Congress, the House Appropriations Committee reported 11 of the 12 regular appropriations bills, and the House passed seven of these. During that same Congress, the Senate Appropriations Committee reported eight of the regular bills. Although one of them received floor consideration, none was passed by the Senate. Consequently, on September 19, 2014, a FY2015 CR ( P.L. 113-164 ) was enacted into law to provide temporary funding through December 11, 2014. Two further extensions of this CR were enacted to provide temporary funding for all 12 regular appropriations bills through December 13 and December 17 ( P.L. 113-202 and P.L. 113-203 , respectively). On December 16, 2014, regular appropriations for 11 out of the 12 regular appropriations bills were enacted as part of the Consolidated and Further Continuing Appropriations Act (Divisions A-K of ( P.L. 113-235 ); the FY2015 Consolidated Act). A fourth CR was also enacted in Division L of P.L. 113-235 to extend temporary funding for the Department of Homeland Security (DHS) through February 27, 2015. Action on FY2015 appropriations also occurred in the early part of the 114 th Congress. On February 27, a fifth CR was enacted to further extend temporary funding for DHS through March 6, 2015 ( H.R. 33 ; P.L. 114-3 ). Full year appropriations for the DHS were ultimately signed into law on March 4, 2015 ( H.R. 240 ). This report provides background and analysis on congressional action related to the FY2015 appropriations process. The first section discusses the status of discretionary budget enforcement for FY2015, including the statutory spending limits and allocations normally associated with the congressional budget resolution. The second section provides information on the consideration and enactment of regular appropriations and an overview of aggregate discretionary spending. The third section discusses the legislative action on FY2015 CRs and associated budget enforcement considerations. Further information with regard to the FY2015 regular appropriations bills is provided in the various CRS reports that analyze and compare the components of the current House and Senate proposals. The framework for budget enforcement of discretionary spending under the congressional budget process has both statutory and procedural elements. The statutory elements are the discretionary spending limits derived from the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The procedural elements are primarily associated with the budget resolution and limit both total discretionary spending and spending under the jurisdiction of each appropriations subcommittee. The BCA imposes separate limits on defense and nondefense discretionary spending for each of the fiscal years from FY2012 through FY2021. The defense category includes all discretionary spending under budget function 050 (defense); the nondefense category includes discretionary spending in all other budget functions. Enacted discretionary spending may not exceed these limits , which are enforceable through sequestration. The Office of Management and Budget (OMB) evaluates enacted discretionary spending relative to the spending limits and determines if sequestration is necessary to enforce either or both of them. For FY2015 discretionary spending, the first such evaluation and any necessary enforcement are to occur within 15 calendar days after the 2014 congressional session adjourns sine die. For any FY2015 discretionary spending that becomes law after the session ends, evaluation and any enforcement of the limits are to occur 15 days after enactment. To achieve additional budgetary savings, the BCA as originally enacted included procedures to lower the amount of the initial spending limits for each of the fiscal years from FY2014 through FY2021. However, the Bipartisan Budget Act of 2013 amended the BCA to set the FY2014 and FY2015 limits at specific levels. The limits for FY2015 discretionary spending are $521.272 billion for defense spending and $492.356 billion for nondefense spending. The procedural elements of budget enforcement generally stem from requirements under the Congressional Budget Act of 1974 (CBA) that are associated with the adoption of an annual budget resolution. Through this CBA process, the Appropriations Committee in each chamber receives a procedural limit on the total amount of discretionary budget authority for the upcoming fiscal year, referred to as a 302(a) allocation. The Appropriations Committee subsequently divides this allocation among its 12 subcommittees, referred to as a 302(b) suballocation. The 302(b) suballocation restricts the amount of budget authority available to each subcommittee for the agencies, projects, and activities under its jurisdiction, effectively acting as a cap on each of the 12 regular appropriations bills. Enforcement of the 302(a) allocation and 302(b) suballocations occurs through points of order. As of the date of this report, Congress has not adopted a FY2015 budget resolution. The House agreed to a budget resolution ( H.Con.Res. 96 ) on April 10, 2014, and the measure was placed on the Senate calendar the following day. No further action occurred. The Senate did not consider a budget resolution for FY2015. Both the House and Senate have used an alternative mechanism for FY2015 procedural budget enforcement that was enacted as part of the Bipartisan Budget Act. Section 115 of that act provided the chair of the House Budget Committee the authority to enter a statement into the Congressional Record between April 15, 2014, and May 15, 2014, that included an allocation for the House Appropriations Committee. This allocation was required to be consistent with the FY2015 discretionary spending limits. Section 116 provided similar authority to the Senate Budget Committee chair. Once filed, the allocation would be enforceable as if it had been associated with a budget resolution adopted by Congress. The House statement was filed in the Congressional Record on April 29; the Senate statement was filed on May 5. Based upon the budget enforcement provided via this alternative mechanism, the House and Senate Appropriations Committees each reported 302(b) suballocations to their subcommittees prior to floor consideration of the FY2015 regular appropriations bills. In the House, interim suballocations were reported on April 29 for two subcommittees—Legislative Branch and Military Construction and Veterans Affairs. These were later superseded by allocations for all 12 subcommittees on May 19. In the Senate, 302(b) suballocations were reported on May 22. The House and Senate currently provide annual appropriations in 12 regular appropriations bills. Each of these bills may be considered and enacted separately, but it is also possible for two or more of them to be combined into an omnibus vehicle for consideration and enactment. Alternatively, if some of these bills are not enacted, funding for the projects and activities therein may be provided through a full-year CR. None of the FY2015 regular appropriations bills was enacted by the beginning of the fiscal year, October 1, 2014. Final action for 11 out of the 12 regular appropriations bills occurred during the 113 th Congress with the enactment of the Consolidated and Further Continuing Appropriations Act (Divisions A-K of P.L. 113-235 , the FY2015 Consolidated Act) on December 16, 2014. The FY2015 Department of Homeland Security Appropriations Act was considered and enacted during the first months of the 114 th Congress, on March 4, 2015 ( H.R. 240 ). Table 1 lists the 12 regular appropriations bills, along with the associated date of subcommittee approval, date reported to the House, and report number. Subcommittee and full committee action on approving and reporting regular appropriations bills occurred over about a 16-week period. In total, 11 regular appropriations bills were approved by subcommittees and reported to the House by the House Appropriations Committee. The first regular appropriations bills to be approved in subcommittee were the Military Construction and Veterans Affairs, and Related Agencies appropriations bill ( H.R. 4486 ) and the Legislative Branch appropriations bill ( H.R. 4487 ), both on April 3, 2014. This was reportedly the earliest that a House appropriations subcommittee had approved a regular appropriations bill in several decades. Those same bills were also the first regular appropriations bills to be reported to the House, which occurred on April 17. In total, three regular appropriations bills were approved by their respective subcommittees during the month of April, four in May, three in June, and one in July. Of these, the House Appropriations Committee reported two in each of April and May, five in June, and the remaining two in July. The final bill reported to the House was the Department of the Interior, Environment, and Related Agencies appropriations bill ( H.R. 5171 ) on July 23. Of the 12 regular appropriations bills for FY2015, only one was not reported to the House. The Departments of Labor, Health and Human Services, and Education and Related Agencies appropriations bill was neither approved by the subcommittee nor considered by the full committee. Table 2 presents the eight regular appropriations bills that were considered on the House floor during the 113 th Congress, along with the date consideration was initiated, the date consideration was concluded, and the vote on final passage. Such consideration occurred over about an 11-week period. The first bill to be considered on the House floor was the Military Construction and Veterans Affairs, and Related Agencies appropriations bill ( H.R. 4486 ). Consideration was initiated on April 30, and the House passed the bill on the same day by a vote of 416-1. The House considered and passed two bills during the month of May and two in June. A third bill—the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies appropriations bill ( H.R. 4800 )—was considered and amended on the House floor on June 11 without a vote on final passage. The House considered and passed the final two bills in July. The last floor action on initial consideration of individual regular appropriations bills occurred on July 16 with the passage of the Financial Services and General Government appropriations bill by a vote of 228-195. OMB projected the budgetary levels of the House regular appropriations bills on August 20, 2014. Defense discretionary spending subject to the BCA limits was projected to be about $521.261 billion, which is about $0.11 billion below the defense limit. When defense spending designated under Section 251(b) of the BBEDCA for OCO/GWOT was accounted for, the total amount of defense discretionary spending was projected to be about $579.835 billion. Nondefense discretionary spending subject to the BCA limits was projected to be about $487.724 billion, which is about $4.632 billion below the nondefense limit. When nondefense spending designated as for OCO/GWOT, continuing disability reviews and redeterminations, health care fraud and abuse control, or disaster relief was accounted for, the total amount of nondefense discretionary spending was projected to be about $504.260 billion. Table 3 lists the 12 regular appropriations bills and their associated date of subcommittee approval, date reported to the Senate, and report number. Subcommittee and full committee action on approving and reporting regular appropriations occurred over about an eight-week period. In total, 11 regular appropriations bills were approved by subcommittees and eight were reported to the Senate by the Senate Appropriations Committee. The first regular appropriations bills to be approved by a subcommittee were the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies appropriations bill ( S. 2389 ) and the Military Construction and Veterans Affairs, and Related Agencies appropriations bill ( H.R. 4486 ) on May 20, 2014. Both of these bills were reported to the Senate on May 22. In total, two regular appropriations bills were approved by their respective subcommittees in May, eight in June, and one in July. The full committee pattern of reporting to the Senate was similar, with two bills reported in May, five in June, and one in July. The final bill to be approved in subcommittee and reported to the Senate was the Department of Defense appropriations bill ( H.R. 4870 ), on July 17, 2014. Four of the 12 regular appropriations bills were not reported to the Senate. The Labor, Health and Human Services, and Education, and Related Agencies; Energy and Water Development; and Financial Services and General Government subcommittees all reported regular appropriations bills to the full committee, but no further action occurred. The Departments of the Interior, Environment, and Related Agencies appropriations bill was neither approved by the subcommittee nor considered by the full committee. The only regular appropriations bill to receive initial floor consideration in the Senate during the 113 th Congress was the Commerce, Justice, Science, and Related Agencies appropriations bill ( H.R. 4660 ). Prior to the bill being brought to the floor, Senator Mikulski, chairwoman of the Senate Appropriations Committee, indicated her intention to propose an amendment that would add to the bill the texts of two additional regular appropriations bills—Agriculture, Rural Development, Food and Drug Administration, and Related Agencies; and Transportation, Housing and Urban Development, and Related Agencies. This was to allow initial floor consideration of those appropriations to occur in the same legislative vehicle. On June 12, the motion to proceed was made in the Senate and cloture was filed on that motion. Cloture was invoked on the motion to proceed on June 17 by a vote of 95-3. The motion to proceed was agreed to on June 19 by a voice vote, but no further proceedings occurred after that time. OMB projected the budgetary levels of the Senate regular appropriations bills on August 20, 2014. Defense discretionary spending subject to the BCA limits was projected to be about $521.306 billion, which is about $0.034 billion in excess of the defense limit. When defense spending designated under Section 251(b) of the BBEDCA for OCO/GWOT was accounted for, the total amount of defense discretionary spending subject to the BCA limits was projected to be about $579.880 billion. Nondefense discretionary spending subject to the BCA limits was projected to be about $488.603 billion, which was about $3.753 billion below the nondefense limit. When nondefense spending designated as for OCO/GWOT, continuing disability reviews and redeterminations, health care fraud and abuse control, or disaster relief was accounted for, the total amount of nondefense discretionary spending was projected to be about $505.139 billion. On December 9, the House and Senate Appropriations Committee chairs announced an omnibus appropriations package that combined an agreement on 11 of the 12 regular appropriations bills into a single vehicle, referred to in this report as the FY2015 Consolidated Act. Congress did not include annual funding for the Department of Homeland Security (DHS) as part of that package. The exclusion of annual appropriations for DHS was, in large part, due to the lack of consensus on how Congress would respond to the Obama Administration's announcement of immigration-related executive action that had occurred the previous month. Some congressional critics of the Administration's proposal suggested that annual appropriations for DHS be used as the vehicle to respond to those actions. Consequently, this omnibus package contained a temporary extension of the DHS funding provided in the first CR for the fiscal year ( H.J.Res. 124 , P.L. 113-164 ) through February 27, 2015. This omnibus agreement was to be considered as a House amendment to a Senate amendment to an unrelated bill ( H.R. 83 ). After adopting a special rule that provided for the consideration of the amendment ( H.Res. 776 ), the House concurred in the Senate amendment with an amendment by a vote of 219-206 on December 11. On December 13, cloture was invoked in the Senate on the motion to concur in the House amendment by a vote of 77-19. After disposing of a point of order against the motion to concur, the Senate agreed to the motion that same day by a vote of 56-40. The bill was signed into law by the President on December 16, 2014. Prior to consideration on the House floor, CBO estimated the discretionary appropriations that would be provided through the enactment of H.R. 83 , Divisions A-L. This included the budgetary effects of the 11 annual regular appropriations acts contained in those divisions, as well as the annualized budget authority for the part-year CR for DHS. These are listed in Table 4 below. CBO estimated that appropriations subject to the FY2015 discretionary spending limits would not exceed those levels. When adjustments to the limits were accounted for, total appropriations were projected to be about $1.1 billion. Because FY2015 annual appropriations were not enacted for DHS during the 113 th Congress, congressional action related to those appropriations occurred in the first months of the 114 th Congress. On January 9, Representative Harold Rogers, chairman of the House Appropriations Committee, introduced H.R. 240 , the Department of Homeland Security Appropriations Act for 2015. On January 13 and 14, the House considered this measure pursuant to a special rule that made in order five amendments to address certain immigration-related executive actions that have occurred over the past few years. After adopting all five amendments, the House passed H.R. 240 by a vote of 236-191. Over the next six weeks, the Senate unsuccessfully attempted to invoke cloture on the motion to proceed to the measure on five occasions, the last of which occurred on February 25. Ultimately, cloture was invoked later that same day by a vote of 98-2 after a deal was reached to consider an amendment to remove the House language related to executive action ( S.Amdt. 255 ). On February 27, after adopting the amendment to H.R. 240 , the Senate passed the measure by a vote of 68-31. Action to resolve differences between the House and Senate versions of H.R. 240 occurred between February 27 and March 3, 2015. On February 27, the House adopted a motion to disagree to the Senate amendment and request a conference on H.R. 240 by a vote of 228-191. Later that same day, the Senate proceeded to consider the House message, and a motion was made to insist on the Senate amendment, agree to the request for the conference, and authorize the presiding officer to appoint conferees. On March 2, cloture was filed on the motion but failed to achieve the necessary three-fifths vote (47-43). The Senate subsequently tabled the House message by a vote of 58-31. On March 3, the House voted to recede from disagreement and concur in the Senate amendment by a vote of 257-167. The bill was signed into law on March 4, 2015. Because none of the FY2015 regular appropriations bills was to be enacted by the beginning of the fiscal year, a CR ( H.J.Res. 124 ; P.L. 113-164 ) was enacted on September 19, 2014. This CR generally extended funding at last year's levels, with a small across-the-board reduction and certain enumerated exceptions, through December 11, 2014. Two additional CRs were enacted to extend temporary funding for all 12 regular appropriations bills through December 13 and December 17 ( P.L. 113-202 and P.L. 113-203 , respectively). A fourth CR was enacted as part of the Consolidated and Further Continuing Appropriations Act to extend temporary funding for DHS through February 27, 2015 (Division L, H.R. 83 ). On February 27, a fifth CR was enacted to further extend funding through March 3, 2015 ( H.R. 33 ; P.L. 114-3 ), after another CR ( H.J.Res. 35 ) was defeated on the House floor. The Continuing Appropriations Resolution for FY2015 was introduced by Representative Harold Rogers, chairman of the House Appropriations Committee, on September 9, 2014. The following week, on September 16, the House adopted a special rule ( H.Res. 722 ) allowing for the consideration of an amendment that authorized the President to arm and train vetted elements of Syrian opposition groups and that provided for the potential use of funds for those purposes. The next day, after debate on H.J.Res. 124 and the Syria amendment thereto was completed, the House adopted the amendment by a vote of 273-156 and passed the CR by a vote of 319-108. On September 18, the Senate invoked cloture on the CR by a vote of 73-27. It then passed the CR on that same day by a vote of 78-22. The President signed the CR into law on September 19. According to the Congressional Budget Office (CBO), the annualized budget authority for regular appropriations provided in the CR that is subject to the BCA limits was $1,012.236 billion. When spending designated as for OCO/GWOT, continuing disability reviews and redeterminations, health care fraud abuse control, or disaster relief is included, the total amount of annualized budget authority in the CR was $1,110.678 billion. CBO also estimated that annualized spending in the CR would exceed one of the two statutory discretionary spending limits. Defense spending in the CR was estimated to total $517.689 billion, which is about $3.583 billion below the defense limit, but nondefense spending was estimated to total $494.547 billion, which was about $2.191 billion above the nondefense limit. However, the BCA limits are first enforced within 15 calendar days after the congressional session adjourns sine die, and the funds in this CR were superseded by the enactment of H.R. 83 prior to that time. As congressional action was occurring on H.R. 83 to complete the annual appropriations process for 11 out of the 12 regular appropriations bills, it became evident that additional time would be needed. On December 10, 2014, Representative Harold Rogers, chairman of the House Appropriations Committee, introduced H.J.Res. 130 to extend the effectiveness of the first FY2015 CR for two additional days—to December 13, 2014. On December 11, this measure was agreed to in the House without objection and passed the Senate by a voice vote. It was signed into law by the President on December 12, 2014 ( P.L. 113-202 ). That same day, the chairman of the House Appropriations Committee introduced another CR, H.J.Res. 131 , to further extend the effectiveness of the first FY2015 CR through December 17, 2014. The measure passed the House without objection and the Senate by a voice vote. It was signed into law on December 13, 2014 ( P.L. 113-203 ). These temporary appropriations laws were superseded by the enactment of H.R. 83 on December 16, 2014. As was previously discussed, the omnibus appropriations package that provided annual appropriations for 11 out of the 12 regular appropriations acts also contained an extension of the DHS funding provided in the first CR through February 27, 2015 (Division L of H.R. 83 ). This CR also made a few modifications to the first CR, including the addition of two provisions related to DHS (Section 101 of Division L). Congressional consideration of H.R. 83 is discussed in the report section entitled " The FY2015 Consolidated Act (H.R. 83, P.L. 113-235; Divisions A-K) ." The measure was enacted on December 16, 2014. Congressional negotiations on H.R. 240 and annual funding for DHS had not been completed by the time the temporary funding provided by the fourth CR was scheduled to expire on February 27. Consequently, on February 26, Representative Harold Rogers introduced a measure to provide a further temporary extension of funding for DHS through March 19, 2015 ( H.J.Res. 35 ). On February 27, the House considered the measure pursuant to a special rule ( H.Res. 129 ), but it was defeated by a vote of 203-224. Later on February 27, the Senate took up an unrelated measure ( H.R. 33 ) and amended it with a one-week extension of DHS funding that expires on March 3, 2015. The measure passed the Senate by a voice vote. The House subsequently suspended the rules and agreed to the Senate amendment by a vote of 357-60. The measure was signed into law by the President that evening ( P.L. 114-3 ). The funding provided therein was superseded by the enactment of annual appropriations for DHS ( H.R. 240 ) on March 4, 2015.
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The congressional appropriations process, which provides discretionary spending for federal government agencies, assumes the annual enactment of 12 regular appropriations bills prior to the beginning of the fiscal year (October 1). One or more continuing resolutions (CRs) may be enacted if all regular appropriations bills are not completed by that time. This report provides information on the budget enforcement framework for the consideration of FY2015 appropriations measures, the status of the FY2015 regular appropriations bills as of the beginning of the fiscal year, and the enactment of FY2015 continuing appropriations. Budget enforcement for discretionary spending under the congressional budget process has two primary sources. The first is the discretionary spending limits that are derived from the Budget Control Act of 2011 (P.L. 112-25). The FY2015 levels for those limits are about $521.3 billion for defense spending and $492.4 billion for nondefense spending. The second source is the limits associated with the budget resolution on both total discretionary spending and spending under the jurisdiction of each of the appropriations subcommittees. However, Congress has not adopted a FY2015 budget resolution and has instead used an alternative mechanism for budget enforcement that was enacted as part of the Bipartisan Budget Act of 2013 (P.L. 113-67). On the basis of this mechanism, the House and Senate Appropriations Committees received the total allocation for spending under their jurisdictions, and each reported 302(b) suballocations to its subcommittees prior to floor consideration of the FY2015 regular appropriations bills. In the course of the FY2015 appropriations process that occurred during the 113th Congress, the House Appropriations Committee reported all but one of the 12 regular appropriations bills for FY2015. The House separately considered eight regular appropriations bills on the floor and passed seven of them. The Senate Appropriations Committee reported eight of the 12 regular appropriations bills. Although the Senate began floor consideration of one of these bills, it did not complete it. The Senate did not separately consider any other regular FY2015 appropriations bills prior to the beginning of the fiscal year. Because none of the FY2015 regular appropriations bills were to be enacted by the beginning of the fiscal year, a CR (H.J.Res. 124; P.L. 113-164) was enacted on September 19, 2014. This CR generally extended funding at last year's levels, with a small across-the-board reduction and certain enumerated exceptions, through December 11, 2014. Two additional CRs extended temporary funding for all 12 regular appropriations bills through December 13 and December 17 (P.L. 113-202 and P.L. 113-203, respectively). The regular appropriations process for 11 of the 12 regular appropriations bills was concluded on December 16, 2014, when the Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235), Divisions A-K) was enacted. A fourth CR was enacted as Division L of P.L. 113-235 to extend temporary funding for the Department of Homeland Security (DHS) only through February 27, 2015. On February 27, a fifth CR (H.R. 33; P.L. 114-3) was enacted to extend temporary funding for DHS through March 6, 2015, after another CR (H.J.Res. 35) was defeated on the House floor. On March 4, 2015, the FY2015 Department of Homeland Security Appropriations Act was signed into law (H.R. 240). This report will be updated during the FY2015 appropriations process as developments warrant. For information on the current status of FY2015 appropriations measures, see the CRS Appropriations Status Table: FY2015, at http://www.crs.gov/Pages/AppropriationsStatusTable.aspx.
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It has been three years since Congress enacted the FAA Modernization and Reform Act of 2012 (FMRA), calling for the integration of unmanned aircraft systems (UAS), or "drones," into the national airspace by September 2015. During that time, the substantive legal privacy framework relating to UAS on the federal level has remained relatively static: Congress has enacted no law explicitly regulating the potential privacy impacts of drone flights; the courts have had no occasion to rule on the constitutionality of drone surveillance; and the Federal Aviation Administration (FAA) did not include privacy provisions in its proposed rule on small UAS. However, this issue has not left the national radar. Congress held several hearings in the 113 th Congress on the potential privacy impacts of domestic drone use on American citizens; Members have introduced legislation to regulate both public- and private-actor use of drones; the executive branch has taken various measures to assess the privacy impact of its drone operations; and almost half the states have enacted UAS legislation. As this report will discuss, there are two overarching privacy issues implicated by domestic drone flights. The first issue is defining and understanding what the chameleon phrase "privacy" means in the context of aerial surveillance. Traditional privacy concepts such as the right to control information about oneself or secrecy do not adequately capture potential privacy concerns raised by visual surveillance; instead, privacy concepts such as personal autonomy and anonymity must be explored to get a fuller understanding about the scope of privacy interests implicated by UAS operations. Additionally, a separate set of privacy interests might be implicated by the subsequent aggregation, use, and retention of drone-obtained information. For instance, the Supreme Court's aerial surveillance cases generally hold that it is not a Fourth Amendment search to conduct surveillance of private property while flying in navigable airspace. However, one could argue that beyond the initial collection of data, a unique privacy interest is at risk by aggregating multiple flights over one's home, using drone-obtained data in ways never envisioned by the initial collection, or retaining that data indefinitely. The second predominant issue is which entity should be responsible for regulating UAS privacy issues. The courts can be expected to apply traditional privacy rules encompassed in the Fourth Amendment's prohibition against unreasonable searches and privacy torts found largely in state statutory and common law. Since drone use has been relatively limited to date, the courts have yet to address how these laws apply to UAS flights. Privacy safeguards might also come from executive branch policies. On February 15, 2015, President Obama issued a memorandum charging all federal agencies that use drones in their operations to evaluate the privacy impact of such use and develop policies to mitigate any privacy concerns. The need for this new initiative may have been prompted, in part, by the FAA's relatively passive role in setting privacy rules for drone operations. The FAA's recently proposed rule for small UAS operations and certifications did not include any privacy provisions, and it is likely the FAA will remain in an advisory, rather than regulatory, role with respect to this issue. With its power over interstate commerce, Congress has the broadest authority to set national standards for UAS privacy regulation. For instance, Congress could create a broad legislative scheme regulating all UAS uses; it could pass more narrow proposals such as a warrant requirement for law enforcement use; or it could create a scheme regulating the subsequent use, retention, and dissemination of drone-obtained data. Federal legislation introduced in the 113 th Congress, and likely to be introduced in the 114 th Congress, utilized, to some extent, these various approaches. Lastly, some have argued that under our system of federalism, the states should be left to experiment with various privacy schemes. Indeed, the states have taken up this call with 20 states reportedly enacting laws addressing UAS issues by the end of 2014. In reviewing these various forms of regulation, it is clear that understanding privacy rights vis-à-vis drones is not as simple as applying Supreme Court case law or federal and state statutes. Rather, regulations may come from myriad sources, some statutory, some regulatory, and some practical. With this in mind, this report will provide a primer on privacy issues relating to various UAS operations, both public and private, including an overview of current UAS uses, the privacy interests implicated by these operations, and various potential approaches to UAS privacy regulation. The FMRA defined an "unmanned aircraft" to mean "an aircraft that is operated without the possibility of direct human intervention from within or on the aircraft." An "unmanned aircraft system" (UAS) is the unmanned aircraft and its "associated elements (including communications links and the components that control the unmanned aircraft) that are required for the pilot in command to operate safely and efficiently in the national airspace system." UAS, commonly referred to as "drones," can range from the size of an insect—sometimes called nano or micro drones—to the size of a traditional jet. Drones can be outfitted with an array of sensors, including high-powered cameras, thermal imaging devices, license plate readers, and laser radar (LADAR). In the near future, drones might be outfitted with facial recognition or soft biometric recognition, which can recognize and track individuals based on attributes such as height, age, gender, and skin color. In addition to their sophisticated sensors, the technical capability of drones is rapidly advancing. For instance, the Defense Advanced Research Projects Agency (DARPA), the technology research arm of the U.S. military, is working on a drone that can enter a building through a window and fly at speeds up to 20 meters/second without communication to the operator and without GPS waypoints. As discussed below, these advanced sensors and capabilities have the capacity to heighten privacy risks posed by drones. Currently, all UAS operators who do not fall within the recreational use exemption (discussed below) must apply directly to the FAA for permission to fly. The process for obtaining permission to operate differs depending on whether the operator is a public operator or a private commercial operator. UAS operated by federal, state, or local agencies must obtain a certificate of authorization or waiver (COA) from the FAA. After receiving COA applications, which can be completed online, the FAA conducts a comprehensive operational and technical review of the UAS and can place limits on its operation in order to ensure its safe use in airspace. COAs are not generally publicly available, but have been released in response to Freedom of Information Act (FOIA) requests. The most recent FOIA request on the FAA's website revealed 426 UAS COA files. The most prominent domestic user of UAS among federal agencies is the Department of Homeland Security's (DHS's) U.S. Customs and Border Protection (CBP). As of September 2013, CBP was reported to own 10 UAS, which are operated by CBP's Office of Air and Marine (OAM). The bulk of CBP's flight missions involve patrolling the nation's borders, interdicting persons and contraband illegally entering the United States. CBP's COA allows it to operate in an airspace that covers a 100 mile corridor along the northern border and within 20 to 60 miles along the southern border, excluding urban areas. In addition to its border missions, CBP has provided unmanned aerial support to various federal and state agencies, including the Drug Enforcement Administration (DEA), Immigration and Customs Enforcement (ICE), the U.S. Marshals Service, the U.S. Coast Guard, the Bureau of Land Management, and the Texas Department of Public Safety, among others. In one prominent case, CBP used one of its Predator drones to assist local police in North Dakota to monitor an individual suspected of cattle theft and threatening police officers. The number of these "loan" operations has steadily increased each year since 2010. For instance, CBP flew one flight for the DEA in 2010, 19 flights in 2011, and 66 in 2012. The other primary federal agency currently using UAS in its operations is the Department of Justice (DOJ), the nation's chief law enforcement agency. In 2013, DOJ's Office of the Inspector General issued a report reviewing the various UAS programs underway within DOJ. All of the UAS purchased by DOJ so far have been what the FAA calls "small UAS," those 55 pounds or less. The Federal Bureau of Investigation (FBI) has been the most prominent component of DOJ to use UAS in the field and has been doing so since 2006. The FBI noted in a July 2013 letter to Senator Rand Paul that it had used UAS in 10 operations, including those related to search and rescue, drug interdictions, kidnapping, and fugitive investigations. The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) has plans to use UAS in its future operations but has not done so yet. And while the DEA and the Marshals Service have purchased several UAS, as of 2012 they had no plans to use them in future operations. This might be attributed to the DEA and Marshals Service use of CBP drones in their operations. In addition to DHS and DOJ, the FAA has issued COAs to various other federal entities—both military and civilian. On the defense side, COAs have been issued to DARPA, the U.S. Army, the Navy, the Marine Corps, and the Air Force, for operations in U.S. airspace. On the civilian side, COAs have been issued to the Departments of State, Interior, and Energy, the National Aeronautics and Space Administration (NASA), and the National Institute of Standards and Technology (NIST). Like their federal counterparts, state and local governmental entities must obtain a COA in order to conduct drone operations. As of 2012, the FAA has issued several hundred COAs to state and local governmental entities to operate UAS. These have included state and city governments, such as Houston, Texas, and the Colorado Department of Transportation; local fire and police departments, including the Miami-Dade Police Department; and state and local universities, like Indiana University. Until the FAA finalizes its small UAS rule as required under FMRA, there are currently only a limited number of ways to gain authorization for private commercial use of UAS. A private operator may obtain a special airworthiness certificate in the experimental category issued by the FAA. These certificates have been issued on a limited basis for flight tests, demonstrations, and training. The second means of authorization is under FMRA's Section 333, which permits the FAA to authorize certain UAS flights before the FAA issues a final small UAS rule. These Section 333 exemptions have been issued for such purposes as movie productions, precision agriculture, flare stack inspection, and bridge inspections. Finally, certain recreational UAS users may fall within FMRA's model aircraft exception, meaning they are not required to obtain specific authorization from the FAA before flying UAS. Section 336 of FMRA prohibits the FAA from promulgating a rule regarding "model" aircraft if the aircraft is flown "strictly for hobby or recreational use" and meets several other requirements. A threshold issue in analyzing drones and privacy is determining what privacy interests might be implicated by drone operations, both public and private. Privacy is an ambiguous term that can mean different things in different contexts, which becomes apparent when attempting to apply traditional privacy concepts to drone surveillance. The first privacy interest implicated by the use of UAS is the initial collection of information about people—what can be called "surveillance"—whether it is conducted by a government or private actor. With respect to UAS operations, surveillance takes place in nearly all flights, as one of their major purposes is to collect information, namely visual surveillance, from the sky above. Surveillance might entail a broad and indiscriminate recording of people on the ground using a camera sensor on the aircraft. For instance, the U.S. Air Force recently rolled out the newest iteration of its "Gorgon Stare" sensor, a remotely controlled, aircraft-based Wide-Area Persistent Surveillance (WAPS) system. This sensor allows a single UAS to monitor a 100km 2 area in high resolution for several hours at a time. CBP uses a similar sensor while monitoring the U.S. border. Alternatively, surveillance might consist of more targeted data collection, such as the FBI's use of a drone in 2013 to monitor a standoff with a child kidnapper. Both types of surveillance, to one degree or another, implicate various privacy concepts, including personal control, secrecy, autonomy, and anonymity. One of the leading privacy theories is the right to control information about oneself. According to one prominent privacy theorist, "[p]rivacy is the claim of individuals, groups, or institutions to determine for themselves when, how, and to what extent information about them is communicated to others." This paradigm works in some mediums, for example, when we consent to a smart phone app tracking our location: we can decide whether the trade-off to our privacy is worth the service we will receive in exchange. However, with drones and aerial surveillance, this theory of privacy breaks down. For instance, should we be able to control whether people can view us or our activities in public? How are we expected to exercise such control? And should it make a difference if a person sees us from a traditional aircraft versus a drone? Requiring consent before conducting aerial surveillance could undermine many uses of this new technology, making this theory of privacy as applied to drone surveillance unworkable. Another prominent theory of privacy is the secrecy model. Under this model, an individual's privacy is invaded if previously concealed information about them is publicly disclosed; or, put another way, an individual is not entitled to privacy where that information has been revealed to another person. The Supreme Court relied on this secrecy model in the three aerial surveillance cases from the 1980s, which held that surveillance conducted in public airspace does not even trigger—let alone violate—the Fourth Amendment's protection against unreasonable searches. Citing to an earlier case, the Court observed in California v. Ciraolo that "[w]hat a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection." In addition to Fourth Amendment case law, the privacy tort intrusion upon seclusion applies this same secrecy model such that most activities revealed to the public would not constitute a violation of this tort. If secrecy remains the primary model for the Fourth Amendment and privacy torts, individuals would have little protection from drone surveillance when their location and activities have been revealed to the public. Another important theory of privacy is personal autonomy. Autonomy generally refers to the ability of an individual to make life decisions free from interference or control by both government and private actors. Some have argued that surveillance represents a form of social control, mandating conformity in society, hindering independent thinking, and recording and notating people who stray from acceptable norms. One such example is Jeremy Bentham's Panopiticon, a prison facility designed to give inmates the perception of being watched at all times causing them to self-regulate their behavior to the desired norm. Of course, some form of social control—say, crime control—is beneficial and expected in every society. As noted by Professor Daniel Solove, "many people desire the discipline and control surveillance can bring." He notes that "[t]oo much social control, however, can adversely impact freedom, creativity, and self-development." It would appear that potential risks to personal autonomy will depend, at least in part, on the pervasiveness of drone surveillance. Single, targeted operations would not appear to implicate this fear of societal control and harm to personal autonomy. However, some have questioned what effect 24-hour, omnipresent surveillance would have on our public spaces. At this point, the shorter flight capabilities of small UAS—the aircraft likely to be most prevalent in the early stages of UAS integration—would limit the ability to conduct such pervasive surveillance. Yet, as this technology becomes more sophisticated and maximum possible flight times are extended, this risk to autonomy may heighten. Anonymity is a "state of privacy" that "occurs when the individual is in public places or performing public acts but still seeks, and finds, freedom from identification and surveillance." Professor Christopher Slobogin notes that "the right to public anonymity provides assurance that, when in public, one will remain nameless—unremarked, part of the undifferentiated crowd—as far as the government is concerned. The right is surrendered only when one does or says something that merits government attention, which most of the time must be something suggestive of criminal activity." Others might argue that when we leave our doorstep, and enter into society, we give up this right to anonymity by permitting anyone to view our public movements and whereabouts. Potential blanket UAS surveillance over an urban landscape or a large public event (for instance, the Super Bowl or NASCAR racing), appears to pose a low risk to anonymity. Each person can remain a faceless person in the crowd, free from government identification. Take, for instance, CBP's surveillance at the border: its Predator-B drones reportedly fly at a minimum of 19,000 feet and are not able to identify specific persons on the ground. However, the potential use of sensors such as Automated License Plate Readers (ALPRs) or facial recognition technology, or UAS surveillance specifically targeted at an individual, may have the capacity to eliminate one's anonymity when in public. The second class of privacy risks posed by drone surveillance are those activities that occur after surveillance has been conducted—the aggregation, use, and retention of that data. In certain instances, the initial collection may not directly implicate an individual's privacy interests, but the subsequent manipulation and storage of that data may warrant an alternative privacy analysis. "Aggregation" is simply the gathering of information about a person whether from one or multiple sources. In the pre-digital era, aggregating information about a person took concerted effort and lots of resources. With computer automation, information can be gathered and aggregated from many sources at the mere push of a button. The privacy theory of aggregation supposes that while the collection of bits of data about a person may not violate his or her privacy interests, extensive collection of information about him or her can rise to the level of a legal privacy intrusion. Professor Solove argues that this unique privacy intrusion arises because "when analyzed, aggregated information can reveal new facts about a person that she did not expect would be known about her when the original, isolated data was collected." This theory was on display in the 2012 GPS tracking case United States v. Jones , where five Justices of the Supreme Court (in two separate concurrences) acknowledged that short-term location monitoring was likely not a Fourth Amendment search, but that 28 days of tracking should be considered a search. Judge Richard Leon of the U.S. District Court for the District of Columbia also applied this aggregation theory when invalidating the National Security Agency's (NSA's) metadata program, observing, the ubiquity of phones has dramatically altered the quantity of information that is now available and, more importantly, what that information can tell the Government about people's lives. ... Records that once would have revealed a few scattered tiles of information about a person now reveal an entire mosaic—a vibrant and constantly updating picture of the person's life. In the context of UAS operations, aggregation may mean the surveillance of an individual for an extended time, or the combination of drone-obtained data with other independent information. A simple one time fly-over of a residence may not significantly implicate any of the privacy interests described above (e.g., secrecy, autonomy, anonymity), but continuous surveillance of a person may implicate this aggregation interest. Alternatively, aggregating drone-collected data with other seemingly personal information, such as telephone, banking, utility, and other records—all of which can be obtained without a probable cause warrant—might entail a unique privacy infringement beyond the mere collection of those individual data sets. The second post-collection privacy risk is the improper use of data—that is, data collected for an authorized purpose, but subsequently used in an unauthorized way. One commentator has argued that in the era of big data, where we inevitably share troves of personal information with the government and commercial entities, privacy rules that focus on the collection and retention of data are "becoming impractical for individuals, while also potentially cutting off future uses of data that could benefit society." He argues that privacy laws should instead focus on controlling the use of that data. Various federal laws embody this principle. For instance, the Privacy Act of 1974 requires any federal agency that maintains a database of personal records to inform each individual about whom it collects information of "the principal purpose or purposes for which the information is intended to be used." Similarly, the Driver's Privacy Protection Act of 1994 made it a federal crime "for any person knowingly to obtain or disclose personal information, from a motor vehicle record, for any use not permitted" under that statute. Instead of placing front-end restrictions on drone surveillance, such as requiring warrants before they are operated, policymakers might want to instead regulate how that information is used. For instance, a proposal may permit law enforcement officials to collect information for one purpose—say, traffic control—but prohibit it from using that information for other purposes, such as against an individual in a criminal prosecution absent a court order. Another incident of the digital revolution is the near limitless ability of the government and private companies to store and retain information about individuals. The cost of storage has decreased exponentially over the past several decades and is no longer a hindrance to maintaining vast databases of personal data. The Obama Administration's report on big data highlighted this concern when it noted that "the declining cost of collection, storage, and processing of data, combined with new sources of data like sensors, cameras, geospatial and other observational technologies, means that we live in a world of near-ubiquitous data collection." This issue of data retention has been one of the drivers behind Europe's "right to be forgotten" law, which includes a provision requiring that data be retained "for no longer than is necessary for the purposes for which it was collected." Generally speaking, when it comes to Fourth Amendment law, once information is lawfully collected, there are no additional constitutional hindrances to it being stored indefinitely. However, in the NSA metadata litigation, Judge Leon acknowledged that unique privacy interests were affected by the long-term storage of everyone's telephone call records. He observed that in decades past, it was not expected that the government would retain a suspect's phone records once a case was concluded, whereas "[t]he NSA telephony metadata program ... involves the creation and maintenance of a historical database containing five years' worth of data." The privacy impact of retention of UAS-derived data would largely depend on whether people could be identified in the recording. Retention of data that contains personally identifiable information and can be located based on this information would seem to implicate this retention interest. In addition to the general privacy concepts implicated by drone surveillance, one might question which government entity, if any, should regulate the potential privacy issues posed by the integration of thousands of UAS into domestic skies. Congress neither mentioned the word "privacy" in FMRA nor has it enacted any substantive privacy rules relating to drones subsequently. The FAA recently issued its proposed rule for operating small drones (55 pounds or less), but failed to include any privacy safeguards. Potentially in response to this dearth of privacy regulations, President Obama recently mandated that all federal agencies evaluate the privacy risks posed by their drone operations. This section will explore different approaches to UAS privacy regulation, focusing on the various government institutions—the courts, the executive branch, Congress, and state governments—that might conduct such regulation. As the final arbiter of the Constitution, the courts are frequently relied on to safeguard the privacy rights of Americans, whether through the suppression mechanism in criminal prosecutions, or civil suits against government officials for violations of constitutional rights. The Fourth Amendment, as applied by the courts, will provide a floor of legal protections against government actor use of drones. Likewise, privacy torts, which are given much of their content by the courts, will provide some legal recourse to potential privacy invasions caused by drones operated by private actors. The Fourth Amendment provides in relevant part: "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated." This Amendment, like most constitutional protections, applies only to acts by public actors, and, as such, will provide the minimum legal requirements for government use of drones. In order for the Fourth Amendment to apply in a particular situation, a reviewing court must assess whether the government conducted a "search" by asking whether it invaded an individual's "reasonable expectation of privacy." Although no court has had the opportunity to apply the Fourth Amendment to drone technology, similar cases regarding traditional aircraft and location monitoring provide insight. In three cases from the 1980s, the Supreme Court upheld the government's warrantless use of traditional aircraft to surveil both private and commercial property. In Florida v. Riley , the case most closely resembling potential UAS surveillance, the police flew a helicopter 400 feet above a private residence to determine if marijuana was growing in a greenhouse in the backyard. The Court held that this fly-over was not a Fourth Amendment search, as anyone from the public could have seen the property from that vantage point since the aircraft was in federal airspace. Similarly, in the 1983 case United States v. Knotts , the Court held that it was not a Fourth Amendment search to track a person's public movements using an electronic tracking device. There is a general consensus among commentators that a strict application of these cases would accord limited privacy safeguards to individuals located on both public and private property from UAS surveillance being conducted from lawful federal airspace. However, several more recent cases demonstrate that the Court has been uneasy about applying decade-old cases to new technology. In Kyllo v. United States , for instance, the use of sense-enhancing technology "not in general public use" to obtain information about the inside of a home was considered a Fourth Amendment search. Similarly, in United States v. Jones , five Justices (in two separate concurrences) would have held that a month-long location monitoring using a GPS device constituted a search, even in the face of Knotts , which upheld the use of a more rudimentary tracking device. The concurring Justices in Jones expressed concern about the sheer ability of these new technologies to collect vast amounts of information about individuals, and their capacity to break down any natural barriers (such as time and resources) to excessive police surveillance. This conundrum of applying old precedent to newer forms of technology is not unique for the federal courts. Several cases currently pending in the federal courts are wrestling with how to apply Smith v. Maryland , a case from the 1970s that addressed the collection of telephone numbers of one individual over several days, to the NSA's collection of millions of telephone records over a five-year period. With this trend in mind, federal judges may be persuaded that the sophistication and type of sensors used by UAS present a strong enough privacy risk to modify old precedents such as Riley or Ciraolo and adapt them to the new potential reality of UAS aerial surveillance. Additionally, depending on the duration of the surveillance and the amount of data collected on an individual, the courts may be inclined to apply an aggregation-type theory to long-term UAS surveillance. This issue of the law keeping up with technology is a constantly recurring theme in Fourth Amendment jurisprudence. Some have argued that the judiciary is not the ideal forum for creating adequate privacy rules when fast-moving technology is involved. Courts tend to be backward looking—resolving past factual scenarios between two discrete parties. This characteristic makes courts reactive rather than proactive, leading to privacy rules that might fall behind the particular technology in question. For instance, the Supreme Court has yet to resolve whether individuals are entitled to a reasonable expectation of privacy in their emails, a technology that has been around for decades. Part of the problem is that the Court has been unsure of its role in developing privacy rules when technology is in flux, with some Justices preferring that legislatures, rather than the courts, take the lead role. This is not to say that this approach is ineffective: this case-by-case approach allows the courts to formulate rules more cautiously based on concrete facts in an adversarial setting, and reduces the risk of creating rules with potentially unintended consequences. This hesitancy to confront new technologies head-on might explain the Court's recent reliance on property rights as the basis for Fourth Amendment decisions, which, incidentally, might boost Fourth Amendment safeguards against UAS surveillance. In Jones , the five-Justice majority led by Justice Scalia rejuvenated a centuries old property-based theory of the Fourth Amendment by holding that the physical attachment of a GPS device on the undercarriage of a vehicle constituted an invasion of the owner's "effect" and therefore a Fourth Amendment search. Justice Scalia observed that the Katz reasonable expectation of privacy formula added to, but did not replace, the traditional property-based test. Likewise, in Florida v. Jardines , the Court relied on this property theory in holding that the government's use of a trained police drug dog to investigate an individual's home and its immediate surroundings was a "search." Depending on the flight path of the aircraft, and the height at which it is operating, this property theory might be employed to hold that flying a UAS onto someone's property with the intent to obtain information is a Fourth Amendment search for which a warrant would be required. Like the Fourth Amendment, a body of laws collectively known as "privacy torts" might create safeguards against privacy invasions by both public- and private-actor use of unmanned aircraft. While some have held up privacy torts as proof that the existing body of case law is sufficient to regulate privacy issues arising from UAS operations, others have asserted that such laws would provide minimal protection from drone surveillance, at least while in public. The genesis of the modern privacy tort sprung from the pens of Justice Louis Brandeis and Samuel Warren in their law review article "Right to Privacy." There, they espoused the view that privacy could form the underpinning of civil liability absent other physical or tortious conduct. This new tort was later broken down into four discrete torts and included in a set of model rules intended for adoption by the states: (1) intrusion upon seclusion; (2) appropriation of one's name or likeness; (3) publicity given to private life; (4) publicity placing person in false light. Of these four, the first and third will likely prove the most applicable to UAS surveillance. The tort of intrusion upon seclusion, which may vary in its details from state to state, generally provides, "One who intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns, is subject to liability to the other for invasion of his privacy, if the intrusion would be highly offensive to a reasonable person." This tort applies a "reasonable person standard"—that is, it tests whether a person of "ordinary sensibilities" would be offended by the alleged invasion. Likewise, the intrusion must not only be offensive, but " highly offensive," or as one court put it, "outrageously unreasonable conduct." Generally, a single incident will not suffice; instead, the intrusion must be "repeated with such persistence and frequency as to amount to a course of hounding" and "becomes a burden to his existence.... " However, in a few cases a single intrusion was adequate. The invasion of privacy must be intentional, meaning the defendant must desire that the intrusion would occur, or, as with other torts, know with a substantial certainty that such an invasion would result from his actions. An accidental intrusion is not actionable. Finally, in some states, the intrusion must cause mental suffering, shame, or humiliation to permit recovery. The tort "publicity given to private facts" provides, "One who gives publicity to a matter concerning the private life of another is subject to liability to the other for invasion of his privacy, if the matter publicized is of a kind that (a) would be highly offensive to a reasonable person, and (b) is not of legitimate concern to the public." Like the intrusion upon seclusion tort, publicity given to private facts focuses on publicity given to an individual's private, as opposed to public, life. As the comments to the model rules observe, a person cannot complain of someone taking his photograph while walking down the street, but when a photograph is taken without his consent in a private place, and then subsequently published, he will have a valid publicity claim. Unlike the intrusion tort, publicity given to private life requires that the information be made available to the public at large, and furthermore, generally prohibits claims that involve matters that are of legitimate public concern. Under current law, the location of the target of the surveillance largely controls whether someone has a viable claim for both intrusion upon seclusion and publicity given to private life, and this is likely to hold true with drone surveillance. For the most part, using a drone to peer inside the home of anotherwhether looking through a window or utilizing extra-sensory technology such as thermal imagingwould likely satisfy the intrusion tort, and if photographs were taken and subsequently published, that person would also likely have a claim for publicity given to private life. The likelihood of a successful claim is significantly diminished, however, if the surveillance is targeted at individuals in a public space, or even while on private property so long as they could be viewed from a public vantage point. Take, for instance, the suit brought by Aaron and Christine Boring against Google for photographs taken of their home and subsequently published online as part of Google's Street View program. To create this program, Google employees attach panoramic cameras to their vehicles and drive around taking photographs of areas along the streets. The Borings, who live on a posted private road, discovered that Google had taken photographs of their private residence and swimming pool from their driveway. The Borings sued, among other claims, for intrusion upon seclusion and publicity given to private facts. Both claims were dismissed by the district court. On appeal, the Third Circuit Court of Appeals affirmed the dismissal on both counts, holding that the photographs failed to meet the "highly offensive" standard required under both privacy torts. The court found that "no person of ordinary sensibilities would be shamed, humiliated, or have suffered mentally as a result of a vehicle entering in his or her ungated driveway and photographing him or her from there." The view of the Borings' house, pool, and driveway could "be seen by any person who entered onto their driveway, including a visitor or a delivery man." Recording someone with a drone in a public place or even on private property that can be viewed from a public vantage point, as in the Google Street View case, would likely not constitute an invasion under either of these privacy torts. In addition to the courts, the executive branch is likely to play a significant role in regulating the privacy implications of UAS operations. Although the FAA has attempted to focus on safety and other regulatory issues, privacy remains a perennial topic for the FAA as it leads the federal government's UAS integration efforts. Some have posited that instead of the FAA, other executive branch agencies, such as DHS and DOJ, should take the lead role in overseeing the privacy implications of their own unmanned operations. President Obama recently issued a new memorandum taking a similar approach, directing all federal agencies to evaluate the privacy impact of their UAS operations and developing policies to mitigate such concerns. In FRMA, Congress charged the FAA with integrating UAS into the national airspace. Since passage of this legislation, the FAA has become the center of debate on the privacy implications of these new aircraft. Some in the industry and law enforcement have questioned FAA's authority to regulate privacy at all, arguing that it is both outside its expertise and its legislative grant of authority. Others have argued that precisely because the FAA is charged with integrating UAS that it must resolve one of the most pressing issues involved with such integration—privacy. As a general matter, the FAA has stated that its "mission does not include developing or enforcing policies pertaining to privacy or civil liberties," but several of its obligations in FMRA have kept the FAA enmeshed in this privacy debate. The first such obligation was FMRA's mandate that the FAA establish six test sites to help facilitate the integration of UAS into the national airspace. Neither the program requirements nor the list of attributes for selecting the test sites expressly granted the FAA authority to regulate privacy, or even mentioned "privacy" as a general matter of consideration. Nonetheless, the FAA sought public comment on a proposed privacy policy for UAS operations at the sites on February 22, 2013, and issued a final rule on November 14, 2013. The privacy rules, which are contained as a provision in the contracts (known as an "Other Transaction Agreement," or OTA) between the FAA and each site operator include the following requirements: (1) operations at the test sites must adhere to existing federal, state, and local laws regarding an individual's right to privacy; (2) the test site operator must develop a publicly available privacy policy that is informed by the Fair Information Practice Principles (a generally accepted set of rules that regulate how data should be stored, used, and disseminated); (3) the site operator must maintain a record of all UAS operating at the test site; and (4) the site operator must require each UAS operator to have a written plan for the operator's use and retention of data collected by the UAS. The authority to create these rules was purportedly under the FAA's contracting authority and not its general statutory authority. Although the FAA retains the authority to rescind an OTA for a site operator in violation of existing privacy laws, ultimately, this privacy policy signals a hands-off approach, leaving the policing of privacy rules to private parties affected by operations at the test sites, to the test site operators themselves, and to local and state government bodies that oversee the test site operators. Despite this relatively passive approach to privacy at the test sites, the FAA has recognized the political and legal importance of privacy in both its proposed small UAS rule and its various planning documents required under FMRA. On February 15, 2015, the FAA issued its proposed operating requirements to allow small UAS (less than 55 pounds) to operate for non-hobby or non-recreational purposes. As was expected, the FAA noted that privacy concerns "were beyond the scope of this rulemaking." However, the FAA also noted it would participate in the "multi-stakeholder engagement process" (described below) to assist in a privacy framework concerning commercial and private use of drones. Also, in its five-year roadmap required under FMRA, the FAA noted that while its primary mission "does not include developing or enforcing policies pertaining to privacy or civil liberties, experience with the UAS test sites will present an opportunity to inform the dialogue ... concerning the use of UAS technologies and the areas of privacy and civil liberties." Likewise, in its Comprehensive Plan, also required under FMRA, the FAA devoted a whole section to highlighting the privacy and civil liberties concerns that all federal agencies must take into account as UAS are integrated into the national airspace. While safety will undoubtedly remain the top priority of FAA officials as it navigates the difficult task of integrating drones in the national airspace, with its prominent role of testing and licensing both government, commercial, and private use of drones, it will remain a significant voice in the ongoing privacy debate. On February 15, 2015, the same day the FAA issued its proposed small UAS rule, President Obama issued a memorandum entitled "Promoting Economic Competitiveness While Safeguarding Privacy, Civil Rights, and Civil Liberties in Domestic Use of Unmanned Aircraft Systems." This presidential memorandum establishes two new frameworks relating to the potential privacy implications of drone operations by both government and private actors. The memorandum first observes that all operations conducted by federal agencies must comply with the Constitution, federal law, and other applicable regulations and policies, an obligation to which agencies are already subject. The memorandum requires that, prior to deployment of new UAS technology and at least every three years, all federal agencies must "examine their existing UAS policies and procedures relating to the collection, use, retention, and dissemination of information obtained by UAS, to ensure that privacy, civil rights, and civil liberties are protected." Agencies that collect information through UAS shall ensure their policies and procedures adhere to the following requirements: (i) Collection and Use. Agencies must only collect information using UAS, or UAS-collected information, to the extent that such collection or use is consistent with and relevant to an authorized purpose. (ii) Retention. Information collected using UAS that may contain PII [personally identifiable information] shall not be retained for more than 180 days unless retention of the information is determined to be necessary to an authorized mission of the retaining agency, is maintained in a system of records covered by the Privacy Act, or is required to be retained for a longer period by any other applicable law or regulation. (iii) Dissemination. UAS-collected information that is not maintained in a system of records covered by the Privacy Act shall not be disseminated outside of the agency unless dissemination is required by law, or fulfills an authorized purpose and complies with agency requirements. To ensure accountability, the memorandum requires, among other things, that agencies develop protocols for receiving, investigating, and addressing potential privacy complaints; ensure they have rules of conduct and training for federal government personnel and contractors; establish meaningful oversight of individuals who have access to sensitive information collected by UAS; develop policies and procedures to authorize the use of UAS in response to a request for UAS assistance of federal, state, tribal, or territorial government operations; and ensure that local entities that purchase UAS through federal funding have policies in place to safeguard privacy and civil liberties prior to expending such funds. To promote transparency, the memorandum requires agencies to provide notice to the public regarding where the agency's UAS are authorized to operate; keep the public informed about the agency's UAS program as well as changes that would significantly affect privacy; and make available to the public, on an annual basis, a general summary of the agency's UAS operations during the previous fiscal year, to include a brief description of types or categories of missions flown, and the number of times the agency provided assistance to other agencies, or to state, local, tribal, or territorial governments. The agencies must report to the President within 180 days from the date of the issuance of the memorandum with a status on the implementation of these policies and procedures, and must make these policies publicly available within one year. The President's memorandum also charges the Department of Commerce, through the National Telecommunications and Information Administration (NTIA), to initiate "a multi-stakeholder engagement process to develop a privacy framework regarding privacy, accountability, and transparency for commercial and private UAS use." The end result is expected to be a set of voluntary best practices for privacy issues implicated by commercial and private UAS use. Prior to the President's memorandum, several federal agencies had taken steps to assess and address the privacy impacts of their UAS operations. In September 2013, DHS's Chief Privacy Officer, in conjunction with CBP's Office of Air and Marine, issued a Privacy Impact Assessment (PIA) primarily evaluating the privacy impact of its operations at the U.S. border. This was prompted, in part, by statutory obligations under federal law. Under the E-Government Act of 2002, federal agencies must conduct a PIA before (1) "developing or procuring information technology that collects, maintains, or disseminates information that is in an identifiable form"; or (2) "initiating a new collection of information that will be collected, maintained, or disseminated using information technology ... [and] includes information in an identifiable form permitting the physical or online contacting of a specific individual." Specific to the Department of Homeland Security, under the Homeland Security Act of 2002, DHS must conduct PIAs "of proposed rules of the Department or that of the Department on the privacy of personal information, including the type of personal information collected and the number of people affected." More generally, the Privacy Officer of DHS is required to coordinate with the Officer for Civil Rights and Civil Liberties to ensure that "(A) programs, policies, and procedures involving civil rights, civil liberties, and privacy considerations are addressed in an integrated and comprehensive manner; and (B) Congress receives appropriate reports on such programs, policies, and procedures." DHS's PIA evaluated the various uses of UAS in DHS's operations, including its operations at the border, and concluded that such operations have minimal privacy impact. Because current DHS operations limit flights to an altitude of 19,000 feet, the report noted that cameras on UAS do not permit the operator to specifically identify people on the ground nor do they use technology that sees through walls or collects information regarding the interior of buildings. The report noted that personally identifiable information (PII) is generally not retrieved, but that images may later be associated with specific individuals if they are apprehended and the surveillance feed is associated with them. Acknowledging that UAS can stay in flight longer than traditional aircraft, the report concludes that the privacy impact of this technological difference is mitigated by various safeguards including well-defined flight operations, restrictions on accessing collected data, and security protocols for storing data. It is likely that DHS will utilize this PIA when developing any new policies and procedures required by the President's new memorandum. In addition to PIAs, in late 2012, DHS's Office for Civil Rights and Civil Liberties and its Privacy Office spearheaded the "Working Group to Safeguard Privacy, Civil Rights, and Civil Liberties in the Department's Use and Support of Unmanned Aerial Systems." The working group was intended to assess all active and planned uses of UAS by the various components of DHS and flag any privacy or civil liberties issues potentially raised by such operations. The goal was to develop a set of best practices for safeguarding these various legal interests, and it was reported in September 2014 that such a document would be out by the end of 2014. DHS has yet to release this best practices document. It may be that this document will be subsumed into the larger obligations placed on DHS through the President's new memorandum. There has been some debate within DOJ concerning the extent to which unmanned aerial surveillance differs from manned aerial surveillance, and whether these differences warrant new rules for deploying UAS in law enforcement operations. A report issued by DOJ's Office of Inspector General explained that both the FBI and ATF did not see a practical difference in how UAS collect evidence as compared to their manned counterparts. As such, these entities did not see a need to develop specialized UAS privacy protocols. DOJ's Inspector General disagreed with the assessment of the FBI and ATF and concluded the following in its interim report: We found that the technological capabilities of UAS and the current, uncoordinated approach of DOJ components to UAS use may merit the DOJ developing consistent, UAS-specific policies to guide the proper use of UAS. Unlike manned aircraft, UAS can be used in close proximity to a home and, with longer-lasting power systems, may be capable of flying for several hours or even days at a time, raising unique concerns about privacy and the collection of evidence with UAS. Considering that multiple components are using or have the potential to use UAS, we believe the Office of the Deputy Attorney General (ODAG), which has the primary responsibility within DOJ for formulating cross-component law enforcement policies, should consider the need for a DOJ-wide policy regarding UAS uses that could have significant privacy or other legal implications. This conclusion that unmanned operations pose a unique and potentially greater privacy threat than manned operations mirrors that of the President's new memorandum on UAS operations. Even when DOJ, like all other federal agencies using UAS, adopts specific policies and procedures addressing the privacy impact of its UAS operations, this inevitably prompts the question whether federal agencies should be left to police their own surveillance activities. While praising the White House drone memorandum as "an important and welcome step in advancing drone technology," one commentator noted that the memo itself "does not establish strong privacy and transparency drone standards for agencies, leaving it up to the agencies to develop these standards." He continues: "Because the memo's requirements are not specific, the drone policies the agencies set for themselves will be key to how individuals' privacy is actually protected. Congress still has a role to play in setting strong privacy and transparency standards for drone use." Several measures were introduced in the 113 th Congress that would have restricted both public-and private-actor domestic UAS operations, and reintroduction of these bills is likely in the 114 th Congress. The proposed regulations in these bills range from warrant requirements for law enforcement operations to comprehensive data collection and minimization statements to privacy-tort-like prohibitions against private-actor intrusions. Additionally, Congress has utilized its oversight authority to hold hearings and probe executive branch agencies to disclose when and where they are using drones and the potential privacy implications of such uses. In the 113 th Congress, Senator Ed Markey and Representative Peter Welch introduced nearly identical legislation entitled the Drone Aircraft Privacy and Transparency Act of 2013 ( S. 1639 , H.R. 2868 ). These bills would have amended FMRA to create a comprehensive scheme to regulate both government and private-actor use of drones, including data collection requirements, a warrant requirement for law enforcement, and various enforcement mechanisms. First, these bills would have required the Secretary of Transportation, with input from the Secretary of Commerce, the Chairman of the Federal Trade Commission, and the Chief Privacy Officer of the Department of Homeland Security, to study any potential threats to privacy protections posed by the introduction of drones in the national airspace. They would have prohibited the FAA from issuing a license to operate a drone unless the application included a "data collection statement." This statement would have had to include a list of individuals who would have the authority to operate the drone; the location in which the drone would be used; the maximum period it would be used; and whether the drone would be collecting information about individuals. If the drone would be used to collect personal information, the statement would have had to provide the circumstances in which such information would be used; the kinds of information collected and the conclusions drawn from it; the type of data minimization procedures to be employed; whether the information would be sold, and if so, under what circumstances; how long the information would be stored; and the procedures for destroying irrelevant data. The statement also would have had to include information about the possible impact on privacy protections posed by the operation under that license and steps to be taken to mitigate this impact. Additionally, the statement would have had to include the contact information of the drone operator; a process for determining what information had been collected about an individual; and a process for challenging the accuracy of such data. Finally, the FAA would have been required to post the data collection statement on the Internet. In addition to the data collection statement, any law enforcement agency which operates a drone would have had to file a "data minimization statement" with the FAA. This statement would have required adoption of policies by the agency that minimize the collection of information and data unrelated to the investigation of a crime under a warrant; required the destruction of data that is no longer relevant to the investigation of a crime; established procedures for the method of such destruction; and established oversight and audit procedures to ensure the agency operates a UAS in accordance with the data collection statement filed with the FAA. S. 1639 and H.R. 2868 would have provided several enforcement mechanisms. First, the FAA could have revoked a license of a user that did not comply with these requirements. The Federal Trade Commission would have had the primary authority to enforce the data collection requirements. Additionally, the Attorney General of each state, or an official or agency of a state, would have been empowered to file a civil suit if there was reason to believe that the privacy interests of residents of that state had been threatened or adversely affected. These bills would have also created a private right of action for a person injured by a violation of this legislation. These bills would also have prohibited a governmental entity from using a drone, or obtaining information from another person using a drone, for protective activities, or for law enforcement or intelligence purposes, except with a warrant. This prohibition would not apply in "exigent circumstances," which was defined to mean imminent danger of death or serious physical injury or high risk of terrorist attack as determined by the Secretary of Homeland Security. Senator Rand Paul and Representative Austin Scott's companion bills, the Preserving Freedom from Unwarranted Surveillance Act of 2013 ( S. 1016 , H.R. 972 ), would have focused exclusively on government drone operations. These bills would have required any entity acting under the authority of the federal government to obtain a warrant based upon probable cause before conducting drone surveillance to investigate violations of criminal law or regulations. S. 1016 and H.R. 972 included several exceptions to this warrant requirement: (1) when necessary to prevent or deter illegal entry of any persons or illegal substances into the United States; (2) when a law enforcement officer possesses reasonable suspicion that under particular circumstances "swift action to prevent imminent danger to life or serious damage to property, or to forestall the imminent escape of a suspect, or destruction of evidence" is necessary; or (3) when the Secretary of Homeland Security determines credible intelligence indicates a high risk of a terrorist attack by a specific individual or organization. H.R. 972 would have created a right to sue for any violation of its prohibitions. Unlike H.R. 972 , S. 1016 included an express exclusionary rule for evidence obtained in violation of the act. Representative Ted Poe introduced the Preserving American Privacy Act of 2013 ( H.R. 637 ), which would have regulated both public and private use of drones under various mechanisms. As to law enforcement use, H.R. 637 would have created a general prohibition on the use of drones to collect covered information or disclose covered information so collected. "Covered information" was defined as "information that is reasonably likely to enable identification of an individual" or "information about an individual's property that is not in plain view." This prohibition was subject to the following exceptions: (1) law enforcement obtains a court-issued warrant and serves a copy of the warrant on the target of the search within 10 days of the surveillance. However, notice need not be provided if it would jeopardize an ongoing criminal or national security investigation.(2) Law enforcement obtains a court-issued order based upon "specific and articulable facts showing a reasonable suspicion of criminal activity and a reasonable probability" that the operation "will provide evidence of such criminal activity." The order may authorize surveillance in a stipulated public area for no more than 48 hours which may be renewed for a total of 30 days. Notice of the operation must be provided to the target no later than 10 days after the operation. Alternatively, notice may be provided not less than 48 hours before the operation in a major publication, on a government website, or with signs posted in the area of the operation. (3) Operation is within 25 miles of national border. (4)The targeted individual has provided prior written consent. (5) Emergency situation involves danger of death or serious physical injury, conspiratorial activities threatening the national security interest, or conspiratorial activities characteristic of organized crime, where a warrant cannot be obtained with due diligence. Law enforcement must then obtain a warrant within 48 hours of such operation. Any evidence obtained in violation of this act would not have been admissible in any trial or adjudicative proceeding. Additionally, H.R. 637 would have required any governmental entity applying for a certificate or license to operate a UAS to also file a data collection statement with the Attorney General, which would have included the purpose for which the UAS will be used; whether the UAS is capable of collecting covered information; the length of time the information will be retained; a point of contact for citizen feedback; the particular unit of governmental entity responsible for safe and appropriate operation of the UAS; the rank and title of the individual who may authorize the operation of the UAS; the applicable data minimization policies barring the collection of covered information unrelated to the investigation of crime and requiring the destruction of covered information that is no longer relevant to the investigation of a crime; and applicable audit and oversight procedures. Under H.R. 637 , the Attorney General would have been empowered to request that the Secretary of Transportation revoke the license or certificate of any entity that fails to file a data collection statement. Further, H.R. 637 contained a provision permitting administrative discipline against an officer who intentionally violates a provision of this act. H.R. 637 would also have made it unlawful to intentionally operate a private UAS to capture images in a manner highly offensive to a reasonable person where the person is engaging in a personal or familial activity under circumstances in which the individual has a reasonable expectation of privacy, regardless of whether there is a physical trespass. In addition to its authority to enact federal law, Congress can and has utilized its oversight function to shape the debate surrounding the privacy implications of drone surveillance. For instance, both the Senate and House Judiciary Committees held hearings in the 113 th Congress specifically addressing the privacy impact of drone operations. Additionally, individual members probed executive branch officials on when and where they were using drones and the potential privacy implications of such uses. One such example of this oversight function is demonstrated by correspondence between the Senator Rand Paul and the FBI in the summer of 2013. In a July 25, 2013, letter to FBI Director Mueller, Senator Paul asked how the Bureau defined "reasonable expectation of privacy" in the context of UAS surveillance, as Paul feared that "an overbroad interpretation of this protection would enable more substantial information collection on an individual in a circumstance they might not have believed was subject to surveillance." The FBI responded by arguing that based on the Supreme Court's three aerial surveillance cases from the 1980s, it need not obtain a warrant for any surveillance "open to public view" and that the "Fourth Amendment principles applicable to manned aerial surveillance discussed in these cases apply equally to UAVs." Similar oversight is likely to continue in the 114 th Congress. Justice Brandeis once observed that "it is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country." Some have argued that under this theory of federalism, the states are best situated to experiment with various UAS policies to determine the most appropriate legal framework for their state. Others have countered that applying a patchwork of 50 different privacy regimes would be overburdensome on both public and private users of UAS. According to the National Conference of State Legislatures (NCSL), by the end of 2014, 20 states had enacted laws addressing UAS issues. State laws in this area have mainly come in three forms. The first, and perhaps most numerous, are laws that create broad prohibitions on their own state law enforcement entities, subject to various exceptions that differ from state to state. These exceptions include obtaining a warrant based upon probable cause; countering a high risk of terrorist attack; responding to threats of imminent harm of human life; locating a missing person; and conducting crime scene and traffic photography, among others. The second category relates to use restrictions of data collected by UAS. For instance, Illinois requires law enforcement to destroy all information gathered by a UAS within 30 days of collection unless there is reasonable suspicion that the information contains evidence of criminal activity or the information is relevant to an ongoing criminal investigation. While the relevancy standard is a very low evidentiary threshold, it does prevent limitless retention of private data. Similarly, Alaska prohibits the retention of records collected by drones unless it is required as part of an investigation or prosecution, is used for training purposes, or is required by federal or state law. Images that are retained under Alaska's statute are considered confidential and not subject to the state's public records laws. The third category relates to regulation of private actors, generally through the creation of private causes of action for privacy invasions caused by UAS surveillance. For instance, Idaho prohibits recording individuals on their residence without their consent, or from photographing an individual for the purpose of publishing or otherwise publicly disseminating such photograph no matter where the target is located. Undoubtedly, this third category of proposals creates tension between the public's First Amendment right to gather news and the individual privacy interests at stake, requiring legislatures to fine tune this balance when enacting UAS legislation.
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It has been three years since Congress enacted the FAA Modernization and Reform Act of 2012 (FMRA), calling for the integration of unmanned aircraft systems (UAS), or "drones," into the national airspace by September 2015. During that time, the substantive legal privacy framework relating to UAS on the federal level has remained relatively static: Congress has enacted no law explicitly regulating the potential privacy impacts of drone flights, the courts have had no occasion to rule on the constitutionality of drone surveillance, and the Federal Aviation Administration (FAA) did not include privacy provisions in its proposed rule on small UAS. This issue, however, has not left the national radar. Congress has held hearings and introduced legislation concerning the potential privacy implications of domestic drone use; President Obama recently issued a directive to all federal agencies to assess the privacy impact of their drone operations; and almost half the states have enacted some form of drone legislation. There are two overarching privacy issues implicated by domestic drone use. The first is defining what "privacy" means in the context of aerial surveillance. Privacy is an ambiguous term that can mean different things in different contexts. This becomes readily apparent when attempting to apply traditional privacy concepts such as personal control and secrecy to drone surveillance. Other, more nuanced privacy theories such as personal autonomy and anonymity must be explored to get a fuller understanding of the privacy risks posed by drone surveillance. Moreover, with ever-increasing advances in data storage and manipulation, the subsequent aggregation, use, and retention of drone-obtained data may warrant an additional privacy impact analysis. The second predominant issue is which entity should be responsible for regulating drones and privacy. As the final arbiter of the Constitution, the courts are naturally looked upon to provide at least the floor of privacy protection from UAS surveillance, but as will be discussed in this report, under current law, this protection may be minimal. In addition to the courts, the executive branch likely has a role to play in regulating privacy and drones. While the FAA has taken on a relatively passive role in such regulation, the President's new privacy directive for government drone use and multi-stakeholder process for private use could create an initial framework for privacy regulations. With its power over interstate commerce, Congress has the broadest authority to set national standards for UAS privacy regulation. Several measures were introduced in the 113th Congress that would have restricted both public- and private-actor domestic UAS operations, and reintroduction of these bills is likely in the 114th Congress. Lastly, some have argued that under our system of federalism, the states should be left to experiment with various privacy schemes. It is reported that by the end of 2014, 20 states have enacted some form of drone regulation. This report will provide a primer on privacy issues related to various UAS operations, both public and private, including an overview of current UAS uses, the privacy interests implicated by these operations, and various potential approaches to UAS privacy regulation.
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The Arecibo Ionospheric Observatory is a radio and radar telescope located on approximately 120 acres of federally owned land in Barrio Esperanza, Arecibo, Puerto Rico. Currently, the Arecibo Observatory is managed, operated, and maintained by SRI International. (SRI International partners with the Universities Research Association, and the Universidad Metropolitana, San Juan, and the University of Puerto Rico). Built in a natural depression in the jungles of Puerto Rico, Arecibo is the world's largest single-dish radio-wavelength reflector, measuring approximately 1,000 feet across and 167 feet deep. The 900-ton receiver platform is suspended 450 feet above the reflector dish. The 40,000 aluminum panels of the structure cover 20 acres. Arecibo can receive signals from 25 megahertz to 10 gigahertz. Transmitters include an S-band 2,380-megahertz radar system for solar studies and a 430-megahertz radar system for ionospheric studies. Arecibo can access approximately 40.0% of the sky and "has an unrivalled sensitivity due to its large size." The fixed spherical telescope has the ability to predict and track the movement of potentially hazardous near-Earth objects. Construction of the Arecibo Observatory began in 1960 at the initial cost of $9.7 million. The Defense Department's Advanced Research Projects Agency provided funding for the project, the Air Force administered it, and Cornell University managed the project for the Air Force. Arecibo was commissioned for service on November 1, 1963. Initially designed for radar studies of Earth's ionosphere, it was also found to be valuable for research in radio and radar astronomy. In 1970, ownership of Arecibo was transferred from the Department of Defense to the National Science Foundation's (NSF) Division of Astronomical Sciences (AST), with NSF subsequently taking responsibility for funding of the telescope. It was at this time that the NAIC was established at Cornell University to manage the facility. The telescope has evolved and developed over its lifetime. In 1974, the first upgrade was completed, replacing the original wire mesh surface with aluminum panels. The upgrade totaled approximately $8.0 million—approximately $5.0 million from NSF and $3.0 million from National Aeronautics and Space Administration (NASA). The upgrade enabled Arecibo to operate at 3 gigahertz. Also, planetary radar studies were expanded with the installation of a 420 kilowatt transmitter, operating at 2.4 gigahertz. In 1997, the second upgrade of the facility was completed, with the installation of a Gregorian reflector system, suspended approximately 450 feet above the telescope's 1,000-foot dish and a 1-megawatt radar transmitter. This upgrade allowed the telescope to operate at up to 10 GHZ, increasing the telescope's "sensitivity, frequency coverage, and agility, and enabl[ing] dual-beam incoherent scatter radar capability, providing new research opportunities." The upgrade was undertaken by NSF and NASA, with support from Cornell University, at a cost of $25.0 million—$14.0 million from NSF and $11.0 million from NASA. Arecibo is recognized for its research in radio astronomy, solar system radar astronomy/planetary radar, and ionospheric observations/terrestrial aeronomy. It has been used for research in such diverse areas as interstellar gas, pulsars and fundamental physics, variations in Earth's ionosphere, galactic structure formation and evolution, complex and pre-biotic molecules in the interstellar medium, planetary surfaces and moons, and the post-discovery characterization and orbital refinement of near-Earth asteroids. One of the first accomplishments of Arecibo was determining the correct rotation rate of Mercury, which was found to be 59 days instead of the previously estimated 88 days. Other Arecibo firsts include the first discovery of a binary pulsar, the first discovery of planets outside the solar system, and the first detailed three-dimensional mapping of how galaxies are distributed in the universe. In 1982, research conducted at Arecibo discovered a type of radio emission—hydroxyl megamaser—that has since been found to indicate a collision between two galaxies. In 1997, the Board on Physics and Astronomy of the National Research Council (NRC) established the Astronomy and Astrophysics Survey Committee to assess the field of ground- and space-based astronomy and astrophysics for the decade 2000 to 2010. The committee was charged with recommending priorities for initiatives during that decade and to explore areas of development of new technologies. The report of the 2000 decadal survey, Astronomy and Astrophysics in the New Millennium, made an effort to find the balance between long-term support for facility operations and research grants and priority for new technological opportunities and facilities. The committee made recommendations relating to coordination of the astronomy and astrophysics programs of the NSF, NASA, and the Department of Energy Office of Science (DOE). The committee also explored possibilities for international collaboration and private, state, and federal partnerships. The decadal survey recommended that NSF conduct competitive review of its astronomy facilities and organizations approximately every five years. Another report of the NRC, Connecting Quarks with the Cosmos , proffered recommendations that paralleled those of the decadal survey. Both noted that AST should respond to emerging scientific opportunities and construct different operational models for future astronomy facilities and organizations. The 2008 annual report of the federal Astronomy and Astrophysics Advisory Committee mirrored many of the recommendations contained in the 2000 decadal survey and Connecting Quarks with the Cosmos . It stated that AST's focus must of necessity change to reflect the needs of these new, powerful and very expensive facilities. A robust program of support for the majority of our current facilities, combined with the operations funding needed for our new and immensely more powerful facilities…, mandate cuts in funding for some current facilities if we are to make a credible case for new funding! The report suggested that in order to bring long-term stability to Arecibo for the science community, alternative funding sources and partnerships should be explored with other institutions in Puerto Rico and possibly with support from NSF's Division of Atmospheric Sciences. It was suggested also that international partnerships should be explored. In a joint NSF-NASA response to the committee, it was noted that although partnerships and joint projects can be problematic by increasing managerial complexity, they do offer the benefit of sharing responsibility and authority. A January 2010 report of the National Research Council examined near-earth objects (NEOs) and hazard mitigation strategies. Included in this report was an analysis of the costs of detecting potentially hazardous NEOs and the costs associated with mitigation efforts. The survey sought to determine the role the Arecibo would have in detecting, tracking, and characterizing NEOs. One of the findings in the report was that The Arecibo and Goldstone radar systems play a unique role in the characterization of NEOs, providing unmatched accuracy in orbit determination, and insight into the size, shape, surface structure, and other properties for objects within their latitude coverage and detection range. The report further recommended that Immediate action is required to ensure the continued operation of the Arecibo Observatory at a level sufficient to maintain and staff the radar facility. Additionally, NASA and NSF should support a vigorous program of radar observations of NEOs at Arecibo and NASA should support such a program at Goldstone for orbit determination and characterization of physical properties. The current decadal survey, addressing the period 2010-2020, was released in August 2010— New Worlds, New Horizons in Astronomy and Astrophysics . This survey provides a comprehensive and robust review of strategic planning process. In addition, it explores interagency issues among NSF's AST, NASA's Astrophysics Division, and DOE's Office of Science, High Energy Physics. The committee for this survey, known as Astro2010, was directed to make its recommendations and considerations for funding levels for astronomical research based on limited resources and a flat budget trajectory. This survey included prioritization of "unrealized projects from previous decadal surveys that had not had a formal start alongside new research activities that had emerged from the research community." The report recommended that NSF-Astronomy should complete its next senior review before the mid-decade independent review that is recommended elsewhere in this report, so as to determine which, if any, facilities NSF-AST should cease to support in order to release funds for (1) the construction and ongoing operation of new telescopes and instruments, and (2) the science analysis needed to capitalize on the results from existing and future facilities. In 2005-2006, NSF's AST conducted a Senior Review of its portfolio of facilities. This review resulted from a combination of factors—projections for federal spending on research and development, growth of the AST budget, the proposed directions of the astronomical research community, and the recommendations and analyses contained in the aforementioned reports on ground-and space-based facilities. The Senior Review was to, among other things, identify potential reinvestment in the highest priority existing programs in AST and to restructure the operational efficiency of the existing AST-operated facilities. The Senior Review examined the balance within the full portfolio of projects and recommended changes that would provide savings from existing programs to be redirected in support of new activities. The Senior Review stated that Arecibo continues to produce scientific results, but when budgets are limited, choices have to be made to explore new science opportunities and new capabilities. The committee reported that the scientific value of the telescope was modest when compared to other existing and proposed projects funded primarily by the NSF. NSF has stated that Identifying potential cost savings in our current portfolio of projects and devising an acceptable implementation plan for realizing these savings will allow progress to be made on the next generation of Astronomical instruments and better position AST for future budget augmentation. The Senior Review determined that the approximately $200.0 million astronomy budget was facing a deficit of $30.0 million by 2010. The Senior Review recommended decreasing the Arecibo's annual $12.0 million budget to $9.0 in FY2009 and securing partnerships for the remaining necessary funding. It stated that if alternative funding sources or partnerships could not be obtained by 2011, the Observatory should be dismantled. The Senior Review anticipated that by FY2010, the $2.5 million savings resulting from the proposed changes would be recovered by the AST budget and be made available for other projects and activities. The recommendation from the Senior Review as it relates to Arecibo is as follows The [Senior Review] recognizes the significant and unique scientific contributions that the Arecibo Observatory has made to astronomy and astrophysics and it congratulates NAIC and Cornell on operating the facility so effectively.... However, the committee was not persuaded of the primacy of the science program beyond the end of the decade and found that the case for long term support at the present level was not as strong as that for other facilities. The [Senior Review] recommends a decrease in AST support for Arecibo to $8 m (plus the $2M from ATM) over the next three years. This should permit a reduction in the scientific and observing support staff and a discontinuation of the future instrumentation program without compromising the main science program.... The [Senior Review] recommends that NAIC plan either to close Arecibo or to operate it with a much smaller AST budget. This will require that NAIC seek sufficient external funding to continue to operate it fully. If Arecibo is kept operating beyond 2011, it is expected that this will only be a limited term extension, pending the deliberations of the next decadal survey. Supporters of Arecibo charge that the Senior Review made its recommendations based on anticipated flat budget forecasts. They contend that NSF's budget has been increasing over the years, and that should translate into additional funding for the AST and Arecibo in particular. There are some in the scientific community who believe that the NSF does not view solar system science as a high priority. In testimony before the House Subcommittee on Space and Aeronautics, Donald B. Campbell, professor, Cornell University, contended that the planetary/near-Earth objects radar research program at the Arecibo was in jeopardy as a result of the recommendations in the Senior Review. Campbell charged that the Senior Review gave the planetary program scant attention in its report and failed to take into account the telescope's capabilities in detecting NEOs. The Arecibo radar system has conducted approximately 65.0% of all radar observations characterizing NEOs. Others in the science community maintain that NASA should provide funding for the Observatory because it benefits greatly from its ability to track NEOs. The NASA Authorization Act, 2005, directs NASA to, among other things, track and catalogue, and characterize all near-Earth objects. NASA counters that NSF should be the supporter of the Observatory. NASA contends that it is focused on space-based programs and not ground-based programs. The report of the Senior Review noted that NASA has been very clear that it does not regard the support of ground-based telescopes as part of its mandate although on those occasions when it has contributed in this manner, the results have usually been scientifically highly productive. There are good reasons now to revisit the working relationship between the two agencies. The relationship with DOE has a shorter history but is currently more stable. In response to the Senior Review recommendations, Cornell University, which at that time operated the Arecibo , said that it would terminate operations of the planetary radar in October 2007 in order to meet budget deadlines. However, the University continued operation of the radar on a "less frequent schedule." The Senior Review proposed that the Arecibo and the NSF seek partners, including international partners, to share operation costs and to allow the telescope to remain as a competitive scientific and educational facility. Within AST and in anticipation of a more constrained budget, efforts are being made to examine and balance both the operation of older facilities and the planning and construction of new facilities. In February 2011, the Senior Review Committee stated that the "AST Division must consider carefully the relative priorities of continuing to operate its older facilities and transitioning to the increased cost of operating the new facilities." The report also estimated that closure and decommissioning the Arecibo could cost an estimated $88.0 million, approximately eight times its current annual operating cost. The Senior Review report further stated that "Despite the challenge, the budget and facilities planning process must identify and take such costs into account." An April 2010 NSF program solicitation indicated that the Arecibo Observatory would continue to operate at least until 2016. It was anticipated that in addition to AST, the Arecibo would receive funding from NSF's Division of Atmospheric and Geospace Sciences (AGS) and NASA. The proposed funding structure would allow for additional astronomical research at the Observatory and an increase in asteroid-detection efforts and atmospheric research. The AGS would increase its support of the Arecibo, rising from $2.3 million to $3.0 million in FY2011 to approximately $4.0 million in FY2015. Funding from AST decreased from $6.2 million in FY2011 to an estimated $5.5 million in FY2012. It is estimated that support would further decrease to approximately $4.0 million by FY2015. NASA provided funding of $2.0 million in FY2011 and has provided budget plans to support planetary radar in FY2012 and beyond. In June 2011, NSF announced that it awarded a $42.0 million, five-year contract to SRI International to manage, operate, and maintain the Arecibo. SRI International partners with the Universities Space Research Association, the Ana G. Mendez-Universidad Metropolitana, San Juan, and the University of Puerto Rico. The Arecibo will, among other things, expand its research on the study of the ionosphere, the remains of imploded stars, and also search within and beyond the Milky Way for asteroids and pulsars. At present, the Arecibo is operating on a $10.7 million budget. The Administration's FY2013 budget request for NSF provides a total of $8.2 million for the Arecibo Observatory—$5.0 million from the AST and $3.2 million from the AGS. Support provided in FY2012 is estimated at $5.5 million from AST and $3.2 million form AGS. Language in the FY2008 Omnibus Appropriations Act stated The Appropriations Committees express concern over the conclusion of the NSF's division of Astronomical Science Senior Review with regard to the Arecibo Observatory. The Committees believe that this Observatory continues to provide important scientific findings on issues of near-space objects, space weather, and global climate change, as well as numerous other research areas. The Committees believe that these endeavors will have scientific merit far beyond the end of this decade. As such, the Committees hope the Division of Astronomical Science will reconsider its conclusion regarding future funding for the Arecibo Observatory. In the 110 th Congress, S. 2862 , a bill to provide for NSF and NASA utilization of the Arecibo Observatory, was introduced on April 15, 2008. The bill would have provided for operation of Arecibo to continue. It would (1) ensure that the facility is fully funded to continue (A) its research on Earth's ionosphere, and (B) its research in radio astronomy, and (C) research on the solar system; and (2) coordinate with the Administrator of NASA to ensure that the capabilities of the Arecibo Observatory continue to be available for NASA in characterizing and mitigating near-Earth objects, and other research as needed. A similar bill, H.R. 3737 , was introduced on October 3, 2007. The 112 th Congress may choose to consider increased funding for Arecibo. NASA has received a legislative mandate to observe and detect near-Earth objects. Considering the capabilities of Arecibo to characterize the physical properties of near-Earth objects, some say NASA could benefit from its continued support. In addition, preliminary estimates for dismantling Arecibo and restoring the land to its original state could exceed the cost of maintaining it for several years. It is anticipated that continued operation of the Arecibo will be assessed in a mid-decade independent review that was recommended in the August 2010 decadal survey. Also, it was noted in a January 2012 presentation of NSF's AST outlook that budget realities and constraints are expected to have a long-term impact on several programs, possibly leaving many of the recommendations of the decadal survey unfunded or not addressed.
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The Arecibo Ionospheric Observatory is a radio and radar telescope located in Barrio Esperanza, Arecibo, Puerto Rico. The Arecibo Observatory is managed, operated, and maintained by SRI International, under contract with the National Science Foundation (NSF). In 2005-2006, NSF's Division of Astronomical Sciences (AST) conducted a Senior Review of its portfolio of facilities. Among other things, the Senior Review was to identify potential reinvestment in the highest priority existing programs in AST and restructure the operational efficiency of the existing facilities. The Review reported that the scientific value of the Arecibo was modest when compared to other existing and proposed projects and recommended decreasing the telescope's annual $12.0 million budget to $9.0 million in FY2009, and securing partnerships for the remaining necessary funding. If alternate funding sources or partnerships could not be obtained by 2011, the Review recommended dismantling the facility. In February 2011, a report of the Senior Review estimated that closure of the Arecibo could approach $88.0 million, approximately eight times its current operating cost. The Review determined that AST should carefully examine the priorities of continuing to operate older facilities while simultaneously transitioning to newer facilities. The issue before the 112th Congress is whether the Arecibo is more cost-effective than replacing it with newer, available technology. In June 2011, NSF announced that it awarded a $42.0 million, five-year contract to SRI international to manage, operate, and maintain the Arecibo. SRI International will partner with the Universities Research Association, the Universidad Metropolitana, San Juan, and the University of Puerto Rico. The Arecibo will, among other things, expand its research on the study of the ionosphere, the remains of imploded stars, and also search within and beyond the Milky Way for asteroids and pulsars. The Administration's FY2013 budget request for the Arecibo in the NSF totals $8.2 million; the FY2012 estimate is $8.7 million. Requested funding for the Arecibo Observatory in the FY2013 request includes $5.0 million from the AST, and $3.2 million from the Division of Atmospheric and Geospace Sciences (AGS).
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Since July 1999, when the Chinese government began detaining thousands of Falun Gong (FLG) adherents, the spiritual exercise movement has gained the attention of many U.S. policy makers, primarily as an international human rights concern. Many FLG practitioners reportedly have died or remain in PRC prisons or other forms of detention. In 2005, the United States Commission on International Religious Freedom recommended that China remain as a "country of particular concern" (CPC) and stated that crackdowns on the group have been "widespread and violent." On the basis of this recommendation, the State Department, in its annual International Religious Freedom Report (November 2005), designated China as a CPC for the sixth consecutive year, noting: "The arrest, detention, and imprisonment of Falun Gong practitioners continued; those who refused to recant their beliefs were sometimes subjected to harsh treatment in prisons and reeducation-through-labor camps, and there were credible reports of deaths due to torture and abuse." The PRC government appears to have been largely successful in not only suppressing FLG activity in China but also discrediting Falun Gong in the eyes of PRC citizens and preventing linkages between Falun Gong and other social protest movements. Nonetheless, FLG followers have displayed a remarkable tenacity and dedication both domestically and abroad. They have become a recurring irritant in China's efforts to project an image of a peaceful world power that abides by international norms, and have raised suspicions among some PRC leaders that the U.S. government is colluding with them. On April 20, 2006, at the official welcoming ceremony of PRC President Hu Jintao's visit to Washington, D.C., Ms. Wang Wenyi, a reporter for the Epoch Times , interrupted Hu's speech by shouting in support of Falun Gong for more than two minutes before being hustled away by U.S. security agents. Although ostensibly not a political movement, Falun Gong practitioners in the United States have become visible and vocal, particularly in major U.S. cities and in Washington, D.C., in criticizing the PRC government and publicizing human rights abuses against their fellow members in China. The PRC government reportedly also has been aggressive abroad, attempting to refute FLG claims and counteract their activities. "Falun Gong,"also known as "Falun Dafa," combines an exercise regimen with meditation, moral values, spiritual beliefs, and faith. The practice and beliefs are derived from qigong , a set of movements said to stimulate the flow of qi —vital energies or "life forces"—throughout the body, and Buddhist and Daoist concepts. Falun Gong upholds three main virtues—truthfulness, compassion, and forbearance ( zhen-shan-ren) —which may deliver practitioners from modern society's "materialism" and "moral degeneration." FLG adherents claim that by controlling the "wheel of dharma," which is said to revolve in the body, one can cure a wide range of medical ailments and diseases. They believe that by practicing Falun Gong, or "cultivation," they may achieve physical well-being, emotional tranquility, moral virtue, an understanding of the cosmos, and a higher level of existence or salvation. Some observers maintain that Falun Gong resembles a cult and refer to the unquestioning support given to its founder, Master Li Hongzhi, departure from orthodox Buddhism and Daoism, and emphasis on supernatural powers. Others criticize the spiritual practice for being intolerant or exclusive. The PRC government charges that Falun Dafa has disrupted social order and contributed to the deaths of hundreds of Chinese practitioners and non-practitioners by discouraging medical treatment and causing or exacerbating mental disorders leading to violent acts. FLG followers counter that the practice is voluntary and that levels of faith and involvement vary with the individual practitioner. They also emphasize that Falun Gong is not a religion—there is no worship of a deity, all-inclusive system of beliefs, church or temple, or formal hierarchy. During the mid-1990s, Falun Gong acquired a large and diverse following, with estimates ranging from 3 to 70 million members, including several thousand practitioners in the United States. Falun Gong attracted many retired persons as well as factory workers, farmers, state enterprise managers, entrepreneurs, intellectuals, and students in China. The practice's claimed healing powers became especially attractive as economic reforms caused many citizens to lose medical benefits and services. In addition, Falun Gong reportedly was embraced by many retired and active Chinese Communist Party (CCP) and government cadres and military officials and personnel. In 1999, then Vice-President Hu Jintao stated that of 2.1 million known members of the Falun Gong group, one-third belonged to the CCP. Falun Gong's apparently loose but effective organization has remained somewhat mysterious. During the early phase of the crackdown, adherents of Falun Gong generally characterized their objectives as personal and limited in scope. They described their movement as being loosely organized and without any political agenda beyond protecting the constitutional rights of practitioners in China. According to some analysts, however, the movement was well organized before the crackdown in 1999. After the government banned Falun Gong, a more fluid, underground network, aided by the Internet, pagers, and cell phones, carried on for over two years. Li Hongzhi ("Master Li"), a former Grain Bureau clerk, developed Falun Gong in the late 1980s, when qigong began to gain popularity in China. In 1992, Li explained his ideas in a book, Zhuan Falun . Falun Gong was incorporated into an official organization, the Chinese Qigong Association, in 1993 but separated from it by 1996. Around this time, Li reportedly left China. Since 1999, Li, who lives with his family outside New York City, has remained in seclusion, but has made occasional appearances at Falun Gong gatherings. In 2005 and 2006, Li gave lectures to followers in Chicago, New York, San Francisco, and Los Angeles. Some reports suggest that Li Hongzhi has directed his adherents from behind the scenes and that his public statements are interpreted by many Falun Gong practitioners as instructions. On April 25, 1999, an estimated 10,000 to 30,000 Falun Gong practitioners from around China gathered in Beijing to protest the PRC government's growing restrictions on their activities. Some adherents presented an open letter to the Party leadership at its residential compound, Zhongnanhai , demanding official recognition and their constitutional rights to free speech, press, and assembly. Party leaders reportedly were split on whether to ban Falun Gong and conveyed contradictory messages. Premier Zhu Rongji reportedly met with a delegation of practitioners and told them that they would not be punished. By contrast, President Jiang Zemin was said to be shocked by the affront to Party authority and ordered the crackdown. Jiang was also angered by the apparent ease with which U.S. officials had granted Li Hongzhi a visa and feared U.S. involvement in the movement. The government produced circulars forbidding Party members from practicing Falun Gong. Security forces collected the names of instructors, infiltrated exercise classes, and closed book stalls selling Falun Dafa literature. Tensions escalated as followers engaged in 18 major demonstrations, including occupying a government building in the city of Nanchang and demonstrating in front of China Central Television Station in Beijing. The official crackdown began on July 21, 1999, when Falun Gong was outlawed and an arrest warrant was issued for Li Hongzhi. On October 30, 1999, China's National People's Congress promulgated an "anti-cult" law (article 300 of the Criminal Law), effective retroactively, to suppress not only the Falun Gong movement but also thousands of religious sects across the country. However, Ye Xiaowen, director of the State Bureau of Religious Affairs, stated that police would not interfere with people who practiced alone in their own homes. In Beijing alone, public security officers closed 67 teaching stations and 1,627 practice sites. In the immediate aftermath, the state reportedly detained and questioned over 30,000 followers nationwide, releasing the vast majority of them after they promised to quit or identified group organizers. Under article 300, cult leaders and recruiters may be sentenced to 7 or more years in prison, while cult members who disrupt public order or distribute publications may be sentenced to three to seven years in prison. During the first two years of the crackdown, between 150 and 450 group leaders and other members were tried for various crimes and sentenced to prison terms of up to 18-20 years. Estimates of those who have spent time in detention or "labor reeducation" range from 10,000 to100,000 persons. According to estimates by the State Department and human rights organizations, since 1999, from several hundred to a few thousand FLG adherents have died in custody from torture, abuse, and neglect. Many other followers have been suspended or expelled from school or demoted or dismissed from their jobs. It took the PRC government, employing methods of social control that have deep roots in both Chinese Communist Party practice and Chinese history, over two years to subdue the Falun Gong organization. Incremental improvements in the rule of law in China in the past decade have had little if any effect in protecting the constitutional rights of FLG followers. In 1999, the central government reportedly combined an intensive propaganda campaign with stern internal party directives and reliance upon a system of informal control at the local level. At first, the local enforcement of government decrees, such as those requiring universities, employers, and neighborhood committees to obtain individual repudiations of Falun Gong, was often lax. Some reports suggested that local officials had hoped that they could persuade Falun Gong members to give up the practice or at least refrain from engaging in public protests in the capital. However, between July 1999 and October 2000, many Falun Gong adherents continued to journey to Beijing and staged several large demonstrations (involving several hundred to over a thousand persons)—many participants were sent home repeatedly or evaded the police. As Falun Gong demonstrations continued, the government crackdown took on a greater sense of urgency. The PRC leadership employed a traditional method of threats and incentives toward lower authorities to prevent public displays of Falun Gong, particularly demonstrations in Beijing. Central leaders turned a blind eye to local methods of suppression against unrepentant practitioners, including the reported use of torture. The largest memberships and severest human rights abuses have been reported in China's northeastern provinces. There has been little, if any, FLG activity reported in the past year, although the State Department reported that in 2005, there were still hundreds of thousands of practitioners in the country. Many FLG followers are believed to be still practicing in their homes or meeting secretly. One source estimates that there are 60,000 FLG practitioners left in China: half of them are still in detention while the other half remain under surveillance. According to another expert, there are between 15,000 and 25,000 political or religious prisoners in China, half of whom are linked to the Falun Gong movement. FLG members in the United States claim that adherents in China continue to disseminate written information about the practice. Between 2002 and 2005, in about a dozen reported cases, Falun Gong members interrupted programming in several large Chinese cities and broadcast their own images, possibly with the aid of sources outside the country. In 2002, PRC courts sentenced 27 practitioners to prison terms of 4 to 20 years for carrying out these activities. In July 2005, satellite broadcasts reportedly were interrupted by a 15-minute FLG video. On May 19, 2003, U.S. citizen Charles Li was sentenced to three years in prison for "intending to sabotage" Chinese television broadcasts. Li returned to California after he was released in January 2006. U.S. consular officials had maintained regular contact with Li through his detainment. In a letter that he sent while under incarceration, Li reportedly wrote of physical and mental abuse in prison. In March 2006, U.S. Falun Gong representatives claimed that thousands of practitioners had been sent to 36 concentration camps throughout the PRC, particularly in the northeast, and that many of them were killed for profit through the harvesting and sale of their organs. Many of these claims were based upon allegations about one such camp in Sujiatun, a district of Shenyang city in Liaoning province. The Epoch Times , a U.S.-based newspaper affiliated with Falun Gong, first reported the story as told by a Chinese journalist based in Japan and a former employee of a Sujiatun hospital that allegedly operated the camp and served as an organ harvesting center. According to Epoch Times reports, of an estimated 6,000 Falun Gong adherents detained there, three-fourths allegedly had their organs removed and then were cremated or never seen again. American officials from the U.S. Embassy in Beijing and the U.S. consulate in Shenyang visited the area as well as the hospital site on two occasions—the first time unannounced and the second with the cooperation of PRC officials—and after investigating the facility "found no evidence that the site is being used for any function other than as a normal public hospital." Amnesty International spokespersons have stated that the claims of systematic organ harvesting of Falun Gong practitioners cannot be confirmed or denied. The PRC government has rejected claims about live organ harvesting of Falun Gong practitioners. In December 2005, Chinese officials reportedly confirmed that executed prisoners had been "among the sources of organs for transplant" and admitted that a market for such organs had existed, but denied that they had been removed without consent. In March 2006, the Chinese Ministry of Health announced stricter regulations that would require written consent from organ donors, ban the sale of human organs, and limit the number of hospitals allowed to perform transplants. On July 6, 2006, two Canadian investigators, former Liberal Member of Parliament David Kilgour and David Matas, an international human rights attorney, published Report into Allegations of Organ Harvesting of Falun Gong Practitioners in China. The report concludes that the allegations that "large numbers" of Falun Gong practitioners in the People's Republic of China (PRC) have been victims of live organ harvesting are true. For the most part, however, the report does not bring forth new or independently-obtained testimony and relies largely upon the making of logical inferences. The authors had conducted their investigation in response to a request by the Coalition to Investigate the Persecution of the Falun Gong in China (CIPFG), a U.S.-based, non-profit organization founded by the Falun Dafa Association in April 2006. In addition to interviewing the same former Sujiatun hospital worker as featured in the Epoch Times , Kilgour and Matas refer to recordings of telephone conversations provided by CIPFG. In these recorded calls that CIPFG members allegedly made from locations outside China to PRC hospitals, police bureaus, and detention centers, telephone respondents reportedly indicated that organ harvesting of live Falun Gong detainees was common. Although many claims and arguments in the Kilgour-Matas report are widely accepted by international human rights experts, some of the reports's key allegations appear to be inconsistent with the findings of other investigations. The report's conclusions rely heavily upon transcripts of telephone calls in which PRC respondents reportedly stated that organs removed from live Falun Gong detainees were used for transplants. Some argue that such apparent candor would seem unlikely given Chinese government controls over sensitive information, which may raise questions about the credibility of the telephone recordings. Practicing Falun Gong is permitted in the Hong Kong Special Administrative Region (HKSAR) and local members, which number an estimated 500, frequently stage protests against PRC policies toward Falun Gong on the mainland. In November 2004, a Hong Kong appeals court reversed convictions for "obstructing a public place" against sixteen Falun Gong members who had participated in a demonstration in March 2002. The judges ruled that the defendants had been exercising their right to demonstrate. In May 2005, the Court of Final Appeal overturned the convictions of eight other protesters for assaulting and obstructing police, stating that "the freedom to demonstrate peacefully is protected by law." The HKSAR government reportedly has occasionally barred entry to foreign Falun Gong adherents. In February 2006, 83 overseas Falun Gong practitioners, mostly from Taiwan, were refused entry prior to a conference organized by the Hong Kong Association of Falun Dafa, leading some to speculate that PRC authorities keep tabs on overseas and Taiwan FLG members. There are an estimated several thousand Falun Gong practitioners in the United States and similarly large numbers of adherents in other countries with large ethnic Chinese populations. The movement has become highly public in the United States. Members regularly stage demonstrations, distribute flyers, and sponsor cultural events. In addition, FLG followers are affiliated with several mass media outlets, including Internet sites. These include The Epoch Times , a newspaper distributed for free in eight languages and 30 countries (with a distribution of 1.5 million); New Tang Dynasty Television (NTDTV), a non-profit Chinese language station based in New York with correspondents in 50 cities worldwide; and Sound of Hope, a northern California radio station founded by FLG members. These media outlets report on a variety of topics but emphasize human rights abuses in China, particularly against Falun Gong members, and publish mostly negative or critical reports on PRC domestic and foreign policies. Two U.S. Internet companies founded by Chinese Falun Gong practitioners, Dynaweb Internet Technology Inc. and UltraReach Internet Corporation, have been at the forefront of overseas Chinese and U.S. efforts to breach the PRC "Internet firewall." They have each developed software to help Chinese Web users—estimated at 111 million in 2005—to circumvent government censorship and access websites which the PRC government has attempted to block. The United States Broadcasting Board of Governors has provided funding to these companies in order to help sustain their efforts in enabling Web users in China to freely access the Internet, including Voice of America and Radio Free Asia websites. On behalf of plaintiffs in China, Falun Gong adherents in the United States have filed several civil complaints in U.S. federal courts against PRC leaders for violations of the Torture Victim Protection Act, the Alien Tort Claims Act, and other "crimes against humanity." In September 2003, a U.S. District Court judge in Chicago dismissed a lawsuit filed against former PRC President Jiang Zemin, on the basis of lack of jurisdiction and sovereign immunity. In December 2004, a U.S. District Court in San Francisco ruled that Beijing Party Secretary and former Beijing mayor Liu Qi had broken U.S., international, and PRC law for his role in violating the human rights of Falun Gong practitioners. PRC officials in the United States have engaged in a public relations blitz to counter FLG efforts. In 2001, over one dozen U.S. mayors reported pressure from PRC officials urging them not to give public recognition to Falun Gong. In 2002, according to Falun Gong practitioners, PRC consulates sent approximately 300 letters to local U.S. officials, including mayors and the governor of Washington state, asking them not to support Falun Gong. The Wall Street Journal wrote: "Chinese diplomats spend a lot of time writing letters and making visits to governments, local newspapers and television outlets, politicians and others...warning them about the movement." Since 2001, Falun Gong plaintiffs have filed several lawsuits in federal courts claiming that the PRC officials in the United States have been responsible for dozens of isolated incidents of physical and verbal harassment, eavesdropping, and destruction of property of Falun Gong adherents and supporters in the United States. However, plaintiffs often have possessed little evidence of direct involvement by the Chinese government in the alleged incidents. PRC consular officials deny participation in such criminal activity in the United States and claim that they are entitled to diplomatic immunity. In November 2002, the Circuit Court of Cook County charged a PRC immigrant with battery for having physically assaulted a Falun Gong hunger striker in front of the Chinese Consulate in Chicago in September 2001. In February 2005, Falun Gong members in the United States reported that a coordinated, world-wide campaign (in over 20 countries) of telephone harassment against them had taken place. This telephone harassment allegedly consisted of pre-recorded anti-Falun Gong messages in both English and Chinese, some purportedly originating in China. In May 2005, Mr. Chen Yongli, a political officer at the PRC Consulate General in Sydney, Australia, defected and requested political asylum on the grounds that he would be persecuted if sent back to China. On June 4, 2005, Chen made a public appearance at a rally in Sydney to commemorate the 16 th anniversary of the 1989 Tiananmen Square military action. In his speech, Chen declared that Beijing had directed the PRC consulate to identify and harass members of the Australian Chinese community who belonged to groups that the PRC deems subversive, such as democracy activists and Falun Gong practitioners. As a consular official, Chen reportedly resisted orders to provide extensive details about FLG adherents in Australia. Chen alleged that the PRC government had deployed a network of 1,000 agents and spies in Australia to discredit Falun Gong and to spy on its members, and that the number of such agents in the United States was likely higher. In July 2005, the Australian Immigration Department granted permanent protection visas to Chen, his wife and daughter. The Chinese government reportedly referred to Falun Gong as "the most serious threat to stability in 50 years of [Chinese] communist history." The practice's popularity in China's northeast and other economically depressed areas was especially worrisome to the Party because of the fear that "religious fever" combined with economic unrest could spark widespread political protests. Some observers noted that the crackdown on Falun Gong deepened anti-government sentiment among not only adherents but also non-adherents, including many reform-minded intellectuals. However, there has been little indication that Falun Gong has become a rallying cry for other disaffected social groups or China's small number of political activists. Many Chinese, either because of government propaganda or their indifference toward Falun Gong, have become critical toward the movement or apathetic about the crackdown. Some have charged that Li Hongzhi has exploited vulnerable people and caused their suffering by exaggerating the healing powers of Falun Gong or by encouraging followers in prison to attain full enlightenment by exercising "forbearance" or refusing to recant. The January 2001 self-immolations of six purported Falun Gong members on Tiananmen Square was exploited by the official media, further alienating many PRC citizens. Since 1999, some Members of the United States Congress have made many public pronouncements and introduced several resolutions in support of Falun Gong. In the 109 th Congress, H.Res. 608 , agreed to in the House on June 12, 2006, condemns the "escalating levels of religious persecution" in China, including the "brutal campaign to eradicate Falun Gong." H.Res. 794 , passed by the House on June 12, 2006, calls upon the PRC to end its most egregious human rights abuses, including the persecution of Falun Gong. H.Con.Res. 365 , introduced on March 28, 2006, would urge the PRC government to allow civil rights attorney Gao Zhisheng to continue practicing law. PRC authorities reportedly revoked Gao's license after he provided legal assistance for peasant demonstrators, Christian house church worshipers, Falun Gong practitioners, and others. For six consecutive years (1999-2004), the U.S. Department of State has designated China a "country of particular concern" for "particularly severe violations of religious freedom," including its persecution of Falun Gong. An ongoing ban on the export of crime control and detection instruments and equipment to China satisfies the requirements of P.L. 105-292 , the Freedom from Religious Persecution Act of 1998, which authorizes the President to impose sanctions upon countries that violate religious freedom. In April 2006, prior to PRC President Hu Jintao's visit to the United States, 81 Members of Congress reportedly co-signed a letter written by Representative Dana Rohrabacher to President Bush in support of an investigation into the allegations of organ harvesting of Falun Gong adherents in China.
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In 1999, the "Falun Gong" movement gave rise to the largest and most protracted public demonstrations in China since the democracy movement of a decade earlier. The People's Republic of China (PRC) government, fearful of a political challenge and the spread of social unrest, outlawed Falun Gong and carried out an intensive, comprehensive, and unforgiving campaign against the movement. Since 2003, Falun Gong has been largely suppressed or pushed deep underground in China while it has thrived in overseas Chinese communities and Hong Kong. The spiritual exercise group has become highly visible in the United States since 1999, staging demonstrations, distributing flyers, and sponsoring cultural events. In addition, Falun Gong followers are affiliated with several mass media outlets. Despite the group's tenacity and political activities overseas, it has not formed the basis of a dissident movement encompassing other social and political groups from China. The State Department, in its annual International Religious Freedom Report (November 2005), designated China as a "country of particular concern" (CPC) for the sixth consecutive year, noting: "The arrest, detention, and imprisonment of Falun Gong practitioners continued; those who refused to recant their beliefs were sometimes subjected to harsh treatment in prisons and reeducation-through-labor camps, and there were credible reports of deaths due to torture and abuse." In March 2006, U.S. Falun Gong representatives claimed that thousands of practitioners had been sent to 36 concentration camps throughout the PRC. According to their allegations, at one such site in Sujiatun, near the city of Shenyang, a hospital has been used as a detention center for 6,000 Falun Gong prisoners, three-fourths of whom are said to have been killed and had their organs harvested for profit. American officials from the U.S. Embassy in Beijing and the U.S. consulate in Shenyang visited the area as well as inspected the hospital on two occasions and "found no evidence that the site is being used for any function other than as a normal public hospital." Since 1999, some Members of the United States Congress have made many public pronouncements and introduced several resolutions in support of Falun Gong and criticizing China's human rights record. In the 109th Congress, H.Res. 608, agreed to in the House on June 12, 2006, condemns the "escalating levels of religious persecution" in China, including the "brutal campaign to eradicate Falun Gong." H.Res. 794, passed by the House on June 12, 2006, calls upon the PRC to end its most egregious human rights abuses, including the persecution of Falun Gong. In January 2006, U.S. citizen Charles Li was released from a PRC prison after serving a three-year term for "intending to sabotage" broadcasting equipment in China on behalf of Falun Gong. This report will be updated periodically.
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This report provides background information and discusses possible oversight issues for Congress regarding DOD's strategy for implementing a network centric approach to warfare, otherwise known as Network Centric Operations (NCO). NCO forms a central part of the Administration's plans for defense transformation. Proponents argue that a Network Centric approach may improve both the efficiency and effectiveness of U.S. combat operations. However, when NCO was originally envisioned, the U.S. military was structured to counter conventional threats, including possibly, two regional war scenarios involving national armies. Now, partly from recognition that U.S. forces were inadequately prepared for the insurgency in Iraq and the wider hunt for terrorists worldwide, DOD reportedly may be considering new policy that places less emphasis on waging conventional warfare and more on dealing with counterinsurgency, terrorist networks, and other non-traditional threats. Some observers now question the effectiveness of Network Centric Operations, and its relevance to different types of conflict, including close urban combat. Others argue that technology may be dictating military strategy, and point out that the military's extreme reliance on high technology may also present a new vulnerability that adversaries may exploit. Still others pose questions about (1) the interoperability of information systems for joint and coalition forces, (2) a shortage of available bandwidth to support Net Centric Operations, and (3) possible unexpected outcomes when organizations rely on data-dependent systems. NCO is recognized as the cornerstone of military transformation that is occurring in many countries around the world. Defense transformation for the U.S. military involves large-scale and possibly disruptive changes in military weapon systems, organization, and concepts of operations. These changes are the result of technology advances, or the emergence of new international security challenges. Many observers believe that a U.S. military transformation is necessary to ensure U.S. forces continue to operate from a position of overwhelming military advantage in support of national objectives. The Administration has stated that DOD must transform to achieve a fundamentally joint, network centric, distributed force structure capable of rapid decision superiority. To meet this goal, DOD is building doctrine, training, and procurement practices to create a culture of continual transformation that involves people, processes, and systems. Past experimentation to stimulate wider innovation for military operations and NCO has been coordinated by the DOD Office of Force Transformation (OFT). However, DOD plans to shift many ongoing technology initiatives formerly managed by the OFT into the DOD Research and Engineering Directorate. In addition, a reorganization of the office of the DOD Undersecretary for Policy will lead to establishment of a new Office of Strategic Futures, which will examine technology issues that may affect U.S. defense policies. The reorganization is reportedly planned for early 2007, and will require congressional approval for a new assistant secretary position. NCO is a theory which proposes that the application of information age concepts to speed communications and increase situational awareness through networking improves both the efficiency and effectiveness of military operations. Proponents advocate that this allows combat units to be smaller in size, operate more independently and effectively, and undertake a different range of missions than non-networked forces. Networked sensors are sources of data, and data is processed into information. NCO is intended to increase collaboration through enabling the free flow of information across the battlespace so that acquired data is shared, processed into information, and then provided quickly to the person or system that needs it. Proponents argue that a strong and flexible network linking military forces will speed up the pace of warfare, prevent or reduce fratricide, and also provide the means for getting more combat power out of a smaller force. These proponents also argue that theory and practice have merged through achieving proof of concept in the major operations phase of Operation Iraqi Freedom, and that NCO is now an accepted and enduring part of current and future combat. Procurement policy to support joint NCO efforts is also intended to improve economic efficiency by eliminating stove-pipe systems, parochial interests, redundant and non-interoperable systems, and by optimizing capital planning investments for present and future information technology systems. Command and control objectives of NCO include the following: (1) Self-synchronization, or doing what needs to be done without traditional orders. (2) Improved understanding of higher command's intent. (3) Improved understanding of the operational situation at all levels of command. (4) Increased ability to tap into the collective knowledge of all U.S. (and coalition) forces to reduce the "fog and friction" commonly referred to in descriptions of fighting. Some argue that as new concepts and technologies are proven over time, NCO may also become a stabilizing deterrence against extended conflict. For example, if adversary targets are neutralized by NCO systems before they can engage in fighting with U.S. forces, then the battle can be finished before it has really begun. Others argue that wealthy countries now only have a temporary advantage which may be reduced as NCO technology becomes less expensive and as technical knowledge spreads to other nations, and also to terrorist groups. Hence, to maintain its advantage, the United States must continue to refine the uses of technology to increase adaptability for both joint and coalition NCO operations. Other observers have wondered whether proponents of NCO are making claims that create unrealistic expectations. They wonder if the DOD model for network centric operations may underestimate an enemy's ability to deceive high technology sensors, or block the information necessary for NCO to be effective. A possible vulnerability cited by observers may be the fact that DOD has openly published its plans for using NCO technologies in future warfare, thus giving an enemy time to create strategies to avoid strengths and attack weaknesses. National security in the "Information Age" involves a complex environment, where U.S. forces are confronted by instantaneous media coverage, insurgencies, terrorist cells, regional instability, and adversaries using commercially available state-of-the-art high technology devices. Therefore, military operations are now characterized by greater complexity. Events involving greater complexity are less effectively controlled through traditional industrial-age methods that de-construct problems into a manageable series of predictable pieces. However, the command and control objectives of NCO seem to align closely with many of the key properties of complexity—nonlinear interaction, decentralization, and self-organization. Proponents of NCO support the theory that power is increasingly derived from information sharing, information access, and speed. This view is reportedly also supported by results of recent military operational experiences showing that when forces are truly joint, with comprehensively integrated capabilities and operating according to the principles of NCO, they can fully exploit the highly path-dependent nature of information age warfare. Some resulting military advantages that are expected from applying NCO systems to military operations include the following: (1) Networked forces can consist of smaller-size units that can travel lighter and faster, meaning fewer troops with fewer platforms and carrying fewer supplies may be able to perform a mission effectively, or differently, at a lower cost. (2) Networked forces can fight using new tactics. During OIF, U.S. Army forces utilized movement that was described by some as "swarm tactics." Because networking allows soldiers to keep track of each other when they are out of one another's sight, forces in Iraq could move forward spread out in smaller independent units, avoiding the need to maintain a tight formation. Using "swarm tactics," unit movements are conducted quickly, without securing the rear. Network technologies enable all units to know each other's location. If one unit gets into trouble, other independent units nearby can quickly come to their aid, by "swarming" to attack the enemy from all directions at once. Benefits may include the following: (1) it is harder for an enemy to effectively attack a widely dispersed formation; (2) combat units can cover much more ground, because they do not have to maintain a formation; (3) knowing the location of all friendly units reduces fratricide during combat operations; and (4) swarming can allow an attack to be directed straight into the heart of an enemy command structure, undermining support by operating from the inside, rather than battling only on the periphery. (3) The way individual soldiers are expected to think and act on the battlefield is also changing. When a unit encounters a difficult problem in the field, they can radio the Tactical Operations Center, which types the problem into an online chat room, using Microsoft Chat commercial software. The problem is then "swarmed" by experts who may be located as far away as the Pentagon. (4) The sensor-to-shooter time is reduced. Using NCO systems, soldiers in the field may have the capability to conduct an "on site analysis" of raw intelligence from sensor displays, rather than waiting for "return analysis" reports to arrive back from the continental United States. This has led some to question the investment in NCO. DOD officials have stated that it is irregular and unconventional conflicts, rather than confrontations with standing armies, that will dominate U.S. military operations for the foreseeable future. Accordingly, some observers question the utility of NCO in urban combat operations and for counterinsurgency operations, and ask whether the U. S. military currently places too much emphasis on high-technology. In operations in Afghanistan and in urban warfare in Iraq, NCO has reportedly reduced fratricide among friendly forces. However, in Afghanistan and Iraq, the insurgents mix in with the population, and are able to get very close to U.S. forces. This tactic alone reportedly may negate much of the technological and military advantage of superior coalition forces. Others question whether information itself may be overrated as a useful military asset (See Appendix C , "Perverse Consequences of Data-Dependent Systems"). Proponents say that a growing body of evidence highlights a very strong relationship between information advantage, cognitive advantage, and increased lethality and survivability at the tactical level. DOD has conducted several exercises to demonstrate the effectiveness of network centric strategies to improve success in combat scenarios. However, some researchers warn that thorough testing of NCO concepts is vital before systems are deployed , and others argue that NCO theory may manifest important and pervasive flaws. These researchers state that "... the theory of network-centric warfare ... cannot substantiate a claim to scientific status, despite its mesmerizing transformational luster." They also state that "... the [NCO] thesis simultaneously overstates the promise of information and communications technology, while being incapable of adequately realizing the great potential the technology does offer." Their argument is that NCO theory has several paradoxes, including (1) no proper definition of NCO yet exists, but proponents claim that experimentation supports the NCO hypothesis, (2) experimental evidence equally supports multiple alternative explanations for potentially improved performance with networking, and (3) the conclusions of proponents are based on an invalid notion of knowledge development, known as "inductivisim". These researchers maintain that a close examination of the structure of repeated NCO experiments shows that the only hypothesis that has actually been tested is a refutation of the theory that networks cannot yield improvements. Finally, these researchers have asked how it can be possible for faults to remain unrecognized despite troubling results found through critical review and testing. They warn that contemporary military theory may be encouraging NCO proponents to seek confirmation and ignore refutation of their ideas. Proponents of NCO say that shared situational awareness enables collaboration and self-synchronization and enhances speed of command, which increasing mission effectiveness. Critics, however, are concerned that dangerous assumptions are being made by military planners about how future forces will benefit from "information dominance" to such a degree that fewer soldiers will be needed, or that U.S. forces will not require as much protection because they will be able to act ahead of enemy action. They believe that the doctrine of "see first, act first", that underlies NCO, may be flawed because the tempo of operations may outpace the ability of U.S. forces to assess and respond. While a network may provide better access to information, usually about the activities of one's own side, that information may not be complete and may not necessarily enable an accurate understanding of the situation. They have indicated that sensor-based situational awareness may not reflect an accurate picture of operational reality. Other observers say that the military leadership's commitment to NCO may stifle useful criticism from operational commanders. These observers question whether the U.S. military is constructing it forces to prepare to fight the type of wars they want to fight, and rather than the wars they are likely to fight. For example, if NCO is intended to make wars short in duration, then inferior adversaries may likely try to draw U.S. forces into a protracted conflict of lower intensity, and will seek to win merely by avoiding defeat, while U.S. political will dissolves as expenses mount. The inferior opponent may avoid superior U.S. firepower by simply denying a target for our complex and sophisticated weapons. Some military researchers say that opponents using guerilla tactics can significantly reduce the value of high-technology security measures, and that the utility of NCO can be less certain in urban counter-insurgency operations. When NCO is employed against conventional forces, a sensor detects a target, passes information to a decision-making process, the most effective weapon available is selected, and the target is engaged. However, when opponents hide behind walls, in sewers, or inside buildings, they may be difficult for NCO sensors to detect. If the enemy is better at concealment than U.S. forces are at finding them, then our forces may also become more vulnerable. Some observers report that during Operation Iraqi Freedom (OIF), in order to understand the enemy, U.S. forces had to "go out and meet them on the ground", meaning that effective reconnaissance often required engaging the enemy in close combat. These observers say that interviews with OIF warfighters suggested that modern surveillance technology did not alter that condition, and in some instances did not "...provide forces in Iraq in Spring 2003 and onwards with very much insight on the opposing forces". This suggests that DOD should perhaps reexamine several of its basic assumptions about NCO and the power of technology for surveillance and information dominance. NCO relies heavily on deployment of a network of sensors to detect movement and position of both friendly and enemy forces. However, a study by the Rand Corporation in 2002 concluded that, "...as remote assets become more capable, it is likely that a future [enemy] force will develop counter technologies and become more sophisticated at cover, concealment, deception, and electronic warfare. Taking all of these into consideration, the net effect may actually be a decrease of knowledge and ultimately of situational awareness on the battlefield." Our adversaries in Iraq and Afghanistan have taken actions to directly bypass U.S. NCO sensors, and to negate the usefulness of U.S. high technology NCO weapons. Examples include (1) use of suicide bombings and Improvised Explosive Devices (IEDs); (2) hostile forces intermingling with civilians used as shields; or (3) irregular fighters and close-range snipers that swarm to attack, and then disperse quickly. Other possible uses of technology by adversaries of the United States to attack NCO capabilities may include use of (1) powerful directed energy devices to disrupt commercial satellite signals; (2) smaller directed energy devices to burn out computer circuits at a distance, and (3) malicious computer code to subvert controls for complex weapon systems. Some observers state that huge information resources may be overrated as an asset for creating effective military operations, and that important military decisions may not always lend themselves to information-based rational analysis. They argue that discussions of military transformation have been overwhelmingly focused on the rewards of information, and that the military services, national security establishment, and intelligence community have not thoroughly studied the risks associated with data-dependent military doctrine. Some issues raised by these observers include: (1) Reliance on sophisticated information systems may lead to management overconfidence. (2) Quantitative changes in information and analysis often lead to qualitative changes in individual and organizational behavior that are sometimes counter-productive; e.g., as information technology reveals more targets, ammunition may be expended faster, leading to greater dependence on logistics support. (3) An information-rich, opportunity-rich environment may shift the value of the information, redefine the mission objectives, and possibly increase the chances for perverse consequences. (See Appendix C , "Perverse Consequences of Data-Dependent Systems.") The proliferation of sensors in the battlefield has created what some would call "data overload", where large inflows of real-time data could overwhelm users, and jeopardize the decision-making process. DOD is examining using new "data fusion" centers, which would use special software to filter out battlefield data that is unneeded by warfighters. Also, to make sure that radio frequencies in use don't encounter interference, the US Air Force Electronic Systems Center is working to design a universal tool called the Joint Interface Control Officer (JICO) Support System, which is intended to manage all radio communications traffic in tactical situations. Military systems and software are becoming increasingly complex. Software is used to process sensor data, identify friend and foe, set targets, issue alerts, coordinate actions, and guide decisions for manned and unmanned combat vehicles on land, sea, and in the air. For example, observers estimate that at least 31 million lines of computer code will be required to operate the Army Future Combat System. Also, many military combat systems which now operate as stand-alone equipment will eventually be tied into network systems. However, as complexity grows, components of networked systems may sometimes process information received from other systems whose capabilities, intentions, and trustworthiness are not always known. A recent article published by the Carnegie Mellon Software Engineering Institute about the growing complexity of military computerized systems argues the following: With modern complex systems of systems, most systems are described as "unbounded" because they involve an unknown number of participants or otherwise require individual participants to act and interact in the absence of needed information. For the complex systems of systems being constructed today and defined for the future, it is no longer possible for any human or automated component to have full knowledge of the system. Each component must depend on information received from other systems whose capabilities, intentions, and trustworthiness are unknown. Unbounded systems of systems are fast becoming the norm in many of the most demanding military and commercial applications. These include command-and-control systems, air traffic control systems, the electric power grid, the Internet, individual aircraft, enterprise database systems, and modern PC operating systems. For example, in net-centric warfare as applied by U.S. troops at the beginning of the current war in Iraq, agility and rapid progress were achieved by direct interactions among ground troops, helicopters, artillery, and bombers using equipment whose designs did not anticipate such usage and the accompanying mission changes. Most systems of systems use their component systems in ways that were neither intended nor anticipated. Assumptions that were reasonable and appropriate for individual component systems become sources of errors and malfunction within systems of systems. As a result, the individual systems—and the system of systems as a whole—acquire vulnerabilities that can be triggered accidentally by normal actions of users and automated components, or exploited consciously by intelligent adversaries. Often when problems of interoperability arise in complex systems, there is a tendency to try to gain greater visibility, to extend central control, and to impose stronger standards. Not only are these actions ineffective in complex systems, they also increase the likelihood of certain kinds of accidents, user errors, and other failures. What are called normal accidents are inherent and occur naturally in complex systems. The frequency of normal accidents increases with the degree of coupling in systems. Coupling is increased by central control, overly restrictive specifications, and broadly imposed interface standards. Developers of systems of systems should strive for loose coupling. Military computers are continuously threatened by attack from hackers, or others with malicious intent. One example of a hacker attack is the British programmer, Gary McKinnon, who reportedly used commercially-available off-the-shelf software in several attacks through the Internet to successfully penetrate hundreds of military computers, causing measurable damage, and forcing portions of several military network to shut down temporarily. Also, in Afghanistan, stolen military portable computer drives, some containing classified data and software, were recently discovered for sale in the streets, in public markets, and in local shops. There is growing controversy about whether the U.S. military should rely on general purpose "open-source" commercial computer software for the command, control, and communications functions in advanced defense systems for tanks, aircraft and other complex equipment. An example of open-source code is the popular computer operating system known as Linux, which has been developed by a worldwide community of programmers who continuously add new software features by building on each others' openly-shared source code. Subscriptions can be purchased from different commercial vendors who will provide technical support for specific versions of the Linux open-source software. In contrast, proprietary code created by other commercial vendors is called "closed-source", and includes software products such as Microsoft Windows. Both open-source and closed-source products which are supported by commercial software vendors are commonly referred to as commercial-off-the-shelf (COTS). However, open-source software appears much less expensive than proprietary software, and the reputation it has earned for general soundness and reliability is helping open-source software gain acceptance by different government organizations and the global business community. NSA has researched a secure version of Linux, but it is not clear that all military computer systems that use Linux are restricted by the results of that research. Some experts believe that open-source software violates many security principles, and may be subverted by adversaries who could secretly insert malicious code to cause complex defense systems to malfunction. Other computer experts disagree, stating that precisely because Linux is openly reviewed by a worldwide community of contributing programmers, it has security that cannot easily be compromised by a foreign agency. The open review by many contributors acts as a safeguard against insertion of malicious code. A recent study by the Defense Information Systems Agency (DISA) states that DOD currently uses a significant variety of open-source computer software programs, and concluded that open-source software is vital to DOD information security. This is partly because many information security tools used by DOD are built using open-source code, and effective counterparts are not available from proprietary COTS products. The study also states that DOD web services and DOD software development would be disrupted without continued use of open-source software. This is because many tools that are basic to web design and software development are based on open-source code. Experts at the Naval Post Graduate School reportedly have stated that "software subversion" can only be avoided by using "high-assurance" software that has been proven to be free of any malicious code. Because of the added development rigor and intensive test procedures required to achieve such proof, high-assurance software would cost considerably more than open-source software. However, researchers at the Massachusetts Institute of Technology have reportedly found that as the complexity of a system increases, additional testing does not always reduce the number of vulnerabilities that can remain hidden in computer software. U.S. military forces may be vulnerable to electronic warfare attacks, such as Electromagnetic Pulse (EMP), which is an instantaneous, intense energy field that can overload or disrupt at a distance numerous electrical systems and high technology microcircuits, which are especially sensitive to power surges. A single, specially designed low-yield nuclear explosion high above a local battlefield area can produce a large-scale electromagnetic pulse (EMP) effect that could result in widespread disruption of electronic equipment, without any fatalities due to blast or radiation. A similar EMP effect on a more limited scale could also be produced by using a high-power microwave device, triggered by a conventional explosive. Commercial electronic equipment is now used extensively to support logistics to support the operation of complex U.S. weapons systems. For example, a large percentage of U.S. military communications during Operation Iraqi Freedom was carried by commercial satellites, and much military administrative information is currently routed through the civilian Internet. Many commercial communications satellites, particularly those in low earth orbit, reportedly may degrade or cease to function shortly after a high-altitude EMP attack. Special shielding could reduce this vulnerability in future commercial satellites. However, the current vulnerability of high technology equipment and communications to the effects of EMP could create a new incentive for other countries, or terrorists and extremists, to develop or acquire electronic warfare weapons. The following is a list of key technology areas used to implement NCO for U.S. forces, and related issues. C4I capabilities are the nervous system of the military. DOD is seeking to move from a policy of information "push", where information is labeled and sent by data "owners" only to recipients who are deemed appropriate, to a policy of information "pull", where authenticated users within a given community of interest can request and receive all information available to solve a problem, regardless of the data owner. This shift in policy is intended to promote more widespread information sharing and collaboration. NCO relies on a high-bandwidth communications backbone consisting of fiber optics and satellites, all communicating using Internet Protocol (IP). By 2008, DOD is planning to switch all communications systems from IPV4 to the newer IPV6 to improve communications mobility, create more IP addresses, and reduce system management problems. (For more on IPV6, See Appendix A , "The Transition from Internet Protocol Version 4 (IPv4) to IPv6.") NCO is highly dependent on the interoperability of communications equipment, data, and software to enable networking of people, sensors, and manned and unmanned platforms. Parts of NCO technology rely on line-of-sight radio transmission for microwave or infrared signals, or laser beams. Other parts of the technology aggregate information for transmission through larger network trunks for global distribution via fiber optic cables, microwave towers, or both low-altitude and high-altitude satellites. The designs for this technology must enable rapid communications between individuals in all services, and rapid sharing of data and information between mobile platforms and sensors used by all military services. The architectures must also have the ability to dynamically self-heal and re-form the network when one or more communications nodes are interrupted. DOD officials have noted that the new military Global Information Grid (GIG) must be also designed to interoperate securely with the networks of other organizations outside of DOD, including state and local governments, multinational military commands, and the commercial and research communities. Some observers question whether the U.S. military can achieve true network and systems interoperability among all services. DOD reportedly intends to integrate the architectures of network systems used by all branches of the military to create a network centric capability linked to the GIG (see section below). To help accomplish this integration, the DOD Joint Staff has created a new Force Capability Board (FCB) to monitor NCO programs for mismatches in funding, or mismatches in capability. When an issue is detected, the FCB reports to the Joint Requirements Oversight Council, which then provides guidance during budget deliberations at the Pentagon. Satellites are crucial for enabling mobile communications in remote areas, as well as for providing imagery, navigation, weather information, a missile warning capability, and a capability to "reach back" to the continental United States for added support. For example, the Global Positioning System (GPS), consisting of 28 navigation satellites, helps identify the location of U.S. forces, as well as the locations of targets for guided U.S. weapons, such as cruise missiles. The United States maintains 6 orbital constellations for Intelligence, Surveillance, and Reconnaissance (ISR): one for early warning, two for imagery, and three for signals intelligence. Recently, the Army deployed the Coalition Military Network, a new satellite communications system designed to add bandwidth to support coalition forces in remote areas of Iraq. However, despite the growing number of military satellites, the Defense Information Systems Agency (DISA) reported that up to 84 percent of the satellite communications bandwidth provided to the Operation Iraqi Freedom (OIF) theater was supplied by commercial satellites. Some drawbacks using commercial satellite services became apparent during OIF. U.S. Army officials indicated that the high volume of traffic on Iridium communications satellites at times overwhelmed that system, which also had to suspend service periodically for updates. In addition, the military reportedly was unable to get encrypted data transmission services from the Inmarsat satellite system at transmission rates of 128 kilobits per second, and instead had to settle for rates of 64 kilobits per second, which was too slow for the Army's needs. The Transformational Satellite Communications (TSAT) program, run by the Air Force, is part of a plan to build a satellite-based military Internet. The future TSAT program involves launching 5 military satellites in geosynchronous orbit, with laser communication links and Internet-like routers to provide high-speed, high-capacity communications to U.S. warfighters worldwide. The first TSAT satellite is scheduled to be launched in 2014, with full operational capacity scheduled for 2018. The United States remains highly-dependent on space assets, and has enjoyed space dominance during previous Gulf conflicts largely because its adversaries simply did not exploit space, or act to negate U.S. space systems. However, the United States may not be able to rely on this same advantage in the future. For example, a non-state group could possibly take advantage of commercial space-based technology by leasing satellite bandwidth, or by purchasing high-resolution imagery from suppliers in the Soviet Union, China, or other countries that own and operate space assets. Also, less-technically advanced nations and non-state actors may employ electronic jamming techniques, or launch attacks against satellite ground facilities. News reports show that over a period of several years China has fired high-power laser weapons at U.S. military optical spy satellites as they fly over Chinese territory. Experts say this may have been testing of a new ability to blind the spacecraft. It is not clear how many times China may have tested their ground-based laser system against U.S. satellites, or whether the tests were successful. Individual air-to-ground weapons will be integrated into network centric operations. Recent tests under the Weapons Data Link Network (WDLN) Advanced Concept Technology Demonstration have shown that various weapons can use standard methods to report their status after release from an aircraft, and provide information on their impact. When pilots and ground controllers have two-way communications with network-enabled weapons after they are in flight, new information can be continually supplied to shift the weapon as the target changes location, or to shift the attack to a different target, or to abort the attack. Networked weapons with these capabilities are projected to become operational by 2010. However, if a large volume of weapons are used concurrently in a conflict, this may add considerably to the demand for network bandwidth. Bandwidth is the transmission capacity for any given channel on a network. Since 1991, there has been an explosive increase in military demand for bandwidth, largely due to efforts to speed up the delivery of digital information. Defense officials remain concerned about whether the bandwidth available through DOD communications systems will grow to keep up with increasing military demand in the future. Some observers question whether enough bandwidth will be available in the future to support DOD plans for major NCO systems, such as the Future Combat System, Warfare Information Network - Tactical, and Joint Tactical Radio System. When the supply of bandwidth becomes inadequate during combat, military operations officers have sometimes been forced to subjectively prioritize the transmission of messages. They do this by literally pulling the plug temporarily on some radio or computer switching equipment in order to free up enough bandwidth to allow the highest-priority messages to get through. This can delay messages, or cancel other data transmissions. Latency, or delays in information updates resulting from a bandwidth shortage could leave some units attempting to fight on their computer screens with outdated information, when the enemy changes position faster than the screen image data can be updated. An example of this type of problem occurred in April 2003, when a U.S. Army battalion was surprised by a large force of Iraqi tanks and troops because intelligence systems were unable to update enemy information in databases quickly enough to keep front line units accurately informed. By the year 2010, the Congressional Budget Office estimates that the supply of effective bandwidth in the Army is expected to fall short of peak demand by a ratio of approximately 1 to 10. According to former Assistant Secretary of Defense for Networks and Information Integration (ASD/NII), Paul Stenbit, the primary barrier to achieving the NCO Internet paradigm is finding new ways to meet the demand for bandwidth. Communications infrastructure must have enough bandwidth to allow, for example, several people at different locations in the battlefield to pull the same problem-solving data into their computer systems at the same time, without having to take turns sharing and using the same limited local bandwidth. UVs, also known as Unmanned Aerial Vehicles (UAVs), Ground Vehicles (UGVs), and Underwater Vehicles (UUVs) are primarily used for surveillance. However, their mission is evolving to also include combat, under the title Unmanned Combat Vehicles (UCVs). During OIF, approximately 16 Predator and 1 Global Hawk UAVs were in operation, and all were controllable remotely via satellite link from command centers in the continental United States. UVs each require a large amount of bandwidth for control and for transmission of reconnaissance images. Sensors are being developed to remotely detect movement and heat signatures of enemy equipment. However, some observers have warned that it is likely that future foes will develop technologies to counter U.S. weapons, and will become more sophisticated in cover and concealment, with the possible net effect that U.S. situational awareness on the battlefield could decrease, depending upon the sophistication of the adversary. Software is an important component of all complex defense systems used for NCO. GAO has recommended that DOD follow best practices of private sector software developers to avoid the schedule delays and cost overruns that have plagued past DOD programs dependent on development of complicated software. Many observers of the software industry believe that globalization of the economy dictates a global process for software development. In keeping with the GAO recommendation, contractors for DOD often outsource software development to smaller private firms, and in some cases, programming work is done by offshore companies. This raises questions about the possibility of malicious computer code being inserted to subvert DOD computer systems. However, DOD is currently investigating ways to increase confidence in the security of both foreign and domestic software products, for example, by co-sponsoring with the Department of Homeland Security a series of software assurance forums where government, industry, and academic leaders discuss security methodologies that promote integrity and reliability in software. . Gordon Moore's Law of Integrated Microprocessor Circuits observes that computer semiconductor chips follow an 18-month cycle of evolution where they will become twice as dense and twice as fast for about the same cost. Commercial industries have long relied on the predictability of Moore's Law as a guide for investing in future technology systems. DOD plans for NCO also rely on the predictable growth in computer processing power, but this predictability may be affected by advances in new technologies. New technology developments could be disruptive, for example by reducing circuit size to nanometer units giving rise to extreme miniaturization, or by quickly lowering costs and giving adversaries and terrorist groups easier access to more sophisticated and powerful commercial high-technology equipment. Electronic technologies are critical to the operation of modern, complex systems for communications and weaponry, and much of the technology for U.S. military data networking reportedly comes from Commercial-Off-The-Shelf (COTS) products. Much of this same state-of-the-art COTS technology is readily available on the open market, and is also available to our adversaries. Some officials in DOD also say that off-shore outsourcing of critical design and manufacturing capabilities, along with other factors, has contributed to the erosion of the U.S. lead in key defense technologies. These DOD officials warn that the United States may some day no longer have the asymmetric technology advantage it once had over our existing and potential adversaries. The Defense Science Board has reported that the 1996 voluntary Wassenaar Arrangement, which replaced the Cold War-era international regime that governed semiconductor exports, is not an effective tool for assuring that potential adversaries do not have access to technology for leading-edge design and fabrication equipment for integrated circuits. In addition, non-allied foreign acquisition of any U.S. company that manufactures or develops items of defense significance can erode the security of the defense industrial base. China, in particular, has reportedly procured advanced weapons and technology from abroad to make up for deficiencies in its domestic military sector. In doing so, China has reportedly developed an active policy of acquiring foreign industrial and manufacturing production lines, and then seeking U.S. export licenses for advanced semiconductor fabrication instruments and equipment. The Defense Science Board has also identified the increasing shift of U.S. semiconductor fabrication and design technology offshore as a critical national security challenge. Past supplies of classified integrated circuits have come from government-owned facilities operated by the National Security Agency (NSA) and Sandia National Laboratory. However, technological evolution, and new methods for mass production, have reportedly raised the cost of low-production-volume custom integrated circuits used by DOD, and made government facilities obsolete. As a result, there is no longer a diverse base of U.S. integrated circuit fabricators capable of meeting DOD needs. The DSB report calls for DOD and the defense industry to develop a new economic model for profitably producing a limited number of custom circuits and equipment for U.S. military systems. U.S. corporations are now sending more high-level research and development (R&D) work to off-shore partners. For example, as early as 1998, Intel Corporation, Microsoft Corporation, and other IT vendors opened new R&D facilities in Beijing and other parts of Asia. Microsoft also reportedly has 200 Ph.D. candidates and 170 researchers currently working in its Asia R&D facilities. The Gartner Group research firm has reported that corporate spending for offshore information technology (IT) services will increase from $1.8 billion in 2003 to more than $26 billion in 2007, with half of the work going to Asian countries such as India and China. Contracting for national defense is reportedly among the most heavily outsourced of activities in the federal government, with the ratio of private sector jobs to civil service jobs within DOD nearly five to one. However, a 2004 study by DOD concluded that utilizing foreign companies as sources for high-technology equipment does not affect long-term military readiness. Operation Iraqi Freedom (OIF) might be more accurately characterized as a transitional rather than transformational operation because NCO technology was not fully deployed in all units during OIF, and some systems proved not to be user-friendly. Nevertheless, some observers feel that OIF proved the effectiveness and potential of network enhanced warfare, while others believe that it is hard to interpret the NCO experiences objectively, partly because the review process may sometimes be distorted by the internal military bias that favors force transformation. Still others point out that experiences using NCO technology may be misleading because recent U.S. adversaries were relatively weak militaries, including Panama (1990), Iraq (1991), Serbia (1999), and Afghanistan (2001). A March 2005 report from the U.S. Army War College asserts that network-enabled operations achieved proof of concept in the major combat operations phase of Operation Iraqi Freedom. The report further states that net centric operations enhanced the ability of U.S. forces to conduct battles and campaigns by providing a common operating picture and situational awareness never before experienced in combat. A case study by the Office of Force Transformation concluded that the deployment of some net centric technologies during OIF improved operational effectiveness specifically for planning, command and control agility, tempo, and synchronization. Increased networking during OIF reportedly allowed U.S. forces to develop a much improved capability for coordinating quick targeting. In Operation Desert Storm in 1991, coordinating efforts for targeting required an elapsed time of as much as four days. In Operation Iraqi Freedom, U.S. forces reduced that time to about 45 minutes. During April 2003, the Marine Corps Systems Command compiled comments from some soldiers about their experiences using several new communications systems during combat operations in Iraq. Comments from soldiers and other observers follow: (1) Several communicators, operations officers, and commanders reportedly stated that they felt generally overloaded with information, and sometimes much of that information had little bearing on their missions. They stated that they received messages and images over too many different networks, requiring them to operate a large number of different models of communications equipment. (2) Some troops stated that when on the move, or when challenged by line-of-sight constraints, they often used military email and "chat room" messages for communications (This usually required linking to a satellite). (1) Force XXI Battle Command, Brigade and Below (FBCB2), with Blue Force Tracker, received widespread praise from troops for helping to reduce the problem of fratricide. Blue Force Tracker (BFT) is a generic term for a portable computer unit carried by personnel, vehicles, or aircraft that determines its own location via the Global Positioning System, then continuously transmits that data by satellite communications. The position of each individual unit then appears as a blue icon on the display of all other Blue Force Tracker terminals, which were used by commanders on the battlefield, or viewed at remote command centers. Clicking on any blue icon would show its individual direction and speed. A double-click reportedly would enable transmission of a text message directly to that individual unit, via satellite. (2) Objective Peach involved U.S. forces defending a captured bridge from Iraqi forces on the morning of April 3, 2003. The commander of the U.S. forces reportedly complained that he received no information from sensors to provide warning when his position was attacked by 5,000 Iraqi soldiers approaching under cover of night, backed up by 25 tanks and 70 armored personnel carriers. Subsequent investigation revealed that at division level and above, the sensor information was adequate, but among front-line Army commanders, there was inadequate support to aid situational awareness on the ground. (3) During a blinding sandstorm lasting from March 25 to 28, 2003, a U.S. radar plane detected Iraqi forces maneuvering near U.S. troops. U.S. bombers attacked the enemy units using satellite-guided bombs that were unaffected by poor visibility. The Blue Force Tracker system ensured that friendly forces were identified and not harmed during the successful bombing attack. Satellite communications played a crucial role for transmitting message and imagery data during OIF operations, and also enabled U.S. forces in the field to "reach back" to the continental United States for support. However, a growing dependence on space communications may also become a critical vulnerability for NCO. (1) Commercial satellites were used to supplement military communications, which lacked capacity despite the fact that a number of military satellites were moved to a better geostationary orbital position for both Afghanistan and Iraq. DOD satellites cannot satisfy the entire military demand for satellite bandwidth, and therefore DOD has become the single largest customer for commercial or civilian satellite services. DOD sometimes leases commercial satellite bandwidth through DISA, and at other times bypasses the process to buy directly from industry. However, bypassing DISA may reduce interoperability between the services, and may increase redundancies. (2) During the OIF conflict, communications trunk lines, including satellite transmissions, were often "saturated", with all available digital bandwidth used up. The peak rate of bandwidth consumed during OIF was approximately 3 Gigabits-per-second, which is about 30 times the peak rate consumed during Operation Desert Storm in 1991. Some problems with delayed arrival of messages during OIF may have occurred due to unresolved questions about managing and allocating bandwidth. Sometimes, when demand for bandwidth was high, NCO messages with lower priority were reportedly dropped deliberately so that other messages with a higher priority could be transmitted. (1) The speed with which U.S. forces moved, a shortage of satellite communications, and the inability to string fiber nationwide hampered efforts to provide adequate bandwidth. At times, some commanders were required to share a single communications channel, forcing them to wait to use it whenever it became free. (2) Brigade-level command posts could view satellite and detailed UAV images, but battalion-level commanders, and lower command levels, could not view those same images. The lower-level commands are where greater detail is critical. (3) Although the Army has invested in military-only decision-support systems, some of the planning and collective decision-making during OIF was handled through email and chat-rooms that soldiers were familiar with, that were "user-friendly" and reliable, that were available when other systems experienced transmission delays, and that required little or no training. UAVs sometimes carry thermal cameras that can see through darkness or rain. These reportedly gave military planners so much confidence when orchestrating raids, they often skipped the usual time-consuming rehearsals and contingency planning. However, without early air dominance, UAVs and other Intelligence Surveillance and Reconnaissance (ISR) aircraft could not have been used to provide information needed for NCO systems. UAVs, and other support aircraft, such as refueling support tankers, are nearly defenseless and reportedly cannot operate without early air dominance. Using NCO technology with coalition forces resulted in reduced fratricide during OIF. However, during OIF, coalition assets reportedly operated as separate entities, and were often locked out of U.S. planning and execution because most information was posted on systems accessible only to U.S. forces. For example, most major air missions, that used NCO technology for coalition operations, involved only U.S. aircraft. Policy for sharing of classified information requires a separate contract agreement between the United States and each coalition partner. DOD currently maintains 84 separate secure networks for NCO coalition operations: one for each coalition partner. This is because U.S. National Disclosure Policy restricts what information may be released to coalition partners. In addition, each coalition partner nation has a corresponding policy for release of its own sensitive information. As a result of these policies, operations planning information was distributed to coalition forces using a manual process, and the transfer of data fell behind combat operations. A secure single network is required to efficiently share information among multiple partners, with a capability to dynamically add and subtract coalition partners. DOD has initiated a program called "Network Centric Enterprise Services" (NCES, also known as "Horizontal Fusion") to make information immediately available to coalition partners, while also providing strong security through network encryption technologies and dynamic access controls. However, this technical solution may not affect the differences in the individual policies that restrict information sharing among coalition partners. Military operations today generally are generally conducted with coalition partners. A coalition member that is unable to efficiently communicate situational information and other data electronically exert an unacceptable drag on the collective operations of all coalition members. Therefore, militaries of some other countries have developed Network Enabled Capability (NEC) technologies similar to those used by joint U.S. forces. NEC is the European equivalent of NCO, and is at the heart of defence transformation ongoing in militaries throughout Europe. NEC is defined as the coherent integration of sensors, decision-makers and weapon systems along with support capabilities to create superior decision-making. This will enable military forces to operate more effectively in the future strategic environment through the more efficient sharing and exploitation of information. Some countries also view NEC as a way to reduce their military budgets by gaining efficiency through networking with coalition partners. Observers note that European and other coalition partners now deploying NEC equipment are still not yet interoperable with NCO equipment operated by the U.S. military. NATO is currently building a NEC capability for dynamic interoperability with U.S. forces in the future and is developing a framework for high-technology warfare using the combined forces of multiple nations. Called the NATO Network Enabled Capabilities (NNEC), it is similar to the U.S. military's Joint Vision 2020. The confidential NATO 2005 Defense Requirements Review reportedly describes newer capabilities needed by allied commanders, including a description of technologies for sensors for sharing intelligence among allied warfighters. However, problems have been encountered with the U.S. National Disclosure Policy, which restricts release of classified information, and with the International Traffic in Arms rules which govern the export of unclassified technical data, and affect technology transfer (see previous section titled, " Technology Transfer Threat to U.S. Net Centric Advantages "). Initially, the DOD Office of Force Transformation constructed a conceptual model to study net centric operations. However, NATO has since developed another conceptual model to test newer network centric approaches to military command and control (C2). To resolve differences, and establish open, interoperable standards for NEC and NCO, a new Network Centric Operations Industry Consortium has been created. The consortium consists of about 80 defense and information technology companies, of which 19 are European. The Australian Defense Force is developing innovative networked sensor technologies, and testing autonomous unmanned vehicles to offset the small size of their military. They are testing network communications that will allow one operator to control a formation of unmanned aerial vehicles that can be programmed to peel off independently for surveillance, or to launch an attack. The French reportedly are implementing a concept called "Guerre Infocentre", or Infocentric Warfare, which emphasizes the importance of information flows rather than the network itself. The initial program is called the Future Air Land Combat Network System, which will enable different combat platforms to contribute to cooperative engagement of targets. Plans call for development of a future soldier system for the German Army, called "Infanterist der Zuknft", which will introduce new ways of networking between combat units and higher command levels. The system includes optical components, soldier-level computing equipment, and a tactical military internet which links voice and data systems. The UK is reportedly building its own Global Information Infrastructure, which is a single, general purpose network, with a specialized security architecture and a family of joint command battlespace management applications. The UK system design will expand to allow multinational forces, such as the United State, Canada, Australia, and New Zealand to also reach through each others' protective electronic boundaries to share a common operating picture through Voice Over IP and video teleconferencing. During the brief 2006 conflict with Syrian- and Iranian-supported Hizballah, Israel reportedly combined tactical unmanned aerial vehicles with their new Tzayad digitized command-and-control systems to locate and destroy many of Hizballah's rocket launchers. Experts reported that Israeli brigades that were equipped with the latest digital equipment were able to apply firepower in a very effective manner. China reportedly has considerable and growing capabilities for developing information technology and networks. Chinese officials have reportedly noted that future military plans call for China to focus on developing new-concept weapons, such as electromagnetic pulse (EMP) systems for jamming adversary networks, and new satellites for establishing a unique GPS network for the Chinese military. China has also reportedly networked its forces using the European "Galileo" space-based global positioning system Recent publications from China on security and national defense policy use terms such as "informationalization" and "Integrated Network-Electronic Warfare" (INEW), while describing how warfare is becoming more information oriented. Chinese military officials have stated that the INEW concept is comparable to U.S. Net Centric Operations. However, while INEW involves acquiring both defensive and offensive information operations capabilities, there is a priority placed on developing active strategies for offensive information operations. DOD officials acknowledge that China has been conducting research to develop ground-based laser anti-satellite weapons. Some officials claim that China in recent years may have tested the means to harm or destroy U.S. satellites. However, a recent statement by DOD did not confirm or deny this possibility. The United States military relies on commercial satellites for up to 80 percent of DOD space-based communications, according to space officials. DOD officials also report that hacker attacks directed against U.S. military networks increased approximately fifty percent between 2003 and 2004. Officials also state that most of these computer intrusions were originating from within China, with one extended attack involving the theft of perhaps 10 to 20 terabytes of data from the DOD Non-Classified IP Router Network. These attacks may indicate that China, and perhaps other countries, are developing or testing skills to defeat U.S. Network Centric Operations. Other non-state groups also watch as the United States and other countries network their forces. In many cases, these groups are able to bypass much of the R&D associated with creating and testing new networked services, and instead are able to purchase Commercial-Off-Shelf (COTS) products and equipment adequate for their purposes. These sophisticated commercial technologies may enable smaller countries, or Al Qaeda or Hamas, to project an advanced and adaptive electronic warfare threat. In 2003 the U.S. government launched an investigation code named "Titan Rain" after detecting a series of persistent intelligence-gathering cyberattacks directed at military computer systems. The attackers demonstrated a high level of sophistication, and the investigation led many security experts to believe that the computer intrusions originated from sources in China. The targeted systems included (1) the U.S. Army Information Systems Engineering Command at Fort Huachuca, Arizona, (2) the Defense Information Systems Agency in Arlington, Virginia, (3) the Naval Ocean Systems Center in San Diego, California, (4) the U.S. Army Space and Strategic Defense installation in Huntsville, Alabama, and many other installations. In 2004, the Army base at Fort Campbell, Kentucky initiated a multimillion-dollar program to secure its computer systems after its networks were penetrated for a period of approximately two months, during a sustained intelligence-gathering cyberattack. Although these attacks persisted over a long period of time, the U.S. government claims that no classified information was compromised. Recently, China was also blamed for cyber intrusions that disabled the computer networks of the Department of Commerce Bureau of Industry and Security, which is responsible for controlling U.S. exports of software and technology for both commercial and military use. The attacks were traced to websites registered with Chinese Internet service providers. However, other analysts caution that a sophisticated opponent, such as China, would not leave clues pointing back to itself. Instead, another sophisticated opponent could use China as a platform for third party computer attacks. China's civilian computer networks are very vulnerable to viruses. Some estimates reportedly say that up to 90% of the software used in China is pirated, lacking in the most important security patches, and especially vulnerable to being taken over by malicious code. Therefore, any attack that can be traced back to China may actually demonstrate very little about the true source. Sophisticated hacking tools are widely available on the Internet, and some hackers advertise their cybercrime skills for hire to other organizations, which could include extremists, both domestic and international. After the 34-day war with Israel in 2006, Hizballah was described by some Israeli officials as a well-equipped, networked force still capable of commanding its combat units after weeks of high-intensity fighting. Hizballah's units were supported by a well-fortified terrestrial communications network supplemented by satellite telephone and broadcast services, including the Al-Manar television network. Hizballah units also reportedly had the capability to attempt eavesdropping on Israeli cellular networks. Hamas was reportedly inspired by the way Hizballah fought against Israel in Lebanon, and the organization continues to receive increasing support from both Iran and Hizballah in the form of weapons, funding, and training. Hizballah is also reportedly sharing with Hamas operatives many of the lessons they learned from the recent military engagement with Israel. Al Qaeda networks, in addition to technology, often rely on dispersed cells of people that are under central direction, which allows the organization to be highly flexible, elusive, and adaptable. As Al Qaeda evolves to using newer commercially available communication systems, dispersed cells may become more coordinated and self-organizing, with increased situational awareness, with the possible future capability of conducting their own network operations, in ways similar to the network operations of current U.S. military units. The following are key DOD programs related to NCO. The GIG is the communications infrastructure that supports DOD and related intelligence community missions and functions, and enables sharing of information between all military bases, mobile platforms, and deployed sites. The GIG also provides communications interfaces to coalition, allied, and non-DOD users and systems. Key service network architectures for implementing an important NCO capability through the GIG are the Air Force C2 Constellation, Navy and Marine Corps ForceNet, and Army LandWarNet. The Joint Task Force - Global Network Operations is tasked with operation and defense of the GIG. DOD is planning that 2008 military communications equipment will use the new Internet Protocol version 6 (IPv6) as the standard for all transmission through the Global Information Grid (GIG), and for all Defense Information System Network systems that will interoperate with the GIG. The new IPv6 protocol offers greater message security and better tracking of equipment, supplies, and personnel through use of digital tags (See Appendix A , "The Transition from Internet Protocol Version 4 (IPv4) to IPv6"). It is noteworthy that in a 2006 study, the Government Accountability Office found that the GIG lacks clearly defined leadership able to cut across organizational lines. GAO warned that without adequate leadership the GIG program could exceed cost and schedule requirements, partly due to development and acquisition methods characterized as "stovepiped" and "uncoordinated". The AT3 system combines information collected by an airborne network of sensors to identify the precise location of enemy air defense systems. The system relies on coordination of information from different systems aboard multiple aircraft. Tactical Data Links (TDLs) are used in combat for machine-to-machine exchange of information messages such as radar tracks, target information, platform status, imagery, and command assignments. The purpose of this program is to insure the interoperability of Air Force TDLs. TDLs are used by weapons, platforms, and sensors of all services. The CEC system links Navy ships and aircraft operating in a particular area into a single, integrated air-defense network in which radar data collected by each platform is transmitted in a real-time to the other units in the network. Each unit in the CEC network fuses its own radar data with data received from the other units. As a result, units in the network share a common, composite, real-time air-defense picture. CEC will permit a ship to shoot air-defense missiles at incoming anti-ship missiles that the ship itself cannot see, using radar targeting data gathered by other units in the network. It will also permit air-defense missiles fired by one ship to be guided by other ships or aircraft. FBCB2, used with Blue Force Tracker computer equipment, is the U.S. Army's main digital system that uses the Tactical Internet for sending real-time battle data to forces on the battlefield. During Iraq operations, this system was used in some Bradley Fighting Vehicles and M1A1 Abrams tanks, and replaced paper maps and routine reporting by radio voice communication. The computer images and GPS capabilities allowed tank crews to use Blue Force Tracker to pinpoint their locations, even amid Iraqi sand storms, similar to the way pilots use instruments to fly in bad weather. Officials stationed at the Pentagon using Blue Force Tracker receivers were also able to observe the movements of U.S. forces. The software-based JTRS Program is intended to bring together separate service-led programs into a joint software-defined radio development effort. JTRS is a family of common, software-defined, programmable radios that are intended to interoperate with existing radio systems and provide the additional capability to access maps and other visual data by allowing the war fighter to communicate directly with battlefield sensors. DOD has determined that all future military radio systems should be developed in compliance with the architecture for JTRS. JTRS will initially be used by the Army as its primary tactical radio for mobile communications, including satellite communications. Acquisition for the JTRS program is being carried out through a series of five separate but interrelated clusters, with each cluster intended to meet a specific DOD requirement. The Warfighter Information Network (WIN-T) is a high-capacity network system that will allow units and command centers to communicate while on the move. The Joint Network Nodes (JNN) is the bridge between the Cold War legacy 30-year-old Mobile Subscriber Equipment and the WIN-T. JNN currently gives brigade and battalion command posts a "reach-back" capability for direct contact with bases in the continental United States, or other locations. JNN provides a significant increase in capability to Army modular units by providing satellite-based high bandwidth communications down to the battalion level. The Future Combat System (FCS) is intended to be the U.S. Army's multi year, multi-billion-dollar program at the heart of the Army's transformation efforts. It is to be the Army's major research, development, and acquisition program consisting of 18 manned and unmanned systems tied together by an extensive communications and information network. FCS is intended to replace such current systems as the M-1 Abrams tank and the M-2 Bradley infantry fighting vehicle with advanced, networked combat systems. Potential oversight issues for Congress pertaining to NCO include the following. Does Congress have sufficient information on the full scope of the Administration's strategy for implementing NCO to conduct effective oversight? Are programs critical for NCO adequately identified as such in the DOD budget? Does the Administration's plan for defense transformation place too much, too little, or about the right amount of emphasis on NCO? Is the strategy for implementing NCO paced too quickly, too slowly, or at about the right speed? Does the Administration's strategy for implementing NCO programs call for too much, too little, or about the right amount of funding? How are "network centric" items identified separately in the budget line items? Is the Administration's strategy for implementing NCO sufficiently joint? Officials at DOD have recently said that when individuals responsible for program management fail to collaborate properly, program offices sometimes move forward working on requirements tailored for their specific service, rather than working on joint requirements. Is there adequate overall DOD information architecture or enterprise architecture? Do the current service network architectures—Army LandWarNet, Navy ForceNet, Air Force C2 constellation—allow systems to work together through the GIG, or do they function along service boundaries inconsistent with the joint environment? Has DOD provided industry with sufficiently clear definitions of the architectures for its various desired NCO systems? If not, when does DOD plan to provide industry with such definitions? What are the potential risks of inadequately defined architectures? What is the role of the Defense Information Systems Agency (DISA) in managing the DOD implementation of NCO? Does DISA have too much, not enough, or about the right amount of policy and funding authority to fulfill its role? Has DISA developed an adequate NCO roadmap to help guide investments, and if not, when does DISA plan to issue such a roadmap? The FCS concept originally consisted of consisting of 18 manned and unmanned systems to be tied together by a network of advanced offensive, defensive, and communications/information systems, including WIN-T and the JTRS. The FCS is experiencing a number of program development issues - with some technologies advancing quicker than anticipated, others progressing along predicted lines, while still others are not meeting the Army's expectations. Is the FCS high technology concept appropriate for the types of conflicts that the U.S. will likely experience in the Global War on Terror? Some additional security features that help protect satellites from electronic attack may consume portions of bandwidth that could otherwise be used for communications. News reports note that DOD may, in some cases, be designing military satellites with reduced security features in order to free more bandwidth to support growing communications needs. Over 100 different UAVs of 10 different types were used in Operation Iraqi Freedom. Worldwide spending on UAVs will likely increase over the next decade to $4.5 billion annually, according to one defense analyst. However, officials from the Government Accountability Office recently reported that DOD lacks a "viable and strategic" plan for developing and acquiring unmanned vehicles. This problem has resulted in cost overruns, delivery delays, and duplication of effort. As a result of the Quadrennial Defense Review, the joint structure of the Joint Unmanned Combat Aerial System (J-UCAS) program was ended, and some UAV programs are now being developed separately by the Navy and Air Force. The J-UCAS program had combined the efforts previously conducted under the DARPA/Air Force Unmanned Combat Air Vehicle (UCAV) program and the DARPA/Navy Naval UCAV (UCAV-N) program, for a common architecture to maximize interoperability. It is uncertain how many crossover benefits can be mutually provided by separate Navy and Air Force efforts because requirements are now very divergent. Other problems reportedly include issues of interoperability of UAVs with ground forces, limited availability of bandwidth, and problems with having both manned and unmanned aerial vehicles share airspace. "Blue Force Tracker" describes a technical capability that has received widespread praise from troops for helping to reduce the problem of fratricide. During the 1991 Gulf War, friendly fire accounted for about 24 percent of 148 U.S. combat deaths, however, the rate declined to about 11 percent of 115 U.S. deaths during major combat in Iraq in 2003. Many top leaders credit Blue Force Tracker (BFT) technology with saving lives during combat. The Blue Force Tracking System reportedly proved so successful in Iraq and Afghanistan that the Army is fielding it to additional units. Observers state that BFT is directly responsible for significant reduction in vehicle-to-vehicle fratricide, and, for example, allowed the Third Infantry Division to fight through darkness and sandstorms on its way to Baghdad. Some questions remain that may affect the future development of BFT equipment and capabilities. Will the Blue Force Tracker database be designed with sufficient categories to enable tracking of different weapon types, vehicles, and individual soldiers for future joint, and coalition operations? Is training adequate for military operators to handle complex BFT capabilities? Will the military have sufficient bandwidth available for future needs? As technology evolves, will the supply of bandwidth support the deployment of miniaturized BFT communications equipment for the individual soldier? Is BFT adequately supported when operating in urban areas and complex terrains, where structures may block radio signals? The Joint Tactical Radio System (JTRS) is intended to enable faster, more streamlined communications among many different types of forces, but stalled development of this system may have created an obstacle to the full implementation of net-centric operations. Originally, the JTRS program was intended to replace DOD legacy radios operating between 2 megahertz and 2 gigahertz, and which were not designed to communicate with each other. However, requirements were modified in 2004 so that future JTRS radios would also include frequencies above 2 gigahertz, to allow communication with satellites and to support future access to the military Global Information Grid. To spur development of JTRS, DOD in November 2004, developed a policy that restricted the purchase of non-JTRS radios already on the market. However, this policy was cited by Congress as an impediment to meeting the needs of operational commanders in the field. JTRS is seen now as a program to enhance, rather than replace, existing legacy radios, and JTRS systems will eventually replace legacy radios as they wear out. Is information overrated as an asset for NCO? How thoroughly has the administration studied the risks associated with data-dependent military doctrine? Several observers have argued that DOD plans stress only the rewards of information without including adequate analysis of the risks associated with possible over-reliance on data-driven systems. Some elite network centric corporations with state-of-the-art systems that offer "information superiority" have experienced perverse results, and sometimes even catastrophic economic losses (See Appendix C , "Perverse Consequences of Data-Dependent Systems"). Congress could encourage DOD to examine the economics of information in order to avoid similar perverse consequences on the battlefield that may be created by "information abundance." How well are coalition forces adapting to NCO? How are U.S. forces affected if coalition networks to which we must link are not as secure and robust? What are implications for future NCO operations when there is a need to share classified information with coalition forces and foreign countries? Is it possible to give Allies access to C4ISR information to improve collaboration during high-speed combat operations, while still protecting other information that is sensitive or classified? Will differences in the national disclosure policies for each coalition nation restrict sharing of necessary information among all partners during training operations, and if so, will this threaten the effectiveness of training? Will U.S. analysts or warfighters be overwhelmed by the vast increase in information that will flow if all coalition NCO networks are seamlessly linked to the U.S. NCO network? Will potential enemies probe for weaknesses in the links between the different networks operated by less sophisticated coalition forces, and thus find a way to disrupt the networks of U.S. forces? The same issues that affect DOD operations with coalition partners may also affect coordination with U.S. first-responders during domestic attacks by terrorists. Should DOD networks also be extended to first-responders who may need support during possible widespread attacks involving nuclear bombs or biological weapons; for example, geo-spatial images from UAVs monitoring domestic areas? Should policy allow domestic first-responders to input, view, or update important data during such an attack, even though some may not have appropriate security clearances? The global diffusion of technology will lead to the eventual loss of the monopoly position now enjoyed by U.S. forces using sophisticated networks and communications equipment. The United States may eventually face adversaries equipped with COTS technologies that provide many NCO capabilities. Technology transfer and offshore outsourcing may also increase the number of foreign-nationals who are experts in newer Internet technologies and software applications (See Appendix A , "The Transition from Internet Protocol Version 4 (IPv4) to IPv6"). Does the Administration's strategy pay sufficient attention to possible national security issues related to technology transfer? What controls does DOD have in place regarding offshore subcontracting that ensure security? Several potential adversaries reportedly have a military strategy that focuses on engaging the United States asymmetrically, rather than with conventional forces. China, for example, is reportedly tailoring its military capabilities to directly, or indirectly, undermine U.S. technological advantages. Does the Administration's strategy for implementing NCO pay sufficient attention to asymmetric threats and growth of technology skills in other countries? How is DOD working with industry to find ways to protect software against cyber threats, including those possibly related to offshore outsourcing of R&D and information technology services? Several policy options that may reduce risk to the effectiveness of NCO due to growth of technology skills in foreign countries may include (1) encourage companies to maintain critical design and manufacturing functions inside the U.S., (2) encourage highly skilled individuals to relocate to areas in the U.S. where industries are in need of technical professionals, or (3) encourage U.S. high technology workers to update and increase their set of job skills. Does the Administration's strategy for implementing NCO incorporate the right technologies and strategy for acquisition? Some observers have stated there is not enough coordination between DOD and the private sector officials involved in information technology acquisition. Others have suggested that the acquisitions community must communicate more directly with the most forward areas of the military, where the business processes deliver value to the war-fighter, so that needs are more clearly understood. DOD Directive 5000 requires that acquisition for all equipment and systems must follow a standard process which involves an examination of requirements, safety testing, developmental testing, and operational testing. However, the acquisition for an information system sometimes requires the same processes as that used for acquiring a major weapons system. For a critically needed system, an operational needs statement (ONS) can sometimes shorten the debate about requirements, and also shorten the traditional testing process, thereby speeding acquisition and deployment of critical systems to warfighting units. Also, in some circumstances, to reduce delays in deployment of critical equipment and systems, the Secretary of Defense was given rapid acquisition authority to waive all federal acquisition regulations for acquisition of equipment. Some observers have suggested that another possibility for speeding up the process for acquisition and deployment would be to give Combatant Commanders limited acquisition authority. For example, the United States Special Operations Command (SOCOM) already has been granted acquisition authority, and reportedly they use it efficiently, and find they are able to buy off-the-shelf technologies to meet some requirements. Future research into areas such as nanotechnology will likely lead to radically new innovations in material science, fabrication, and computer architecture. However, the basic research to develop new technologies requires high-risk investment, and increasingly involves international collaboration. Maintaining a U.S. military advantage for NCO may require stronger policies that encourage domestic education in science and high-technology, and that nurture long-term research that is bounded within the United States private sector, universities, and government laboratories. (1) Technologies: Is DOD making sufficient investments for R&D in nanotechnology? Nanoscience may fundamentally alter military equipment, weapons, and operations for U.S. forces, and possibly for future U.S. adversaries. Does the Administration's plan pay sufficient attention to creating solutions to meet bandwidth requirements for implementing NCO? Latency, which is often caused by a bandwidth bottleneck, is an important complaint of warfighters. How do messages that are either dropped, lost, or delayed during transmission alter the effectiveness of Network Centric Operations? (2) Acquisition: All DOD acquisition programs require a key performance parameter for interoperability and for successful exchange of critical information. Development of some weapons in the past has rendered them obsolete by the time they are finally produced, sometimes 15 to 20 years later. Admiral Arthur Cebrowski, former director of the DOD Office of Force Transformation reportedly proposed that program development cycles be brought in line with those of commercial industry, which are typically measured in months and years, instead of decades. How does the traditional DOD long acquisition cycle keep up with new commercial developments for high technology? NCO enables the military to fight with smaller units, moving rapidly using "swarming tactics". Has DOD developed adequate joint doctrine for NCO? Do training exercises involve coalition partners with complimentary NCO capabilities? How do differences in NCO capabilities of other coalition partners affect U.S. warfighting capabilities? What are the potential risks of inadequately developed doctrine for joint or coalition operations using NCO? Does doctrine for NCO also stress civilian casualty prevention and protection? What are the changing requirements for finding and recruiting personnel who are qualified to operate high-technology NCO equipment? Finally, if terrorist groups become more local and smaller in size, will law-enforcement activities, coupled with good intelligence, displace military operations as a more effective pre-emptive strategy for the future, partly because it may be seen as less controversial? No bills have yet been introduced in the current congress that are directly related to network centric operations. This report will be updated as events warrant. Appendix A. The Transition from Internet Protocol Version 4 (IPv4) to IPv6 The Internet Protocol version 4 (IPv4) is the name of the digital signal transport protocol that has been used for global communications through the Internet since the 1970s. The U.S. military now uses several transport protocols for digital communications in addition to IPv4. However, DOD planners see a need for more network capabilities to support future NCO operations. By 2008, DOD is planning to convert digital military communications to use the newer Internet Protocol version 6 (IPv6) as the standard for all transmission through the Global Information Grid (GIG), and for all systems that are part of the Defense Information System Network (DISN) that will interoperate with the GIG. IPv6 technology is considered the next-generation Internet transport protocol, and all commercial network communications equipment (also heavily used by the military) will eventually transition to its use, and gradually reduce support for IPv4. This is because IPv6 offers advantages in speed, capacity, and flexibility over IPv4. For example, IPv6 will enable network users to more easily set up a secure virtual private network (also known as secure tunneling through a network) than with IPv4. Using IPv6, hardware devices can be attached to a network and configured more easily, which will also provide mobile users with easier and faster access to network services. However, because use of IPv4 is so firmly embedded in the commercial systems now used in the United States, the transition for the civilian communications infrastructure in other countries may go more smoothly and quickly. This is because new communications infrastructures now being built in other countries will use the newest equipment with IPv6 capability already built in. This may also mean that much of the talent for managing the new IPv6 technology may eventually belong to technicians and programmers who reside in countries outside the United States. Research has shown that regional agglomeration of technical expertise increases active sharing of tacit knowledge among groups of innovators. Some of that tacit knowledge may also include sharing of information about newly-discovered vulnerabilities for the IPv6 technology. What follows is a brief explanation of some technical differences between IPv4 and IPv6, and a discussion of possible economic and security issues related to the coming transition to the new Internet protocol. Technical Differences Between IPv4 and IPv6 Information is sent through the Internet using packets (approximately 4000 digital bits per packet), and which include the address of the sender and the intended destination. Internet Protocol version 4 (IPv4) has been used globally since before 1983. However, IPv4 information packets are designed to carry an address in a 32-bit field, which means that IPv4 can only support approximately 4,000,000,000 Internet devices (computers, routers, websites, etc.). With Internet access expanding globally, and with more types of equipment now using Internet addresses (e.g., cell phones, household appliances, and PDAs) the number of Internet addresses needed for connected equipment could soon exceed the addressing capacity of the IPv4 protocol. For example, slightly more than 3 billion of the 4 billion possible 32-bit IPv4 addresses are now allocated to U.S.-operated ISPs. In contrast, China and South Korea, with a combined population of more than 1.3 billion, are allocated 38.5 million and 23.6 million respectively. Therefore, Asian counties are especially interested in the possibilities that come with adoption of IPv6. Internet Protocol version 6 (IPv6) quadruples the size of the address field from 32 bits to 128 bits (IPv1-IPv3, and IPv5 reportedly never emerged from testing in the laboratory). IPv6 could theoretically provide each person on the planet with as many as 60 thousand trillion-trillion unique Internet addresses. Theoretically, by switching to IPv6, humanity will never run out of Internet addresses. IPv6 is also believed to be more secure than IPv4 because it offers a feature for encryption at the IP-level. However, several drawbacks may slow the global adoption of the IPv6 standard. Switching to IPv6 means that software applications that now use Internet addresses need to be changed. Every Web browser, every computer, every email application, and every Web server must be upgraded to handle the 128-bit address for IPv6. The routers that operate the Internet backbone now implement IPv4 via computer hardware, and cannot route IPv6 over the same hardware. By adding software to route IPv6 packets, the routers will operate more slowly, which may cripple the Internet. Alternatively, upgrading and replacing the hardware for millions of Internet routers would be very costly. IPv4 also uses a technology feature called Natural Address Translation (NAT) which effectively multiplies the number of IP address that may exist behind any single firewall. This technology trick is widely employed within the United States, and its usage also adds an extra layer of security to both commercial networks and home PC networks that have a router. NAT allows a home user to connect multiple PCs to their home network, so they all can share a single IPv4 address behind the router/firewall. By using NAT, it is possible, and certainly much cheaper, to put off or ignore the problem of running out of IPv4 addresses. At least temporarily, in the United States, most technologists prefer sticking with NAT rather than switching over to IPv6. Also, despite the new feature that allows IP-level encryption, there may be new security problems associated with converting to IPv6. Whenever new code is deployed onto computers, undiscovered bugs are usually soon discovered through study and repeated experimentation by hackers. Therefore, IPv6 may well hold security surprises that the designers have simply not found through extensive testing. And because switching over to IPv6 will be a global undertaking, some of the newly discovered security problems could possibly become critical, and even threaten the functioning of the Internet itself. IPv6 also offers other technical advantages over IPv4. For example, IPv6 makes peer-to-peer communication between individual computers much easier than with IPv4. This will make applications like Internet telephony and next generation multi-media groupware work much more smoothly. Technology Divide The opportunity to leapfrog past older Internet technology may someday result in increased expertise in newer technology for technicians and engineers who reside outside the United States. For example, countries such as India, North Korea, Iran, Pakistan, and Iraq that are now building new communications infrastructures for Internet commerce, may initially adopt the latest network switching equipment using the newer IPv6 technology, and thus leapfrog over IPv4. Meanwhile, industries in the United States, which are already heavily invested in older IPv4 technology, may remain tied to IPv4 using the NAT technology for a longer time. This is because NAT can extend the useful life of older IPv4 applications, and can defer the cost of conversion by transferring that cost to the ISPs, who would then set up gateways to translate between all IPv4 and IPv6 Internet traffic going into and out of the United States. The U.S. could then become divided from the technology used in the rest of the world, at least for a while, by an IPv4/IPv6 difference that is similar to the U.S./metric divide we see today. U.S. military forces, to save time and expense, sometimes connect staff at multiple locations to the DOD secure SIPRNET network by using an encryption technique known as tunneling, which lets users traverse a non-secure network to access a top-secret one. For example, Marine Corps staff recently began using tunneling through the non-classified NIPRNET to extend the DOD classified SIPRNET to 47 sites in the Marine Forces Pacific Command. However, during OIF as much as seventy percent of NIPRNET traffic reportedly was routed through the civilian communications infrastructure. This means that when there is need for a high volume of U.S. military communications, security may be partly dependent on reliability of IPv6 equipment found in the civilian infrastructure and in commercial satellites. Countries with emerging communications infrastructures, and purchasing the latest commercial network equipment, may also be the home countries of those best able to exploit IPv6 technical vulnerabilities. If this includes countries where the United States may be involved in military activity, hostile groups with appropriate technical knowledge of IPv6 vulnerabilities may be positioned to attempt to interfere with U.S. military communications. Appendix B. Changing Views on Metcalfe's Law of Networks Differing interpretations of what is known as "Metcalfe's Law" may lead to different priorities for acquisition and deployment of NCO technologies, systems, and equipment. In the past, some observers have stated that according to Metcalfe's Law, "the 'power' of a network is proportional to the square of the number of nodes in the network." Proponents of NCO in the past have also stated that network centric computing is governed by Metcalfe's Law, which asserts that the "power" or "payoff" of network-centric computing comes from information-intensive interactions between very large numbers of heterogeneous computational nodes on the network. However, Metcalfe's Law observes that the potential value of a communications network increases (or scales) as a function of the square of the number of nodes that are connected by the network. After some deliberation, many of the same proponents now argue differently about the applicability of Metcalfe's Law to NCO, saying that it only provides insight into the fact that the "value" of a network to its users depends mainly on the interaction between the following: 1) content, quality, and timeliness of information interactions enabled by the network; 2) network-enabled, value-creation logic; and 3) user-value functions. These proponents further state that NCO does not focus on network-centric computing and communications, but rather on information flows and the nature and characteristics of battlespace entities. However, it is also noteworthy that other military observers now propose a corollary to Metcalfe's Law: the complexity of a system is proportional to the cube of the number of nodes, and the reliability of a system is inversely proportional to its complexity. In line with this corollary, some observers propose that different types of networks could have indirect limitations that may begin to appear as those networks reach very large numbers of nodes. Briscoe et. al. (2006) use observations of the rise and fall of Internet companies to propose that use of Metcalfe's Law to predict organizational success can sometimes result in organizational damage, if expectations are set too high. Other observers agree, stating that, with very large networks, other negative factors begin to emerge. For example, the number of messages increases beyond the capacity of the reader to handle. Many network users may then see a strong need to operate within a "less-noisey" network by using editors, moderators, or automatic filters to limit the number of messages. These observers agree that more research is need in the area of indirect limitations of networks. Appendix C. Perverse Consequences of Data-Dependent Systems The Office of Force Transformation http://www.oft.osd.mil/ has indicated that DOD must continue to refine the rules and theory of network centric operations through simulation, testing, and experimentation. This section notes that although some experiences have shown that networking may increase certain advantages in warfare, other experiences may also indicate that relying on information systems can sometimes lead to unexpected results. Information-Age warfare is increasingly path-dependent, meaning that small changes in the initial conditions will result in enormous changes in outcomes. Speed is an important characteristic for NCO because it enables a military force to define initial conditions favorable to their interests, and then pursue a goal of developing high rates of change that an adversary cannot outpace. To this end, whenever data-links are employed between military units and platforms, digital information can be shared and processed instantaneously, which produces a significant advantage over other military units that must rely on voice-only communications. Examples that illustrate this advantage are found in several training exercises conducted in the 1990's between Royal Air Force jets equipped with data-links, referred to as Link-16, and U.S. Air Force jets with voice-only communications. A series of air-to-air engagements showed that the RAF jets were able to increase their kill ratio over the U.S. jets by approximately 4-to-1. Other training engagements, involving more than 12,000 sorties using 2-versus-2, or 8-versus-16, aircraft showed that jets equipped with Link-16 increased their kill ratio by 150 percent over those aircraft having voice-only communications. Similar results were seen in training exercises involving Navy and Army units equipped with new networking technology. However, some observers believe that important military decisions may not always lend themselves to information-based rational analysis. They argue that the military services, national security establishment, and intelligence community have not thoroughly studied the risks associated with a data-dependent military doctrine. Issues raised by these observers include the following: (1) Information flows may be governed by a diminishing marginal utility for added effectiveness. Quantitative changes in information and analysis may lead to qualitative changes in individual and organizational behavior that are sometimes counter-productive. (2) An information-rich, opportunity-rich environment may shift the value of the information, redefine the mission objectives, and possibly increase the chances for perverse consequences. In 1999, large-scale army experimentation with better visualization of the battlefield resulted in surprises such as requests for up to five times the normally-expected amounts of ammunition. Instead of concentrating on only critical targets, the experimental army units were overwhelmed with the vast array of potential targets they could now see. The unprecedented requests for larger quantities of ammunition caused logistical failures. More information did not assure better decision-making, but rather it exposed doctrinal flaws. A similar effect was observed in later experiments conducted as part of the Network Centric Operations Conceptual Framework. Ammunition was expended at a faster rate, possibly because more information creates a target-rich environment. These observations imply a possibly greater demand for logistics support. Issues raise by other observers of data-driven systems are: (3) Reliance on sophisticated information systems may lead to management overconfidence. (4) Different analytical interpretations of data may lead to disagreements among commanders about who is best situated to interpret events and act on them. The past economic under-performance of many hedge fund organizations and other technology firms that have employed very sophisticated network centric management techniques may serve as examples to caution DOD against over-reliance on data-driven military information systems. For example, Long-Term Capital Management (LTCM), a highly-leveraged multi-billion dollar hedge fund, and Cisco Systems, a well-respected high-tech firm, both used sophisticated systems to track market conditions and expand their data-driven "situational awareness" to gain and maintain competitive advantage. However, in 1998 a U.S. government-led consortium of banks bailed out LTCM after its trading losses put the entire world's financial system at risk of meltdown. Also, in 2001 Cisco was forced to take a $2.25 billion inventory write-down. While there is yet no professional consensus explaining these poor performance problems, many analysts agree that the presumed excellence of information systems may have invited managerial over-reliance, and that over-reliance led to overconfidence. Executives may have ignored unambiguous external signals in favor of their own networked data. Finally, some believe that more information imposes a higher degree of accountability on actions. Failure to minimize casualties or protect civilians may be digitally reviewed and used to politicize flawed military decisions. These observers suggest that modern portfolio theory, Bayesian analysis, and Monte Carlo simulation are three quantitative tools that military decision makers should explore if they want the benefits of information transparency to consistently outweigh its costs. These tools could answer questions, such as: (a) if information were to be managed as a portfolio of investment risks much as asset classes like equities, fixed income, and commodities, how would commanders diversify to maximize their returns; (b) what information asset classes would they deem most volatile; (c) what information would they see as most reliable; and (d) which information classes would be co-variant, and which would be auto-correlated?
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Network Centric Operations (also known as Network Centric Warfare) is a key component of DOD planning for transformation of the military. Network Centric Operations (NCO) relies on computer equipment and networked communications technology to provide a shared awareness of the battle space for U.S. forces. Proponents say that a shared awareness increases synergy for command and control, resulting in superior decision-making, and the ability to coordinate complex military operations over long distances for an overwhelming war-fighting advantage. NCO technology saw limited deployment in Afghanistan and, more recently, increased deployment in Operation Iraqi Freedom (OIF). Several DOD key programs are now underway for deployment throughout all services. Congress may be concerned with oversight of the DOD organization and the individual services as they transform through NCO programs that are intended to promote a management style and culture with joint objectives. Oversight may involve a review of service efforts to improve interoperability of computer and communications systems, and may also involve questions from some observers about whether DOD has given adequate attention to possible unintended outcomes resulting from over-reliance on high technology. Updates may also be required on emerging threats that may be directed against increasingly complex military equipment. This report describes technologies that support NCO, and includes (1) questions about possible vulnerabilities associated with NCO; (2) a description of electronic weapons, and other technologies that could be used as asymmetric countermeasures against NCO systems; (3) descriptions of several key military programs for implementing NCO; (4) a list of other nations with NCO capabilities; and, (5) a description of experiences using NCO systems in recent operations involving joint and coalition forces. The final section raises policy issues for NCO that involve planning, network interoperability, acquisition strategies, offshore outsourcing, technology transfer, asymmetric threats, coalition operations, and U.S. military doctrine. Appendices to this report give more information about the global network conversion to Internet Protocol version 6 (IPv6), views on Metcalfe's Law of Networks, and possible perverse consequences of data-dependent systems. This report will be updated to accommodate significant changes.
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The Department of Defense defines intelligence as "information and knowledge obtained through observation, investigation, analysis, or understanding." (4) Surveillance and reconnaissancerefer to the means by which the information is observed. Surveillance is "systematic" observationto collect whatever data is available, while reconnaissance is a specific mission performed to obtainspecific data. For the purposes of this paper, the distinctions between intelligence, surveillance, andreconnaissance are not important unless specified-ISR is used as a shorthand to refer to the systemof collection assets and analysts which brings information about the enemy or potential enemy to thedecision-maker, whether that decision-maker is a top general in Washington, DC or a soldier on theground facing an armed attacker. Another shorthand commonly used by the military services and the intelligence community refers to the source of any given piece of intelligence. Intelligence which comes from a personobserving it is called Human Intelligence, or HUMINT. Intelligence derived from photographs andother imagery is called Imagery Intelligence, or IMINT. Intelligence obtained from electronic signalssuch as communications is called Signals Intelligence, or SIGINT. Finally, intelligence derived fromother technically measurable aspects of the target, such as vibrations or hyper-spectral emissions, isnamed Measurement and Signatures Intelligence, or MASINT. (5) These terms are important, as theyhelp characterize the basic structure of the intelligence community. The Central Intelligence Agency (CIA), State Department, Department of Energy, Department of Justice, and Department of Treasury all contribute to the intelligence picture available to themilitary. (6) However, most intelligence used by themilitary comes from the Defense IntelligenceAgency (DIA), which produces some HUMINT, MASINT and a large portion of the DefenseDepartment's strategic, or long-term, analysis; the National Security Agency (NSA), which producesmost SIGINT; and the National Imagery and Mapping Agency (NIMA), which produces mostIMINT. The services themselves also produce all types of intelligence for the community. Today's security environment appears to be quite different from the environment of only tenyears ago. Major shifts in both the threat to our national security, and the technologies available tous and our potential adversaries, seem to have occurred. In response, the military services have plansto change their ISR capabilities to meet the new environment effectively. Most of today's military equipment and organization was originally designed to fight the Soviet Union. A common scenario was that the Soviets and their Warsaw Pact allies would attempt tooccupy all of Western Europe, using large numbers of tanks and aircraft to sweep through Germanyon their way to the rest of the continent. Defense against such an assault was perceived to requireheavy weapons such as tanks, fighter and bomber aircraft, and aircraft carriers. However, theWarsaw Pact has collapsed and a similar threat has not emerged. Instead, the security environmentlooks significantly different compared to 1989. DOD's 2001 Quadrennial Defense Review (QDR)points out that we "cannot predict with a high degree of confidence the identity of the countries orthe actors that may threaten (our) interests and security." The QDR explains DOD's perception ofthe changed threat by stating that the U.S. is no longer physically protected by distance from itsadversaries. It sees a "broad arc of instability" from the Middle East to Northeast Asia, wherenon-state entities whose activities are damaging to U.S. interests (drug traffickers, terrorists, etc.)are growing in strength and finding safe-haven in weak and failing states. In addition, newtechnologies (especially information technologies and those related to chemical, biological,radiological, nuclear, or enhanced high-explosive weapons) are increasingly within the reach ofpotential adversaries, and warfare may extend to space and cyber space. (7) Outside observers, including other members of the national intelligence community, generally agree with DOD's characterization of the threat. Concern over surprise, deception, increasinglydiverse threats, weapons of mass destruction, the Middle East, and Asia, appears consistent. Someadd that non-state actors with new technology may undermine nation-state control in manycountries. This could exacerbate the effects of environmental deterioration and disaster, increasingthe probability that the U.S. would feel compelled to deploy its military forces to stem a resultinghumanitarian crisis. (8) In sum, many analysts believe the U.S. is now faced with "asymmetric warfare," in which means such as drug-trafficking, terrorism, and biological warfare would be used to attack ourinterests. The events of September 11 appear to confirm the judgement that the threats of the futureare unlikely to look like the threats of the past. Because these are means that the United States wouldnot choose to employ itself and which bear no resemblance to the old Warsaw Pact tank assaultscenario, some believe the U.S. military is currently ill-prepared to deal with them. In addition to the changed threat, the U.S. military along with the rest of society also has experienced major changes in the technologies available. The huge increases in both informationprocessing technology, including data collection and storage, and communications technologies suchas increased bandwidth and networking, appear to be able to completely change the way militaryforces are equipped, organized and employed. (9) Based on these changes in both the threat and in available technology, DOD states it must "transform." Transformation in the context of large organizations such as the Defense Departmentis generally recognized as a process of radical change involving technology, organization, andconcepts of employment. Another term used in military theory which also expresses the idea oftransformation is "revolution in military affairs." However, even within DOD there are at least twocompeting perspectives on what constitutes "transformation." Some personnel define transformationas a discontinuous or leap-ahead change. (10) Thisview supports those who believe it is necessary tomove money, manpower, and particularly patterns of thinking ("doctrine") away from currentweapon systems and methods to entirely new technologies and procedures. They perceive thatresources are being wasted on the older systems, and the only way to accomplish change is to do soin a radical way. The Navy's shift in the 1920s and 30s from the battleship to the aircraft carrier asits centerpiece weapon system could be considered an example of a leap-ahead change, even as thebattleship remained in service until the 1980s. The Army's plan to replace its tank force in favor ofmuch lighter vehicles and other technologies may be seen as an attempt to achieve similar change. (11) Others tend to define transformation as incremental change using current or modernizing technologies in new ways, with an end result of radical improvement over time. They expressconcern that the future is unknown; if DOD cuts out proven capabilities for new ones, those newcapabilities may not match the currently unforeseen threat any better than today's technology. Aproven technology, however, may be able to be adjusted to meet that unknown situation. Theseofficials point to examples such as the change in the military's ability to attack targets from the air,comparing Operation Desert Storm against Iraq in 1991 to Operation Enduring Freedom againstAfghanistan in 2001. Nearly every weapon system which was used in Afghanistan had also beenused in Iraq in 1991. However, improved communications, procedures and the Joint Direct AttackMunition (a standard 2000 lb bomb which can be guided using Global Positioning Systemtechnology) allowed B-52 bombers to attack targets which were very close to friendly militarypersonnel with little risk of hitting the friendly soldiers. This would not have even been consideredin 1991. (12) Regardless of how transformation may be defined, retired Vice Admiral (USN) Arthur Cebrowski, the chief of the Defense Department's Office of Force Transformation, has identifiedsome criteria by which military programs may be judged for their transformational qualities. His topcriterion is that the weapon system or operating procedure be interoperable . Interoperabilitymeansthat the system can function easily with a variety of other systems, including those from otherservices. (13) Other criteria Cebrowski has namedare judgements as to whether the system helps theuser to change warfighting methods , as opposed to merely improving existing methods; andwhether the system can deal with a wide range of threats . (14) Observers generally agree with Cebrowski's criteria. For example, Andrew Krepinevich, Executive Director of the Center for Strategic and Budgetary Assessments, also notes therequirement for interoperability and support to new warfighting methods, and discounts any hard andfast rule that a program must employ new technology to be considered transformational. At the sametime, Krepinevich, along with some other observers, advocates the leap-ahead definition oftransformation, and therefore would likely want to see larger changes in interoperability andwarfighting methods than might Cebrowski. (15) In addition to assessing the military services' ISR programs based on Cebrowski's informal criteria for transformation, it may be helpful to look at what ISR they will really need. Somecommonly recognized characteristics include a world-wide perspective, fusion, detail, andpersistent surveillance . (16) The transformed force, much more than the Cold War force, needs a truly world-wide perspective derived from world-wide collection capabilities and in-depth analysis. During the ColdWar, the threat from the Warsaw Pact was considered so great that military activity in other placesoften was considered inconsequential, or a "lesser included threat." (17) The intelligence communitytherefore put greater effort toward monitoring the Warsaw Pact than the rest of the world. Today,however, the threat may in fact come from within a country which appears quite non-threatening. For example, one former Central Intelligence Agency analyst notes that, in 1998, half of the foreigncrises which demanded U.S. attention occurred in "lower-priority areas,"against which feweranalysts and collection resources had been allocated. (18) Fusion refers to bringing together all types of intelligence to create one consolidated picture of the threat. As mentioned in the beginning of this paper, the various sources of intelligence form thebasic structure of the intelligence community. That is, every piece of intelligence data is identifiedby whether it came from HUMINT, SIGINT, IMINT, or MASINT. In addition, these data are oftenkept in separate communications channels and databases designed to support the unique aspects ofthe data collected. A piece of imagery, for example, requires different bandwidth, software, andhardware for transmission than does a communications intercept, and they each fill completelydifferent types of fields in a database. However, military forces cannot easily use separate HUMINT,SIGINT, IMINT, and MASINT data. They need one "fused" assessment of the threat. While thishas always been true, the speed and precision with which the transformed force is expected to actmakes this fusion even more desirable, as it presents information about the enemy in a timely, clearmanner. The transformed force may also seek more detailed information than before. First, given today's emphasis on precise application of force while mitigating risk to U.S. and civilian personnel,the intelligence required to employ destructive force such as a bomb or artillery round has increased. As adversaries hide within civilian populations or inside mountains, the once straightforward processof identifying potential targets has become much more complex. Once a target has been identifiedfor destruction, the information required to successfully employ the weapon is increasing as targetcoordinates must be accurate to within a few feet in three dimensions. Even after a weapon isemployed, the assessment of whether the target is destroyed, known as bomb damage assessment(BDA), has also increased in difficulty. In the Cold War, this was performed primarily by comparing"before" and "after" images of the target. If a target such as an enemy tank looked destroyed, withits turret blown off or smoke coming out of a gaping hole, then it probably was. Weapons used bythe transformed force, however, may not cause that type of visible damage. Even in OperationDesert Storm against Iraq, precision-guided munitions made only small holes in Iraqi tanks as theypenetrated and completely obliterated the insides. This damage, however, could not be seen fromimagery. Other types of information, such as hyperspectral data which might detect whether the tankgot very hot from internal explosions, are needed to make an accurate damage assessment. Second,as opposed to most Cold War scenarios, physical destruction is not the only effect the transformedforce may be able to bring against the adversary. The military force may, for example, be able toaccomplish its objectives by isolating an opposing commander electronically. However, creatingor defending against this type of effect requires extremely specific intelligence. The ability to continuously monitor a given target and provide immediate assessment of changes to it, known as persistent surveillance, is seen as essential to the transformed force's ability to defeatunconventional enemies like terrorists. (19) As hasbeen seen in Kosovo and Afghanistan, detailed,long-term surveillance of a house or convoy, such as that provided by a Predator Unmanned AerialVehicle (UAV) or a special operator on the ground, is key to properly identifying all personnel inthe target area and maintaining full awareness of all activities, hostile, friendly, or neutral. Theassessment that the desired target is present and can be effectively struck must then be made andcommunicated to the striking force within seconds, so that the opportunity is not lost. Some experts express caution about these characteristics. They assert that doctrinal writings about the transformed force assume perfect access to perfect intelligence, that training its personnelto rely on such intelligence will prevent them from learning initiative, and that reliance on perfectintelligence may keep the U.S. from acting in circumstances where it needs to act but, for whateverreason, its precision-guided munition or other high-technology asset cannot be used. (20) The U.S.intelligence community does not have eyes and ears everywhere in the world, and it does not haveperfect vision into potential adversary minds. Transformation advocates, when asked, recognize thefact of imperfect intelligence and respond to this criticism by emphasizing the planned force'sagility, in equipment and training, to overcome situations where intelligence is imperfect andrespond quickly to the evolving circumstances. To assess the intelligence, surveillance and reconnaissance aspects of military transformation, it is useful to have a basic understanding of the military forces which the future ISR structure willbe expected to support. This section explains, in general terms, DOD's plans for future forces, andprovides greater detail on ISR programs. All of the services are planning their forces in light of thechanged threat and new information technologies. In general, the changes are intended to increasethe force's access to information, agility and versatility while maintaining or increasing its lethality. OSD and JCS. The Office of the Secretary of Defense (OSD) and the Joint Chiefs of Staff (JCS) have multiple initiatives touted as supporting ISR. While neither organization procures weapon systems, they do have a voice in funding, research anddevelopment, operating methods supported, and joint organization. In November 2001, Secretary Rumsfeld established an Office of Force Transformation, headed by retired Vice Admiral Cebrowski, to monitor and push transformational ideas in the services. Theoffice is staffed by approximately 18 uniformed and civilian personnel from all the services and 15contractors, and focuses on five broad areas-strategy, concept formulation, technology andtechnological surprise, joint and service experimentation, and operational prototyping. The officeintends to assess service plans with respect to these areas, and make recommendations to the servicesand OSD which identify gaps in DOD's capability to meet potential threats, increase efficiency,improve existing capabilities, and recognize outmoded paradigms which should be changed. (21) TheOFT is studying Operation Enduring Freedom to determine whether there are completely differentways it could have been approached, and also seeking to provide seed money to service experimentswhich appear transformational. (22) Two key offices for developing technology, the Advanced Systems & Concepts Office and the Defense Advanced Research Project Agency (DARPA), have strong track records in ISRdevelopment. For example, DARPA developed both the Predator and Global Hawk UnmannedAerial Vehicles, then handed them off to the Advanced Systems & Concepts Office for furtherdevelopment as Advanced Concept Technology Demonstrations (ACTD). Although still indevelopmental status, both aircraft have contributed substantially to the war in Afghanistan. (23) Bothoffices appear to continue to consider ISR as a significant area for research. For example, of the 15ACTDs which the Advanced Systems & Concepts Office established for FY2002, five aretechnologies which promise to improve the military's ability to collect data on enemy forces. Another may substantially improve the ability of commanders to control surveillance andreconnaissance assets over the battlefield. A final ACTD aims at new ways of analyzingintelligence. (24) DARPA is developing continuingadvances in unmanned vehicles, afoliage-penetrating radar, an advanced ISR management program, and artificial intelligence fordatabase analysis. (25) Its recently formedInformation Exploitation office is specifically intended towork on improving the military's ability to identify a target on the battlefield and communicate thatinformation quickly to a weapon system for destruction. (26) The Assistant Secretary of Defense for Command, Control, Communications and Intelligence (ASD/C3I) has oversight of ISR concept development. It has divided ISR initiatives into fivecategories. First, as discussed above, are collection technologies. Second are efforts forinteroperability and networking, ensuring that all intelligence available to one entity is also availableto other entities working in the same theater. (27) A major contribution to this effort is ASD/C3I'scoordination of the Distributed Common Ground System (DCGS). DCGS is an umbrella term forseveral systems tailored to individual service requirements. These systems are designed to receiveand process HUMINT, SIGINT, IMINT, and MASINT data (all of which come in different formsand often on different networks), support analysis of the data, and distribute intelligence to theircustomers, both on the battlefield and at higher headquarters. DCGS is recognized as beingextremely important to all of the services, and they are moving toward this single, integratedarchitecture. (28) ASD/C3I's third category forinitiatives is persistent and responsive surveillance, withprograms such as the Global Hawk long-endurance UAV, the Army's Aerial Common Sensor, andSpace-Based Radar. Fourth, the office seeks new ways to use existing capabilities, such as gettingimagery to be automatically tagged with all required geographic coordinate information. Finally,ASD/C3I is working on the communications technology needed to move the collected intelligenceto its customers. (29) Other than its work on DCGS, some ISR planners discount ASD/C3I work, noting that they coordinate directly with the other services without prompting from the OSD office, while ASD/C3Imay push "one size fits all" solutions. (30) Someobservers also believe that ASD/C3I has little actualauthority, with the result that services continue to do what they think best for themselves. Most ofASD/C3I's power appears to come from its direct access to the Joint Requirements OversightCouncil (JROC), which is chaired by the vice chairman of the Joint Chiefs of Staff. (31) The JROCvalidates major service programs as being either "joint" or not. Those programs which are notdeemed joint enough are unlikely to receive funding. However, the current chair, Marine GeneralPeter Pace, believes that the JROC is not playing a significant role in the transformation of the armedforces, and advocates a greater role in identifying and pushing development of new capabilities. (32) If Pace or his successors succeed in shifting the JROC from a simple validation role to a morepro-active one, this may also increase ASD/C3I's control over the future of ISR. Joint Forces Command (JFCOM), established in 1999, is another organization which some defense experts believe has the potential to aid military efforts toward transformation and ISRintegration. (33) This unified command has thecharter to run major force experimentation and improveinteroperability among the services, and has been working several ISR-related initiatives. (34) Its JointInterface Control teams, consisting of communications specialists as well as special software andhardware, are reportedly improving communications among intelligence sources in Afghanistan. (35) JFCOM is testing a new analytical capability known as Operational Net Assessment this year. Thissystem of databases, analytical tools, and networks claims to fuse intelligence and other data in aninteragency environment. DOD's new Unified Command Plan, which divides warfightingresponsibilities among various commanders, may improve JFCOM's ability to supporttransformation. The plan emphasizes JFCOM's experimentation and interoperability duties whileit moves responsibilities for homeland defense on land and sea from JFCOM to the newly createdNorthern Command. (36) Do the Office of the Secretary of Defense and Joint efforts in ISR support transformation, according to Admiral Cebrowski's criteria? Taken together, they do appear to be helping improveinteroperability while supporting changes in the way warfare is conducted against a wide range ofthreats. The DARPA and Advanced Systems & Concepts Office projects promise to provide someof the detailed intelligence sought, as well as improve persistent surveillance. ASD/C3I's leadershipof DCGS could result in significant improvements in providing fused assessment to warfighters. Observers generally point to strengthening the JROC and JFCOM, particularly their influence onmilitary spending, as ways to increase OSD's and JCS's abilities to guide military transformation. Army. The Army may be making the biggest force structure change of all the services, as it seeks to replace the M-1 tank as its centerpieceweapon system. It is designing the network-centric Future Combat System, an as-yet undefinedcombination of manned and unmanned vehicles, tied together with a comprehensive network,intended to be much lighter and therefore more transportable than today's weapon systems. Thisforce will depend on the ability to detect enemy activity, share that information quickly, and defeatit before coming into close contact with an enemy. (37) The Army's plans for ISR focus on interoperability. The Army recognizes that the majority of its intelligence needs are collected by other services and the national agencies. It therefore stressesbeing able to communicate with the other intelligence sources. However, exactly how it intends toaccomplish that is still under development. Thus, at least some of the programs which will beneeded to achieve Army objectives have not yet been defined. Technologically, research anddevelopment effort is focused on analysis tools, especially data fusion and validation. An apparentlysingular success in this area is the Pathfinder text analysis system, which is used extensively by theArmy's National Ground Intelligence Center and is being incorporated into analysis systemsthroughout the military. This software is reported to be able to sort through 500,000 documents injust a few minutes, finding patterns, trends and statistics, and to have already contributed extensivelyto key decisions. (38) Key procurement effortsinclude the Distributed Common Ground Station, theTactical Exploitation System for IMINT analysis, a Tactical Unmanned Aerial Vehicle (Shadow),a HUMINT analysis support system, the Aerial Common Sensor to replace the Guardrail andAirborne Reconnaissance-Low airborne reconnaissance systems, and the PROPHET ground-basedsensor and jammer. (39) The Joint Tactical Terminal,a prototype radio system designed forinteroperability to access several different intelligence broadcasts, has been deployed in Afghanistanwith apparent success. (40) Operationally, the Army says it is making major changes at the tactical level. It is forming Reconnaissance, Surveillance, Targeting and Acquisition (RSTA) squadrons to provide focusedanalysis to the brigade commander. Traditionally, this level of effort for collecting and analyzingintelligence occurs higher up the chain of command, at division and corps level. The shift todelivering high-quality, timely intelligence directly to the smaller unit is a key aspect of why theArmy believes it can operate some units successfully in combat without the armored protection anM-1 tank provides. These RSTA squadrons are expected to employ many of the technologies listedin the previous paragraph, particularly the tactical UAV, HUMINT analysis, ground sensors, and theDCGS for analysis and dissemination. The RSTA squadrons will place intelligence personneltrained to collect HUMINT forward to operate directly with tactical patrol elements, creating thepotential to significantly increase the quantity and value of HUMINT to army operations. (41) A finalplanned change to army tactical intelligence operations is to allow every soldier, regardless ofoccupational specialty, to contribute his or her observations of battlefield activity to the intelligencenetwork. How this will be manifested is not yet determined. If achieved, it will likely mean a vastincrease in the amount of information available to the units, and a concurrent increase in therequirement for analysis while seeking to prevent information overload. (42) Organizationally, the Army appears to have made fewer recent changes than other services. While both the Air Force and the Navy have in the past few years designated their senior intelligenceofficers as the functional managers for ISR, the Army does not have a focal point for ISR. Thesenior intelligence officer has some programmatic oversight, particularly for intelligence, butsurveillance and reconnaissance fall under the purview of the operations officer. (43) Some observersbelieve this split in responsibility may slow the Army's ability to integrate all aspects of ISR not onlywith Army operations but with other service ISR capabilities. Do the Army's activities in ISR support transformation? The Army's emphasis on interoperability, as well as its apparent major commitment to change the way it fights, seems to saythey do, although there are still many questions to be answered concerning how the new army unitswill operate, including how they will use ISR. The RSTA squadron, incorporating most aspects ofArmy intelligence plans and promising fusion, increased detail, and persistent surveillance, may beviewed as a radical departure from current operations, but its ability to function in the face of a widerange of threats is yet to be determined. Air Force. The Air Force says its transformation effort builds on the successes it has already achieved in being able to reach targets with stealthaircraft and strike them very accurately with guided weapons. It emphasizes integration of currentcapabilities with modernization of its fighter force (the F-22 Raptor and the Joint Strike Fighter),improved airborne reconnaissance and command and control aircraft including UAVs, andnetworking. (44) The Air Force is the largest military provider of surveillance and reconnaissance as it operates most surveillance and reconnaissance aircraft and is DOD's executive agent for space. It is focusingits ISR transformation effort on creating multiple platforms which together can watch a battlefieldregardless of the terrain, time of day or weather conditions, and communicate the observations in away that an identified target can be destroyed within ten minutes of the initial observations. (45) Technologically, the challenges the Air Force perceives are in integrating today's platforms toprovide one coherent picture of the battlespace, reducing the need for human transfer betweensystems of basic technical data such as location information, and determining if or when to moveISR capabilities currently performed by airborne platforms to space. Key procurement programs arethe Space-Based Radar and "Smart Tanker" (a program to equip all aerial tankers with surveillancesensors and communications equipment) to increase the military's persistent surveillance, theMulti-Platform Radar Technology Insertion Program to improve tracking moving ground targets,Predator B and Global Hawk UAVs for airborne persistent surveillance and reconnaissance, TheaterBattle Management Core System, Network Centric Collaborative Targeting and the Air OperationsCenter Common Operating Picture for coordination with operations, and the previously mentionedDistributed Common Ground Station for analysis and dissemination. (46) To some observers, the operational changes the Air Force is now attempting to develop in ISR are more incremental than revolutionary. As noted earlier, the Air Force claims that revolutionarychanges have already occurred, such as the integration of UAVs into the Air Force's operations andthe ability to get the process of identifying targets and subsequently destroying them down from daysto minutes in length. The Air Force believes it is doing a good job providing ISR at the theater level,but is not yet able to provide a global perspective. Moving most of the Air Force's surveillance andreconnaissance assets to space could significantly increase world-wide coverage, and may be the nextmajor change in ISR operations, if appropriate technology develops. Such a move, however, willsurely be quite costly, and also risks a loss in flexibility, as satellites have historically been difficultto move quickly from one target area to another, and have also been more difficult than aircraft torepair or replace when necessary. Observers also question whether more emphasis should be placedon analysis, rather than on more equipment. For example, bomb damage assessment, the processby which the commander determines how much damage an attack caused on a given target, andtherefore whether it needs to be struck again, has been called a weak area for Operation EnduringFreedom. (47) Organizationally, the Air Force has made several moves to improve its ISR. Its re-organization in the early 1990s combining Strategic Air Command with Tactical Air Command to form AirCombat Command could be seen as a step toward ISR transformation, as it brought most ISR assetsunder one commander. Previously, the Air Force's "strategic" reconnaissance aircraft like theRC-135, U-2, and SR-71, belonged to Strategic Air Command, and were reserved primarily for tasksassociated with defeating the Soviet Union. With the formation of Air Combat Command, theseaircraft have been made much more available to units fighting theater wars, such as Iraq, Bosnia, andKosovo. Another organizational change the Air Force has made which may support ISRtransformation is the designation of its senior intelligence officer as the functional manager for allISR, giving that person responsibility for all ISR resourcing and management. Also, in 1997 the AirForce formed a center now known as the Aerospace Command and Control and Intelligence,Surveillance and Reconnaissance Center (AC2ISRC) which focuses on standardizing Command andControl as well as ISR systems for both the joint and coalition audience. (48) The Air Force's recentdesignation as DOD's executive agent for space, including director of the National ReconnaissanceOffice (NRO), has increased its responsibility and authority to coordinate and guide the use of spacefor ISR. The Air Force has also formed a new office, the deputy chief of staff for warfareintegration. This office is expected to ensure that all Air Force systems fit into a commonarchitecture, with particular emphasis on command and control and ISR systems. (49) Finally, the AirForce has formed seven functional "task forces" in its headquarters staff, each headed by a Colonel.One of these is the Air and Space/C2ISR Task Force. The task forces are meant to be able to cutacross traditional program areas and staff lines focused on weapon systems such as "bombers,"design new concepts of operation, and advocate for required capabilities with a stronger, morecoherent voice than has previously occurred. (50) Do the Air Force's activities in ISR support transformation? Judged by the standards of interoperability, support to changed methods of warfighting, and ability to confront a wide range ofthreats, the answer is unclear. Interoperability stands at the top of the Air Force's stated priorities. The various changes in Air Force organization which have occurred since the end of the Cold Warappear to be the most aggressive of all the services. The availability and applicability of space assetsto warfighting has increased significantly, adding greatly to the services' access to a world-wideperspective as well as in-depth intelligence. As noted earlier, Air Force efforts appear to have playeda large role in establishing the lauded ISR capabilities, particularly their persistent surveillance, forOperation Enduring Freedom. However, some observers believe the Air Force is primarily achievingtechnical improvements to established programs and operating methods, rather than a radical changeappropriate to a potentially radically different enemy. Another point made is that while the Air Forceowns the vast majority of ISR aircraft, these aircraft have been operating at a very high rate for anumber of years, such that the aircraft and crews are significantly more stressed than most of the AirForce. This leads to situations where ISR aircraft are unavailable to fly missions for commanderswho need them. Observers wonder why the Air Force has not yet fixed this problem. (51) Navy and Marine Corps. The Navy and Marine Corps' primary effort for transformation is their concept of network centric warfare, linking today'sweapon systems in local and wide-area networks such as the Cooperative Engagement Capability(CEC) for air and missile defense and the Navy and Marine Corps Intranet (NMCI) to exchangeinformation and control actions. In addition, the Navy is studying new ship designs and operationalconcepts to improve naval capability in littoral waters and for sea-basing to defeat the "anti-access"threat where no near-by land bases are available. (52) The Marine Corps seeks to improve its abilityto fight in the urban environment. This includes less-than-lethal weapons, tactical and man-portableUAVs, and networking. (53) The Navy and Marine Corps' plans for ISR are toward better networking and integration, as well as organic sensors for persistent surveillance. (54) The Navy's CEC has been successfullydeployed with the USS John F. Kennedy carrier battle group, earning accolades from some observersas the military's first true "network-centric" program. (55) While CEC is not specifically an ISRprogram, it ties many Navy sensors together to achieve a much better picture of the battlespace. Fornetworking and analysis, DCGS forms the foundation for bringing all sources of intelligencetogether, while the Naval Fires Network is the primary program supporting the Navy's entire processof identifying targets and striking them. The P-3 Aircraft Improvement Program and S-3Surveillance System Upgrade, both still in development but used with success in Afghanistan, aimat significantly improving that process. (56) Concerning sensors, most effort is on unmanned platformswith new sensors for better SIGINT and MASINT. The Navy expects to procure the Global HawkUAV, at least for testing, and is actively developing an unmanned underwater vehicle (UUV), whilethe Marine Corps is speeding the fielding of its man-portable Dragon Eye UAV and continues worktoward a vertical-takeoff and landing UAV to replace its Pioneer UAV. (57) Operationally, some degree of transformation appears to have occurred as shown by the successful integration of Navy ISR assets, particularly the P-3 and space assets, with Air Force assetsto produce persistent surveillance and a common operating picture of the battlefield for all services'combat assets operating in Afghanistan. In the Marine Corps, a shift in ISR operations began afterOperation Desert Storm, when it was thought that the marines received poor intelligence support. In 1993 the Corps initiated a plan to produce professional intelligence officers, with their own careerplans and command opportunities. (58) The Corpsnow has experienced intelligence officers at alllevels, apparently contributing directly to the success of the Marine units in Afghanistan. TheMarine Corps is also expanding its Intelligence Analysis System, which brings the various sourcesof intelligence together for analysis by intelligence personnel. Organizationally, the Navy has implemented some of the same concepts as the Air Force in its bid to transform its ISR. Its senior intelligence officer is also designated the functional manager forISR. In addition, the Navy has implemented a concept very similar to the Air Force's sevenfunctional task forces. It has identified six "mission capability packages," each overseen by a NavyCaptain, to cut through the traditional weapon systems focus, design new concepts of operation, andbuild the architectures needed. One of these mission capability packages is dedicated to ISR. (59) Themission capabilities packages are overseen by the Navy's Office of Warfare Integration andAssessment, which began operation in October, 2000. (60) Finally, the Navy has designated a newcommand, the Naval Network Warfare Command, to begin operation in May 2002. (61) While notlimited to ISR, its charter to oversee the development of all networks in the Navy should have amajor impact on Navy and Marine Corps ISR. Do the Navy and Marine Corps activities in ISR support transformation? Like the Army and Air Force, interoperability appears to be stressed in the naval ISR programs. The Marine Corps'Intelligence Analysis System appears to be making progress on improving fused assessments for itsunits. Some observers believe the Navy deserves just as much credit as the Air Force for theestablishment of a successful persistent ISR network in Operation Enduring Freedom. (62) In addition,the naval programs appear, more than the Army and Air Force, designed to deal with a wide rangeof threats as they consider littoral and urban warfare as well as the "anti-access" scenario of havingto fight completely from the sea with no nearby land-based support. Their programs promise toprovide the detail and persistence warfighters believe they need to defeat these threats. Special Operations Forces (SOF). SOF are elite, specialized military units that can be inserted into enemy territory. These forces both require andcollect intelligence at all levels-one of their capabilities is strategic reconnaissance. (63) While muchof the equipment SOF uses is procured by the services, Special Operations Command (SOCOM) hasauthority unique among the unified commands to procure systems specific to SOF requirements. Its main effort for transformation appears to be successful fielding of the CV-22 tilt-rotor aircraft andthe Advanced SEAL Delivery System (ASDS) mini-submarine to be launched from former ballisticmissile submarines which the Navy is converting to guided missile submarines. (64) The unique capabilities SOF are seeking in ISR concentrate on receiving the highest-quality intelligence at the lowest tactical level. They are developing the Joint Threat Warning System toprovide a downlink for intelligence broadcasts and a SIGINT receiver for immediate warning. Thissystem will be designed in several physical configurations, from body-worn to maritime-based. Theyare also designing an upgrade to the SOF Intelligence Vehicle, a modified "humvee" withcommunications links and analysis terminals which may increase the availability of intelligence andtailored analysis to personnel in the field. (65) Man-portable UAVs are also being procured. (66) Operationally, SOF actions in Afghanistan suggest that some transformation has already occurred, as SOF personnel determined how to identify and communicate potential targets foraircraft to strike. While this type of operation has long been a SOF skill, the melding of GPS andother immediately available data such as Predator video with the human observations of the SOFpersonnel had not been possible in previous conflicts. (67) Organizationally, the naval component of SOCOM, Naval Special Warfare Command, which previously did not have a dedicated intelligence analysis capability, is establishing a Mission SupportCenter which will include intelligence analysis. The other components, Air Force SpecialOperations Command and Army Special Operations Command, are increasing the size of theirintelligence organizations, mostly in response to the increased requirements of the global war onterrorism. The Special Operations Command Joint Intelligence Center's production capability mayexpand considerably, as well. (68) To many observers, the special operations forces have always been transformational. At least within their own community, interoperability is stressed, and they have historically used differentways of fighting against unconventional enemies. The plans outlined above for ISR may appear tobe only incremental, but this may be appropriate for a force which is believed to already have aculture of transformation. The effort in unmanned vehicles may improve SOF's ability to providesurveillance, while the increasing size of their intelligence centers promises an improved world-wideperspective, potentially at a greater level of detail than before. A caution may be that SOF, whileinteroperable and innovative among themselves, have in the past had difficulty communicating andcoordinating with non-SOF assets. This appears to have been overcome in Operation EnduringFreedom, at least with respect to calling in air strikes, receiving other types of air support, andsharing intelligence. If after-action reports of the war in Afghanistan bear out these earlyobservations, SOF will probably be considered by most to still be on the leading edge oftransformation. Coast Guard. The Coast Guard, probably more than any of the other services, is undergoing a mission change due to the attacks of September 11,2001. It is moving from a force which emphasized maritime safety, protection of natural resources,and law enforcement to focus more on its maritime security and national defense missions, includingport security both in the United States and at overseas ports where U.S. forces are located. (69) At thesame time, the Coast Guard is undergoing a wholesale replacement of many of its ships, boats, andaircraft in an effort to replace obsolete systems while achieving full integration and interoperability. This acquisition program, named "Deepwater", has been in planning for several years and shouldbe contracted out in 2002. It will not replace systems type for type, but instead will use an integratedmix of surface and air platforms with appropriate connectivity to achieve the required capabilities. (70) Coast Guard acquisitions, including Deepwater, claim to strongly emphasize interoperability. Much more than the other services, however, for the Coast Guard interoperability implies the abilityto communicate and operate with civilian vessels and other non-defense agencies, as well as withdefense organizations. Thus, one key ISR program is its National Distress Response ModernizationProgram, providing VHF radio towers to improve communications with all maritime activities,particularly its ability to receive distress calls. Another program aims at expanding SIPRNET, thestandard DOD-wide secure internet system for classified data, to all port operations centers andmajor cutters. (71) The Deepwater contractspecifically requires its system integrator to periodicallyupgrade sensors and ISR throughout the 30 years of the Deepwater program. (72) ISR capabilities beingconsidered for the Deepwater program include the Global Hawk UAV, a vertical take-off andlanding UAV, and other sensors such as air and surface-search radars and passive electronicsurveillance systems. (73) Operationally, the Coast Guard has a goal to inspect all suspect and other high-interest vessels such as cruise ships before they enter U.S. territorial waters. ISR must point the Coast Guard to theright vessels for inspection. Some regulatory tools, such as the requirement that all ships provideinventory and crew data 96 hours before reaching U.S. waters and the anticipated 2004implementation of an identification transponder for all ships worldwide larger than 300 gross tonsare expected to help. However, these sources of information need automated analysis not yetavailable. Another shift in operations involves the field intelligence teams working at major ports. The Coast Guard's goal is to post a team permanently at every major port. These teams includeCoast Guard intelligence personnel and Coast Guard investigative service special agents. The teamsare expected to liaise with other federal, state and local law enforcement and intelligence agenciesto conduct data collection, reporting and dissemination. Finally, putting SIPRNET terminals onevery ship could encourage a major change in ISR operations. These terminals provide easy accessto and transmission of large amounts of classified data and communications and enhance the user'sability to coordinate with other DOD activities, including the military intelligence community. Taken together, these changes in ISR operations are expected to substantially increase the CoastGuard's production of and access to intelligence. (74) Organizationally, the Coast Guard sees a need for shore-based fusion and analysis centers to handle the increased quantity of intelligence, and is coordinating with the Navy to establish one such24-hour operations center on each coast. The Coast Guard is also significantly increasing itsairborne and shipborne intelligence collection capability, and bringing it under the guidance of theNavy's Naval Security Group. (75) Do the Coast Guard's activities in ISR support transformation? As with the other services, interoperability is perceived as key and appears to be receiving strong emphasis from Coast Guardplanners. The Deepwater program's ISR, although conceived well before transformation becamethe coin of the realm in the Defense Department, seems to be aimed at allowing the Coast Guard tochange its methods of operation by giving it an ability to function in tandem with the Navy and otheragencies, significantly farther from shore than is possible today. Finally, the Coast Guard doesappear to be standing up to the new perception of the threat with its desire to intercept suspect shipsat sea and increase the robustness of in-port intelligence and security. These, in turn, should addsignificant detail to the intelligence picture. However, the Coast Guard seems to be in unchartedwaters. Deepwater is a very ambitious program, and the means to fully fuse and analyze the vastlyincreased amount of intelligence while coordinating with law enforcement agencies has not yet beendetermined. As noted earlier, military intelligence uses ISR from the entire intelligence community, not just the military services. The services depend primarily on three intelligence agencies in the DefenseDepartment itself-the Defense Intelligence Agency (DIA), National Security Agency (NSA), and theNational Imagery and Mapping Agency (NIMA). The National Reconnaissance Office (NRO), whilea DOD agency, designs, launches, and flies satellites for the other agencies, and is not a primaryproducer of intelligence products. Service expectations concerning the future activities of DIA, NSA,and NIMA are important factors in service decision-making. DIA. Since September 11, 2001, DIA, the military's primary source of HUMINT and strategic analysis, has received a large increase inresources to increase its production of both HUMINT and strategic analysis. This has the potentialto significantly improve the military's awareness of possible threats worldwide. Service officialsindicate general satisfaction with DIA's direction. The Navy, for example, appears to be reducingits expenditure on HUMINT activities in the belief that DIA will be able to successfully fill anygaps. (76) In addition, DIA runs severalmilitary-wide programs that support strategic analysis. Forexample, DOD officials believe the Joint Intelligence Virtual Architecture, a collaborativeintelligence network, has made major headway in establishing standardized access to data andanalysts throughout the military intelligence community. The architecture has incorporated manyanalytical tools including the Army's Pathfinder mentioned earlier as well as a single integrated database which together may improve analysts' ability to fuse all sources of intelligence. NSA. Analysts generally believe the nation's primary producer of Signals Intelligence, or SIGINT, is struggling to maintain and improvecapability while faced with the huge world-wide changes in how information flows and is processed. For example, experts say fiber-optic cables make eavesdropping difficult. The vast increase in thequantity and variety of communications, such as by cell phones, pagers, and the internet, alsoincrease the difficulty of finding communications of interest. (77) Due to the need to re-tool, especiallyin the light of its essential role in protecting the United States from terrorist attack, NSA hassignificantly reduced its support to tactical-level military operations. The services are acutely awareof this and are devoting more resources toward tactical SIGINT, an often key element for successfultime-critical targeting. (78) NIMA. The nation's primary producer of geospatial intelligence (maps and imagery) is attempting to digitize all geospatial intelligence, aidingin the processing and dissemination of the gathered intelligence, as well as fusion with otherintelligence resources. It also plans to deploy a Future Imagery Architecture which consists of alarge number of small imagery satellites able to provide more persistent coverage of areas of interestthan today's satellite architecture. Service representatives are generally convinced that there will besufficient imagery data for the transformed force. They are less certain that the geo-locationinformation required for precision strike will be available for every location the services may needto know about, and they also believe that continued emphasis on processing, exploitation, anddissemination of geospatial intelligence is needed. (79) As noted earlier, many observers believe significant transformation of ISR has already occurredand has been practiced in Afghanistan. The military's ability to move data from the reconnaissanceplatform to the weapon system able to take action, the so-called "sensor to shooter" sequence,generally required at least a full day in Operation Desert Storm, as imagery from a satellite orreconnaissance aircraft had to be analyzed, identified as a target, turned into hard-copy, andintensively studied by the aircrew before a weapon could be dropped accurately. In OperationEnduring Freedom, Special Operations Forces personnel on the ground identified a Taliban troopconcentration, called the target back to the Combined Air Operations Center in Saudi Arabia,received permission to call in an airstrike, determined the exact coordinates of the enemy usingGlobal Positioning System (GPS), and passed those coordinates to a loitering B-52 bomber whichagain used GPS to guide bombs onto the target within less than 20 minutes of the originalidentification of the target. (80) Similarly, PredatorUAVs have been able to transmit live video picturesto waiting AC-130 gunships, which were able to attack moving targets while the Predator monitoredfor effectiveness, again within minutes of original target identification. (81) These examples highlightrecent gains in the precision and timely communication of intelligence, as well as interoperabilityamong weapon systems and even between services. With regard to analysis, over the past ten yearsthe growth of an intelligence-community-wide secure intranet known as INTELINK has significantlyincreased intelligence personnel access to intelligence data, reports of all types, and other analysts,worldwide. (82) Most members of the military intelligence community say they are continuing to work hard at interoperability-they appear to have agreed that the ability to share intelligence throughout thecommunity is essential. In addition, there appear to be some significant departures from old waysof doing things which could support the other goals of transformation. The most revolutionaryconcepts being developed today appear to be the Army's Reconnaissance, Surveillance, Targetingand Acquisition squadron, DIA's Joint Intelligence Virtual Architecture, and the large increase inthe use of unmanned vehicles already underway in all of the services. Although by no means radicalto the rest of the intelligence community, the Coast Guard's plan to bring classified communicationsvia SIPRNET onto every ship creates the possibility of a sweeping change in its use of intelligence. Some outside observers, however, believe that in addition to these changes, the military intelligence community needs to establish a whole new method for analysis. Bruce D. Berkowitz andAllan E. Goodman, for example, note that the subject matter for most military analysts is far morefluid than during the cold war, rendering standard databases and analytical models for explainingbehavior obsolete. (83) Indications and Warning,the analysis which warns of impending attack on theUnited States or its vital interests, depends on the ability to predict enemy activity, based on enemyplans, doctrine, and observed exercises and training. Many of today's potential adversaries offerlittle in the way of traditionally observable activity. (84) Berkowitz and Goodman see maintainingdatabases as a vastly more difficult problem today than it was twelve years ago; precision-guidedmunitions, world-wide interests, adversary use of western and non-traditional weaponry, and theneed for increased information about civilian populations have significantly expanded andcomplicated military intelligence database needs. (85) In response to this problem, the primary solution offered, both inside and outside the Defense Department, is the development of better technology. This may be artificial intelligence such asneural networks which "learn" as they are used to perform data-mining and other analytical tasks,or powerful "cookies" like those that internet marketers use to track customer responses. (86) However,senior analysts who have observed these tools believe they still require significant developmentbefore they can be applied to day-to-day intelligence analysis. (87) As noted earlier, this is an area inwhich DARPA is conducting research and development. While much effort is being placed on improving the technological tools available to analysts, several observers argue that, whereas in the Cold War the vast majority of key information wasobtainable only through classified intelligence methods, today most information of value is availablethrough open sources. They propose a more market-based or decentralized approach to intelligenceanalysis, allowing multiple groups, possibly contractors or even the general public, to makecompeting inputs to databases and analyses for the decision-maker. (88) Another possible approach is to move more intelligence analysis from the arguably insulated world of the intelligence community directly into operations analysis. Two examples of this meldingare the Air Force's Checkmate analysis cell which gained public attention helping plan the airoperation for Desert Storm, (89) and the JointWarfare Analysis Center, which conductsengineering-level analyses of potential target systems such as power grids to find the linkages andvulnerabilities in them. (90) Both organizations havestrong reputations within the Defense Departmentfor finding new ways to defeat the enemy when "traditional" intelligence and operations centers donot. They are not intelligence centers, although both have intelligence analysts working in them. The intelligence analysts work side by side with operations analysts to focus all data, whether froman intelligence source or another source such as a logistics report, on the operational problem athand. This type of analysis requires getting the intelligence community to find and produce exactlywhat a specific customer requests, working beside the customer from start to finish. The conference report for the Intelligence Authorization Act for Fiscal Year 2002 stated fourprimary concerns for the intelligence community; re-vitalization of NSA, correction of HUMINTdeficiencies, correcting a perceived imbalance between collection and analysis, and ensuringadequate research and development. (91) In addition,several other issues involving the cost and qualityof intelligence, as well as leadership, military intelligence's role in homeland defense and the impactof potential intelligence community reform may be considered. A long-standing congressional concern has been to ensure that NSA adjust successfully to the emerging electronic environment. (92) The servicesnote that NSA has shifted resources to help it dealwith the new environment, with a resulting reduced support for tactical operations. The serviceshave therefore identified actions needed to mitigate the loss of some NSA support. As mentionedearlier, these include upgraded airborne platforms in all services, including UAVs and aerialrefueling aircraft, the PROPHET ground-based sensor, and SOF's Joint Threat Warning System. The services stress, however, that NSA must still provide them with access to technologies as theyare fielded. (93) Congress may choose to monitorthis aspect of NSA's performance, while fundingappropriate service initiatives which fill in some of the gaps left by NSA's current focus on thestrategic electronic environment. Congress also sees a national security imperative to improve HUMINT. HUMINT is the one type of intelligence that nearly all outside experts believe needs to be increased, as it can provideaccess to potential enemies' plans and intentions in greater detail than other sources. This isprimarily the responsibility of CIA and DIA; the services' roles at the strategic level have declinedsignificantly since 1995 when most service HUMINT capabilities, in particular their attaches postedto embassies world-wide, were consolidated into the Defense HUMINT Service, run by DIA. Somebelieve this move hurt the production of HUMINT for military purposes. (94) The services do retain some capabilities, usually for employment on or near the battlefield itself. For example, some military personnel are trained to monitor potential hostile activity in the localareas of bases and ports, for force protection. In addition, as previously discussed, the Army plansto integrate soldiers trained in collecting information into front-line squadrons. Operation EnduringFreedom has apparently used Special Operations Forces and other troops to gather tacticalinformation to a greater extent than has occurred in other recent conflicts. Collection is only part of the issue, however. The information gained must be analyzed and processed into usable formats. This is a difficult problem currently without a clear solution. Whilethe other sources of intelligence data are generally objective and fit fairly easily into databaseformats, information derived from humans is subjective and often defies objective categorization. Entry into a database so that the information is easily available to other analysts is, at this time, verymanpower intensive. Within the military community, DIA is responsible for this type of analysisand has apparently made progress on database development. (95) DIA's continued efforts in increasingthe quantity and analysis of HUMINT in support of DOD, especially the global war on terrorism,may deserve examination. A third area in which Congress has expressed significant concern is the apparent imbalance between collection and analysis, such that much data is collected by the intelligence community butnot analyzed in a timely manner. All of the services report that analysis requires more attention. They say they are shifting manpower toward analytical positions, increasing their use of contractedregional experts, and trying to reduce redundancy in analysis. Technological solutions to theinformation overload problem are also being researched, as noted earlier. Institutional changes toaddress the analysis shortfall, such as encouraging competing analyses from outside DOD, however,are not apparent. At the same time that there is reported to be more information than can be analyzed, continued acquisition of some specific collection capabilities may still be appropriate. Many of DOD's ISRplatforms are in very high demand and are operating at a significantly higher operating tempo thanmost of the rest of the force. (96) These platformscollect focused intelligence of immediate value tothe warfighter and cannot be replaced by the large amounts of other intelligence already beingcollected. In addition, acquisition of emerging capabilities designed to detect very difficult targets,such as foliage-penetrating radars and other highly-technical capabilities potentially able to detectdeeply buried targets or biological and chemical laboratories may provide previously inaccessibleinformation of direct relevance to prosecution of the global war on terrorism and other potentialthreats of the 21st century. (97) Another major area of congressional concern is in research and development-will the intelligence community be able to stay ahead of potential adversaries as they develop new ways toconduct and hide their activities? As noted above, both DARPA and OSD's Advanced ConceptTechnology Demonstrations have projects which cover many aspects of Defense ISR, particularlyin unmanned reconnaissance, sensing technologies, and integrated analysis. Congress may chooseto watch these projects, as well as OSD's selection of future projects, to ensure the appropriatetechnologies are being developed. Congress may also scrutinize the performance of the NationalReconnaissance Office in this area. Widely recognized as highly innovative in its early years, theNRO has over the past several years been criticized for a reduced level of innovation as it becamemore a standard member of the defense bureaucracy. (98) Some of DOD's ISR research and development programs have encountered Congressional opposition. For example, the 106th Congress killed "Discoverer-2", a space-based radar conceptconsisting of two experimental satellites, due to the high cost and possible overlap with NIMA'sFuture Imagery Architecture satellite program. In addition, some in DOD believe that the structureof the program with just two experimental satellites and no follow-on funding requirementsinaccurately communicated a low DOD priority for the program. (99) In the FY2002 budget, the AirForce's Space Based Radar and Space Based Infrared System both had funding requests reduced. The cuts were due primarily to seriously escalating costs and program management issues. (100) TheDOD intelligence community still believes development of these capabilities is vital, and the AirForce is re-focusing the programs in response. (101) Congress will then have the opportunity todetermine whether the programs still make sense. A consistent theme throughout DOD is an emphasis on getting networks in place so that information can flow. (102) While even the bestintelligence is only useful if it is communicated, poordata on the network can also have devastating consequences. One potential danger is that the flowof information, regardless of the quality of that information, may become a measure of success. (103) Particularly if the number of contributors to the intelligence networks grows, possibly exponentially,the data must still be analyzed and validated. While DIA appears to be making progress on thisproblem at the strategic analysis level, some observers believe the Marine Corps has the clearestvision on meeting this requirement at the tactical level with its design of its Intelligence AnalysisSystem bringing all data collected by the front-line troops into one location for comparison, analysis,and dissemination. The Army's Pathfinder text analysis tool appears to be an example of the typeof automated analytical tool which will be needed both in the field and in supporting intelligencecenters, although it is currently primarily used by strategic analysts, not those directly supportingcombat troops. Analysis tools and the doctrine and people to use them will need to develop whilethe networks evolve. Congress may choose to examine service networking programs to ensure thatquality of data, as well as data flow, is being improved. Will ISR for the transformed force cost significantly more than today's ISR? Due to the mix of "black" (classified) with "white" (unclassified) funding, it is impossible to quantify in anunclassified report the expected changes in the military ISR budget over the next several years. However, some feel for the impact on the budget can be measured in general terms. In theadministration's budget request for FY2003, for example, the Defense Emergency Response Fundrequest of $20.1 billion included $2.6 billion for increased situational awareness supporting theglobal war on terrorism. (104) With a significantportion of this request going toward ISR and relatedactivities, service ISR planners note general satisfaction with the budgetary support they arereceiving. One area which traditionally is quite expensive is satellite reconnaissance. Whileupgrades to our imagery satellite constellation are already presumably budgeted (the funding forreconnaissance satellites has always been classified), other changes to the satellite constellation,particularly in support of DOD's quest for world-wide "persistent" surveillance and reconnaissance,may significantly increase the cost of future ISR. These programs are apparently exactly the typesof programs Secretary of Defense Rumsfeld is proposing should receive funds re-directed fromreduced or cancelled major weapons programs such as the F-22 fighter and Comanche helicopter. (105) On the other hand, increased ISR expenditure may hold out the promise of decreased expendituresin other areas, as potentially the services will require fewer and/or cheaper weapon systems as theyexperience lower attrition and more efficient employment in combat situations. These savings,however, are unlikely to compensate for the potential large increases in ISR funding requirements. The military services seem to place their greatest trust in people who are trained to directly attack the enemy with deadly force. Officers who spent much of their career in the intelligence fieldare rarely selected to be senior leaders of their services. Most three-star officers who spentsignificant time as intelligence officers, as well as Admiral Bobby Inman, U.S. Navy (ret), perhapsthe only career intelligence officer to achieve four-star rank, have served at that rank only as theirservice's senior intelligence officer or as the head of an intelligence agency such as the NationalSecurity Agency. An exception was Lieutenant General (three star) Ervin Rokke, U.S. Air Force(ret), who served as the president of National Defense University. Invariably, the officers retire aftercompletion of their tours as the head of an intelligence agency, rather than move back into theleadership of their parent service or the Joint Chiefs of Staff. (Admiral Inman led the NationalSecurity Agency as a three-star, then became the Deputy Director of Central Intelligence as afour-star officer.) Consequently, the most senior uniformed members of the military continue to be people who are most familiar with the procurement, planning and employment of lethal force, rather than withthe procurement, planning and employment of information and intelligence. (106) While the effect isnot measurable, this fact could reduce the strength with which ISR issues are fought in the DODbureaucracy, as well as reducing the options senior officers are willing to consider as they confrontnew enemies and situations. While it is probably appropriate that any officer in position to orderothers into combat also be a combat officer, there are positions at the three and four star level whichdo not command combat forces. If intelligence is becoming more important to national security andthe application of force than the weapons themselves, the Senate may find it desirable to express adesire to the Secretary of Defense that more officers with an intelligence background be nominatedfor senior officer positions. All of the services believe that they must play a greater role in homeland defense than they had before the September 11 attacks. The role of the services' intelligence capabilities, however, doesnot appear to be as clear. By law, the military is restricted in its authority to collect or analyzeintelligence on U.S. persons or the United States. In addition, the military is in a war, the global waron terrorism, which is stretching intelligence assets. Intelligence collected and analyzed for themilitary should be made available to other agencies involved in homeland defense. This is alreadyoccurring between the Navy, Coast Guard, and other domestic agencies with responsibilities for portsecurity, as well as between DIA, CIA, FBI and NSA. (107) However, a significant shift of effort by theservice intelligence agencies from overseas to homeland defense may be inappropriate. The establishment of the Department of Homeland Security (DHS) in January 2003 will affect the responsibilities of all intelligence agencies, including those in DOD. DHS will not itself collectforeign intelligence, but will depend upon intelligence forwarded from other agencies. The natureand extent of support that DOD agencies will be expected to provide DHS remains as yetuncertain. (108) Congress may wish to maintainoversight of the overall effort to coordinate andconsolidate intelligence for homeland security. Reform of the Intelligence Community is a perennial subject for high-level commissions. The most recent presidential commission, headed by Lt Gen Brent Scowcroft (U.S. Air Force, ret), madea recommendation to place the defense intelligence agencies directly under the Director of CentralIntelligence (DCI), (109) but no action was takenon the proposal in the 107th Congress. If such a movedoes occur in the future, the concern for the military services would probably be to prevent anysignificant reduction in current and near-term production of IMINT by NIMA and SIGINT by NSA. The services use these capabilities heavily, and subordinating the defense agencies under the DCIcould lower the priority placed on military requirements. If, on the other hand, the centralizationcreates conditions for a transformation in analysis without significantly reducing current production,the military services may be better off in the long run. AC2ISRC Aerospace Command and Control and Intelligence, Surveillance and Reconnaissance Center ACTD Advanced Concept Technology Demonstration ASD/C3I Assistant Secretary of Defense for Command, Control, Communications and Intelligence ASDS Advanced SEAL Delivery System BDA Bomb Damage Assessment C2ISR Command, Control, Intelligence, Surveillance and Reconnaissance CEC Cooperative Engagement Capability CIA Central Intelligence Agency DARPA Defense Advanced Research Project Agency DCGS Distributed Common Ground System DCI Director of Central Intelligence DIA Defense Intelligence Agency DOD Department of Defense GPS Global Positioning System HUMINT Human Intelligence IMINT Imagery Intelligence ISR Intelligence, Surveillance, and Reconnaissance JCS Joint Chiefs of Staff JFCOM Joint Forces Command JROC Joint Requirements Oversight Council MASINT Measurement and Signatures Intelligence NIMA National Imagery and Mapping Agency NMCI Navy and Marine Corps Intranet NRO National Reconnaissance Office NSA National Security Agency OFT Office of Force Transformation OSD Office of the Secretary of Defense QDR Quadrennial Defense Review RSTA Reconnaissance, Surveillance, Targeting and Acquisition SEAL Sea-Air-Land forces SIGINT Signals Intelligence SIPRNET Secure Internet Protocol Network SOCOM Special Operations Command UAV Unmanned Aerial Vehicle UUV Unmanned Underwater Vehicle
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The Department of Defense (DOD) indicates it is undertaking a major alteration in its capabilities, from a force designed to fight the Soviet Union to one tailored to 21st centuryadversaries including terrorism. This shift has been prompted by the perception of a changing threatand improved technology, especially information technology. As the military services attempt toincrease the agility and versatility of their weapon systems, they also see a need to increase thecapabilities of military intelligence, surveillance and reconnaissance (ISR) to support the newweapon systems and operating methods against these new threats. To judge whether service activities are likely to help the military "transform," the head of DOD's Office of Force Transformation, retired Vice Admiral Arthur Cebrowski (U.S. Navy) hasproposed three criteria-whether the proposed capability can communicate and operate easily inconjunction with the other services, whether it helps the military develop new methods ofwarfighting, and whether it will be useful against a wide range of threats. In addition, ISR activitiesshould, in the aggregate, provide a world-wide perspective of the threat, "fuse" all types ofintelligence into one picture, access extensive details about the enemy, and monitor specific targetsfor long periods of time. All of the services are planning ISR programs which exhibit at least some attributes of transformation. Many observers believe military ISR has already achieved some transformation, asshown in the war in Afghanistan by the military's ability to detect a target and destroy it withinminutes. The military's ability to move intelligence quickly has improved dramatically. However,many observers are concerned that analysis may be lagging behind. Proposals to make revolutionarychanges in analysis include using contractors to produce competing unclassified analyses, developingartificial intelligence capabilities for database work, and establishing more operations analysiscenters. The military intelligence community is supported by the national intelligence community, which even before the September 11 attacks was under intense scrutiny. Therefore, the aspects ofthe national intelligence community's operations in which Congress has expressed interest directlyaffect the quality of military intelligence. In addition, DOD's plans for improving its ISRcapabilities raise potential issues for Congress with regard to cost, the balancing of potentiallycompeting efforts to improve the flow of intelligence and the quality of the data, and the support ofmilitary leadership. Finally, the consequences of the military's role in homeland defense, andintelligence community reform may generate concern. Discussion of these issues is provided asbackground as Congress considers ISR programs as part of defense and intelligence authorizationand appropriations legislation. This report will not be updated.
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On January 14, 2013, Cuba's new travel policy went into effect whereby Cubans wanting to travel abroad no longer need an exit permit and letter of invitation. Under the new policy, travel requires only an updated passport and a visa issued by the country of destination, if required. Thousands of Cubans lined up at government migration offices and travel agencies on the first day. While on its face, the new policy can be viewed as a human rights improvement, how significant that improvement is will depend on how the law is implemented. (See " Cuba Alters Its Policy Regarding Exit Permits " below.) On January 3, 2012, the Cuban Commission on Human Rights and National Reconciliation (CCDHRN) reported that there were at least 6,602 short-detentions for political reasons in 2012, (a 60% increase over 2011). (See " Cuban Government's Change of Repressive Tactics " below.) On December 10, 2012 (Human Right Day), the State Department issued a press statement expressing deep concern about Cuba's "repeated use of arbitrary detention and violence to silence critics, disrupt peaceful assembly, and intimidate independent society." (See " Policy Developments in 2012 " below.) On December 5, 2012, the Senate approved S.Res. 609 (Moran) by voice vote, calling for the immediate and unconditional release of Alan Gross, the USAID subcontractor imprisoned in Cuba since December 2009, and urging the Cuban government to address his medical issues. On November 16, 2012, Gross filed suit (along with his wife) in U.S. District Court in Washington, DC, against the U.S. government and his employer, Development Alternatives Inc., alleging that they "failed to disclose adequately.... the material risks that he faced" during his trips to Cuba. Gross had been working in Cuba on a U.S.-funded democracy project. (See " December 2009 Imprisonment of Alan Gross " below.) On November 19, 2012, official peace talks between the Colombian government and the Revolutionary Armed Forces of Colombia (FARC) began in Havana. (See " Terrorism Issues " below.) On November 7, 2012, Cuban security agents arrested government critic Antonio Rodiles, and charged him with "resisting authority." Rodiles ultimately was released on November 26, 2012, and charges of "resisting authority" were dropped, but according to Amnesty International (which had issued an urgent appeal for his release), Rodiles was warned not to continue with his activism in Cuba. Rodiles is one of the coordinators of an initiative begun in June 2012 known as the "Citizens' Demand for Another Cuba," which calls on the Cuban government to implement the legal guarantees and policies in the Universal Declaration of Human Rights and to ratify two U.N. human rights conventions. (See " Cuban Government's Change of Repressive Tactics " below.) On November 2, 2012, Cuba announced that an oil well being drilled offshore Cuba by the Venezuelan state oil company, PdVSA, was not commercially viable. The Italian-owned oil rig, Scarabeo-9, departed Cuba on November 14, reportedly to West Africa. This was the third well drilled by foreign oil companies offshore Cuba this year that did not find oil, and was a significant setback for the Cuban government's efforts to develop its deepwater offshore hydrocarbon resources. (See " Cuba's Offshore Oil Development " below.) For additional entries, see Appendix B . Political and economic developments in Cuba and U.S. policy toward the island nation, located just 90 miles from the United States, have been significant congressional concerns for many years. Since the end of the Cold War, Congress has played an active role in shaping U.S. policy toward Cuba, first with the enactment of the Cuban Democracy Act of 1992 ( P.L. 102-484 , Title XVII) and then with the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 ). Both of these measures strengthened U.S. economic sanctions on Cuba that had first been imposed in the early 1960s, but the measures also provided roadmaps for a normalization of relations dependent upon significant political and economic changes in Cuba. A decade ago, Congress modified its sanctions-based policy toward Cuba somewhat when it enacted the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX) allowing for U.S. agricultural exports to Cuba that led to the United States becoming a major source for Cuba's food imports. Over the past decade, much of the debate over U.S. policy in Congress has focused on U.S. sanctions, especially over U.S. restrictions on travel to Cuba. The George W. Bush Administration initially liberalized U.S. family travel to Cuba in 2003, but subsequently tightened restrictions on family and other categories of travel in 2004 because of Cuba's crackdown on political dissidents. In 2009, Congress took legislative action in an appropriations measure ( P.L. 111-8 ) to ease restrictions on family travel and travel for the marketing of agricultural exports, marking the first congressional action easing Cuba sanctions in almost a decade. The Obama Administration took further action in April 2009 by lifting all restrictions on family travel and on cash remittances by family members to their relatives in Cuba and restarting semi-annual migration talks that had been curtailed in 2004. In January 2011, the Administration announced the further easing of restrictions on educational and religious travel to Cuba and on non-family remittances, and it also expanded eligible airports in the United States authorized to serve licensed charter flights to and from Cuba. This report is divided into three major sections analyzing Cuba's political and economic situation, U.S. policy toward Cuba, and selected issues in U.S.-Cuban relations. The first section on the political and economic situation includes a brief historical background, a discussion of the human rights situation and political prisoners, and an examination of economic policy changes that have occurred to date under Raúl Castro. The second section on U.S. policy provides a broad overview of U.S. policy historically through the George W. Bush Administration and then provides a brief discussion of the broad debate on the direction of U.S. policy toward Cuba. Policy under the Obama Administration is then examined in more detail. The third section analyzes many of the key issues in U.S.-Cuban relations that have been at the forefront of the U.S. policy debate on Cuba and have often been the subject of legislative initiatives. These include U.S. restrictions on travel, remittances, and agricultural exports to Cuba; a sanction that denies protection for certain Cuban trademarks; the status of anti-drug cooperation with Cuba; the status of Cuba's offshore development and implications for disaster response preparedness; terrorism issues, especially in consideration of Cuba remaining on the State Department's state sponsors of terrorism list; U.S. funding for democracy and human rights projects; U.S. government-sponsored broadcasting to Cuba (Radio and TV Martí); and migration issues. Cuba did not become an independent nation until 1902. From its discovery by Columbus in 1492 until the Spanish-American War in 1898, Cuba was a Spanish colony. In the 19 th century, the country became a major sugar producer with slaves from Africa arriving in increasing numbers to work the sugar plantations. The drive for independence from Spain grew stronger in the second half of the 19 th century, but it only came about after the United States entered the conflict when the USS Maine sank in Havana Harbor after an explosion of undetermined origin. In the aftermath of the Spanish-American War, the United States ruled Cuba for four years until Cuba was granted its independence in 1902. Nevertheless, the United States still retained the right to intervene in Cuba to preserve Cuban independence and maintain stability in accordance with the Platt Amendment that became part of the Cuban Constitution of 1901. The United States subsequently intervened militarily three times between 1906 and 1921 to restore order, but in 1934, the Platt Amendment was repealed. Cuba's political system as an independent nation was often dominated by authoritarian figures. Gerardo Machado (1925-1933), who served two terms as president, became increasingly dictatorial until he was ousted by the military. A short-lived reformist government gave way to a series of governments that were dominated behind the scenes by military leader Fulgencio Batista until he was elected president in 1940. Batista was voted out of office in 1944 and was followed by two successive presidents in a democratic era that ultimately became characterized by corruption and increasing political violence. Batista seized power in a bloodless coup in 1952 and his rule progressed into a brutal dictatorship. This fueled popular unrest and set the stage for Fidel Castro's rise to power. Castro led an unsuccessful attack on military barracks in Santiago, Cuba, on July 26, 1953. He was jailed, but subsequently freed and went into exile in Mexico where he formed the 26 th of July Movement. Castro returned to Cuba in 1956 with the goal of overthrowing the Batista dictatorship. His revolutionary movement was based in the Sierra Maestra and joined with other resistance groups seeking Batista's ouster. Batista ultimately fled the country on January 1, 1959, leading to more than 45 years of rule under Fidel Castro until he stepped down from power provisionally in July 2006 because of poor health. While Castro had promised a return to democratic constitutional rule when he first took power, he instead moved to consolidate his rule, repress dissent, and imprison or execute thousands of opponents. Under the new revolutionary government, Castro's supporters gradually displaced members of less radical groups. Castro moved toward close relations with the Soviet Union while relations with the United States deteriorated rapidly as the Cuban government expropriated U.S. properties (see " Background on U.S.-Cuban Relations " below). In April 1961, Castro declared that the Cuban revolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. Over the next 30 years, Cuba was a close ally of the Soviet Union and depended on it for significant assistance until the dissolution of the Soviet Union in 1991. From 1959 until 1976, Castro ruled by decree. In 1976, however, the Cuban government enacted a new Constitution setting forth the Cuban Communist Party (PCC) as the leading force in state and society, with power centered in a Political Bureau headed by Fidel Castro. Cuba's Constitution also outlined national, provincial, and local governmental structures. Since then, legislative authority has been vested in a National Assembly of People's Power that meets twice annually for brief periods. When the Assembly is not in session, a Council of State, elected by the Assembly, acts on its behalf. According to Cuba's Constitution, the president of the Council of State is the country's head of state and government. Executive power in Cuba is vested in a Council of Ministers, also headed by the country's head of state and government, that is, the president of the Council of State. Fidel Castro served as head of state and government through his position as president of the Council of State from 1976 until February 2008. While he had provisionally stepped down from power in July 2006 because of poor health, Fidel still officially retained his position as head of state and government. National Assembly elections were held on January 20, 2008, and Fidel Castro was once again among the candidates elected to the now 614-member legislative body. (As in the past, voters were only offered a single slate of candidates.) On February 24, 2008, the new Assembly was scheduled to select from among its ranks the members of the Council of State and its president. Many observers had speculated that because of his poor health, Fidel would choose not to be reelected as president of the Council of State, which would confirm his official departure from heading the Cuban government. Statements from Castro himself in December 2007 hinted at his potential retirement. That proved true on February 19, 2008, when Fidel announced that he would not accept the position as president of the Council of State, essentially confirming his departure as titular head of the Cuban government. After Fidel stepped down from power, Cuba's political succession from Fidel to Raúl Castro was characterized by a remarkable degree of stability. After two and one half years of provisionally serving as president, Raúl Castro officially became Cuba's president on February 24, 2008, when Cuba's legislature selected him as president of the 31-member Council of State. For many years, Raúl, as first vice president of the Council of State and the Council of Ministers, had been the officially designated successor and was slated to become head of state with Fidel's departure. Raúl also had served as Minister of the Revolutionary Armed Forces (FAR) since the beginning of the Cuban revolution. When Fidel stepped down from power in 2006, he signed a proclamation that ceded political power to Raúl on a provisional basis, including the positions of first secretary of the Cuban Communist Party, commander in chief of the FAR, and president of the Council of State. Despite the change in government in February 2008, Fidel still officially held the title of first secretary of the PCC, although Raúl as provisional first secretary was leading the party. (It was not until the PCC's sixth party congress held in April 2011 that Raúl officially assumed the title of first secretary.) While it was not a surprise to observers for Raúl to succeed his brother Fidel officially as head of government, the selection of José Ramón Machado Ventura as the Council of State's first vice president in February 2008 was a surprise. (At the same time, Machado became first vice president of the Council of Ministers, and later in April 2011 became PCC second secretary at the sixth party congress.) Born in 1930, Machado is a physician by training and is part of the older generation of so-called históricos of the 1959 Cuban revolution along with the Castro brothers (Fidel Castro was born on August 13, 1926, while Raúl Castro was born on June 3, 1931). He has been described as a hard-line communist party ideologue, and reportedly has been a close friend and confident of Raúl for many years. Machado's position is significant because it makes him the official successor to Raúl, according to the Cuban Constitution. Many observers had expected that Carlos Lage, one of five other vice presidents on the Council of State, would have been chose as first vice president. Born in 1951, Lage was responsible for Cuba's economic reforms in the 1990s and represented a younger generation of Cuban leaders. Several key military officers and confidants of Raúl also became members of the Council of State, increasing the role of the military in the government. General Julio Casas Regueiro, who already was on the Council, became one of its five vice presidents. Most significantly, Casas Regueiro, who had been first vice minister in the FAR, was selected by Raúl as the country's new minister of the FAR, officially replacing Raúl in that position. Casas Regueiro also is chairman of GAESA (Grupo de Administracion Empresarial, S.A.), the Cuban military's holding company for its extensive business operations. (On September 2, 2011, Casas Regueiro died from a heart attack at 75 years of age, and was replaced as minister of the FAR by 70-year old Gen. Leopoldo Cintra Frías, who was serving as first vice minister of the FAR and also was a member of the Council of State.) In March 2009, Raúl orchestrated a government shake-up that combined four ministries into two and ousted a dozen high-ranking officials, most notably including Foreign Minister Felipe Pérez Roque, Council of Ministers Secretary Carlos Lage, and Minister of Economy and Planning José Luis Rodriguez García. The streamlining combined the portfolios of food and fishing into one ministry and the foreign investment and trade portfolios into another ministry. Changes in the bureaucracy had been anticipated since February 2008 when Raúl Castro vowed to make the government smaller and more efficient, but the ouster of both Felipe Pérez Roque and Carlos Lage, who lost all their government and party positions, caught many observers by surprise. Pérez Roque was replaced by career diplomat Bruno Rodriguez Parrilla, who served for eight years (1995-2003) as Cuba's U.N. Ambassador and most recently as vice foreign minister. Carlos Lage, who most significantly lost his position as a vice president of the Council of State, was replaced by military General José Amado Guerra, who had worked for Raúl Castro as secretary of the FAR. What was unexpected about the simultaneous ouster of both Pérez Roque and Lage was that they represented different tendencies within Cuba's communist political system. Pérez Roque, a former private secretary to Fidel, was known as a hardliner, while Carlos Lage, who was responsible for Cuba's limited economic reforms in the 1990s, was viewed as a potential economic reformer. Some observers maintain that the ouster of both Pérez Roque and Lage was a move by Raúl to replace so-called Fidelistas with his own supporters. Fidel, however, wrote in one of his reflections in the Cuban press that both officials had been seduced by ambitions for power, and that a majority of the other officials who were replaced by Raúl had not originally been appointed by Fidel. Along these lines, a number of observers maintain that the ouster of Pérez Roque and Lage had more to do with removing potential contenders for power in a post-Castro Cuba. What appears clear from the government shake-up is that Raúl Castro began putting his mark on the Cuban government bureaucracy. Some observers contend that Raúl was moving forward with his pledge to make the government more efficient. According to this view, ideology did not play a role in the appointments, and several of those brought in as ministers were relatively unknown technocrats. The new appointments also continued the trend toward bringing more military officials into the government. While Raúl began implementing some limited economic reform in 2008 (see " Reform Efforts Under Raúl Castro ," below), there has been no change to his government's tight control over the political system and few observers expect there to be, with the government backed up by a strong security apparatus. Some observers point to the significantly reduced number of political prisoners over the past several years as evidence of a lessening of repression, but while human rights activists have welcomed the change, some maintain that the overall situation has not improved, with the government resorting to short-term detentions and other forms of intimidation. The Cuban Communist Party's sixth congress was expected to be held at the end of 2009 (the last was held in 1997), but the party postponed it, with Raúl Castro maintaining that additional and extensive preparation was needed for the meeting. Ultimately the party congress was held April 16-19, 2011, concentrating on making changes to Cuba's economic model, but some political changes also occurred at the party congress. As expected, Fidel was officially replaced by Raúl as first secretary of the PCC, and First Vice President José Ramón Machado became the party's second secretary. The party's Political Bureau or Politburo was reduced from 24 to 15 members, with three new members, Marino Murrillo, Minister of Economy Adel Yzquierdo Rodriguez, and the first secretary of the party in Havana, Mercedes Lopez Acea. The party's Central Committee also was reduced from 125 to 115 members, with about 80 of those being new members of the committee. At the April 2011 party congress, Raúl Castro also proposed two five-year term limits for top positions in the party and in the government, calling for systematic rejuvenation. This change was confirmed by a January 28-29, 2012, PCC national conference (a continuation of the April 2011 party congress, but focusing on PCC internal changes.) Some analysts maintain that enacting term limits ultimately could pave a way for political succession from one generation to another. Cuba's revolutionary leadership has been criticized for remaining in party and government positions far too long, and for not passing leadership opportunities to a younger generation. Some observers had expected leadership changes to occur at the January 2012 meeting. While this did not occur, the conference approved a resolution by which the PCC Central Committee would be allowed to replace up to 20% of its 115 members within its five-year mandate. Overall, analysts expressed disappointment that the national conference, which reaffirmed the PCC as Cuba's only recognized party, did not offer more significant political reforms. Given the age of Cuba's current leadership, some observers believe that the government could confront significant difficulty if it faced a sudden succession scenario. On February 3, 2013, Cuba is scheduled to hold elections for over 600 members of the National Assembly of People's Power, the national legislature, as well as over 1,200 provincial government representative, both for five-year terms. Once the National Assembly members are elected, the body will have 45 days to meet to select the next president of the Council of State, Cuba's head of government. Most observers expect Raúl Castro to be reselected for a five year-term. In the last National Assembly election in 2008, all candidates ran unopposed and were vetted by government-run commissions. Under Cuba's one-party system, the overwhelming majority of those elected are PCC members. Critics maintain that the elections are a sham and entirely controlled by the Communist Party. One change in this year's elections is Ricardo Alarcón, who had served as president of the National Assembly since 1993, will not stand for re-election. Some observers speculate that Alarcón's departure could be a sign that the government is moving to replace Cuba's older revolutionary leadership. Cuba has a poor record on human rights, with the government sharply restricting freedoms of expression, association, assembly, movement, and other basic rights since the early years of the Cuban revolution. Some observers anticipated a relaxation of the government's oppressive tactics in the aftermath of the January 1998 visit of Pope John Paul II, but government attacks against human rights activists and other dissidents continued. While the government has released numerous political prisoners over the past several years—including more 125 since 2010—it has also resorted to thousands of short-term detentions for political reasons and other forms of harassment and intimidation against government critics. At the same time, there appears to have been increased space for public discussion and dialogue on economic and social issues, including in Catholic Church and academic publications. (See the text box on "Human Rights Reporting on Cuba" below for links to reports from Human Rights Watch, the Inter-American Commission on Human Rights, the State Department, Amnesty International, and the Cuban Commission on Human Rights and National Reconciliation.) Cuba signed two U.N. human rights treaties in 2008: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights. Some considered this a positive step, while others point out that Cuba has not yet ratified the agreements, and has not taken any significant action to guarantee civil and political freedoms. Human rights activists in Cuba have called on the Cuban government to put into place the legal and political guarantees embodied in the two covenants. In March 2008, the Cuban government did lift the ban on Cubans staying at tourist hotels. Although few Cubans will be able to afford the cost of staying in such hotels, the move was symbolically significant and ended the practices of what critics had dubbed "tourism apartheid." While Cuban authorities have continued to stifle dissent and repress freedoms, Cuban pro-democracy and human rights activists continue to call attention to the country's poor human rights record and many have been recognized over the years by the international community for their efforts. A human rights group known as the Ladies in White ( Las Damas de Blanco ) was formed in April 2003 by the wives, mothers, daughters, sisters, and aunts of the members of the "group of 75" dissidents arrested a month earlier in Cuba's human rights crackdown. The group conducts peaceful protests calling for the unconditional release of political prisoners. Dressed in white, its members attend Mass each Sunday at St. Rita's Church in Havana and then walk silently along First Avenue to a nearby park. In April 2008, 10 members of the Ladies in White were physically removed from a park near the Plaza of the Revolution in Havana when they demanded the release of their husbands and the other members of the "group of 75" still imprisoned. The group held protests during the third week of March 2010 to commemorate the March 2003 crackdown. Cuban security forces and government-orchestrated mobs forcefully broke up the protests on March 16 and 17, while protests on other days were subject to verbal abuse by mobs. In April 2010, the Ladies in White were prevented from conducting their weekly protests by government-orchestrated mobs. Through the intercession of Roman Catholic Cardinal Jaime Ortega, the Cuban government ended the harassment in early May 2010 and allowed the Ladies in White to resume their weekly marches. Nevertheless, the Ladies in White have continued to face harassment. On March 18, 2011, members of the group were subject to "acts of repudiation" by government-orchestrated mobs as they attempted to commemorate the anniversary of the 2003 human rights crackdown. In August 2011, pro-government mobs attacked members of the Ladies in White in the city of Santiago when they attempted to march peacefully. On August 18, 2011, more than 40 members of the Ladies in White in Havana were attacked by a government-orchestrated mob. The group had been attempting to stage a protest to call attention to the recent harassment of their colleagues in Santiago. In late August 2011, police used tear gas to disrupt a street march in the town of Palma Soriano in Santiago province that was protesting the attacks against the Ladies in White. Amnesty International and the Department of State called for the end of harassment and attacks against the human rights group. In September 2011, pro-government supporters prevented the Ladies in White in Havana from marching to attend Mass on the feast day of the Virgin of Mercy. A founding member and leader of the Ladies in White, Laura Pollán, died unexpectedly in a Havana hospital from respiratory complications on October 14, 2011. In late November 2011, two human rights activists—Ivonne Malleza Galano and her husband Ignacio Martínez Montejo—were arrested after staging a peaceful protest in Havana, while an onlooker who protested their arrest—Isabel Haydee Álvarez—was also arrested. Malleza Galano was a member of a group supporting the Ladies in White. Amnesty International subsequently adopted all three as prisoners of conscience. After 52 days of being held without charges, all three were released from prison on January 20, 2012 (a day after the death of hunger striker Wilman Villar Mendoza), and were reportedly warned that they would face harsh sentences if they continued their dissident activities. On the weekend of February 18-19, 2012, Cuban Archbishop Dionisio Garcia reportedly helped evacuate 14 members of the Ladies in White who had sought refuge at the El Cobre Basilica in Santiago, Cuba, after the women received messages that they would face beatings by the police. In the lead up to the visit of Pope Benedict XVI to Cuba in March 2012, repression against the Ladies in White increased with numerous short-term detentions intended to block the human rights activists from attending planned activities. In early June 2012, representatives of the Ladies in White held an almost four-hour meeting with Cardinal Ortega that some observers maintained was an effort to improve relations between the Church and dissidents, relations that have been strained in recent months. Berta Soler, the leader of the Ladies in White, expressed satisfaction with the meeting, and said that she asked the Cardinal to intercede with the government to curb repression against her group. Amnesty International (AI) issued an urgent action appeal on July 18, 2012, calling on Cuban authorities to either charge three protestors—Ladies in White Niurka Luque Álvarez and Sonia Garro Alfonso, and Sonia's husband Ramón Alejandro Muñoz González—or release them. All three were first detained in March 2012 after the two women participated in a peaceful commemoration of the anniversary of Cuba's March 2003 human rights crackdown. According to AI, Luque Álvarez was released on October 5, 2012, pending trial, while both Garro Alfonso and her husband reportedly continue to be incarcerated. AI also reported that some 68 members of the Ladies in White were arrested from September 21-25, 2012, but all were released by September 26. Around 50 had been traveling from different provinces to attend four-day event in Havana, but were arrested en route, while 18 had been arrested in Havana. On October 14, 2012, at least 22 members of the Ladies in White were detained to prevent them from commemorating the one-year anniversary of the death of the group's leader Laura Pollán—dozens of other members, however, were able to commemorate Pollán during their weekly march. On December 9, 2012, a day before Human Rights Day, more than 90 members of the Ladies in White were reportedly beaten and detained, according to the Department of State. Over the past several years, numerous independent Cuban blogs have been established that are often critical of the Cuban government—all of these are hosted on overseas servers. The Cuban government has responded with its own team of some 1,000 official bloggers to counter the independent bloggers. Cuban Internet blogger Yoani Sánchez has received considerable international attention since late 2007 for her website, Generación Y, which includes commentary critical of the Cuban government. (Sánchez's website is available at http://www.desdecuba.com/generaciony/ , and has links to numerous other independent Cuban blogs and websites ). In May 2008, Sánchez was awarded Spain's Ortega y Gasset award for digital journalism, but the Cuban government did not provide her with an exit permit (known as a "white card") allowing her to travel to Spain to accept the award. On November 6, 2009, Sánchez and two other bloggers, Orlando Luis Pardo and Claudia Cadelo, were intercepted by state security agents while walking on a Havana street on their way to participate in a march against violence. Sánchez and Pardo were beaten in the assault. The Department of State issued a statement deploring the assault, and expressed its deep concern to the Cuban government for the incident. In early February 2012, Sánchez was denied an exit visa by the Cuban government to travel to Brazil to attend a documentary screening on freedom of expression. Sánchez has been denied an exit visa numerous times in the past, highlighting a common practice of the Cuban government in forbidding citizens from leaving Cuba without official permission. Sánchez maintained that she would test the recent changes in Cuba's migration policy announced October 16, 2012, that will eliminate the long-criticized required "exit permit"—the changes went into effect on January 14, 2013, and Sánchez was one of the first people in line at the immigration office for a new passport, which she was told would take 15 days and then she would be able to travel. (For more, see " Cuba Alters Its Policy Regarding Exit Permits " below.) Sánchez, along with her husband, Reinaldo Escobar, and several other dissidents were detained for some 30 hours in early October 2012 after traveling to the city of Bayamo to cover the trial of a Spanish politician accused of causing the death of political dissident Oswaldo Payá in a car crash in July 2012 (see " Death of Human Rights Activist Oswaldo Payá " below). Overview . The Cuban government conducted a severe crackdown in March 2003 (often referred to as the Primavera Negra , or Black Spring) and imprisoned 75 democracy activists, including independent journalists and librarians and leaders of independent labor unions and opposition parties. Until mid-2010, a majority of the "group of 75" political prisoners remained incarcerated, but the Cuban Catholic Church held talks with the Cuban government in July 2010 that ultimately led to the release of all of them by March 2011. Overall, more than 125 political prisoners have been released since mid-2010. Most traveled to exile in Spain, while a dozen remained in Cuba. In April 2012, the Cuban Commission on Human Rights and National Reconciliation (CCDHRN) reported that there remained at least 50 political prisoners in Cuba sanctioned for political reasons (along with another 15 released on parole); this compares to more than 200 political prisoners estimated by the CCHHRN at the beginning of 2010. As described below, two Cuban political prisoners conducting hunger strikes have died in recent years, Orlando Zapata Tamayo in February 2010 and Wilman Villar Mendoza in January 2012. The Department of State maintains that accurate numbers of political prisoners are difficult to determine because the Cuban government continues to deny prison access to independent monitors who could help determine the size of the political prisoner population. In anticipation of Pope Benedict XVI's March 2012 visit, the Cuban government released almost 3,000 prisoners in late December 2011, including about 7 political prisoners. In May 2012, the Cuban government maintained that it had released over 10,000 prisoners over the past six months, leaving some 57,000 people incarcerated in the country. The CCDHRN, however, estimates that the actual number of Cubans incarcerated is between 65,000 and 70,000. Death of Orlando Zapata Tamayo. The death of imprisoned Cuban dissident Orlando Zapata Tamayo on February 23, 2010, after an 83-day hunger strike focused increased U.S. and world attention on the plight of Cuba's political prisoners. Zapata, who was 42 years old at the time of his death, was arrested on March 20, 2003, while taking part in a hunger strike to demand the release of political prisoner Oscar Biscet. He was a member of the Alternative Republican Movement and the National Civic Resistance Committee. Zapata was not counted among the "group of 75" political prisoners arrested in 2003, but in January 2004, Amnesty International declared that he was a prisoner of conscience. In May 2004, Zapata was sentenced to three years in prison for "disrespect, public disorder, and resistance," but he was subsequently tried on further charges and was serving a total sentence of 36 years. U.S. officials maintained that Zapata's death highlighted the injustice of Cuba's holding political prisoners and called for their immediate release. President Obama issued a statement on March 24, 2010, expressing deep concern about the human rights situation in Cuba, including the death of Zapata, the repression of the Ladies in White, and increased harassment of those who dare to express support for their fellow Cuban citizens. The President called for the end of repression, the immediate and unconditional release of all political prisoners, and respect for the basic rights of the Cuban people. On March 18, 2010, the Senate approved S.Con.Res. 54 (Nelson, Bill), which recognized Zapata's life and called for a continued focus on the promotion of internationally recognized human rights in Cuba. Zapata's death also prompted considerable criticism from human rights organizations and other countries. Amnesty International expressed strong criticism of the death of Zapata, which it maintained was an "indictment of the continuing repression of political dissidents in Cuba." It called for Cuba to invite international human rights experts to visit Cuba to verify respect for human rights. The European Parliament condemned the death of Zapata and called for the "immediate and unconditional release of political prisoners," and even Spain, which had been lobbying the European Union for a relaxation of its common policy on Cuba, urged the release of Cuban political prisoners. Chile and Costa Rica also criticized Cuba for Zapata's death, and Mexico expressed concern for the health of Cuban dissidents. President Raúl Castro said that he regretted Zapata's death, but he also maintained that no one has been tortured or murdered in Cuba. Zapata's death prompted protests by other dissidents, and several dissidents vowed to undertake hunger strikes. Cuban dissident Guillermo Fariñas began a hunger strike on February 24, 2010, calling for the release of 26 political prisoners who were reported to be in ill health. Fariñas had undertaken numerous other hunger strikes over the years, but he developed complications and a blood clot that drove him to near death before he ended the strike on July 8, 2010, when the Cuban government, after talks with the Cuban Catholic Church, announced that it would release 52 political prisoners. Death of Wilman Villar Mendoza. On January 19, 2012, 31-year old Wilman Villar Mendoza died following a 50-day hunger strike after he was convicted of "contempt" of authority in November 2011 and sentenced to four years in prison. Villar Mendoza had participated in a peaceful demonstration with eight other members of the dissident Cuban Patriotic Union. The Cuban government has attempted to paint Villar Mendoza as a common criminal, but human rights organizations hold the government responsible for the political dissident's death. Amnesty International said that Villar Mendoza's death was a "shocking reminder of the Raúl Castro government's intolerance for dissent." A White House statement on Villar Mendoza described the hunger striker as a "young and courageous defender of human rights and fundamental freedoms in Cuba," and maintained that "his senseless death highlights the ongoing repression of the Cuban people and the plight faced by brave individuals standing up for the universal rights of all Cubans." On February 1, 2012, the Senate approved S.Res. 366 (Menendez), " honoring the life of dissident and democracy activist Wilman Villar Mendoza" and "condemning the Castro regime for the death of Wilman Villar Mendoza." Human right groups across the board maintain that even though the number of long-term political prisoners has declined, Cuba's human rights situation nevertheless has deteriorated since 2011, with the number of short-term detentions increasing significantly. In early May 2011, Cuban dissident Juan Wilfredo Soto Garcia died three days after he reportedly was beaten by police, although Cuban authorities maintain that he died of natural causes. The press rights groups Committee to Protect Journalists issued a report in early July 2011 detailing continued Cuban government persecution of independent journalists through arbitrary arrests, beatings, and intimidation. The Cuban Commission on Human Rights and National Reconciliation (CCDHRN) reports that there were at least 4,123 short-detentions for political reasons in 2011, compared to at least 2,074 in 2010, almost double. Short-detentions of dissidents for political reasons increased further in 2012, with at least 6,602 such detentions (a 60% increase over 2011), according to the CCDHRN. This included 1,158 detentions in March alone surrounding the visit of Pope Benedict XVI. In March 2012, Amnesty International published a report maintaining that "the Cuban government wages a permanent campaign of harassment and short-term detentions of political opponents to stop them from demanding respect for civil and political rights." The report maintained that the release of dozens of political prisoners in 2011 "did not herald a change in human rights policy." AI asserted that "the vast majority of those released were forced into exile, while in Cuba the authorities were determined to contain the dissidence and government critics with new tactics," including intimidation, harassment, surveillance, and "acts of repudiation," or demonstrations by government supporters targeting government critics. On June 7, 2012, the Senate Foreign Relations Committee, Subcommittee on Western Hemisphere, Peace Corps, and Global Narcotics held a hearing on the human rights situation in Cuba, featuring Assistant Secretary of State for Western Hemisphere Affairs Roberta Jacobson along with three human rights activists testifying from Cuba. One of the human rights activists testifying from Cuba, Jorge Luis García Pérez (also known as Antúnez), was subsequently arrested and beaten on June 9 by Cuban police in the province of Villa Clara and released five days later. Several U.S. Senators strongly criticized the Cuban government, including Senate Foreign Relations Committee Chairman John F. Kerry, who condemned "any efforts to intimidate Mr. Pérez or any other Cuban citizen into silence." On November 7, 2012, Cuban security agents arrested government critic Antonio Rodiles, and charged him with "resisting authority." Rodiles was arrested along with some 20 dissidents (including Yoani Sanchez) who were going to the Department of State Security headquarters to inquire about the detainment of an independent lawyer and journalist, Yaremis Flores. Subsequently Flores was released on November 9, 2011, while the other dissidents, with the exception of Rodiles, were also subsequently freed. Amnesty International issued an urgent action appeal on November 15, 2012, calling for the Cuban government to immediately and unconditionally release Rodiles and to cease the harassment of other citizens peacefully exercising their rights to freedom of expression and association. Rodiles ultimately was released on November 26, 2012, and charges of "resisting authority" were dropped, but according to Amnesty International, Rodiles was warned not to continue with his activism in Cuba. Rodiles is one of the coordinators of an initiative known as the "Citizens' Demand for Another Cuba," which was presented to Cuba's National Assembly in June 2012. The initiative calls on the Cuban government to implement the legal guarantees and polices in the Universal Declaration of Human Rights and to ratify two U.N. human rights treaties that the government signed in 2008—the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights. Rodiles also is the coordinator of a forum known as "Estado de Sats" (State of Sats), which was begun in July 2010 in order to encourage open debate on cultural, social, and political issues (see the group's website at http://www.estadodesats.com/ ). On November 27, 2012, according to Amnesty International, Cuban authorities assaulted independent journalist Guillermo Fariñas on the street, and in a separate incident threatened Elizardo Sánchez, the head of the CCDHRN. Both had attended a meeting with other civil society groups. Amnesty International issued an urgent action appeal to call on Cuban authorities to investigate these incidents and "to cease immediately the harassment of the two men and all other citizens who peacefully exercise their rights to freedom of expression and association." Pope Benedict XVI visited Cuba from March 26-28, 2012, the first papal visit since the visit of Pope John Paul II in 1998. The Pope's visit coincided with the 400 th anniversary of Our Lady of Charity (La Virgen de Caridad del Cobre), the patron saint of Cuba. After a trip to Mexico, the pontiff's visit to Cuba began in the eastern city of Santiago, where he celebrated mass in the Plaza of the Revolution, and visited the shrine of Our Lady of Charity in the town of El Cobre outside Santiago. The Pope then traveled to Havana, where he celebrated an outdoor mass in the Plaza of the Revolution and also met with church and Cuban government officials. While the purpose of the Pope's visit was pastoral (some 60% to 70% of Cubans are Catholic), the trip also highlighted the increased social and political profile of the Catholic Church in Cuba and its efforts in recent years to influence the Cuban government. Cuba's Catholic Church became more openly critical of the Cuban government in 1993 when Cuban bishops issued a pastoral letter opposing limitations on freedom, excessive surveillance by state security, and imprisonment and harassment of dissidents. For many observers, the bishops' statement reflected a new era in which the Church would be more openly critical of the government. Pope John Paul elevated Archbishop of Havana Jaime Ortega to the position of Cardinal in 1994, which raised the profile of the Church in Cuba. Since then, Ortega has been widely commended for reinvigorating the Cuban Catholic Church—the role of Caritas Cuban, the Church's social assistance agency, has expanded throughout Cuba under Ortega. In late 2010, the Catholic Church opened up its first seminary in Cuba in more than 50 years. Cuban bishops have not refrained from speaking out on the need for change in Cuba, and Church publications—such as Palabra Nueva (New Word) and Espacio Laical (Space for Laity)—have become a way for the Church to broaden the debate in Cuba on social and economic problems facing the country. Beginning in 2010, the Cuban Catholic Church under Cardinal Ortega took on a prominent role in engaging with the Cuban government over political prisoners—this led to the release of more than 125 prisoners, with the majority going to Spain. In anticipation of Pope Benedict's visit, as noted above, the Cuban government pardoned almost 3,000 prisoners in late December 2011, although only seven were reported to be political prisoners. During his March 2012 trip to Cuba, Pope Benedict urged Cubans during his homily in Santiago "to build a renewed and open society, a better society, one more worthy of humanity, and which better reflects the goodness of God." In Havana, the Pope invoked 19 th century Cuban priest Father Felix Varela (a candidate for sainthood) as someone who offers a "path to a true social transformation ... to form virtuous men and women in order to forge a worthy and free nation." Emphasizing reconciliation, the Pope asserted that "Cuba and the world need change, but this will occur only if each one is in a position to seek the truth and chooses the way of love, sowing reconciliation and fraternity." At the end of his visit, in reference to U.S. economic sanctions, the Pope criticized "restrictive economic measures, imposed from outside the country," as an "unfair burden to the Cuban people." Some Cuban dissidents, as well as some in the Cuban American community, criticized the Pope for not more forcefully confronting the Cuban government during his visit. The Pope did not meet with any dissidents or human rights activists during his visit or speak out about the increased government harassment surrounding his visit. As a result, some in the dissident community felt the Church lost credibility a result of the Pope's visit. Other dissidents, however, emphasize the record of the Cuban Catholic Church in supporting political prisoners and their families and for the support provided to the Ladies in White. They point to the Church's role in opening space for increased public dialogue, including criticism of the government, on economic and social issues, through Church publications. Cardinal Jaime Ortega also has received criticism from some dissidents and Cuban Americans for not more openly confronting the government. In particular, he was criticized for remarks in April 2012 at Harvard University in which he defended the government's eviction of 13 dissidents occupying a Havana church who were demanding a papal audience. Ortega described the protestors as "former delinquents" with "no culture," words that brought strong criticism from dissidents in Cuba as well as Cuban Americans. Most surprising, however, was the criticism of the Cardinal in an editorial by the director of the Office of Cuban Broadcasting that oversees Radio and TV Marti, Carlos García-Pérez, who referred to the Cardinal in an editorial as a "lackey" of the Cuban government. (The strong language in the editorial by a U.S. government official raised considerable criticism itself, including from some Members of Congress, who called for the Administration to reject the comments against Ortega.) Defenders of Cardinal Ortega maintain that while he made some unfortunate statements at Harvard, he has a strong record of support for political prisoners and creating a space for dialogue and debate in Cuba. Looking ahead, given that the Catholic Church is Cuba's largest independent civil society group, it is likely that it will continue to have a significant voice as Cuba confronts economic and political change in the years ahead. On July 22, 2012, prominent Cuban democracy and human rights activist Oswaldo Payá was killed in a car accident in the eastern province of Granma. Also killed in the crash was Cuban dissident Harold Cepero while two Europeans accompanying Payá and Cepero were injured—Angel Carromero Barrios, a leader of the Spanish Popular Party's youth organization, was driving, while Jens Aron Modig, president of the Swedish Christian Democrats youth wing, was a passenger along with Payá and Cepero. Payá founded the Christian Liberation Movement 1988, an opposition civil society group that advocates peaceful democratic change and respect for human rights. He is probably best known for his work founding the Varela Project in 1996. Named for the 19 th century priest, Felix Varela, who advocated independence from Spain and the abolition of slavery, the Varela Project collected thousands of signatures supporting a national plebiscite for political reform in accordance with a provision of the Cuban Constitution. The referendum, if granted, would have call for respect for human rights, an amnesty for political prisoners, private enterprise, and changes to the country's electoral law that would result in free and fair elections. In May 2002, organizers of the Varela Project submitted 11,020 signatures to the National Assembly calling for a national referendum. This was more than the 10,000 required under Article 88 of the Cuban Constitution. Former President Jimmy Carter noted the significance of the Varela 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 see that Cubans, and not foreigners, will decide the future of this country." In response to the Varela Project, the Cuban government orchestrated its own referendum in late June 2002 that ultimately led to the National Assembly amending the Constitution to declare Cuba's socialist system irrevocable. The Varela Project persevered despite the 2003 human rights crackdown, which included the arrest of at least 21 Project activists. In October 2003, Oswaldo Payá delivered more than 14,000 signatures to Cuba's National Assembly, again requesting a referendum on democratic reforms. Payá's death prompted expressions of sympathy from around the world, including from Pope Benedict XVI. The White House called Payá "a tireless champion for greater civic and human rights in Cuba" and asserted that "we continue to be inspired by Payá's vision and dedication to a better future for Cuba, and believe that his example and moral leadership will endure." The State Department maintained that Cuba had "lost one of its most important voices of political dissent and strongest proponents of fundamental freedoms for the people of his homeland." Several Members of Congress issued statements regarding Payá's death. These included House Foreign Affairs Committee Chairman Representative Ileana Ros-Lehtinin, who said that Payá's "leadership and passion within the dissident community will never be forgotten and will be a model for those who follow his path to a free and democratic Cuba," and Senate Foreign Relations Committee Chairman John Kerry who stated that Payá's "legacy will be an enduring inspiration to Cubans seeking freedom and democratic reforms." S.Res. 525 , introduced by Senator Bill Nelson on July 24, 2012, and approved by the Senate on July 31, recognizes and honors Payá's life and exemplary leadership and calls on the Cuban government to allow an impartial, third-party investigation into the circumstances surrounding Payá's death. The resolution also condemns the Cuban government for the detention of almost 50 pro-democracy activists following Payá's memorial service. On October 15, 2012, a Cuban court convicted Carromero Barrios of vehicular manslaughter and sentenced him to four years in prison. Carromero had denied that he was speeding, and maintained that signs for road work in the area were poorly marked. The Spanish political party youth leader did not appeal the conviction. Instead, Spain engaged in diplomatic efforts to repatriate Carromero to Spain. Such an agreement was reached in late December 2012, and Carromero returned to Spain to complete his prison term. On January 11, 2013, Carromero was released from prison under a program where he was allowed to return to work during the day and have weekend furlough, but otherwise would live at a detention center. Cuba's economy is largely state-controlled, with the government owning most means of production and employing over 80% of the labor force. Key sectors of the economy that generate foreign exchange include the export of professional services (largely medical personnel to Venezuela); tourism, which has grown significantly since the mid-1990s, with 2.53 million tourists visiting Cuba in 2010; nickel and cobalt mining, with the Canadian mining company Sherritt International involved in a joint investment project; and a biotechnology and pharmaceutical sector that supplies the domestic healthcare system and has fostered a significant export industry. Remittances from relatives living abroad, especially from the United States, have also become a significant source of hard currency, with more than $1 billion sent to Cuba annually in remittances from families living abroad. The once-dominant sugar industry has declined significantly over the past 20 years; in 1990, Cuba produced 8.4 million tons of sugar while in 2012 it produced just 1.4 million tons. After the collapse of the former Soviet Union, Russian financial assistance to Cuba practically ended, and as a result, Cuba experienced severe economic deterioration from 1989 to 1993, with estimates of economic decline ranging from 35% to 50%. Since then, however, there has been considerable improvement. From 1994 to 2000, as Cuba moved forward with some limited market-oriented economic reforms, economic growth averaged 3.7% annually. Economic growth was especially strong in the 2004-2008 period (see Figure 2 ) registering an impressive 11.2% in 2005 (despite widespread damage caused by Hurricanes Dennis and Wilma), 12.1% in 2006, and 7.3% in 2007 before slowing to 4.1% in 2008. The economy benefitted from the growth of the tourism, nickel, and oil sectors, and support from Venezuela and China in terms of investment commitments and credit lines. Cuba also benefits from a preferential oil agreement with Venezuela, which provides Cuba with more than 90,000 barrels of oil a day. Cuba's economic growth subsequently slowed to 1.4% in 2009. The global financial crisis had a negative effect on the Cuban economy because of lower world prices for nickel and a reduction in tourism from Canada and Europe. Cuba was also still recovering from the devastation wrought by Hurricanes Gustav and Ike in 2008, particularly in the agricultural sector. As a result of the economic downturn, the government announced austerity measures that included energy rationing and cutbacks in transportation and some food programs. Economic growth, however, has improved somewhat since 2010, with 2.4% growth in 2010 and estimated growth rates of 2.8% in 2011 and 3.1% in 2012. Beyond that, some observers maintain that Cuba's economic reform efforts to expand the private sector and boost productivity could help increase average economic growth in the 2013-2017 period to just over 4%. Over the years, Cuba has expressed pride for the nation's accomplishments in health and education. According to the U.N. Development Program's 2011 Human Development Report, life expectancy in Cuba in 2011 was 79.1 years and adult literacy was estimated at almost 100%. The World Bank estimates that Cuba's per capita income level of $5,550 (2010) is in the upper-middle-income range, higher than many other countries in the Americas. When Cuba's economic slide began in 1989, the government showed little willingness to adopt any significant market-oriented economic reforms, but in 1993, faced with unprecedented economic decline, Cuba began to change policy direction and implemented a number of policy measures. Beginning in 1993, Cubans were allowed to own and use U.S. dollars and to shop at dollar-only shops previously limited to tourists and diplomats. Self-employment was authorized in more than 100 occupations in 1993, most in the service sector, and by 1996 more than 200,000 Cubans had become small entrepreneurs. In 1993, the government divided large state farms into smaller, more autonomous, agricultural cooperatives (Basic Units of Cooperative Production, UBPCs). It opened agricultural markets in 1994, where farmers could sell part of their produce on the open market, and it also permitted artisan markets for the sale of handicrafts. In 1995, the government allowed private food catering, including home restaurants ( paladares) , in effect legalizing activities that were already taking place, and approved a new foreign investment law that allows fully owned investments by foreigners in all sectors of the economy with the exception of defense, health, and education. In 1996, it authorized the establishment of free trade zones with tariff reductions typical of such zones. In 1997, the government enacted legislation to reform the banking system and established a new Central Bank (BCC) to operate as an autonomous and independent entity. After Cuba began to recover from its economic decline in the early 2000s, however, the government began to backtrack on some of its reform efforts. Regulations and new taxes made it extremely difficult for many of the nation's self-employed, with the result that the number of small entrepreneurs declined to about 150,000. Some home restaurants were forced to close because of the new regulations. In 2004, the Cuban government limited the use of dollars by state companies for any services or products not considered part of their core business. When Raúl Castro assumed provisional power in July 2006, there was some expectation that the government would be more open to economic policy changes, and a debate about potential economic reforms reemerged in Cuba. On July 26, 2007, in a speech commemorating Cuba's revolutionary anniversary, Raúl Castro acknowledged that Cuban salaries were insufficient to satisfy needs, and maintained that structural changes were necessary in order to increase efficiency and production. In the aftermath of the speech, Cuban public expectations for economic reform increased as thousands of officially sanctioned meetings were held in workplaces and local PCC branches around the country where Cubans were encouraged to air their views and discuss the future direction of the country. Complaints focused on low salaries and housing and transportation problems, and some participants advocated legalization of more private businesses. After Raúl Castro officially assumed the presidency in 2008, his government announced a series of economic changes. In his first speech as president in February 2008, Raúl promised to make the government smaller and more efficient, to review the potential revaluation of the Cuban peso, and to eliminate excessive bans and regulations that curb productivity. In March, the government announced that it would lift restrictions on the sales of consumer products such as computers, microwaves, and DVD and video players as well as on the use of cell phones. The government also announced that it would begin revamping the state's wage system by removing the limit that a state worker can earn. This was an effort to boost productivity and to deal with one of Cuba's major economic problems: how to raise wages to a level where basic human needs can be satisfied. The promised revamp of the wage system, however, has been delayed. The problem of low wages in Cuba is closely related to another major economic challenge in Cuba: how to unify the two official currencies circulating in the country—the Cuban convertible peso (CUC) and the Cuban peso, which trade at 24 to 1 CUC. Most people are paid in Cuban pesos, and the average monthly wage in Cuba is about 448 pesos (about 19 U.S. dollars), but for increasing amounts of consumer goods, convertible pesos are used. Cubans with access to foreign remittances or who work in jobs that give them access to convertible pesos are far better off than those Cubans who do not have such access. In March 2011, President Castro tasked outgoing Minister of Economy and Planning Marino Murillo (replaced by Vice Minister Adel Yzquierdo Rodriguez) with the job of overseeing the implementation of the country's economic reforms. Some press reports have referred to Murillo as the country's new economic czar. Murillo has been in charge of coordinating the economic policy committee for the party congress, and as vice president of the Council of Ministers, he will continue to oversee the Ministry of Economy and Planning and other economic agencies. Murillo reportedly is a key member of Raúl Castro's inner circle. As noted above, Cuba's Communist Party held its sixth congress from April 16-19, 2011, focusing on making changes to Cuba's economic model. Some 1,000 party delegates analyzed and debated the Draft Guidelines for Social and Economic Policy ( Proyecto de Lineamientos de la Política Económica y Social ) that were issued in November 2010. The guidelines are an expansive list of economic goals or aspirations, rather than a plan of action. As originally set forth in November, the guidelines numbered 291, but as approved at the party congress, the guidelines consist of 313 goals or objectives. While the guidelines do not have any reference with regard to sequencing or how the objectives may be implemented, they include some potentially significant economic reforms that, if realized, could significantly alter Cuba's state-dominated economic model. These include the liquidation of state enterprises with sustained financial losses (#17), advancement toward the unification of Cuba's two currencies (#55), the gradual development of a tax system as an efficient means to distribute income (#60), creation of special development zones for foreign investment (#102), expansion of the non-state sector as an alternative means of employment (#168), and an orderly and gradual elimination of the ration system (#174). Some economic analysts maintain that the proposed changes set forth in the guidelines are too limited and too late to deal with the severity of Cuba's difficult economic situation. Cuba's National Assembly approved the guidelines in a legislative session held in early August 2011. Among other government actions taken during the second half of 2011, the government permitted the sale of cars beginning in October and the sale of homes in November. A new program began in December 2011 whereby Cubans will be able to take out small peso loans from state banks, and will allow small businesses to open commercial bank accounts. A significant reform effort under Raúl Castro has focused on the agricultural sector, a vital issue because Cuba reportedly imports some two-thirds of its food needs. In an effort to boost food production, the government began in 2008 to give farmers more discretion over how to use their land and what supplies to buy. The government also began a program of turning idle land into productive use through a land grant program, whereby private farmers and cooperatives can apply for land. Under the program, the government reportedly granted some 200,000 leases as of May 2012. In September 2012 the government approved measures to revitalize quasi-autonomous farming cooperatives (UBPCs, first established in 1993), which have performed poorly, by increasing their autonomy. In October 2012, the government announced new rules increasing the amount of land that private farmers may lease, from about 40 to about 67 hectares. Despite the government's agricultural reform efforts, food production has been significantly below targets. The non-sugar agriculture sector contracted some 2.5% in 2010, and in 2011, while production increased for some agricultural crops, overall food production was less than it was some 5 years earlier in 2007. At the same time, the government reported that food prices rose some 20% in 2011 because of reduced imports and stagnating farm production. Coffee production reportedly has declined some 25% in 2012, despite efforts to renovate neglected plantations. Problems in the agricultural sector focus on an entrenched system whereby famers depend on the state for fuel, pesticides, fertilizers, and other resources in exchange for a majority of what they produce. The government's inability to provide enough resources to farmers has hampered production, and its domination of the distribution process has hampered the delivery of products to market. In March 2011, the government began granting micro credits to new farmers in an effort to increase lagging food production, although the program reportedly is not extensive enough to have an effect on production. On June 18, 2012, the Cuban government reimposed duties on imported food that had been lifted in 2008 after several hurricanes hurt domestic production. While over the long term, the reimposition of the tax could stimulate domestic production, in the short to medium term, the tax could affect the flow of food parcels brought by visiting Cuban Americans. It could also affect the hundreds of private restaurants and caterers that have sprung up over the past two years. With regard to the sugar sector, in the fall of 2011, the government eliminated its Ministry of Sugar, and turned the industry into a state-run holding company incorporating 26 subsidiary companies. Cuba's once dominant sugar sector produced some 8 million tons of sugar annually, but only produced 1.2 million tons in 2011 and 1.4 million tons for the 2012 harvest. While the 2012 harvest was an improvement over the 2011 harvest, it was still below expectations. Analysts maintain that the sugar industry continues to be plagued by such problems of weak incentives, not enough decentralization, and a lack of capital and investment. In September 2010, the Cuban government announced a series of potentially significant reforms designed to reduce the public sector and increase private enterprise. The government announced that by the end of March 2011 it would identify half a million state workers who would be laid off, with most expected to find work in the expanding private sector. The layoffs reportedly would affect all public sector employees, including in the public service and state-owned enterprises. Over the next five years, a total of 1.2 million state employees would be cut (out of about 4.3 million state workers). The government also announced an expansion of self-employment, identifying 178 categories of work allowed with 83 of those allowing small businesses to hire non-family members. The self-employment categories cover a wide range of employment from "carpenters, gardeners, artisans, and animal trainers to small businesses such as home-based bed and breakfasts, rental property, restaurants, pizzerias, and snack shops." New tax provisions would generate income for the government and include a new sales tax and social security tax. The Cuban government's implementation of layoffs in the state sector lagged considerably, so much so that President Castro acknowledged in February 2011 that more time was needed to meet the government's initial goal of laying off half a million state employees. Nevertheless, state payrolls were reportedly cut by 137,000 in 2011, and by 228,000 in 2012. The number of self-employed rose to some 400,000 Cubans by December 2012. This compares to some 156,000 self-employed at the end of 2010. Some economic analysts, however, contend that the new categories of self-employment are too limited and still include considerable restrictions and taxes designed to impede the growth of small businesses. In May 2011, the government announced new plans to cut taxes and lift other restrictions in order to stimulate the private sector, while in December 2011, the government announced that more retail services (such as appliance and watch repair and locksmith and carpentry shops) would be open to the private in 2012. In 2012, Cuba experimented in several provinces with private sector contracting for services (landscaping, construction, food, and other services) from state companies. In July 2012, Cuba's economic czar Marino Murillo said that Cuba would expand this pilot by converting some 222 small and medium state companies into non-state cooperatives involving such activities as food services and transportation. To date, Cuba's efforts to create a burgeoning private sector and reduce its bloated public sector have been slower than expected and have not stimulated economic growth. The government has the goal of moving from a state-dominated to a mixed economy. According to a top government and party official, Esteban Lazo Hernández, Cuba wants to move about half of its economic activity from the state sector to the non-state sector over the next four to five years, with the private sector eventually accounting for about 40%-45% of gross domestic product. In mid-2012, however, the government began taking actions that could hurt the country's emerging private sector and call into question the government's overall commitment to the development of private sector activity. As noted above, in mid-June 2012, the government reimposed taxes on imported food, which could affect private restaurants and caterers depending on imported food. On July 2, 2012, the Cuban government quietly published regulations announcing that, beginning in September 2012, significantly higher duties would be imposed on other imported goods carried or shipped to individuals in Cuba. The new duties amount to about $10 a kilogram or more for goods, significantly higher than the current rate of about $0.50 a kilogram. Many small entrepreneurs that depend on the imported goods could be threatened by the new duties. Hurricane Sandy struck eastern Cuban early on October 25, 2012, causing significant damage in the provinces of Santiago, Holguin, and Guantanamo. Eleven Cubans were killed in the storm, with damage to over 226,000 homes, including at least 17,000 destroyed, and overall 3 million people were affected, according to the U.N. Office for the Coordination of Humanitarian Affairs (OCHA). In particular, the city of Santiago was significantly affected, with power outages, damages to homes, and disruption to water services. The U.N. team reported that almost 100,000 hectares (some 247,000 acres) of crops were affected, especially sugar cane. The storm also reportedly did severe damage to Cuba's coffee production. In terms of international response, the International Federation of the Red Cross and Red Crescent Societies issued an emergency appeal in early November for 12.2 million Swiss francs (U.S. $12.97 million) to support the Cuban Red Cross to help some 35,000 vulnerable families. A number of countries—including Venezuela, Bolivia, Russia, Ecuador, Japan, Qatar, and the European Union—provided shipments of assistance or pledges of emergency funding to Cuba in the aftermath of the hurricane. Several U.S. humanitarian aid organizations, including many church affiliated groups such as Catholic Relief Services, are providing assistance to Cuba in the aftermath of the hurricane. The United Nations has been playing a significant role in providing relief and recovery from Hurricane Sandy. In early November, the United Nations World Food Programme (WFP) announced that it would provide food rations to help almost half a million Cubans affected by the storm, with relief concentrated in the municipality of Santiago. By mid-November 2012, U.N. agencies had mobilized $1.5 million in emergency funds, while the U.N. Office for the Coordination of Humanitarian Affairs (OCHA) allocated $5.5 million to respond to the relief efforts. In addition, On November 16, 2012, the U. N. system launched a Plan of Action (developed in cooperation with the Cuban government) for $30.6 million to address the urgent needs of the population in the following sectors: shelter and recovery, water sanitation and hygiene, food security, health, and education. While the plan's various projects all have humanitarian components that will be implemented in the next six months, many of the projects will continue for up to 18 months to strengthen recovery. For additional information on the Hurricane Sandy relief effort in Cuba, see the following ReliefWeb website administered by the U.N. OCHA: http://reliefweb.int/disaster/tc-2012-000180-hti . During the Cold War, Cuba had extensive relations with and support from the Soviet Union, with billions of dollars in annual subsidies to sustain the Cuban economy. This subsidy system helped fund an activist foreign policy and support for guerrilla movements and revolutionary governments abroad in Latin America and Africa. With an end to the Cold War, the dissolution of the Soviet Union, and the loss of Soviet financial support, Cuba was forced to abandon its revolutionary activities abroad. As its economy reeled from the loss of Soviet support, Cuba was forced to open up its economy and economic relations with countries worldwide, and developed significant trade and investment linkages with Canada, Spain, other European countries, and China. In recent years, Venezuela—under populist President Hugo Chávez—has become a significant source of support for subsidized oil imports and investment for Cuba. In 2010, Cuba's leading trading partners in terms of Cuban exports were Venezuela, China, Canada, and the Netherlands (see Figure 3 ), while the leading sources of Cuba's imports were Venezuela, China, Spain, Brazil, and the United States (see Figure 4 ). Relations with Russia, which had diminished significantly in the aftermath of the Cold War, were strengthened with the November 2008 visit of Russian President Dmitry Medvedev to Havana, the visit of several Russian warships to Cuba in December 2008, and Raúl Castro's visit to Russia in January 2009. Castro visited Russia again from July 10-13, 2012, with the goal reportedly to increase and diversify trade and investment. While trade relations between the two countries are not significant, two Russian energy companies have been involved in oil exploration in Cuba. Gazprom has been in a partnership with the Malaysian state oil company Petronas that conducted unsuccessful deepwater oil drilling off of Cuba's western coast in 2012, while the Russian oil company Zarubezhneft began drilling in Cuba's shallow coastal waters (not deepwater) east of Havana in November 2012 (also see " Cuba's Offshore Oil Development " below). Relations with China have also increased in recent years. Chinese President Hu Jintao visited Cuba in November 2008, signing a dozen agreements, while Chinese Vice President Xi Jinping visited Cuba in June 2011. During the Xi Jinping visit, China signed a letter of intent to invest in upgrading a Cuban oil refinery in Cienfuegos. In July 2012, President Castro visited Cuba on a four-day visit beginning July 4; the two countries reportedly signed eight cooperation agreements and talks reportedly focused on trade and investment issues. (After China, Castro visited Vietnam on a four-day trip. The two countries have long had good relations, and some observers speculate that Cuba looks to Vietnam for potential lessons in implementing economic reforms.) With El Salvador's restoration of relations with Cuba in June 2009, all Latin American nations now have official diplomatic relations with Cuba. Cuba has increasingly become more engaged in Latin America beyond the already close relations with Venezuela. Brazilian President Luiz Inácio Lula da Silva visited Cuba twice in 2008 while President Dilma Rouseff visited in January 2012. Cuba is a member of the Bolivarian Alliance for the Americas, (ALBA), a Venezuelan-led integration and cooperation scheme founded in 2004. Cuba became a full member of the Rio Group of Latin American and Caribbean nations in November 2008, and a member of the succeeding Community of Latin American and Caribbean States (CELCAC) that was officially established in December 2011 to boost regional cooperation and cooperation. Cuba expressed interest in attending the sixth Summit of the Americas in April 2012 in Cartagena, Colombia, but ultimately was not invited to attend. The United States and Canada expressed opposition to Cuba's participation. Previous summits have been limited to the hemisphere's 34 democratically elected leaders, and the OAS (in which Cuba does not participate) has played a key role in summit implementation and follow-up activities. Several Latin American nations have vowed not to attend the next Summit of the Americas to be held in Panama in 2015 unless Cuba is allowed to participate. Cuba was excluded from participation in the OAS in 1962 because of its identification with Marxism-Leninism, but in early June 2009, the OAS overturned the 1962 resolution in a move that could eventually lead to Cuba's reentry into the regional organization in accordance with the practices, purposes, and principles of the OAS. While the Cuban government welcomed the OAS vote to overturn the 1962 resolution, it asserted that it would not return to the OAS. (For further background, see a section on "Cuba and the OAS" in CRS Report R40193, Cuba: Issues for the 111 th Congress , by [author name scrubbed].) Cuba is an active participant in international forums, including the United Nations and the controversial United Nations Human Rights Council. Since 1991, the U.N. General Assembly has approved a resolution each year criticizing the U.S. economic embargo and urging the United States to lift it. Cuba also has received support over the years from the United Nations Development Programme (UNDP) and the United Nations Educational, Scientific, and Cultural Organization (UNESCO), both of which have offices in Havana. Cuba was a founding member of the World Trade Organization, but it is not a member of the International Monetary Fund, the World Bank, or the Inter-American Development Bank. Cuba hosted the 14 th summit of the Non-aligned Movement (NAM) in 2006, and held the Secretary Generalship of the NAM until its July 2009 summit in Egypt. In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the Soviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such events and actions as U.S. covert operations to overthrow the Castro government culminating in the ill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis in which the United States confronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cuban support for guerrilla insurgencies and military support for revolutionary governments in Africa and the Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in the so-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted and housed at U.S. facilities in Guantanamo and Panama; and the February 1996 shootdown by Cuban fighter jets of two U.S. civilian planes operated by the Cuban American group Brothers to the Rescue, which resulted in the death of four U.S. crew members. Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the island nation through comprehensive economic sanctions, including an embargo on trade and financial transactions. The Cuban Assets Control Regulations (CACR), first issued by the Treasury Department in July 1963, lay out a comprehensive set of economic sanctions against Cuba, including a prohibition on most financial transactions with Cuba and a freeze of Cuban government assets in the United States. The CACR have been amended many times over the years to reflect changes in policy, and remain in force today. These sanctions were made stronger with the Cuban Democracy Act (CDA) of 1992 ( P.L. 102-484 , Title XVII) and with the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 ), the latter often referred to as the Helms/Burton legislation. The CDA prohibits U.S. subsidiaries from engaging in trade with Cuba and prohibits entry into the United States for any sea-borne vessel to load or unload freight if it has been involved in trade with Cuba within the previous 180 days. The Cuban Liberty and Democratic Solidarity Act, enacted in the aftermath of Cuba's shooting down of two U.S. civilian planes in February 1996, combines a variety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once it begins the transition to democracy. Most significantly, the law codified the Cuban embargo, including all restrictions under the CACR. This provision is especially noteworthy because of its long-lasting effect on U.S. policy options toward Cuba. The executive branch is circumscribed in lifting or substantially loosening the economic embargo without congressional concurrence until certain democratic conditions are met, although the CACR includes licensing authority that provides the executive branch with some administrative flexibility (e.g., travel-related restrictions in the CACR have been eased and tightened on numerous occasions). Another significant sanction in the law 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, Presidents Clinton, Bush, and now Obama have suspended the implementation of Title III at six-month intervals. In addition to sanctions, another component of U.S. policy, a so-called second track, consists of support measures for the Cuban people. This includes U.S. private humanitarian donations, medical exports to Cuba under the terms of the Cuban Democracy Act of 1992, U.S. government support for democracy-building efforts, and U.S.-sponsored radio and television broadcasting to Cuba. In addition, the 106 th Congress approved the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX) that allows for agricultural exports to Cuba, albeit with restrictions on financing such exports. This led to the United States becoming one of Cuba's largest suppliers of agricultural products. The Clinton Administration made several changes to U.S. policy in the aftermath of Pope John Paul II's 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 February 1996 shootdown of two U.S. civilian planes), the resumption of cash remittances by U.S. nationals and residents for the support of close relatives in Cuba (which had been curtailed in August 1994 in response to the migration crisis with Cuba), and the streamlining of procedures for the commercial sale of medicines and medical supplies and equipment to Cuba. In January 1999, President Clinton announced several additional measures 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 of people-to-people contact by loosening restrictions on travel to Cuba for certain categories of travelers, such as professional researchers and those involved in a wide range of educational, religious, and sports activities. The George W. Bush Administration essentially continued the two-track U.S. policy of isolating Cuba through economic sanctions while supporting the Cuban people through a variety of measures. However, within this policy framework, the Administration emphasized stronger enforcement of economic sanctions and further tightened restrictions on travel, remittances, and humanitarian gift parcels to Cuba. The Administration established an interagency Commission for Assistance to a Free Cuba in late 2003 tasked with identifying means to help the Cuban people bring about an expeditious end of the dictatorship" and to consider "the requirements for United States assistance to a post-dictatorship Cuba." In issuing its first report in May 2004, the Commission made recommendations to tighten restrictions on family visits and other categories of travel and on private humanitarian assistance in the form of remittances and gift parcels. The Administration subsequently issued these tightened restrictions in June 2004, while in February 2005, it tightened restrictions on payment terms for U.S. agricultural exports to Cuba. The Commission issued a second and final report in July 2006 that made recommendations to hasten political change in Cuba toward a democratic transition and led to a substantial increase in U.S. funding to support democracy and human rights efforts in Cuba. The Bush Administration continued to emphasize a continuation of the sanctions-based approach toward Cuba pending political change in Cuba. When Raúl Castro officially became head of state in February 2008, then-Secretary of State Condoleezza Rice issued a statement urging "the Cuban government to begin a process of peaceful, democratic change by releasing all political prisoners, respecting human rights, and creating a clear pathway towards free and fair elections." In remarks on Cuba policy in March 2008, President Bush maintained that in order to improve U.S.-Cuban relations, "what needs to change is not the United States; what needs to change is Cuba." The President asserted that Cuba "must release all political prisoners ... have respect for human rights in word and deed, and pave the way for free and fair elections." Over the years, although U.S. policymakers have agreed on the overall objectives of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—there have been several schools of thought about how to achieve those objectives. Some have advocated a policy of keeping maximum pressure on the Cuban government until reforms are enacted, while continuing efforts to support the Cuban people. Others argue for an approach, sometimes referred to as constructive engagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people, and move toward engaging Cuba in dialogue. Still others call for a swift normalization of U.S.-Cuban relations by lifting the U.S. embargo. Legislative initiatives introduced over the past decade have reflected these three policy approaches. Over the past decade, there have been efforts in Congress to ease U.S. sanctions, with, one or both houses at times approving amendments to appropriations measures that would have eased U.S. sanctions on Cuba. Until 2009, these provisions were stripped out of final enacted measures, in part because of presidential veto threats. In March 2009, as noted above, Congress took action to ease some restrictions on travel to Cuba, marking the first time that Congress has eased Cuba sanctions since the approval of the Trade Sanctions Reform and Export Enhancement Act of 2000. In light of Fidel Castro's departure as head of government, many observers called for a reexamination of U.S. policy toward Cuba. In this new context, two broad policy approaches have been advanced to contend with political change in Cuba: a status-quo approach that maintains the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people; and an approach aimed at influencing the attitudes of the Cuban government and Cuban society through increased contact and engagement. In general, those who advocate easing U.S. sanctions on Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba—through increased travel, trade, and diplomatic dialogue—then the seeds of reform would be planted, which would stimulate and strengthen forces for peaceful change on the island. They stress the importance to the United States of avoiding violent change in Cuba, with the prospect of a mass exodus to the United States and the potential of involving the United States in a civil war scenario. They argue that since the demise of Cuba's communist government does not appear imminent, even without Fidel Castro at the helm, the United States should espouse a more pragmatic approach in trying to bring about change in Cuba. Supporters of changing policy also point to broad international support for lifting the U.S. embargo, to the missed opportunities for U.S. businesses because of the unilateral nature of the embargo, and to the increased suffering of the Cuban people because of the embargo. Proponents of change also argue that the United States should be consistent in its policies with the world's few remaining communist governments, including China and Vietnam, and also maintain that moderating policy will help advance human rights. On the other side, opponents of changing U.S. policy maintain that the current two-track policy of isolating Cuba, but reaching out to the Cuban people through measures of support, is the best means for realizing political change in Cuba. They point out that the Cuban Liberty and Democratic Solidarity Act of 1996 sets forth the steps that Cuba needs to take in order for the United States to normalize relations. They argue that softening U.S. policy at this time without concrete Cuban reforms would boost the Castro government, politically and economically, and facilitate 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 and human rights in Cuba, and that sustained sanctions can work. Opponents of loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are the causes of Cuba's difficult living conditions. Since taking office, the Obama Administration has lifted restrictions on travel and remittance to Cuba for Cuban Americans, moved to reengage Cuba on migration and other bilateral issues, and in January 2011 announced further steps to ease restrictions on purposeful travel and non-family remittances. At the same time, the Administration has continued other embargo restrictions on trade and financial transactions. The Administration also has continued to express significant concern about the human rights situation in Cuba, although it welcomed the Cuban government's release of political prisoners. Since December 2009, a key impediment to improved relations has been Cuba's detention of U.S. Agency for International Development (USAID) subcontractor Alan Gross, who was ultimately convicted on March 12, 2011, and sentenced to 15 years in prison. While the United States and Cuba are cooperating on such issues as antidrug efforts and, through multilateral channels, on disaster preparedness and cooperation in the event of an oil spill, improvement of relations in other areas will likely be stymied until Alan Gross is released from prison. During the 2008 electoral campaign, President Obama had pledged to lift restrictions on family travel to Cuba as well as restrictions on Cuban Americans sending remittances to Cuba. At the same time, he also pledged to maintain the embargo as a source of leverage to bring about change in Cuba. However, Obama also asserted that if the Cuban government takes significant steps toward democracy, beginning with the freeing of all political prisoners, then the United States would take steps to normalize relations and ease the embargo. He also maintained that, after careful preparation, his Administration would pursue direct diplomacy with Cuba without preconditions, but only when there is an opportunity to advance U.S. interests and advance the cause of freedom for the Cuban people. In April 2009, just before the fifth Summit of the Americas in Trinidad and Tobago, the Obama Administration announced several significant measures to ease U.S. sanctions on Cuba. The President announced that all restrictions on family travel and on remittances to family members in Cuba would be lifted. This superseded the action taken by Congress in March that had essentially reverted family travel restrictions to as they were in 2004 before they were tightened. The Administration also announced that measures would be taken to increase telecommunications links with Cuba and to expand the scope of eligible humanitarian donations through gift parcels. At the Summit of the Americas, President Obama maintained that "the United States seeks a new beginning with Cuba." While recognizing that it will take time to "overcome decades of mistrust," the President said "there are critical steps we can take toward a new day." He stated that he was prepared to have his Administration "engage with the Cuban government on a wide range of issues—from drugs, migration, and economic issues, to human rights, free speech, and democratic reform." The President maintained that he was "not interested in talking just for the sake of talking," but said he believed that U.S.-Cuban relations could move in a new direction. In the aftermath of the Summit, there appeared to be some momentum toward improved relations. In June 2009, the State Department turned off the electronic billboard at the U.S. Interests Section in Havana that had been had been set up in 2006 and had featured news and pro-democracy messages that irked the Cuban government. Earlier in the year, the Cuban government had taken down anti-U.S. billboards around the U.S. mission. In July 2009, Cuba and the United States also restarted the semi-annual migration talks that had been suspended by the United States in 2004. To date, four rounds of talks have been held and have included issues beyond migration issues (for more details, see " Migration Talks " below). In September 2009, the United States and Cuba held talks in Havana on resuming direct mail service between the two countries that included discussion on issues related to the transportation, quality, and security of mail service. Relations took a turn for the worse in late 2009, however, when Alan Gross, an American subcontractor working on USAID-funded Cuba democracy projects in Cuba, was arrested in Havana in early December. As Cuba's human rights situation deteriorated during the first half of 2010, the Obama Administration expressed significant concern. In the semi-annual migration talks in February, U.S. officials urged Cuban officials to provide imprisoned hunger striker Orlando Zapata Tamayo with all necessary medical care. After Zapata's death, U.S. officials called attention to the more than 200 political prisoners held by Cuba and called for their immediate release. As noted above, President Obama issued a statement on March 24, 2010, expressing deep concern about the human rights situation in Cuba, including the death of Zapata, and the repression of the Ladies in White. He asserted that these events underscore that "Cuban authorities continue to respond to the aspirations of the Cuban people with a clenched fist." The President called for the end of repression, the immediate and unconditional release of all political prisoners, and respect for the basic rights of the Cuban people. The President noted that he has taken steps during the year to reach out to the Cuban people and to signal his desire to seek a new era in relations with the government of Cuba. He asserted that he remains "committed to supporting the simple desire of the Cuban people to freely determine their future and to enjoy the rights and freedoms that define the Americas, and that should be universal to all human beings." In response to the Cuban Catholic Church's July 7, 2010, announcement that the remaining 52 political prisoners of the "group of 75" originally arrested in March 2003 would be released, Secretary of State Clinton said that it was "a positive sign" and that the United States welcomed it. A subsequent State Department statement maintained that "this is a positive development that we hope will represent a step towards increased respect for human rights and fundamental freedoms in Cuba." During the year, Members of Congress raised significant concern about Mr. Gross's continued detention. State Department officials continued to raise the issue with Cuban government, and on the one-year anniversary of his December 2009 incarceration, the State Department maintained that his continued detention was "a major impediment to advancing the dialogue between our two countries." On January 14, 2011, the White House announced new measures to ease travel restrictions further and allow all Americans to send remittances to Cuba. According to the White House statement, the measures will (1) increase purposeful travel to Cuba related to religious, educational, and journalistic activities; (2) allow any U.S. person to send remittances to non-family members in Cuba and make it easier for religious institutions to send remittances for religious activities; and (3) allow all U.S. international airports to provide services to licensed charter flights to and from Cuba. In most respects, these new measures appear to be similar to policies that were undertaken by the Clinton Administration in 1999, but were subsequently curtailed by the Bush Administration in 2003 and 2004. In March 2011, after Alan Gross was convicted and sentenced to 15 years in prison, Secretary of State Clinton called for Gross to be released, at the very least, on humanitarian terms. Upon Cuba's release of the last of "group of 75" political prisoners in late March, the State Department maintained that the release was a "step in the direction," but also urged "the Cuban government to release all remaining political prisoners and allow them to choose whether to remain in Cuba." According to Secretary of State Clinton in May 2011, the Obama Administration believes "that the best way to advance fundamental rights in Cuba … is to support exchanges and constructive relationships," and "that's why we have eased our restrictions on travel and remittances to Cuba." The Secretary maintained that more could be done if there were evidence that there was an opportunity to do so from the Cuban side "because we want to foster these deeper connections and we want to work for the time when Cuba will enjoy its own transition to democracy." In response to questions on Cuba at a September 28, 2011, public forum, President Obama maintained that his Administration has not yet seen "the kind of genuine spirit of transformation inside of Cuba that would justify us eliminating the embargo." The President said his Administration has tried "to send a signal that we are open to a new relationship with Cuba if the Cuban government starts taking the proper steps to open up its own country and … provide the space and the respect for human rights that would allow the Cuban people to determine their own destiny." He maintained that "if we see positive movement we will respond in a positive way." The Obama Administration continued to express concern about the human rights situation in Cuba as well as the imprisonment of Alan Gross. In December 2011, as reports of increased Cuban government repression against human rights and democracy activists, the State Department issued a statement calling "for an immediate end to the harassment and violence against Cuban citizens who are peaceful critics of the government." On the two-year anniversary of the incarceration of Alan Gross in early December 2011, the State Department again called for his release, while just before Christmas the State Department expressed deep disappointment that the Cuban government did not include Gross among the 2,900 prisoners released on humanitarian grounds. President Obama issued a statement in the aftermath of the January 19, 2012, death of Cuban hunger striker Wilman Villar Mendoza, maintaining that "Villar's senseless death highlights the ongoing repression of the Cuban people and the plight faced by brave individuals standing up for the universal rights of all Cubans." In its March 2012 International Narcotics Control Strategy Report, the State Department generally lauded Cuba's antidrug efforts. It stated that the United States was still reviewing a draft bilateral counternarcotics accord presented by Cuba, and that such an accord, if structured appropriately, "could advance the counternarcotics efforts undertaken by both countries." (See " Anti-Drug Cooperation " below.) The State Department released its 2011 human rights report on May 24, 2012, in which it reported on a significant increase in the number of short-term detentions in Cuba, along with other numerous human rights abuses. (See " Human Rights " below.) In June 7, 2012, congressional testimony, Assistant Secretary of State for Western Hemisphere Affairs Roberta Jacobson set forth a clear-cut description of U.S. policy toward Cuba in which she expressed strong U.S. support for democracy and human rights activists in Cuba and defended the Obama's Administration policy on travel and remittances. The Assistant Secretary asserted that "the Obama Administration's priority is to empower Cubans to freely determine their own future." She maintained that "the most effective tool we have for doing that is building connections between the Cuban and American people, in order to give Cubans the support and tools they need to move forward independent of their government." The Assistant Secretary maintained that "the Administration's travel, remittance and people-to-people policies are helping Cubans by providing alternative sources of information, taking advantage of emerging opportunities for self-employment and private property, and strengthening civil society." In support of U.S. funding for democracy and human rights in Cuba, she contended that U.S. policy "recognizes the importance of engaging with the pro-democracy and human rights activists who have been working for years to expand the political and civil rights of all Cubans." With regard to the human rights situation in Cuba, Jacobson lauded the release of dozens of political prisoners, but maintained that their release "did not effect a fundamental change in the Cuban government's poor record on human rights." She asserted that "the Cuban government has continued to punish political dissent, increasingly using repeated, short-term, arbitrary detentions to prevent citizens from assembling peacefully and freely expressing their opinions." Jacobson also highlighted the continued imprisonment of Alan Gross, and vowed that the Administration would continue to seek his immediate release. On June 12, 2012, the Treasury Department's Office of Foreign Assets Control and the U.S. Department of Justice announced a $619 million settlement with a Dutch bank, ING, for violating U.S. sanctions against Cuba, Burma, Sudan, Libya, and Iran. The Cuba sanction violations were the most extensive and stemmed from ING's processing of over 20,000 financial transactions involving Cuba valued at more than $1.6 billion between October 2002 and July 2007. The fine was the largest ever imposed for these types of sanction violations. On Human Rights Day, December 10, 2012, in response to Cuba's crackdown on the Ladies in White human rights group the day, the State Department issued a press statement expressing deep concern about Cuba's "repeated use of arbitrary detention and violence to silence critics, disrupt peaceful assembly, and intimidate independent society." The State Department called for Cuba to end such practices and asserted that "we look forward to the day when all Cubans can freely express their ideas, assemble freely, and express their opinions peacefully." Restrictions on travel to Cuba have been a key and often contentious component of U.S. efforts to isolate the communist government of Fidel Castro for much of the past 40 years. Over time there have been numerous changes to the restrictions and for five years, from 1977 until 1982, there were no restrictions on travel. Restrictions on travel and remittances to Cuba are part of the CACR, the overall embargo regulations administered by the Treasury Department's Office of Foreign Assets Control (OFAC). Under the Bush Administration, enforcement of U.S. restrictions on Cuba travel increased, and restrictions on travel and on private remittances to Cuba were tightened. In March 2003, the Administration eliminated travel for people-to-people educational exchanges unrelated to academic course work. In June 2004, the Administration significantly restricted travel, especially family travel, and the provision of private humanitarian assistance to Cuba in the form of remittances and gift parcels. Under the Obama Administration, Congress took action in March 2009 easing restrictions on family travel and on travel related to U.S. agricultural and medical sales to Cuba (FY2009 omnibus appropriations measure, P.L. 111-8 , Sections 620 and 621 of Division D). As implemented by the Treasury Department, family travel was allowed once every 12 months to visit a close relative for an unlimited length of stay. The definition of "close relative" was expanded to mean any individual related to the traveler by blood, marriage, or adoption who is no more than three generations removed from that person. Travel related to the marketing and sale of agricultural and medical goods to Cuba was allowed pursuant to a general license. (Note: For a general license, there is no need to obtain specific permission from OFAC, while a specific license requires application and review by OFAC on a case by case basis.) In April 2009, the Obama Administration went even further when it announced several significant measures to ease U.S. sanctions on Cuba. Fulfilling a campaign pledge, President Obama announced that all restrictions on family travel and on remittances to family members in Cuba would be lifted. This significantly superseded the action taken by Congress in March 2009 that had essentially reverted family travel restrictions to as they had been before they were tightened in 2004. Under the new policy announced by the Administration, limitations on the frequency and duration of family visits and the 44-pound limitation on accompanied baggage were removed. Family travelers are now able spend the same as allowed for other travelers (provided it does not exceed the Department of State's per diem rate allowance for Havana, currently $166 per day). With regard to family remittances, the previous limitation of no more than $300 per quarter was removed with no restriction on the amount or frequency of the remittances. Authorized travelers are once again authorized to carry up to $3,000 in remittances. Regulations for the above policy changes were issued by the Treasury and Commerce Departments on September 3, 2009. In January 2011, the Obama Administration made a series of changes further easing restrictions on travel and remittances to Cuba. On January 11, the White House announced that President Obama had directed the Secretaries of State, Treasury, and Homeland Security to make changes to regulations and policies "in order to continue efforts to reach out to the Cuban people in support of their desire to freely determine their country's future." The policy changes were subsequently enacted through modifications to existing regulations of the Departments of Treasury and Homeland Security published in the Federal Register on January 28, 2011. The January 2011 measures: 1. increased purposeful travel to Cuba related to religious, educational, and journalistic activities (general licenses are now authorized for certain types of educational and religious travel; people-to-people travel exchanges are authorized via a specific license); 2. allowed any U.S. person to send remittances to non-family members in Cuba and make it easier for religious institutions to send remittances for religious activities (general licenses are now authorized for both); and 3. allowed all U.S. international airports to become eligible to provide services to licensed charter flights to and from Cuba. In most respects, these new measures were similar to policies that were undertaken by the Clinton Administration in 1999, but were subsequently curtailed by the Bush Administration in 2003 and 2004. An exception is the expansion of airports to service licensed flights to and from Cuba. While the new travel regulations immediately went into effect for those categories of travel falling under a general license category, OFAC delayed processing applications for new travel categories requiring a specific license (such as people-to-people exchanges) until it updated and issued guidelines. These ultimately were issued in April 2011: Comprehensive Guidelines for License Applications to Engage in Travel-related Transactions Involving Cuba . To date, the Department of Homeland Security, U.S. Customs and Border Protection (CBP), has announced its approval of 12 additional airports eligible to provide passenger air service between the United States and Cuba, bringing the total number of airports approved to 15. The newly authorized airports are Atlanta, Baltimore-Washington (BWI), Chicago O'Hare, Dallas-Fort Worth, Fort Lauderdale-Hollywood, Houston, New Orleans, Oakland (CA), Pittsburgh, Southwest Florida International Airport (Fort Myers), San Juan (Puerto Rico), and Tampa. Major arguments made for lifting the Cuba travel ban altogether are that it abridges the rights of ordinary Americans to travel; it hinders efforts to influence conditions in Cuba and may be aiding Castro by helping restrict the flow of information; and Americans can travel to other countries with communist or authoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are that more American travel would support Castro's rule by providing his government with potentially millions of dollars in hard currency; that there are legal provisions allowing travel to Cuba for humanitarian purposes that are used by thousands of Americans each year; and that the President should be free to restrict travel for foreign policy reasons. By July 2011, OFAC confirmed that it had approved the first licenses for U.S. people-to-people organizations to bring U.S. visitors to Cuba, and the first such trips began in August 2011. On July 25, 2011, however, prior to the trips beginning, OFAC issued an advisory maintaining that misstatements in the media had suggested that U.S. policy allows for virtually unrestricted group travel to Cuba, and reaffirmed that travel conducted by people-to-people travel groups licensed for travel to Cuba must "certify that all participants will have a full-time schedule of educational exchange activities that will result in meaningful interaction between the travelers and individuals in Cuba." The advisory stated that authorized activities by people-to-people groups are not "tourist activities," and pointed out that the Trade Sanctions Reform and Export Enhancement Act of 2000 prohibits OFAC from licensing transactions for tourist activities. In March 2012, OFAC published an announcement regarding advertising for people-to-people travel, noting that all advertisements must state the name of the licensed organization conducting the travel and that the organization must use the name under which their OFAC travel was licensed unless the group requests and receives a license amendment from OFAC to use an alternative name. The announcement also stated that advertising that appeared to suggest that the people-to-people trips were focused on activities that travelers may undertake off hours (after their daily full-time schedule of people-to-people activities) may give an incorrect impression and prompt OFAC to contact the licensed organization and conduct an investigation. It maintained that people-to-people organizations that failed to meet requirements of their licenses may have their licenses revoked or be issued a civil penalty up to $65,000 per violation. In May 2012, the Treasury Department tightened its restrictions on people-to-people travel by making changes to its license guidelines. The revised guidelines reflect similar language to the March 2012 announcement described above regarding advertising. The revised guidelines also require an organization applying for a people-to-people license to describe how the travel "would enhance contact with the Cuban people, and/or support civil society in Cuba, and/or promote the Cuban people's independence from Cuban authorities." Just as in 2011, the guidelines require applicants to certify that the predominant portion of activities engaged in will not be with prohibited Cuban government or Cuban Communist Party officials (as defined in 31 CFR 515.337 and 31 CFR 515.338), but the changes in May 2012 require that the sample itinerary for the proposed travel needs to specify how meetings with such officials advance purposeful travel by enhancing contact with the Cuban people, supporting civil society, or promoting independence from Cuban authorities. In September 2012, various press reports cited a slowdown in the Treasury Department's approval or reapproval of licenses for people-to-people travel since the agency had issued new guidelines in May. Companies conducting such programs complained that the delay in the licenses was forcing them to cancel trips and even to lay off staff. By early October 2012, however, companies conducting the people-to-people travel maintained that they were once again receiving license approvals. In the 112 th Congress, interest on the issue of Cuba travel and remittances continued. Legislation was introduced to roll back some of the easing of restrictions and some bills were introduced to further ease travel restrictions or lift them altogether, but ultimately none of the measures were enacted. FAA Reauthorization. During consideration of the FAA reauthorization bill, S. 223 , in February 2011, an amendment was submitted, but never considered, S.Amdt. 61 (Rubio), that would have prohibited an expansion of flights to locations in countries that are listed on the Department of State list of states that sponsor international terrorism (which includes Cuba). FY2012 Financial Services and General Government Appropriations. The House Appropriations Committee version of the FY2012 Financial Services and General Government Appropriations bill, H.R. 2434 (§901), introduced July 7, 2011, would have rolled back President Obama's easing of restrictions on remittances and family travel. (The Senate Appropriations Committee version of the measure, S. 1573 , did not contain a similar provision.) Specifically, the provision in H.R. 2434 would have repealed any amendments to certain sections of the Cuban Assets Control Regulations (CACR) relating to family travel ( 31 CFR 515.560(a)(1) and 31 CFR 515.561 ), carrying remittances to Cuba ( 31 CFR 515.560(c)(4)(i) ), and sending remittances to Cuba ( 31 CFR 515.570 ). According to the provision, such regulations would be restored and carried out as in effect on January 19, 2009, "notwithstanding any guidelines, opinions, letters, Presidential directives, or agency practices relating to such regulations issued or carried out after such date." The intent of the provision appears to have been to ensure that these specific regulations remained as they were in effect on January 19, 2009. The provision would have rolled back President Obama's easing of restrictions on family travel and family remittances in 2009 and his easing of restrictions on remittances for non-family members and religious institutions in 2011. Pursuant to the provision: family travel would have been limited to once every three years for a period of up to 14 days to visit immediate family members only, and would have required a specific license from OFAC; licensed travelers would have been allowed to carry just $300 in remittances compared to the $3,000 currently allowed; family remittances would have been limited to $300 per quarter compared to no limits today; non-family remittances restored by the Obama Administration in 2011, up to $500 per quarter, would not have been allowed; and the general license for remittances to religious organizations would have been eliminated, although such remittances would have been permitted via specific license on a case-by-case basis. The White House's Statement of Administration Policy on H.R. 2434 , issued July 13, 2011, stated that the Administration opposed Section 901 because it would reverse the President's policy on family travel and remittances, and that the President's senior advisors would recommend a veto if the bill contained the provision. According to the statement, Section 901 "would undo the President's efforts to increase contact between divided Cuban families, undermine the enhancement of the Cuban people's economic independence and support for private sector activity in Cuba that come from increased remittances from family members, and therefore isolate the Cuban people and make them more dependent on Cuban authorities." In December 2011, a legislative battle ensured over the potential inclusion of a Cuba provision from Section 901 of H.R. 2434 in the Consolidated Appropriations Act, FY2012, H.R. 2055 , a "megabus" bill that combined nine fill-year appropriations measures, including the FY2012 Financial Services and General Government bill. Ultimately, congressional leaders agreed not to include the Cuba provision in the "megabus bill," and also decline to include a second provision in the bill that would have continued to clarify, for the third year in a row, the definition of "payment of cash in advance" for U.S. agricultural and medical exports to Cuba so that the payment would be due upon delivery in Cuba as opposed to being due before the goods left U.S. ports. The While House reportedly had exerted pressure not to include the Cuba provision that would have rolled back the Administration's easing of restrictions on travel and remittances. Dropping the "payment of cash in advance" provision appears to have been a political tradeoff made to compensate for the travel rollback provision being dropped. FY2012 Foreign Relations Authorization Act. In additional action, on July 21, 2011, the House Committee on Foreign Affairs marked up H.R. 2583 , the FY2012 Foreign Relations Authorization Act, with a provision (§1126 of the reported bill) that would have required the President to fully enforce all U.S. regulations on travel to Cuba as in effect on January 19, 2009, and imposed the corresponding penalties against individuals determined to be in violation of such regulations. The provision was added by a Rivera amendment, approved 36-6, that had the intent of reinstating tighter travel restrictions as they existed under the Bush Administration in January 2009. Amendments to the Cuban Adjustment Act. Two additional measures introduced in August 2011 would have amended the Cuban Adjustment Act of 1966 (CAA, P.L. 89-732) in order to curb travel to Cuba by Cubans who have recently immigrated to the United States. Introduced on August 1, 2011, H.R. 2771 (Rivera), would have amended the CAA to increase to five years the period during which a Cuban national must be physically present in the United States in order to qualify for adjustment of status to that of a permanent resident. The legislation also would have provided that an alien shall be ineligible for adjustment to permanent resident status if the alien returns to Cuba after admission or parole into the United States before becoming a U.S. citizen. H.R. 2831 (Rivera), introduced August 30, 2011, also would have provided that an alien from Cuba would be ineligible for adjustment to permanent resident status under the CAA if he or she returned to Cuba before becoming a U.S. citizen; the House Committee on the Judiciary, Subcommittee on Immigration on Policy Enforcement, held a hearing on the bill on May 31, 2012 (available at http://judiciary.house.gov/hearings/Hearings%202012/hear_05312012_3.html ). Initiatives To Ease Restrictions on Travel and Remittances. In contrast to measures aimed at rolling back the Obama Administration's policy, several initiatives were introduced in the 112 th Congress that would have lifted travel restrictions. H.R. 1886 would have prohibited restrictions on travel to Cuba. H.R. 1888 , in addition to removing some restrictions on the export of U.S. agricultural products to Cuba, also would have prohibited Cuba travel restrictions. Two initiatives that would have lifted the overall Cuba embargo, H.R. 255 and H.R. 1887 , also would have lifted restrictions on travel and remittances to Cuba. H.R. 380 would have prohibited the Treasury Department from making any funds to implement, administer, or enforce regulations requiring specific licenses for travel-related transactions directly related to educational activities in Cuba. (For additional information, see CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by [author name scrubbed].) U.S. commercial agricultural exports to Cuba have been allowed for several years, but with numerous restrictions and licensing requirements. The 106 th Congress passed the Trade Sanctions Reform and Export Enhancement Act of 2000 or TSRA ( P.L. 106-387 , Title IX) that allows for one-year export licenses for selling agricultural commodities to Cuba, although no U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees are available to finance such exports. TSRA also denies exporters access to U.S. private commercial financing or credit; all transactions must be conducted in cash in advance or with financing from third countries. TSRA 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 agricultural sales. From 2002 through 2010, the United States was the largest supplier of food and agricultural products to Cuba, although the level of U.S. exports declined annually over the past three years (2009-2011) and in 2011 Brazil's agricultural exports to Cuba superseded those of the United States. Cuba has purchased over $4.1 billion in products from the United States since 2001. U.S. exports to Cuba rose from about $7 million in 2001 to $404 million in 2004 and to a high of $712 million in 2008, far higher than in previous years, in part because of the rise in food prices and because of Cuba's increased food needs in the aftermath of several hurricanes and tropical storms that severely damaged the country's agricultural sector. Beginning in 2009, however, U.S. exports to Cuba declined considerably, amounting to $533 million in 2009 (25% lower than 2008), and $368 million in 2010 (a 31% drop from 2009). In 2011, U.S. exports to Cuba declined to $363 million, just a 1.23% drop from 2010. (See Figure 5 .) Among the reasons for the decline, analysts cite Cuba's shortage of hard currency; credits and other arrangements offered by other governments to purchase their countries' products; overall financial support provided by Venezuela and China; and Cuba's perception that its efforts to motivate U.S. companies, organizations, local and state officials, and Members of Congress to push for change in U.S. sanctions policy toward Cuba have been ineffective. In 2012, the level of U.S. agricultural exports to Cuba began to increase again. Through September 2012, U.S. exports to Cuba amounted to $338 million, a 22% increase from the same period in 2011. Looking at the composition of U.S. exports to Cuba in recent years, the leading products have been cereals (especially corn and to a lesser extent wheat), poultry and pork, soybeans, prepared animal feed, and edible vegetables. In February 2005, OFAC amended the Cuba embargo regulations to clarify that TSRA's term of "payment of cash in advance" means that the payment must be received by the seller or the seller's agent prior to the shipment of the goods from the port at which they are loaded. U.S. agricultural exporters and some Members of Congress strongly objected that the action constituted a new sanction that violated the intent of TSRA and could jeopardize millions of dollars in U.S. agricultural sales to Cuba. OFAC Director Robert Werner maintained that the clarification "conforms to the common understanding of the term in international trade." Facing congressional pressure, on July 29, 2005, OFAC clarified that, for "payment of cash in advance" for the commercial sale of U.S. agricultural exports to Cuba, vessels can leave U.S. ports as soon as a foreign bank confirms receipt of payment from Cuba. OFAC's action was aimed at ensuring that the goods would not be vulnerable to seizure for unrelated claims while still at the U.S. port. Supporters of overturning OFAC's February 22, 2005, amendment, such as the American Farm Bureau Federation, reportedly were pleased by the clarification but indicated that they would still work to overturn the February 2005 rule. In December 2009, Congress took action in the FY2010 omnibus appropriations measure ( P.L. 111-117 ) to define, during FY2010, "payment of cash in advance" as payment before the transfer of title to, and control of, the exported items to the Cuban purchaser. This overturned OFAC's February 2005 clarification that payment had to be received before vessels could leave U.S. ports. The Administration issued regulations implementing this provision in early March 2010. The regulations maintained that the definition applied to items delivered by September 30, 2010, or delivered pursuant to a contract entered into by September 30, 2010, and shipped within 12 months of the signing of the contract. While the 111 th Congress did not complete action on the FY2011 Financial Services and General Government Appropriations measure, it approved a series of short-term continuing resolutions and then in April 2011 ultimately approved a full-year measure ( P.L. 112-10 ) under conditions provided in enacted FY2010 appropriations measures. This continued the "payment of cash in advance" provision through FY2011. Several additional legislative initiatives introduced in the 111 th Congress would have permanently made this change, but no action was completed on these measures. H.R. 4645 (Peterson), reported out of the House Agriculture Committee in June 2010, in addition to addressing travel restrictions, would have permanently changed the definition of "payment of cash in advance" and would have allowed direct transfers between U.S. and Cuban financial institutions for payment for products sold to Cuba under TSRA. In the first session of the 112 th Congress, both the House Appropriations Committee-approved and Senate Appropriations Committee-approved versions of the FY2012 Financial Services and General Government Appropriations measure, H.R. 2434 and S. 1573 respectively, had a provision (§618 of the House bill and §620 of the Senate bill) that would have continued to clarify the definition of "payment of cash in advance" during FY2012 for U.S. agricultural and medical sales to Cuba. The Senate bill, S. 1573 , had another Cuba provision (§624) related to payment for U.S. exports to Cuba. The provision would have prohibited restrictions on direct transfers from a Cuban financial institution to a U.S. financial institution in payment for licensed agricultural and medical exports to Cuba. The provision was added during the Senate Appropriations Committee's markup on September 15, 2011, when the committee approved an amendment offered by Senator Jerry Moran by a vote of 20-10. During debate on the direct transfers provision, supporters argued that restrictions on direct transfers have made U.S. agricultural sales more costly and complicated for U.S. businesses, while opponents maintained that the United States should not open up such direct financial linkages while Cuba is on the State Department's list of states sponsoring international terrorism. Ultimately none of the Cuba provisions related to financing for U.S. agricultural exports to Cuba were included in the Consolidated Appropriations Act, FY2012, H.R. 2055 ( P.L. 112-74 ), a "megabus" bill that included the FY2012 Financial Services and General Government bill. As discussed above, dropping the provisions appear to have been a tradeoff to compensate for not including a provision that would have rolled back the Obama Administration's lifting of some restrictions on travel and remittances to Cuba. In the second session of the 112 th Congress, no Cuba provisions related to U.S. exports to Cuba were included in the House or Senate versions of the FY2013 Financial Services and General Government Appropriations bills, H.R. 6020 and S. 3301 respectively; both measures were reported out of committee without any Cuba policy provisions. Senator Jerry Moran indicated during an Appropriations Subcommittee markup of the Senate bill in June 2012 that he was "taking a hiatus" from advocating an easing of restrictions on financing for payments for U.S. agricultural exports to Cuba "until Cuba deals with the detention of Alan Gross," the USAID subcontractor imprisoned in Cuba since late 2009. Senator Moran expressed hope that his action would "put pressure on Cuba to release" Gross. (Also see " December 2009 Imprisonment of Alan Gross " below.) Two other introduced bills in the 112 th Congress, H.R. 833 (Conaway) and H.R. 1888 (Rangel), would have permanently changed the definition of "payment of cash in advance" for export sales to Cuba under TSRA and also would have allowed direct transfers between Cuban and U.S. financial institutions for payment for products sold to Cuba under TSRA. No action was taken on these measures. In general, some groups favor further easing restrictions on agricultural exports to Cuba. U.S. agribusiness companies that support the removal of restrictions on agricultural exports to Cuba believe that U.S. farmers are missing out on a market so close to the United States. Some exporters want to change U.S. restrictions so that they can sell agriculture and farm equipment to Cuba. Agricultural exporters who support the lifting of the prohibition on financing contend that allowing such financing would help smaller U.S. companies increase their exports to Cuba more rapidly. On July 19, 2007, the U.S. International Trade Commission issued a report, requested by the Senate Committee on Finance, concluding that the U.S. share of Cuba's agricultural, fish, and forest imports would rise from one-third to between one-half and two-thirds if trade restrictions were lifted. (See the full report, available at http://www.usitc.gov/ext_relations/news_release/2007/er0719ee1.htm .) Opponents of further easing restrictions on agricultural exports to Cuba maintain that U.S. policy does not deny such sales to Cuba, as evidenced by the large amount of sales since 2001. Moreover, according to the State Department, since the Cuban Democracy Act was enacted in 1992, the United States has licensed billions of dollars in private humanitarian donations. Opponents further argue that easing pressure on the Cuban government 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 of pressure on Cuba that could prolong the Castro regime and its repressive policies. Some agricultural producers that export to Cuba support continuation of the prohibition on financing for agricultural exports to Cuba because it ensures that they will be paid. For over a decade, the United States has imposed a sanction that denies protection for trademarks connected with businesses confiscated from their owners by the Cuban government. A provision in the FY1999 omnibus appropriations measure (§211 of Division A, Title II, P.L. 105-277 , signed into law October 21, 1998) prevents the United States from accepting payment for trademark registrations and renewals from Cuban or foreign nationals that were used in connection with a business or assets in Cuba that were confiscated, unless the original owner of the trademark has consented. The provision prohibits U.S. courts from recognizing such trademarks without the consent of the original owner. The measure was enacted because of a dispute between the French spirits company, Pernod Ricard, and the Bermuda-based Bacardi Ltd. Pernod Ricard entered into a joint venture in 1993 with the Cuban government to produce and export Havana Club rum. Bacardi maintains that it holds the right to the Havana Club name because in 1995 it entered into an agreement for the Havana Club trademark with the Arechabala family, who had originally produced the rum until its assets and property were confiscated by the Cuban government in 1960. Although Pernod Ricard cannot market Havana Club in the United States because of the trade embargo, it wants to protect its future distribution rights should the embargo be lifted. The European Union initiated World Trade Organization dispute settlement proceedings in June 2000, maintaining that the U.S. law violates the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). In January 2002, the WTO ultimately found that the trademark sanction violated WTO provisions on national treatment and most-favored-nation obligations in the TRIPS Agreement. On March 28, 2002, the United States agreed that it would come into compliance with the WTO ruling through legislative action by January 3, 2003. That deadline was extended several times since no legislative action had been taken to bring Section 211 into compliance with the WTO ruling. On July 1, 2005, however, in an EU-U.S. bilateral agreement, the EU agreed that it would not request authorization to retaliate at that time, but reserved the right to do so at a future date, and the United States agreed not to block a future EU request. On August 3, 2006, the U.S. Patent and Trademark Office announced that Cuba's Havana Club trademark registration was "cancelled/expired," a week after OFAC had denied a Cuban government company the license that it needed to renew the registration of the trademark. On March 29, 2011, the U.S. Court of Appeals of the District of Columbia upheld the decision to deny the renewal of the trademark, while in May 2012, the U.S. Supreme Court declined to hear the case, effectively letting stand the denial to renew the trademark. Bacardi began marketing Havana Club rum in the United States in 2006 in limited quantities in Florida, and Pernod Ricard filed suit that the representation of the origin of the rum was misleading. In April 2010, a U.S. District Court in Delaware ruled in Bacardi's favor that the labeling was not misleading, and this was reaffirmed by a U.S. Court of Appeals on August 4, 2011. In Congress, two different approaches have been advocated to bring Section 211 into compliance with the WTO ruling. Some want a narrow fix in which Section 211 would be amended so that it also applies to U.S. companies instead of being limited to foreign companies. Advocates of this approach argue that it would affirm that the United States "will not give effect to a claim or right to U.S. property if that claim is based on a foreign compensation." Others want Section 211 repealed altogether. They argue that the law endangers over 5,000 trademarks of over 500 U.S. companies registered in Cuba. The House Committee on the Judiciary held a March 3, 2010, hearing on the "Domestic and International Trademark Implications of HAVANA CLUB and Section 211 of the Omnibus Appropriations Act of 2009." (See http://judiciary.house.gov/hearings/hear_100303.html .) Several legislative initiatives were introduced during the 111 th Congress reflecting these two approaches to bring Section 211 into compliance with the WTO ruling, but no action was taken on these measures. In the 112 th Congress, two bills were introduced, S. 603 (Nelson, Bill) and H.R. 1166 (Issa), that would have applied the narrow fix so that the sanction would have applied to all nationals, while three broader bills that would have lifted U.S. sanctions on Cuba— H.R. 255 (Serrano), H.R. 1887 (Rangel), and H.R. 1888 (Rangel)—each included a provision repealing Section 211. The July 2005 EU-U.S. bilateral agreement, in which the EU agreed not to retaliate against the United States, but reserved the right to do so at a later date, has reduced pressure on Congress to take action to comply with the WTO ruling. Cuba is not a major producer or consumer of illicit drugs, but its extensive shoreline and geographic location make it susceptible to narcotics smuggling operations. Drugs that enter the Cuban market are largely the result of onshore wash-ups from smuggling by high-speed boats moving drugs from Jamaica to the Bahamas, Haiti, and the United States or by small aircraft from clandestine airfields in Jamaica. For a number of years, Cuban officials have expressed concerns over the use of their waters and airspace for drug transit and about increased domestic drug use. The Cuban government has taken a number of measures 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 on anti-drug efforts. According to the State Department's 2012 International Narcotics Control Strategy Report (INCSR) , issued March 7, 2012, Cuba has a number of anti-drug-related agreements in place with other countries, including 39 judicial agreements regarding judicial proceedings and extradition, 32 bilateral counterdrug agreements, and 2 memoranda of understanding. Since 1999, Cuba's Operation Hatchet has focused on maritime and air interdiction and the recovery of narcotics washed up on Cuban shores. As reported in the INCSR , Cuba interdicted 9.01 metric tons of illegal narcotics in 2011 (including 8.3 metric tons from wash-ups). Since 2003, Cuba has aggressively pursued an internal enforcement and investigation program against its incipient drug market with an effective nationwide drug prevention and awareness campaign, Operation Popular Shield. Over the years, there have been varying levels of U.S.-Cuban cooperation on anti-drug efforts. In 1996, Cuban authorities cooperated with the United States in the seizure of 6.6 tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned over the cocaine to the United States and cooperated fully in the investigation and subsequent prosecution of 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. Cuba accepted 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 the U.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000, and since that time, coordination has increased. In the 2012 INCSR , the State Department reported that Cuba maintained a significant level of anti-drug cooperation with the United States in 20111. The Coast Guard shares tactical information related to narcotics trafficking on a case by case basis, and responds to Cuban information on vessels transiting through Cuban territorial seas suspected of smuggling. Bilateral cooperation led to multiple at-sea interdictions in 2011. The Cuban Border Guard reported 45 real-time reports of "go-fast" narcotics trafficking events in 2011 to the U.S. Coast Guard, and its e-mail and phone notifications have increased in quality, according to the INCSR , occasionally including photographs of suspected vessels involved in narcotics trafficking. Cuba maintains that it wants to cooperate with the United States to combat drug trafficking, and on various occasions has called for a bilateral anti-drug cooperation agreement with the United States. In the 2011 INCSR (issued in March 2011) the State Department acknowledged that Cuba had presented the U.S. government with a draft bilateral accord for counternarcotics cooperation that is still under review. According to the State Department in the INCSR : "Structured appropriately, such an accord could advance the counternarcotics efforts undertaken by both countries." The report maintained that greater cooperation among the United States, Cuba, and its international partners—especially in the area of real-time tactical information-sharing and improved tactics, techniques, and procedures—would likely lead to increased interdictions and disruptions of illegal trafficking. These positive U.S. statements regarding a potential bilateral anti-drug cooperation agreement and greater multilateral cooperation in the region with Cuba were reiterated in the 2012 INCSR . At a February 1, 2012, hearing before the Senate Caucus on International Narcotics Control on U.S.-Caribbean security cooperation, Caucus Chairman Senator Dianne Feinstein stated that "this limited cooperation we do have between our Coast Guard and Cuban authorities has been very useful, and I hope we can find ways to increase our counternarcotics cooperation with Cuba." The caucus released a report on September 13, 2012, in which Senator Feinstein recommended that the Obama Administration consider taking four steps to increase U.S. collaboration with Cuban on counternarcotics: 1) expand the U.S. Coast Guard and law enforcement presence at the U.S. Interests Section in Havana; 2) establish protocols for direct ship-to-ship communication between the U.S. Coast Guard and the Cuban Border Guard; 3) negotiate a bilateral counternarcotics agreement with Cuba; and 4) allow for Cuba's participation in the U.S.-Caribbean Security Dialogue. Cuba is working toward potential development of its offshore oil resources, but it suffered setbacks in 2012 when three attempts by foreign oil companies drilling wells were unsuccessful. While the country has proven oil reserves of just 0.1 billion barrels, the U.S. Geological Survey estimates that offshore reserves in the North Cuba Basin could contain an additional 4.6 billion barrels of undiscovered technically recoverable crude oil. If oil is found, some experts estimate that it would take at least three to five years before production would begin. While it is unclear whether offshore oil production could result in Cuba becoming a net oil exporter, it could reduce Cuba's current dependence on Venezuela for oil supplies. Cuba has had seven offshore deepwater oil projects involving nine foreign companies in 22 exploration blocs. (See Figure 6 for a map of Cuba's offshore oil blocks.) The Spanish oil company Repsol, in a consortium with Norway's Statoil and India's Oil and Natural Gas Corporation, began offshore exploratory drilling in late January 2012, using an oil rig known as the Scarabeo-9 (owned by an Italian oil services provider, Saipem, a subsidiary of the Italian oil company ENI). On May 18, 2012, however, Repsol announced that its exploratory well came up dry, and the company subsequently announced in late May that it would likely leave Cuba. Subsequently, in late May 2012, the Scarabeo-9 oil rig was used by the Malaysian company Petronas in cooperation with the Russian company Gazprom to explore for oil in a block off the coast of western Cuba. On August 6, 2012, however, Cuba announced that that the well was found not to be commercially viable because of its compact geological formation. In early September 2012, the Venezuelan oil company, PdVSA, announced that it had started exploring for oil off the coast of western Cuba, but on November 2, 2012, Cuba announced that the well was not commercially viable. In addition to these projects, Cuba has three additional offshore projects with foreign oil companies—PetroVietnam, Sonangol (Angola), and ONGC (India). As a result of the three unsuccessful wells, the Scarabeo-9 oil rig left Cuba on November 14, 2012, reportedly headed to West Africa. Some oil experts maintain that it could be years before companies decide to return to drill again in Cuba's offshore deepwaters. Most observers, however, maintain that the failure to discover oil in the three wells drilled by the Scrrabeo-9 oil rig in 2012 is a significant setback for the Cuban government's efforts to develop its deepwater offshore hydrocarbon resources. It should be noted that a Russian company, Zarubezhneft, announced in December 2012 that it had begun drilling an exploratory well in a north coastal block (in shallow waters, not deepwater exploration) east of Havana off Cayo Coco, a Cuban tourist resort area. The company is using an oil rig known as the Songa Mercur operated by Songa Offshore, a Norwegian oil rig company. Drilling is expected to be completed in June 2013. In the aftermath of the Deepwater Horizon oil spill in the Gulf of Mexico, some Members of Congress and others expressed concern about Cuba's development of its deepwater petroleum reserves so close to the United States. They are concerned about oil spill risks and about the status of disaster preparedness and coordination with the United States in the event of an oil spill. Dealing with these challenges is made more difficult because of the long-standing poor state of relations between Cuba and the United States. If an oil spill did occur in the waters northwest of Cuba, currents in the Florida Straits could carry the oil to U.S. waters and coastal areas in Florida, although a number of factors would determine the potential environmental impact. If significant amounts of oil did reach U.S. waters, marine and coastal resources in southern Florida could be at risk. The final report of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, issued in January 2011, maintained that since Mexico already drills in the Gulf of Mexico and Cuba has expressed an interest in deepwater drilling in the Gulf of Mexico, that it is in the U.S. national interest to negotiate with these countries to agree on a common, rigorous set of standards, a system of regulatory oversight, and operator adherence to an effective safety culture, along with protocols to cooperate on containment and response strategies in case of a spill. With regard to disaster response coordination, while the United States and Cuba are not parties to a bilateral agreement on oil spills, both countries are signatories to multilateral agreements that commit the two parties to prepare for and cooperate on potential oil spills. Under the auspices of the International Maritime Organization (IMO), the United States and Cuba have participated in several regional meetings (including Mexico in November 2011; Bahamas in December 2011; Curacao in February 2012; Jamaica in April 2012; and Mexico in August 2012) regarding oil spill prevention, preparedness, and response that have allowed information sharing among nations, including the United States and Cuba. U.S. oil spill mitigation companies can be licensed by the Treasury and Commerce Departments to provide support and equipment in the event of an oil spill. One such example is a Florida-based company, Clean Caribbean & Americas, which has had licenses to be involved in Cuba since 2001. In addition, the U.S. Coast Guard has obtained licenses from Treasury and Commerce that allow it "to broadly engage in preparedness and response activities, and positions" the agency "to direct an immediate response in the event of a catastrophic oil spill." Some energy and policy analysts, however, have called for the Administration to ease regulatory restrictions on private companies for the transfer of U.S. equipment and personnel to Cuba needed to prevent and combat a spill if it occurs. Interest in Cuba's offshore oil development continued in the 112 th Congress, with interest focused on a potential oil spill, and attempts to sanction foreign companies investing in or supporting Cuba's oil development. Eight legislative initiatives were introduced taking different approaches, but only one of these measures was considered and none were enacted: H.R. 372 (Buchanan), introduced January 20, 2011, would have amended the Outer Continental Shelf Lands Act to authorize the Secretary of the Interior to deny leases and permits to persons who engage in activities with the government of any foreign country that is subject to any U.S. government sanction or embargo. The intent of the legislation was to sanction companies involved in Cuba's oil development, although the scope of the legislation was much broader and could have affect other oil companies, including U.S. companies, not involved in Cuba. S. 405 (Nelson, Bill), introduced February 17, 2011, would have required a company conducting oil or gas operations off the coasts of Cuba to submit an oil response plan for their Cuba operations and demonstrate sufficient resources to respond to a worst case scenario oil spill if the company wanted to lease drilling rights in the United States. The bill would also have required the Secretary of the Interior to carry out an oil spill risk analysis and planning process for the development and implementation of oil spill response plans for nondomestic oil spills in the Gulf of Mexico. The Secretary of the Interior would have been required, among other things, to include recommendations for Congress on a joint contingency plan with the countries of Mexico, Cuba, and the Bahamas to ensure an adequate response to oil spills located in the eastern Gulf of Mexico. H.R. 2047 (Ros-Lehtinen), introduced May 26, 2011, would have imposed visa restrictions on foreign nationals and economic sanctions on companies that help facilitate the development of Cuba's offshore petroleum resources. The bill would have excluded from the United States aliens who invest $1 million or more that contributes to the enhancement of the ability of Cuba to develop its offshore oil resources. It would also have required the imposition of sanctions (two or more from a menu of listed sanctions) if the President determined that a person had made an investment of $1 million on or after January 10, 2005, that contributed to Cuba's offshore oil development. The language of H.R. 2047 was also included in Section 105 of H.R. 6067 (Ros-Lehtinen), introduced June 29, 2012. Both H.R. 3393 (Rivera) and S. 1836 (Menendez), introduced respectively on November 7 and 9, 2011, would have amended the Oil Pollution Act of 1990 to clarify that the Act applies to oil spills by foreign offshore units that occur in water beyond the exclusive economic zone of the United States. H.R. 4135 (Flake), the Western Hemisphere Energy Security Act of 2012, introduced March 5, 2012, would have authorized U.S. companies to engage in exploration and extraction activities or oil spill prevention and clean-up activities in Cuba's offshore oil sector contiguous to the U.S. exclusive economic zone. It would also have allowed for the export of all equipment and travel needed for such activities. The bill would also have allowed for the importation of hydrocarbon resources from Cuba. The House version of the FY2013 National Defense Authorization Act, H.R. 4310 (McKeon), approved May 18, 2012, had a provision (§803) that would have prohibited the Department of Defense (DOD) from contracting for the procurement of goods and services with any person that has business operations with a state sponsor of terrorism. The provision was added to the bill by voice vote during House floor consideration of an en bloc amendment, H.Amdt. 1119 (McKeon), that included Amendment No. 94 (Rivera), which became Section 803 of the bill. According to the sponsor, the amendment would affect Repsol from partnering with Cuba in oil exploration efforts while at the same time benefiting from DOD contracts. (Neither the Senate version of the bill, nor the conference report, included a similar provision so it was not included in the final version of the bill.) Three congressional oversight hearings were held in the 112 th Congress on the issue of Cuba's offshore oil development and the implications for the United States. On October 18, 2011, the Senate Energy and Natural Resources Committee hearing held a hearing on Outer Continental Oil Spill Response Capabilities featuring officials from the U.S. Coast Guard, the Department of the Interior, and private witnesses. On November 2, 2011, the House Natural Resources Committee, Subcommittee on Energy and Mineral Resources, held a hearing that also featured Coast Guard and Department of the Interior officials and private witnesses. On January 30, 2012, the House Committee on Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, held a field hearing on the issue in Miami, FL, featuring testimony from the Coast Guard, Department of the Interior, and the state of Florida. Cuba was added to the State Department's list of states sponsoring international terrorism in 1982 (pursuant to section 6(j) of the Export Administration Act of 1979) because of its alleged ties to international terrorism and support for terrorist groups in Latin America, and it has remained on the list since that time. Cuba had a long history of supporting revolutionary movements and governments in Latin America and Africa, but in 1992, Fidel Castro said that his country's support for insurgents abroad was a thing of the past. Cuba's change in policy was in large part due to the breakup of the Soviet Union, which resulted in the loss of billions of dollars in annual subsidies to Cuba, and led to substantial Cuban economic decline. Critics of retaining Cuba on the terrorism list maintain that it is a holdover from the Cold War. They argue that domestic political considerations keep Cuba on the terrorism list and maintain that Cuba's presence on the list diverts U.S. attention from struggles against serious terrorist threats. Those who support keeping Cuba on the terrorism list argue that there is ample evidence that Cuba supports terrorism. They point to the government's history of supporting terrorist acts and armed insurgencies in Latin America and Africa. They point to the government's continued hosting of members of foreign terrorist organizations and U.S. fugitives from justice. The State Department's C ountry Reports on Terrorism 2011 report (issued July 31, 2012) maintained that "current and former members of Basque Fatherland and Liberty (ETA) continued to reside in Cuba," and that "press reporting indicated that the Cuban government provided medical care and political assistance" to the Revolutionary Armed Forces of Colombia (FARC). At the same time, the report maintained that there "was no indication that the Cuban government provided weapons or paramilitary training for either ETA or the FARC." With regard to ETA, the State Department reported that three suspected ETA members were arrested in Venezuela after sailing there from Cuba and were deported back to Cuba in September 2011– one of the men, Jose Ignacio Echarte, is believed to have ties to the FARC and is a fugitive from Spain, which has requested his extradition. In more recent developments in 2012, Cuba has been playing a role in hosting talks between the FARC and Colombian government of President Juan Manuel Santos. Conversations began in Cuba with the FARC in early 2012, and formal peace talks began in Norway on October 18, 2012. Official talks then moved to Havana beginning on November 19, 2012. Another issue noted in the 2011 terrorism report is that the Cuban government continues "to permit fugitives wanted in the United States to reside in Cuba," and provides such support as housing, food ration books, and medical care. In the 112 th Congress, legislation was introduced, H.Res. 226 (King), that would have called for the immediate extradition or rendering of all fugitives from justice who are receiving safe harbor in Cuba in order to escape prosecution or confinement for criminal offenses committed in the United States. Both the President and Congress have powers to take a country off the state sponsors of terrorism list. As set forth in Section 6(j) of the Export Administration Act, a country's retention on the list may be rescinded in two ways. The first option is for the President to submit a report to Congress certifying that there has been a fundamental change in the leadership and policies of the government and that the government is not supporting acts of international terrorism and is providing assurances that it will not support such acts in the future. The second option is for the President to submit a report to Congress, at least 45 days in advance justifying the rescission and certifying that the government has not provided any support for international terrorism during the preceding six-months, and has provided assurances that it will not support such acts in the future. If Congress disagrees with the President's decision to remove a country from the list, it could seek to block the rescission through legislation. Congress also has the power on its own to remove a country from the terrorism list. For example, legislation introduced on Cuba in the 111 th Congress, H.R. 2272 (Rush), included a provision that would have rescinded the Secretary of State's determination that Cuba "has repeatedly provided support for acts of international terrorism." Cuba has been the target of various terrorist incidents over the years. In 1976, a Cuban plane was bombed, killing 73 people. In 1997, there were almost a dozen bombings in the tourist sector in Havana 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 (although the sentences were commuted in 2010 to 30 years in prison), and three Guatemalans were sentenced to prison terms ranging from 10 to 15 years in January 2002 for plans to conduct bombings in 1998. Cuban officials maintain that Cuban exiles funded the bombings. In November 2000, four anti-Castro activists were arrested in Panama for a plot to kill Fidel Castro. One of the accused, Luis Posada Carriles, is also alleged to be involved in the 1976 Cuban airline bombing and the series of bombings in Havana in 1997 noted above. The four stood trial in March 2004 and were sentenced on weapons charges to prison terms ranging from seven to eight years. In late August 2004, Panamanian President Mireya Moscoso pardoned the four men before the end of her presidential term. Three of the men are U.S. citizens and traveled to Florida, where they received strong support from some in the Cuban American community, while Posada reportedly traveled to another country. Posada entered the United States illegally in 2005. In subsequent removal proceedings, an immigration judge found that Posada could not be removed to Cuba or Venezuela because of concerns that he would face torture, and he was thereafter permitted to remain in the United States pending such time as he could be transferred to a different country. Posada subsequently applied for naturalization to become a U.S. citizen. This application was denied, and criminal charges were brought against him for allegedly false statements made in his naturalization application and interview. Although a federal district court dismissed the indictment in 2007, its ruling was reversed by an appellate court in 2008. In April 2009, the United States filed a superseding indictment, which included additional criminal charges based on allegedly false statements made by Posada in immigration removal proceedings concerning his involvement in the 1997 Havana bombings. His trial originally was set to begin in August 2009, but was rescheduled three times until it finally began in January 2011. Ultimately, Posada was acquitted of the perjury charges in April 2011, an action that was strongly criticized by Cuban officials. On July 7, 2010, Venezuelan authorities extradited to Cuba an alleged Posada associate, Salvadoran citizen Francisco Chávez Abarca, who was charged with involvement in one of the 1997 bombings in Havana. Chávez Abarca had been imprisoned from 2005 to 2007 in El Salvador for running a car theft ring, but charges ultimately were dropped, reportedly because of a botched investigation, and he was set free. On July 1, 2010, he was arrested in Venezuela upon entering the county and allegedly confessed to plans to organize protests in Venezuela around the time of the country's legislative elections in September 2010. In late September 2010, the Cuban government released Chávez Abarca's video confessions and reenactment of the bombings, as well as his alleged association with Luis Posada, in a public information campaign featured in the Cuban media as well as abroad. According to Chávez Abarca, Posada recruited him in El Salvador for the Cuba bombings, and paid him $2,000 for each bomb that went off. Only one of the bombs that Chávez Abarca planted actually detonated, on April 12, 2007, in the bathroom of a disco at the Melia Cohiba hotel in Havana. In late December 2010, Chávez Abarca was sentenced to 30 years in prison for his role in the bombings. Since 1996, the United States has provided assistance—through the U.S. Agency for International Development (USAID), the State Department, and the National Endowment for Democracy (NED)—to increase the flow of information on democracy, human rights, and free enterprise to Cuba. USAID's Cuba program has supported a variety of U.S.-based non-governmental organizations with the goals of promoting a rapid, peaceful transition to democracy, helping develop civil society, and building solidarity with Cuba's human rights activists. These efforts are largely funded through Economic Support Funds (ESF) in the annual foreign operations appropriations bill. From FY2001-FY2012, Congress appropriated almost $197 million in funding for Cuba democracy efforts. This included $45.3 million for FY2008, and $20 million in each fiscal year from FY2009 through FY2012. The Administration's FY2013 request is for $15 million. Generally, as provided in appropriations measures, ESF has to be obligated within two years. (For a brief description of USAID's Cuba program along with a listing of current USAID grantees, see http://www.usaid.gov/where-we-work/latin-american-and-caribbean/cuba/our-work .) FY2010. Congress fully funded the Administration's $20 million FY2010 ESF request for Cuba democracy programs in the conference report ( H.Rept. 111-366 ) to the Consolidated Appropriations Act, 2010 ( H.R. 3288 / P.L. 111-117 ). According to the State Department's FY2010 Congressional Budget Justification for Foreign Operations , U.S. assistance programs focus on providing humanitarian assistance to victims of repression, strengthening civil society, weakening the information blockade, and helping Cubans to create space for dialogue about democratic change and reconciliation. Both House-passed H.R. 3081 and Senate Appropriations Committee-reported S. 1434 , the FY2010 State Department, Foreign Operations, and Related Programs Appropriations Act, recommended full funding of the Administration's $20 million request. In April 2011, Senate Foreign Relations Committee Chairman John Kerry placed a hold on the funding. He maintained that he would oppose the spending until a full review of the programs was complete and contended that there was no evidence that programs are helping the Cuban people. Senator Patrick Leahy, chairman of the Senate Appropriations Committee's Subcommittee on the Department of State, Foreign Operations, and Related Programs, also reportedly placed a hold on the assistance. By early August 2011, however, both holds had been lifted. FY2011. The Administration again requested $20 million in ESF for FY2011 to support democracy and human rights projects. According to the Administration's request, the assistance focuses on providing humanitarian assistance to prisoners of conscience and their families, strengthening civil society, supporting issue-based civic action movements and coalitions, and promoting fundamental freedoms, especially freedom of expression and freedom of the press. The Senate version of the State Department and Foreign Operations appropriations measure, S. 3676 , reported by the Senate Appropriations Committee on July 29, 2010 ( S.Rept. 111-237 ), would have provided that $2 million of the ESF appropriated for Cuba be transferred and merged with funds for the National Endowment for Democracy for democracy programs in Cuba. Congress did not complete action on FY2011 appropriations until April 2011 when it approved a full-year appropriations measure ( P.L. 112-10 ). In August 2011, the Administration made known its FY2011 foreign aid allocations by country, which included the full $20 million for Cuba democracy assistance that had been requested. As notified to Congress in April 2012, of the $20 million, USAID will administer $8.9 million, the State Department's Bureau of Western Hemisphere Affair will administer $1.6 million, and the State Department's Bureau of Democracy, Human Rights, and Labor (DRL) will administer $9.5 million, of which $4 million will be transferred to the National Endowment for Democracy. In terms of programs for the $20 million, $12.43 million will be used for democracy, civil society and media programs; $4.7 million will be used to support human rights initiatives; and $2.87 million will be used for program support. FY2012. The Administration once again requested $20 million in ESF for FY2012 with the promotion of democratic principles the core goal of assistance, and Congress supported the full amount in the conference report to the FY2012 Consolidated Appropriations Act ( H.Rept. 112-331 to H.R. 2055 , P.L. 112-74 ). The budget request stated that there is an increased effort to manage programs more transparently, focus efforts on Cuba, and widen the scope of the civic groups receiving supports. According to the Administration's request, U.S. assistance aims to strengthen a range of independent elements of Cuban civil society, including associations and labor groups, marginalized groups, youth, legal associations, and women's networks. The programs are designed to increase the capacity for community involvement of civil society organizations and networking among the groups. The program also supports Cuban efforts to document human rights violations, provides humanitarian assistance to political prisoners and their families, and builds leadership skills of civil society leaders. Finally, the budget request maintains that U.S. assistance also supports the dissemination of information regarding market economies and economic rights. The Senate Appropriations Committee-reported version of the FY2012 Department of State, Foreign Operations, and Related Programs Appropriations bill, S. 1601 ( S.Rept. 112-85 ) would have provided $15 million in ESF for Cuba ($5 million less than the request), including humanitarian and democracy assistance, support for economic reform, private sector initiatives, and human rights. In its report to the bill, the committee maintained that it expected that funds would be made available, and programs carried out, in a transparent manner. The committee also would have directed that the USAID Administrator provide regular updates to the committee on the number of Cubans who receive assistance and the types of assistance. In contrast to the Senate bill, a draft House Appropriations Committee bill and report (marked up by the Subcommittee on State, Foreign Operations, and Relations Programs on July 27, 2011) would have recommended $20 million in ESF for Cuba (the full Administration's request), and would have directed that the funds be used only for democracy-building, and not for business promotion, economic reform, social development or other purposes expressly authorized by Section 109(a) of the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 ). (See the draft committee report, available at http://appropriations.house.gov/UploadedFiles/FY12-SFOPSCombinedReport-CSBA.pdf .) FY2013. For FY2013, the Administration requested $15 million for human rights and democracy programs for Cuba. According to the request, "U.S. assistance will continue to support human rights and civil society initiatives that promote basic freedoms, particularly freedom of expression. Programs will continue to provide humanitarian assistance to prisoners of conscience and their families, as well as strengthen independent Cuban civil society, and promote the flow of uncensored information to, from, and within the island." The Senate Appropriations Committee-reported version of the FY2013 State Department, Foreign Operations, and Related Programs Appropriations Act, S. 3241 ( S.Rept. 112-172 ) would have provided $15 million in ESF for Cuba (the same as the Administration's request), including "for humanitarian assistance, support for economic reform, private sector initiatives, democracy, and human rights." In contrast, the House Appropriations Committee-reported version of the bill, H.R. 5857 ( H.Rept. 112-94 ) would have provided $20 million in ESF ($5 million more than the Administration's request), but would transfer and merge the aid with funds available to the National Endowment for Democracy "to promote democracy and strengthen civil society in Cuba." The report to the House bill maintained that assistance "shall not be used for business promotion, economic reform, social development, or other purposes not expressly authorized by section 109(a)" of the Cuban Liberty and Democratic Solidarity Act ( P.L. 104-114 ). Both the Senate and House bills would continue the long-standing prohibition on direct funding assistance to the government Cuba, and would require that any assistance to Cuba be provided through the regular notification procedures of the Committees on Appropriations. Congress did not complete action on FY2013 appropriations before the beginning of the fiscal year, but in September 2012, it approved a continuing appropriations resolution ( H.J.Res. 117 , P.L. 112-175 ) that continues FY2013 funding through March 27, 2013, at the same rate for projects and activities in FY2012, plus an across-the-board increase of 0.612%, although specific country accounts are left to the discretion of responsible agencies. This continues funding for Cuba democracy programs through March 27, 2013, but the 113 th Congress will need to address foreign aid appropriations for the balance of FY2013. National Endowment for Democracy. Until FY2008, NED's democratization assistance for Cuba had been funded largely through the annual Commerce, Justice, and State (CJS) appropriations measure, but is now funded through the State Department, Foreign Operations and Related Agencies appropriations measure. According to NED, its Cuba funding in recent years has been as follows: $1.4 million in FY2008 for 11 projects; $1.5 million in FY2009 for 10 projects; $2.4 million in FY2010 for 15 projects; and $1.65 million in FY2011 for 13 projects. NED reported in its 2011 annual report (the most recent available) that it funding the following organizations and projects for Cuba in that fiscal year: Afro-Cuban Alliance Inc; Center for a Free Cuba; Committee for Free Trade Unionism; Cuban Democratic Directorate; CubaNet News Inc.; Grupo Internacional para la Responsibilidad Social Corporativa en Cuba; Instituto Político para La Libertad Perú; National Democratic Institute for International Affairs; Observatorio Cubano de Derechos Humanos; People in Need; People in Peril Association; Civic Education; and Rule of Law. As noted above, for FY2011, the State Department notified Congress in April 2012 that $4 million in ESF (of the $20 million appropriated by Congress for Cuba programs) would be transferred to the National Endowment for Democracy, almost doubling the amount of NED funding for Cuba programs compared to FY2010. The funds are to be used for grants to (1) support independent, democratic civil society activists on the island; (2) cultivate the analytical capacity of existing civil society actors; and (3) promote greater knowledge of and adherence to international norms regarding political, civic, and fundamental human rights. In addition, as noted above, the House Appropriations Committee-reported version of the FY2013 foreign aid appropriations measure, H.R. 5857 ( H.Rept. 112-94 ) would have appropriated $20 million in ESF for Cuba democracy funding, but would have transferred and merged the aid with funds available to the NED. Such an amount would be greater than the $14.19 million that NED proposed to spend on program activity in the entire Latin America/Caribbean region for FY2013. In November 2006, the Government Accountability Office (GAO) issued a report examining U.S. democracy assistance for Cuba from 1996 to 2005, and concluded that the U.S. program had significant problems and needed better management and oversight. According to GAO, internal controls, for both the awarding of Cuba program grants and oversight of grantees, "do not provide adequate assurance that the funds are being used properly and that grantees are in compliance with applicable law and regulations." Investigative news reports on the program maintained that high shipping costs and lax oversight had diminished its effectiveness. GAO issued a second report examining USAID's Cuba democracy program in November 2008. The report lauded the steps that USAID had taken since 2006 to address problems with its Cuba program and improve oversight of the assistance. These included awarding all grants competitively since 2006, hiring more staff for the program office since January 2008, and contracting for financial services in April 2008 to enhance oversight of grantees. The GAO report also noted that USAID had worked to strengthen program oversight through pre-award and follow-up reviews, improving grantee internal controls and implementation plans, and providing guidance and monitoring about permitted types of assistance and cost sharing. The GAO report also maintained, however, that USAID had not staffed the Cuba program to the level needed for effective grant oversight. GAO also noted the difficulty of assessing USAID's action to improve its Cuba program because most of its actions to improve the program were only taken recently. Procurement reviews completed in August 2008 by the new financial services contractor identified internal control, financial management, and procurement weaknesses at three grantees. GAO recommended that USAID (1) ensure that its Cuba program office is staffed at the level that is needed to fully implement planned monitoring activities; and (2) periodically assess the Cuba program's overall efforts to address and reduce grantee risks, especially regarding internal controls, procurement practices, expenditures, and compliance with laws and regulations. In April 2011, Senate Foreign Relations Committee Chairman John Kerry said that he had asked GAO to undertake another investigation of the Cuba program regarding its legal basis and effectiveness. On December 4, 2009, Cuban authorities arrested an American subcontractor, Alan Gross, working for Development Alternatives Inc. (DAI), a Bethesda-based company that had received a contract from USAID to help support Cuban civil society organizations. Gross was arrested at Jose Martí International Airport in Havana when he was planning to leave the country. He reportedly was distributing communications equipment (including satellite phone equipment) to Jewish organizations in Cuba. The head of Cuba's National Assembly, Ricardo Alarcon, asserted in January 2010, that the contractor was working for American intelligence, but U.S. officials strongly denied the accusation. A State Department spokesman maintained that the contractor "is not associated with our intelligence services" and noted that "Cuba has a history of mischaracterizing what Americans and NGOs in Cuba are doing." According to a statement by DAI, "the detained subcontractor was not working for any intelligence service … he was working with a peaceful, non-dissident civic group—a religious and cultural group recognized by the Cuban government—to improve its ability to communicate with its members across the island and overseas." Numerous U.S. officials have raised the issue of Alan Gross's detention with the Cuban government, including at the semi-annual bilateral migration talks, and have called for his release. In March 2010, some 40 House Members called for Mr. Gross's release in a letter to the Cuban government, warning that improved relations between the United States and Cuba would not be possible until he is released. The letter maintained that Mr. Gross's work in Cuba with the Jewish community "emanated from his desire to make a positive impact for others of faith on the island." A number of other Members and Senators have also called for Mr. Gross's immediate release. In June 2010, Secretary of State Clinton met with family members of Mr. Gross, and issued a statement expressing deep concern about his welfare. The Secretary maintained that Gross's continued detention "is harming U.S.-Cuba relations," and that his release would be viewed favorably. In September 2010, then-Assistant Secretary of State for Western Hemisphere Affairs Arturo Valenzuela met with Cuban Foreign Minister Bruno Rodriguez in New York to encourage the release of Mr. Gross. In early December 2010, on the one-year anniversary of Mr. Gross's detention, the State Department again issued a statement calling for his release, and maintaining that "the continued detention of Alan Gross is a major impediment to advancing the dialogue between our two countries." At the fourth round of migration talks held on January 12, 2011, in Havana, the U.S. delegation again raised the issue and called for Mr. Gross's immediate release. The head of the U.S. team at the talks, Principal Deputy Assistant Secretary of State for Western Hemisphere Roberta Jacobson, subsequently met with Gross on January 13. Subsequent press reports maintained that a senior State Department official was "cautiously optimistic" that Gross would be released. On February 4, 2011, a Cuban court in Havana officially charged Gross with "actions against the independence and territorial integrity of the state" pursuant to Article 91 of Cuba's Penal Code, and the prosecution asked for a 20-year sentence. The two-day trial began on March 4, and on March 12, Gross was convicted and sentenced to 15 years in prison. Gross's lawyer had asked for the Cuban government to release Gross as a humanitarian gesture, maintaining that his health continues to deteriorate and noting that his elderly mother was recently diagnosed with lung cancer, and his daughter was recovering from cancer treatment. The State Department issued a statement deploring the ruling, and calling on the Cuban government to immediately and unconditionally release him. Secretary of State Clinton maintained that Gross should be released, at the very least, on humanitarian terms, and expressed hope that the Cuban government would do that. In March 2011, former U.S. President Jimmy Carter visited with Gross during a visit to Cuba. A private U.S. delegation visiting Cuba met with Gross in early June 2011, reporting that Gross had lost some 95 pounds according to his own estimation and that while he was in good spirits he is anxious to come home and does not want to be forgotten. Cuba's Supreme Court heard arguments for Gross's appeal on July 22, 2011, but the court rejected the appeal on August 5, 2011. An Administration statement called on the Cuban government to release Gross "immediately and unconditionally to allow him to return to his family and bring an end the long ordeal that began well over a year ago." In early September 2011, former New Mexico Government Bill Richardson traveled to Cuba in an effort to seek the release of Gross, but was unsuccessful. In a subsequent New York Times interview, Cuban Foreign Minister Bruno Rodriguez reportedly suggested that Cuba and the United States could resolve the Gross case "from a humanitarian point of view and on the basis of reciprocity." On the second anniversary of Gross's imprisonment in December 2011, 72 House Members from both parties sent a letter to the Cuban Interests Section in Washington, DC, expressing hope that the Cuban government would release Mr. Gross "on humanitarian grounds immediately." The letter also stated that "Mr. Gross's continued incarceration is viewed by Members of Congress, regardless of their political views on Cuba, as a major setback in bilateral relations," and that "it is unlikely any further positive steps can or will be taken by the Obama Administration or this Congress as long as Mr. Gross remains in a Cuban jail." As noted above, the State Department again called for Gross's release on the second anniversary of his imprisonment, and also expressed deep disappointment in late December 2011 that the Cuban government did not include Gross among the 2,900 prisoners released on humanitarian grounds. In February 2012, investigative press reporting by the Associated Press detailed the various trips undertaken by Alan Gross to Cuba and the equipment that he brought into the country, including a specialized mobile phone chip that reportedly would make it virtually impossible to track satellite phone transmissions. For some observers, the investigative report raises questions about the nature of USAID-supported democracy programs, including whether the agency should be involved in such secretive work that could pose dangers to those implementing such programs. Others stress that it is important for the agency to be able to support democracy programs even in hostile countries. In April 2012, there had been some hope that Cuba would positively respond to a humanitarian request by Alan Gross to visit his elderly sick mother in the United States for a period of two weeks, but this did not occur. In contrast, a U.S. federal judge in Florida granted René González, one of the "Cuban five" spies, the right to visit his dying brother in Cuba for two weeks. Cuba is now explicitly linking the release of Alan Gross to the release of the "Cuban five," while the United States rejects the linkage, maintaining there is no equivalence between the cases. (For more on the "Cuban five," see " Cuban Spies in the United States " below). In September 2012, Judy Gross, the wife of Alan Gross, expressed concern in media reports about the health of her husband and fears that he would not survive continued imprisonment. In early October 2012, Judy Gross expressed concern that her husband could have cancer, while the Cuban government maintains that he does not; in late November 2012, the Cuban government maintained that Gross was in normal health and that a biopsy on a lesion showed that he did not have cancer. Gross's lawyer has called for an independent medical examination by a doctor of Gross's choosing. On November 16, 2012, Alan and Judy Gross filed a suit in U.S. District Court against the U.S. government and his employer, Development Alternatives Inc., alleging that they "failed to disclose adequately to Mr. Gross, both before and after he began traveling to Cuba, the material risks that he faced due to his participation in the project." In late November 2012, Judy Gross urged President Obama to give the case top priority and to designate a special envoy to meet with the Cuban government for her husband's release. On December 3, 2012, the third anniversary of Gross's imprisonment, the State Department issued a statement again calling for his release, and asked the Cuban government to grant Gross's request to travel to the United States to visit his gravely ill 90-year old mother. The Senate subsequently took action on December 5, 2012, when it approved S.Res. 609 (Moran) by voice vote, marking the first congressional vote on the issue since Gross's detention. With 31 cosponsors, the resolution called for the immediate and unconditional release of Gross, and urged the Cuban government in the meantime to provide all appropriate diagnostic and medical treatment to address the full range of medical issues facing Mr. Gross and to allow him to choose a doctor to provide him with an independent medical assessment. On the same day, Cuba denounced a yet-to-be published ruling by the U.N. Working Group on Arbitrary Detention that reportedly characterizes Alan Gross's detention as arbitrary. Cuban officials have continued to call for "serious talks" with the United States aimed at resolving the Alan Gross case and the case of the "Cuban five" through a prisoner exchange. U.S.-government sponsored radio and television broadcasting to Cuba—Radio and TV Martí—began in 1985 and 1990 respectively. According to the Broadcasting Board of Governors (BBG) FY2013 Budget Request , Radio and TV Martí "inform and engage the people of Cuba by providing a reliable and credible source of news and information." The BBG's Office of Cuba Broadcasting "uses a mix of media, including shortwave, medium wave, direct-to-home satellite, flash drives, and DVDs to help reach audiences in Cuba." Until October 1999, U.S.-government funded international broadcasting programs had been a primary function of the United States Information Agency (USIA). When USIA was abolished and its functions were merged into the Department of State at the beginning of FY2000, the BBG became an independent agency that included such entities as the Voice of America (VOA), Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia, and the Office of Cuba Broadcasting (OCB), which manages Radio and TV Marti. OCB is headquartered in Miami, FL. Legislation in the 104 th Congress ( P.L. 104-134 ) required the relocation of OCB from Washington, DC, to south Florida. The move began in 1996 and was completed in 1998. Radio Martí broadcasts on short and medium wave (AM) channels for 24 hours six days per week, and for 18 hours one day per week utilizing transmission facilities in Marathon, FL, and Greenville, NC, according to the BBG. It also transmits to Cuba 24 hours daily through Hispasat satellite television and the internet. TV Martí programming has been broadcast through multiple transmission methods over the years. From its beginning in 1990 until July 2005, it was broadcast via an aerostat (blimp) from facilities in Cudjoe Key, Florida for four and one-half hours daily, but the aerostat was destroyed by Hurricane Dennis. From mid-2004 until 2006, TV Martí programming was transmitted for several hours once a week via an airborne platform known as Commando Solo operated by the Department of Defense utilizing a C-130 aircraft. In August 2006, OCB began to use contracted private aircraft to transmit prerecorded TV Martí broadcasts six days weekly, and by late October 2006 the OCB inaugurated an aircraft-broadcasting platform known as AeroMartí with the capability of transmitting live broadcasts. OCB currently uses two privately contracted airplanes for AeroMartí to transmit broadcasts two and one-half hours for five days weekly. Broadcasts are also transmitted via the internet and satellite television. In September 2011, the BBG awarded a contract to a Maryland firm to design and operate a text messaging system that can distribute up to 24,000 messages per week from OCB broadcasters to mobile phone users in Cuba, including the use of techniques to circumvent censorship. (Cuba has complained that the system would be able to flood Cuban cellular telephone users in open violation of Cuban laws and international agreements.) From FY1984 through FY2011, about $668 million was spent for broadcasting to Cuba. In recent years, funding amounted to $29.630 million in FY2010, $28.416 million in FY2011, and an estimated $28.062 million in FY2012. The FY2013 request is for $23.594 million. FY2011. The BBG requested $29.179 million for Cuba broadcasting in FY2011, about $1 million less than that appropriated in FY2010. The Senate version of the State Department and Foreign Operations appropriations measure, S. 3676 , reported by the Senate Appropriations Committee on July 29, 2010 ( S.Rept. 111-237 ), recommended $28.789 million for broadcasting to Cuba ($390,000 less than the request of $29.179 million). In the report to the bill, the committee also stated that it did not support closing the Greenville Station in North Carolina that transmits the Cuba broadcasts, expanding TV Martí's transmission on DirecTV, or expanding and renovating the TV Martí studio until the Broadcasting Board of Governors submits a multi-year strategic plan for broadcasting to Cuba. Congress did not complete final action on FY2011 appropriations until April 2011 when it approved a full-year appropriations measure ( P.L. 112-10 ). According to the BBG, enacted actual FY2011 funding for Cuba broadcasting amounted to $28.416 million. FY2012. The Administration requested $28.475 million for Cuba broadcasting in FY2012. The Senate Appropriations Committee version of the FY2012 State Department, Foreign Operations, and Related Programs Appropriations measure, S. 1601 ( S.Rept. 112-85 ), recommended $28.181 million in funding for Cuba broadcasting, $294,000 less than the request. In contrast, a draft House Appropriations Committee report and bill (marked up by the House Appropriations Committee's Subcommittee on State, Foreign Operations, and Related Programs on July 27, 2011) recommended $30.175 million for Cuba broadcasting, $1.7 million more than the request. (See the draft committee report, available at http://appropriations.house.gov/UploadedFiles/FY12-SFOPSCombinedReport-CSBA.pdf .) In final FY2012 appropriations action in the FY2012 Consolidated Appropriations Act ( H.R. 2055 , P.L. 112-74 ), Congress approved full funding of the Administration's $28.475 million request for broadcasting to Cuba. The BBG's estimate for FY2012 funding is $28.062 million. FY2013. The Administration requested $23.594 million for Cuba broadcasting in FY2013, almost $4.5 million lower than FY2012 funding. According to the BBG's budget request, program reductions are possible because of OCB's planned streamlining in the planning and execution of news coverage and reliance on additional technical support from the BBG's International Broadcasting Bureau. The Senate Appropriations Committee-reported FY2013 State Department, Foreign Operations, and Related Programs Appropriations Act, S. 3241 ( S.Rept. 112-172 ), would have provided $23.4 million ($194,000 less than the Administration's request), while the House Appropriations Committee-reported bill, H.R. 5857 ( H.Rept. 112-494 ), would have provided $28.062 million ($4.468 million more than the Administration's request and the same amount provided in FY2012). As already noted, Congress did not complete action FY2013 appropriations, but in September 2012 it approved a continuing appropriations resolution ( H.J.Res. 117 , P.L. 112-175 ) that continues FY2013 funding through March 27, 2013, at the same rate for projects and activities in FY2012 plus an across-the-board increase of 0.612%. Additional Legislation in the 112 th Congress. Aside from annual spending bills, two bills were introduced in the 112 th Congress, S. 476 (Pryor) and H.R. 1317 (McCollum), that would have discontinued Radio and TV Martí broadcasts to Cuba by repealing the original authorization legislation for both programs, the Radio Broadcasting to Cuba Act and the Television Broadcasting to Cuba Act. In addition, during House consideration of H.R. 1 , the FY2011 Full-Year Continuing Appropriations Act, two Cuba-related amendments were submitted—Amendment No. 51 (McCollum) and Amendment No. 369 (Flake), both printed in the Congressional Record on February 14, 2011—that would have eliminated funding for Radio and TV Marti, but the amendments were never considered. Both Radio and TV Martí have at times been the focus of controversies, including questions about adherence to broadcast standards. There have been various attempts over the years to cut funding for the programs, especially for TV Martí, which has not had much of an audience because of Cuban jamming efforts. In December 2006, press reports alleged significant problems in the OCB's operations, with claims of cronyism, patronage, and bias in its coverage. In February 2007, the former director of TV Martí programming pled guilty in U.S. federal court to receiving more than $100,000 in kickbacks over a three-year period from a vendor receiving OCB contracts. Over the years, there have been various government studies and audits of the OCB, including investigations by the GAO, by a 1994 congressionally established Advisory Panel on Radio and TV Martí, by the State Department Office Inspector General (OIG) in 1999, and by the combined State Department/BBG Office Inspector General in 2003 and 2007. In July 2008, GAO issued a report that criticized OCB's practices in awarding two contracts to Radio Mambí and TV Azteca as lacking discipline required to ensure transparency and accountability. According to GAO, the approach for awarding the Radio Mambí and TV Azteca contracts did not reflect sound business practices. In January 2009, GAO issued a report asserting that the best available research suggests that Radio and TV Martí's audience is small, and cited telephone surveys since 2003 showing that less than 2% of respondents reported tuning in to Radio or TV Martí during the past week. With regard to TV Martí viewership, according to the report, all of the IBB's telephone surveys since 2003 show that less than 1% of respondents said that they had watched TV Martí during the past week. According to the GAO report, the IBB surveys show that there was no increase in reported TV Martí viewership following the beginning of AeroMartí and DirecTV satellite broadcasting in 2006.The GAO report also cited concerns with adherence to relevant domestic laws and international standards, including the domestic dissemination of OCB programming, inappropriate advertisements during OCB programming, and TV Martí's interference with Cuban broadcasts. GAO testified on its report in a hearing held by the House Subcommittee on International Organizations, Human Rights, and Oversight of the Committee on Foreign Affairs on June 17, 2009. In April 2010, the Senate Foreign Relations Committee majority issued a staff report that concluded that Radio and TV Martí "continue to fail in their efforts to influence Cuban society, politics, and policy." The report cited problems with adherence to broadcast standards, audience size, and Cuban government jamming. Among its recommendations, the report called for the IBB to move the Office of Cuba Broadcasting back to Washington and integrate it fully into the Voice of America. In December 2011, GAO issued a report examining the extent to which the BBG's strategic plan for broadcasting required by the conference report to the FY2010 Consolidated Appropriations measure ( H.Rept. 111-366 to H.R. 3288 / P.L. 111-117 ) met the requirements established in the legislation. As described in the conference report, the BBG strategic plan was required to include (1) an analysis of the current situation in Cuba and an allocation of resources consistent with the relative priority of broadcasting to Cuba as determined by the annual Language Service Review and other factors, including input form the Secretary of State on the relative U.S. interest of broadcasting to Cuba; (2) the estimated audience sizes in Cuba for Radio and TV Martí and the sources and relative reliability of the data on which such estimates are based; (3) the annual operating cost (and total cost over the life of the contract) of any and all types of TV transmission and the effectiveness of each in increasing such audience size; (4) the principal obstacles to increasing such audience size; (5) an analysis of other options for disseminating news and information to Cuba, including DVDs, the Internet, and cell phones and other handheld electronic devices and a report on the cost effectiveness of each; and (6) an analysis of the program efficiencies and effectiveness that can be achieved through shared resources and cost saving opportunities in radio and television production between Radio and TV Martí and the Voice of America. GAO found that the BBG's strategic plan lacked key information. Of the six requirements set forth in the conference report, the GAO found that the BBG's strategic plan fully addressed item (4) regarding the principal obstacles to increasing audience sized, but only partially addressed the other five items called for by Congress. The GAO report stated that while the BBG faces challenges obtaining some of the information, such as audience size, it can develop and provide more information to assist Congress, including an analysis of the cost savings opportunities of sharing resources between Radio and TV Martí and the Voice of America's Latin America Division. Another controversy that occurred in early May 2012 involved an editorial by OCB Director Carlos García-Pérez in which he strongly criticized Cuban Cardinal Jaime Ortega and referred to the Cardinal as a "lackey" of the Cuban government. As noted above (see " March 2012 Visit of Pope Benedict "), the strong language was criticized by several Members of Congress, who called for the Administration to reject the comments against Cardinal Ortega. The editorial raises significant questions about the editorial policy of OCB as well as OCB's adherence to broadcast standards. BBG's Director of Communications and External Affairs Lynne Weil maintains that such "editorials, unless otherwise stated, represent the views of the broadcasters only and not necessarily those of the U.S. government." Yet such a controversial editorial authored by the director of OCB could easily lead one to conclude that the views articulated were those of the U.S. government. Questions for U.S. policymakers to consider include the following: What exactly is the editorial policy of OCB and who should be presenting the editorials? Should OCB be required to follow editorial guidelines similar to those of the Voice of America, where editorials express the policies of the U.S. government? Should OCB be presenting editorials that take sides in controversial debates occurring within the Cuban dissident community? Cuba and the United States reached two migration accords in 1994 and 1995 designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the 1980 Mariel boatlift in which 125,000 Cubans fled to the United States with the approval of Cuban officials. In response to Fidel Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not to allow another exodus. Amid escalating numbers of fleeing Cubans, on August 19, 1994, President Clinton abruptly changed U.S. migration policy, under which Cubans attempting to flee their homeland were allowed into the United States, and announced that the U.S. Coast Guard and 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 culminated in a September 9, 1994, bilateral agreement to stem the flow of Cubans fleeing to the United States by boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderly Cuban migration to the United States, consistent with a 1984 migration agreement. The United States agreed to ensure that total legal Cuban migration to the United States would be a minimum of 20,000 each year, not including immediate relatives of U.S. citizens. In a change of policy, the United States agreed to discontinue the practice of granting parole to all Cuban migrants who reach the 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 United States would parole the more than 30,000 Cubans housed at Guantanamo into the United States, but would intercept future Cuban migrants attempting to enter the United States by sea and would return them to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledged to ensure that no action would be taken against those migrants returned to Cuba as a consequence of their attempt to immigrate illegally. On January 31, 1996, the Department of Defense announced that the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S. Naval Station, most having been paroled into the United States. Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to their country, while those deemed at risk for persecution have been transferred to Guantanamo and then found asylum in a third country or eventually the United States. Those Cubans who reach shore are allowed to apply for permanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). In short, most interdictions, even in U.S. coastal waters, result in a return to Cuba, while those Cubans who touch shore are allowed to stay in the United States. This so-called "wet foot/dry foot" policy has been criticized by some as encouraging Cubans to risk their lives in order to make it to the United States and as encouraging alien smuggling. Others maintain that U.S. policy should welcome those migrants fleeing communist Cuba whether or not they are able to make it to land. The number of Cubans interdicted at sea by the U.S. Coast Guard rose from 666 in FY2002 to a high of 2,868 in FY2007. In the three subsequent years, maritime interdictions declined significantly to 422 by FY2010 (see Figure 7 ). Major reasons for the decline were reported to include the U.S. economic downturn, more efficient coastal patrolling, and more aggressive prosecution of migrant smugglers. In FY2011 and FY2012, however, the number of Cubans interdicted by the Coast Guard increased respectively to 985 and 1,275. Speculation on the reasons for the increase include Cuba's deteriorating economic and political situation; the Coast Guard's more efficient methods of interdiction; and the easing of the economic situation in the United States, making it easier for the payment of fees to migrant smugglers. For FY2013, the number of Cubans interdicted was 232 as of January 14, 2013, according to Coast Guard statistics. U.S. prosecution against migrant smugglers in Florida has increased in recent years with numerous convictions. There have been several violent incidents in which Cuban migrants have brandished weapons or in which Coast Guard officials have used force to prevent Cubans from reaching shore. In late December 2007, a Coast Guard official in Florida called on the local Cuban American community to denounce the smuggling and stop financing the trips that are leading to more deaths at sea. In July 2010, three Cuban nationals (two living in Florida and one in Mexico) were charged in a U.S. federal court in Tampa with conspiracy, kidnapping, and extortion involving the abduction of Cuban migrants in Mexico. The Cuban government also has taken forceful action, including prison sentences of up to three years against those engaging in alien smuggling. Despite the U.S. Coast Guard's maritime interdiction program, thousands of unauthorized Cubans reach the United States each year, either by boat or at land ports of entry. U.S. Border Patrol apprehensions (largely coastal Florida) of unauthorized Cubans were 910 in FY2009, 712 in FY2010, and 959 in FY2011. These statistics are significantly lower than the FY2005-FY2008 period when Border Patrol apprehensions of Cubans averaged over 3,700 each year. Arrival of unauthorized Cubans at U.S. ports of entry—the majority from Mexico—averaged over 7,400 each year from FY2009-FY2011, although it showed a slightly rising trend from 7,053 in FY2009 to 7,798 in FY2011. Comparatively, however, the statistics are much lower than the average of almost 11,000 Cubans arriving at ports of entry annually from FY2005-FY2008. In October 2008, Mexico and Cuba negotiated a migration accord in an attempt to curb the irregular flow of migrants through Mexico. The agreement calls for Mexico to accept all unauthorized immigrants detained by Mexican authorities. On October 16, 2012, the Cuban government announced that it would be updating its migration policy, effective January 14, 2013, by eliminating the long-standing policy of requiring an exit permit and letter of invitation from abroad for Cubans to travel abroad. Cubans would be able to travel abroad with just an updated passport and a visa issued by the country of destination, if required. Under the change in policy, Cubans could travel abroad for up to two years without forgoing their rights as Cuban citizens. The practice of requiring an exit permit has been extremely unpopular in Cuba and the government had been considering doing away with the practice for some time. On its face, Cuba's action can be viewed as a human rights improvement, but how significant that improvement is will depend on how the law is implemented. The Cuban government said that it would fight against "brain drain," and that the new policy would not apply to scientists, athletes, and other professionals. In early January 2013, however, the Cuban government announced that the new travel policy would also apply to health care professionals, including doctors. It remains to be seen whether the government will allow political dissidents to leave the country and return. When the new policy went into effect on January 14, 2013, thousands of Cubans lined up at government migration offices and travel agencies. Travel under the new policy will require an updated passport as well as any visas required by the receiving countries. While most countries require visas for Cubans, several Caribbean countries do not. Ecuador, which had not required a visa for Cubans visiting up to 90 days, announced on January 15, 2013, that it would require Cubans who wanted to visit to provide a letter of invitation from a legal resident in Ecuador with a commitment to cover expenses for the visiting Cuban(s). A U.S. State Department spokesman said that it welcomes any changes that would allow Cubans to depart from and return to their country freely. According to the State Department, Cuba's announced change is consistent with the Universal Declaration of Human Rights in that everyone should have the rights to leave any country, including their own, and return. At the same time, however, Assistant Secretary of State for Western Hemisphere Affairs has cautioned that it is uncertain yet how the changes are to be implemented. She raised questions regarding whether Cuba would impose some controls on passports and whether everyone would be free to travel. In the 112 th Congress, two legislative initiatives were introduced, H.R. 2771 and H.R. 2831 (Rivera), that would have amended the Cuban Adjustment Act of 1966 with the objective of curbing travel to Cuba by Cubans who have recently emigrated to the United States. H.R. 2771 would have amended the CAA to increase to five years the period during which a Cuban national must be physically present in the United States in order to qualify for adjustment of status to that of a permanent resident. The legislation also would have provided that an alien shall be ineligible for adjustment to permanent resident status if the alien returns to Cuba after admission or parole into the United States before becoming a U.S. citizen. H.R. 2831 would also have provided that an alien from Cuba shall be ineligible for adjustment to permanent resident status under the CAA if he or she returns to Cuba before becoming a U.S. citizen. The House Committee on the Judiciary, Subcommittee on Immigration on Policy Enforcement, held a hearing on H.R. 2831 on May 31, 2012. (Also see discussion above on " U.S. Restrictions on Travel and Remittances .") Semi-annual U.S.-Cuban talks alternating between Cuba and the United States had been held regularly on the implementation of the 1994 and 1995 migration accords until they were suspended after the State Department cancelled the 20 th round of talks scheduled for January 2004. At the time, the State Department maintained that Cuba refused to discuss five issues identified by the United States: (1) Cuba's issuance of exit permits for all qualified migrants; (2) Cuba's cooperation in holding a new registration for an immigrant lottery; (3) the need for a deeper Cuban port used by the U.S. Coast Guard for the repatriation of Cubans interdicted at sea; (4) Cuba's responsibility to permit U.S. diplomats to travel to monitor returned migrants; and (5) Cuba's obligation to accept the return of Cuban nationals determined to be inadmissible to the United States. In response to the cancellation of the talks, Cuban officials maintained that the U.S. decision was irresponsible and that Cuba was prepared to discuss all of the issues raised by the United States. Under the Obama Administration, Cuba and the United States agreed to restart the biannual migration talks (in addition to talks on direct mail service), and since mid-2009, there have been four rounds of talks. For the first three rounds, Principal Deputy Assistant Secretary of State for Western Hemisphere Affairs Craig Kelly headed the U.S. team while Deputy Foreign Minister Dagoberto Rodriguez led the Cuban team. The first round was held on July 14, 2009, in New York City. The State Department outlined its four objectives in the talks: ensuring that the U.S. Interests Section in Havana is able to operate effectively; gaining access to a deep-water port for the safe return of Cuban migrants picked up at sea; ensuring that U.S. diplomats are able to monitor the welfare of those Cubans who are sent back to the island; and gaining Cuban government acceptance of Cubans who are excluded from the United States because they have committed crimes. Cuba reportedly proposed a new immigration agreement and more effective cooperation to combat alien smuggling, and also made known its opposition to the so-called "wet foot/dry foot policy." The second round of talks was held on February 19, 2010, in Havana. According to the Department of State, "engaging in these talks underscores our interest in pursuing constructive discussions with the government of Cuba to advance U.S. interests of mutual concern." It maintained that the United States views the talks "as an avenue to achieve practical, positive results that contribute to the full implementation of the [Migration] Accords and to the safety of citizens of both countries." Cuba's Ministry of Foreign Affairs maintained that the meeting took place in an atmosphere of respect and included discussion of some aspects of a new draft migration accord proposed by Cuba at the in the July 2009 round of talks. Cuba also reportedly raised the issue of improving and expanding the Cuban Interests Section in Washington. During the talks, U.S. officials urged Cuban officials to provide political prisoner Orlando Zapata Tamayo all necessary medical care, and also raised the case of USAID subcontractor Alan Gross detained in Cuba since early December 2009 and called for his release. The third round of talks was held on June 18, 2010, in Washington, DC. In addition to migration issues, the U.S. team separately raised the case of Alan Gross and called for his immediate release. A day before the meeting, Secretary of State Clinton met with family members of Alan Gross and issued a statement expressing deep concern about his welfare and poor health and maintaining that his "continued detention … is harming U.S.-Cuba relations." A fourth round of migration talks took place in Havana on January 12, 2011, with the U.S. side led by Principal Deputy Assistant Secretary of State for Western Hemisphere Roberta Jacobson and the Cuban side again led by Deputy Foreign Minister Dagoberto Rodríguez. The State Department maintained that the talks were productive, covering a broad range of topics of mutual interest, including the importance of continued U.S. commitment to promote safe, legal, and orderly migration. The Cuban delegation maintained the meeting recognized the significant reduction in risky illegal departures from Cuba because of efforts by both countries to deal with migrant smuggling and illegal migration. Dagoberto Rodríguez maintained that "it was a fruitful exchange aimed at moving on to the establishment of more effective mechanisms of cooperation to combat illegal migrant smuggling." The U.S. delegation again raised the issue of the continued detention of Alan Gross and called for his immediate release. Over the past decade, a number of individuals, including three U.S. government officials, have been convicted in the United States on charges involving spying for Cuba. Most recently in June 2009, the FBI arrested a retired State Department employee and his wife, Walter Kendall Myers and Gwendolyn Steingraber Myers, for spying for Cuba for three decades. The two were accused of acting as agents of the Cuban government and of passing classified information to the Cuban government. In November 2009, the Myerses pled guilty to the spying charges, and in July 2010 Kendall Myers was sentenced to life in prison while Gwendolyn Myers was sentenced to 81 months. In May 2003, the Bush Administration ordered the expulsion of 14 Cuban diplomats (7 from New York and 7 from Washington, DC), maintaining that they were involved in monitoring and surveillance activities. On September 21, 2001, Defense Intelligence Agency (DIA) analyst Ana Montes was arrested on charges of spying for the Cuban government. Montes reportedly supplied Cuba with classified information about U.S. military exercises and other sensitive operations. Montes ultimately pled guilty to spying for the Cuban government for 16 years, during which she divulged the names of four U.S. government intelligence agents working in Cuba and information about a "special access program" related to U.S. national defense. She was sentenced in October 2002 to 25 years in prison in exchange for her cooperation with prosecutors as part of a plea bargain. In response to the espionage case, the State Department ordered the expulsion of four Cuban diplomats (two from Cuba's U.N. Mission in New York and two from the Cuban Interests Section in Washington, DC) in November 2002. In June 2001, five members of the so-called "Wasp Network" who were originally arrested in September 1998 were convicted on espionage charges by a U.S. Federal Court in Miami. Sentences handed down for the so-called "Cuban five" in December 2001 ranged from 15 years to life in prison for three of the five. (In addition to the five, a married couple in the "Wasp Network" was sentenced in January 2002 to prison terms of seven years and three and one-half years for their participation in the spy network.) The group of five Cuban intelligence agents—Gerardo Hernández, Ramón Labañino, Antonio Guerrero, Fernando González, and René González—penetrated Cuban exile groups and tried to infiltrate U.S. military bases. The Cuban government vowed to work for the return of the "Cuban five" who have been dubbed "Heroes of the Republic" by Cuba's National Assembly. In December 2008, Cuban President Raúl Castro offered to exchange some imprisoned Cuban political dissidents for the "Cuban five," an offer that was rejected by the State Department, which maintained that the dissidents should be released immediately without any conditions. In June 2009, the U.S. Supreme Court chose not to hear an appeal of the case of the "Cuban five" in which their lawyers were asking for a new trial outside Miami before an unbiased jury. However, later in 2009, sentences for three of the five were reduced: Antonio Guerrero had his life sentence reduced to almost 22 years; Ramón Labañino had his life sentence reduced to 30 years; and Fernando González had his 19-year sentence reduced to 18 years. Gerardo Hernández, convicted of murder conspiracy for his role in the 1996 Brothers to the Rescue shootdown, is serving two life sentences. Finally, René González, who received a 15-year sentence, was released from prison in early October 2011, but still has to serve three years of probation; a judge has ruled that he must serve it in the United States. Cuba had asked for González to be returned to Cuba upon his release from prison so that he could be reunited with his wife and family for humanitarian reasons. In late March 2012, González was allowed by a federal judge in Florida to visit his dying brother in Cuba for a period of two weeks, after which he returned to the United States. P.L. 112-10 ( H.R. 1473 ). Department of Defense and Full-Year Continuing Appropriations Act, 2011. Continued funding in FY2011 for Cuba broadcasting (Radio and TV Martí) and Cuba democracy programs. Continued provision in the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), including a continuation during FY2011 of the clarifying provision regarding "payment of cash in advance" for licensed agricultural and medical exports to Cuba. Both Senate and House passed the bill on April 14, 2011; President signed into law April 15, 2011. P.L. 112-74 ( H.R. 2055 ). Consolidated Appropriations Act, 2012. The bill was originally introduced as the FY2012 Military Construction, Veterans Affairs, and Related Agencies Appropriations bill in May 2011, and subsequently approved by the House and Senate, respectively, in June and July 2011. On December 15, 2011, the bill became the vehicle for a FY2012 "megabus" appropriations measure, the Consolidated Appropriations Act, 2012, that combined nine full-year appropriations bills. The conference report for the bill ( H.Rept. 112-331 ) was filed on December 15, 2011, and approved by the House and Senate on December 16 and 17, 2011, respectively. The President signed the measure into law on December 23, 2011. As enacted, the measure continued FY2012 funding for Cuba broadcasting and Cuba democracy funding. The conference report to the bill provided full funding for the Administration's request of $28.475 million for Cuba broadcasting, and supported the Administration's request for $20 million in ESF for Cuba democracy and human rights funding. Before the approval of the measure, a legislative battle ensued over the potential inclusion of two Cuba provisions. The first had been in the House Appropriations Committee-approved version of the FY2012 Financial Services Appropriations bill, H.R. 2434 , and would have rolled back to January 2009 the Obama Administration's actions easing restrictions on remittances and on family travel. The second provision also had been in H.R. 2434 , as well as in the Senate Appropriations Committee-approved version of the FY2012 Financial Services Appropriations bill, S. 1573 , and would have continued to clarify—for the third year in a row—the definition of "payment of cash in advance" for U.S. agricultural and medical exports to Cuba so that the payment would be due upon delivery in Cuba as opposed to being due before the goods left U.S. ports. (The text of these two Cuba provisions were also included in Division C, Section 632 and Section 634, of H.R. 3671 , a "megabus" appropriations bill introduced by House Republicans on December 14, 2011.) Ultimately congressional leaders agreed to not include the two Cuba provisions in H.R. 2055 . The White House reportedly had exerted strong pressure not to include the Cuba provision that would have rolled back the Administration's easing of restrictions on travel and remittances. Dropping the second provision on the definition of "payment of cash in advance" for U.S. agricultural and medical products appears to have been a political tradeoff made to compensate for the travel rollback provision being dropped. P.L. 112-175 ( H.J.Res. 117 ). Continuing Appropriations Resolution, FY2013. Continues funding for FY2013 for all 12 regular appropriations (including the State, Foreign Operations, and Related Programs Appropriations bill) though March 27, 2013, at the same rate for projects and activities in FY2012 plus an across-the-board increase of 0.612%, although specific country accounts are left to the discretion of responsible agencies. This continues funding for Cuba democracy programs and Cuba broadcasting through March 27, 2013, but the 113 th Congress will need to address foreign aid appropriations for the balance of FY2013. Introduced September 10, 2012; House passed (329-91) September 13 and Senate passed (62-30) September 22. Signed into law September 28, 2012. S.Res. 366 (Menendez). Honors the life of dissident and democracy activist Wilman Villar Mendoza and condemns the Castro regime for the death of Wilman Villar Mendoza. Introduced February 1, 2012; Senate passed by Unanimous Consent February 1, 2012. S.Res. 525 (Nelson , FL ). As approved, the resolution: recognizes and honors the life and exemplary leadership of Oswaldo Payá; offers heartfelt condolences to the family, friends, and loved ones of Payá; praises the bravery of Payá and his colleagues for collecting more than 11,000 signatures in support of the Varela Project; calls on the United States to continue policies that promote respect for the fundamental principles of religious freedom, democracy, and human rights in Cuba; calls on the Cuban government to provide its citizens with internationally accepted standards for civil and human rights and the opportunity to vote in free and fair elections; calls on the Cuban government to allow an impartial, third-party investigation into the circumstances surrounding the death of Payá; and condemns the Cuban government for the detention of nearly 50 pro-democracy activists following the memorial service for Oswaldo Payá. Introduced July 24, 2012; Senate passed, as amended by S.Amdt. 2740 (proposed by Senator Lieberman for Senator Nelson, FL), by Unanimous Consent July 31, 2012. S.Res. 609 (Moran). Calls for the immediate and unconditional release of Alan Gross, and urges the Cuban government in the meantime to provide all appropriate diagnostic and medical treatment to address the full range of medical issues facing Mr. Gross and to allow him to choose a doctor to provide him with an independent medical assessment. Introduced and Senate passed by voice vote December 5, 2012. H.R. 1 (Rogers). Full-Year Continuing Appropriations Act, 2011. House passed February 19, 2011. Two Cuba-related amendments submitted—Amendment No. 51 (McCollum) and Amendment No. 369 (Flake), both printed in the Congressional Record on February 14, 2011—would have eliminated funding for Radio and TV Marti, but were never considered. H.R. 255 (Serrano). Cuba Reconciliation Act. Would have lifted the trade embargo on Cuba. Introduced January 7, 2011; referred to Committees on Foreign Affairs, Ways and Means, Energy and Commerce, Financial Services, Judiciary, Oversight and Government Reform, and Agriculture. H.R. 256 (Serrano). Baseball Diplomacy Act. Would have waived certain prohibitions with respect to nationals of Cuba coming to the United States to play organized professional baseball. Introduced January 7, 2011; referred to Committees on Foreign Affairs and Judiciary. H.R. 372 (Buchanan). Would have amend the Outer Continental Shelf Act to authorize the Secretary of the Interior to deny leases and permits to persons who engage in activities with the government of any foreign country that is subject to any sanction or an embargo established by the U.S. government. Introduced January 20, 2011; referred to the Committee on Natural Resources. H.R. 380 (Lee). Pursuit of International Education (PIE) Act of 2011. Would have provide that no funds made available to the Department of the Treasury may be used to implement, administer, or enforce regulations to require specific licenses for travel-related transactions directly related to educational activities in Cuba. Introduced January 20, 2011; referred to the Committee on Foreign Affairs. H.R. 833 (Conaway) . Agricultural Export Enhancement Act of 2011. Would have removed obstacles to legal sales of U.S. agricultural commodities to Cuba, as authorized by the Trade Sanctions Reform and Export Enhancement Act of 2000. Section 2 would have defined the term "payment of cash in advance" under TSRA as "the payment by the purchaser of an agricultural commodity or product and the receipt of such payment by the seller" prior to the transfer of title and the release of control of such commodity or product to the purchaser. Section 3 would have authorized direct transfers between Cuban and U.S. financial institutions for product sales under TSRA. Introduced February 28, 2011; referred to the Committees on Financial Services, Foreign Affairs, and Agriculture. H.R. 1317 (McCollum). Stop Wasting Taxpayer Money on Cuba Broadcasting Act. Would have repealed the Radio Broadcasting to Cuba Act (22 USC 1465 et seq.) and the Television Broadcasting to Cuba Act (22 USC 1465aa et seq.). Introduced April 1, 2011; referred to the Committee on Foreign Affairs. H.R. 1886 (Rangel). Export Freedom to Cuba Act. Would have prohibited restrictions on travel to Cuba. Introduced May 12, 2011; referred to the House Foreign Affairs Committee. H.R. 1887 (Rangel). Free Trade with Cuba Act. Would have lifted the trade embargo by repealing and amending certain laws. Introduced May 12, 2011; referred to the Committee on Foreign Affairs, and in addition to the Committees on Ways and Means, Energy and Commerce, the Judiciary, Financial Services, Oversight and Government Reform, and Agriculture. H.R. 1888 (Rangel). Promoting American Agricultural and Medical Exports to Cuba Act of 2011. Would have facilitated the export of U.S. agricultural products to Cuba, removed impediments to the export of medical devices and medicines to Cuba, and prohibited restrictions on travel to Cuba. Introduced May 12, 2011; referred to Committee on Foreign Affairs, and in addition to the Committees on Ways and Means, the Judiciary, Agriculture, and Financial Services. H.R. 2047 (Ros-Lehtinen). Caribbean Coral Reef Protection Act of 2011. Would have amended the Cuban Liberty and Democratic Solidarity Act to exclude from the United States aliens who invest $1 million or more that contributes to the enhancement of the ability of Cuba to develop petroleum resources located off its coast. Would also have required the imposition of sanctions if the President determined that a person had invested $1 million or more in any 12-month period since January 10, 2005, that contributes to the enhancement of the ability of Cuba to develop petroleum resources off its coast. Introduced May 26, 2011; referred to Committee on the Judiciary, and in addition to the Committees on Foreign Affairs, Financial Services, and Oversight and Government Reform. H.R. 2434 (Emerson)/ S. 1573 (Durbin). FY2012 Financial Services and General Government Appropriations. H.R. 2434 introduced July 7, 2011, and reported by the House Appropriations Committee ( H.Rept. 112-136 ). S. 1573 introduced September 15, 20111, and reported by the Senate Appropriations Committee ( S.Rept. 112-79 ). Both bills had a provision (§618 of H.R. 2434 and §620 of S. 1573 ) that would have continued to clarify the definition of "payment of cash in advance" for U.S. agricultural and medical sales to Cuba to "be interpreted as payment before the transfer of title to, and control of, the exported items to the Cuban purchaser." The Senate bill had another Cuba provision (§624) that would have prohibited restrictions on direct transfers from a Cuban financial institution to a U.S. financial institution in payment for licensed agricultural and medical exports to Cuba. The House bill had another Cuba provision (§901) that would have repealed any amendments to certain sections of the Cuban Assets Control Regulations relating to family travel ( 31 CFR 515.560(a)(1) and 31 CFR 515.561 ), carrying remittances to Cuba ( 31 CFR 515.560(c)(4)(i) ), and sending remittances to Cuba ( 31 CFR 515.570 ) made since January 2009. The provision would have rolled back President Obama's easing of restrictions on family travel and remittances in 2009 and the President's easing of restrictions on remittances for non-family members and religious institutions in 2011. None of the Cuba provision in H.R. 2434 or S. 1573 were included in the FY2012 "megabus" appropriations measure, P.L. 112-74 ( H.R. 2055 ), described above. In November 2011, an attempt to include the Senate version of the Financial Services appropriations measure, S. 1573 , in a "minibus" with two other full-year appropriations measures and a short-term continuing resolution failed in part because of disagreement over the Cuba provision that would have allowed direct transfers from a Cuban financial institution to a U.S. financial institution to pay for U.S. agricultural and medical exports to Cuba. H.R. 2583 (Ros-Lehtinen). FY2012 Foreign Relations Authorization Act. Introduced July 19, 2011; reported by House Committee on Foreign Affairs ( H.Rept. 112-223 ) July 23, 2011. Section 1126 would have required the President to fully enforce all U.S. regulations as in effect on January 19, 2009, on travel to Cuba, and would have imposed the corresponding penalties against individuals determined to be in violation of such regulations. The provision became part of the bill during the committee's markup on July 21, 2011, when the committee approved (36-6) an amendment offered by Representative Rivera. (The Rivera amendment was a second degree amendment to an amendment offered by Representative Meeks that was subsequently was approved by voice vote.) The intent of the Rivera amendment was to reinstate travel restrictions as they existed under the Bush Administration in January 2009. H.R. 2771 (Rivera). Would have amended the Cuban Adjustment Act of 1966 (P.L. 89-732) to increase to five years the period during which a Cuban national must be physically present in the United States in order to qualify for adjustment of status to that of a permanent resident. Would also have provided that an alien shall be ineligible for adjustment to permanent resident status if the alien returns to Cuba after admission or parole into the United States. Introduced August 1, 2011; referred to House Committee on the Judiciary. H.R. 2831 (Rivera). Would have amended the Cuban Adjustment Act of 1966 (P.L. 89-732) to make an alien ineligible for adjustment under the act if the aliens returned to Cuba after admission or parole into the United States. Would have required the Secretary of Homeland Security to rescind the status of an alien who obtained adjustment of status if the alien returned to Cuba before being becoming a U.S. citizen. Introduced August 30, 2011; referred to the Committee on the Judiciary. Subcommittee on Immigration Policy and Enforcement held hearing May 31, 2012 (testimony and webcast available at http://judiciary.house.gov/hearings/Hearings%202012/hear_05312012_3.html ). H.R. 4135 (Flake). Western Hemisphere Energy Security Act of 2012. The bill would have permitted U.S. companies to participate in hydrocarbon exploration and extraction activities from any portion of foreign maritime exclusive economic zone that is contiguous to the exclusive economic zone of the United States. It also would have allowed for the export of all equipment and travel needed for such activities, and would allow for the importation of hydrocarbon resources from Cuba Introduced March 5, 2012; referred to Committee on Foreign Affairs. H.R. 4310 (McKeon) / S. 3254 (Levin) . National Defense Authorization Act for FY2013. H.R. 4310 introduced March 29, 2012; House passed (299-120) May 18, 2012. As approved, Section 803 would have prohibited the Department of Defense from contracting for the procurement of goods and services with any person that has business operations with a state sponsor of terrorism. The provision was added to the bill by voice vote during May 17, 2012, House floor consideration. H.Amdt. 1119 (McKeon), an en bloc amendment considering of several amendments, including Amendment No. 94 (Rivera), which became Section 803 of the bill. S. 3254 , introduced June 4, 2012; approved by the Senate on December 4, 2012 and incorporated in H.R. 4310 as an amendment. As approved by the Senate, the bill did not have a similar provision regarding Department of Defense contracting. The conference report to the measure, H.Rept. 112-705 , filed December 18, 2012, did not include the House provision regarding DOD contracting. H.R. 5857 (Granger)/ S. 3241 (Leahy). FY2013 State Department, Foreign Operations, and Related Programs Appropriations Act, 2013. H.R. 5857 introduced and reported ( H.Rept. 112-494 ) May 25 by the House Committee on Appropriations. S. 3241 introduced and reported ( S.Rept. 112-172 ) by the Senate Committee on Appropriations May 24, 2012. Both bills would continue the long-standing prohibition on direct funding assistance to the government Cuba, and would require that any assistance to Cuba be provided through the regular notification procedures of the Committees on Appropriations. The House bill would provide $20 million in ESF ($5 million more than the Administration's request), but would transfer and merge the aid with funds available to the National Endowment for Democracy to promote democracy and strengthen civil society in Cuba. The Senate bill would provide $15 million in ESF for Cuba (the same as the Administration's request), including for humanitarian assistance, support for economic reform, private sector initiatives, democracy, and human rights. With regard to Cuba broadcasting, the House bill would provide $28.062 million ($4.468 million more than the Administration's request and the same amount provided in FY2012), while the Senate bill would provide $23.4 million ($194,000 less than the Administration's request). Congress did not finish action on the measure before the beginning of FY2013, but instead approved a continuing appropriation resolution, P.L. 112-175 ( H.J.Res. 117 ) described above, that continues funding for Cuba democracy programs and Cuba broadcasting through March 27, 2013, at the same rate for projects and activities in FY2012 plus an across-the-board increase of 0.612%, although specific country accounts are left to the discretion of responsible agencies. The 113 th Congress will need to address foreign aid appropriations for the balance of FY2013. H.R. 6067 (Ros-Lehtinen) . Western Hemisphere Security Cooperation Act of 2012. Introduced June 29, 2012; referred to Committees on Foreign Affairs, Judiciary, Financial Services, and Oversight and Government Reform. Included numerous provisions on Cuba, including Section 104, which would have require notifications relating to travel by Cuban government officials within or to the United States; Section 105, which would have imposed visa restrictions and economic sanctions on those involved in facilitating the development of Cuba's offshore petroleum resources (similar to language of H.R. 2047 described above); and Section 201, which would have imposed restrictions on nuclear cooperation with countries assisting the nuclear program of Venezuela or Cuba. H.Res. 226 (King). Would have called for the immediate extradition or rendering to the United States of convicted felon William Morales and all other fugitives from justice who are receiving safe harbor in Cuba in order to escape prosecution or confinement for criminal offenses committed in the United States. Introduced April 14, 2011; referred to Committee on Foreign Affairs. H.Res. 536 (Diaz-Balart). Would have condemned the murder of Wilman Villar Mendoza and honor his sacrifice in the cause of freedom for the Cuban people. Introduced February 2, 2012; referred to Committee on Foreign Affairs. S. 223 (Rockefeller). FAA Air Transportation Modernization and Safety Improvement Act. Senate approved February 17, 2011. S.Amdt. 61 (Rubio) , submitted February 10, 2011, but never considered, would have prohibited an expansion of flights to locations in countries that are state sponsors of terrorism. S. 405 (Nelson, Bill). Gulf Stream Protection Act of 2011. Section 2 of the bill would have required that if a company that is conducting oil or gas operations off the coasts of Cuba wants to lease drilling rights in the United States, then the company would have to submit an oil response plan for their Cuba operations and would have to demonstrate sufficient financial and other resources to respond to a worst case scenario oil spill in Cuban waters that would affect the waters of the United States. Section 3 of the bill would have required the Secretary of the Interior, within 180 days of the enactment of the bill, to carry out an oil spill risk analysis and planning process for the development and implementation of oil spill response plans for nondomestic oil spills in the Gulf of Mexico. The Secretary of the Interior would have been required, among other things, to consult with the Secretary of State and, to the maximum extent practicable, include recommendations for Congress on a joint contingency plan with the countries of Mexico, Cuba, and the Bahamas to ensure an adequate response to oil spills located in the eastern Gulf of Mexico. Introduced February 17, 2011; referred to the Committee on Energy and Natural Resources. S. 476 (Pryor). Broadcast Savings Act. Would have discontinued Radio and TV Martí broadcasts to Cuba by repealing the Radio Broadcasting to Cuba Act and the Television Broadcasting to Cuba Act. Introduced March 3, 2011; referred to the Committee on Foreign Relations. S. 603 (Nelson, FL)/ H.R. 1166 (Issa). Similar, but not identical bills, would have modified the prohibition by U.S. courts of certain rights relating to certain marks, trade names, or commercial names. S. 603 introduced March 16, 2011; referred to the Committee on the Judiciary. H.R. 1166 introduced March 17, 2011; referred to the Committee on the Judiciary. S. 1601 (Leahy). FY2012 Department of State, Foreign Operations, and Related Programs Appropriations. Introduced September 22, 2011; reported by the Senate Appropriations Committee ( S.Rept. 112-85 ). As reported by the committee, the bill would have provided that $15 million in ESF may be provided for Cuba, including humanitarian and democracy assistance, support for economic reform, private sector initiatives, and human rights. In its report to the bill, the committee maintained that it expected that funds would be made available, and programs carried out, in a transparent manner. The committee also directed that the USAID Administrator provide regular updates to the committee on the number of Cubans who receive assistance and the types of assistance. In the report to the bill, the committee recommended $28.181 million in funding for Cuba broadcasting, $294,000 less than the Administration's request. A draft House Appropriations Committee report and bill (marked up by the Subcommittee on State, Foreign Operations, and Related Programs on July 27, 2011) would have recommended $20 million in ESF for Cuba, and would have directed that the funds be used only for democracy-building, and not for business promotion, economic reform, social development or other purposes expressly authorized by Section 109(a) of the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 ). The draft report would also have recommended $30.175 million for Cuba broadcasting, $1.7 million more than the Administration's request. (See the draft committee report, available at http://appropriations.house.gov/UploadedFiles/FY12-SFOPSCombinedReport-CSBA.pdf .) Ultimately, in the Consolidated Appropriations Act, 2012, ( P.L. 112-74 ; H.Rept. 112-331 ) described above, Congress fully funded the Administration's FY2012 request of $28.475 million for Cuba broadcasting and supported the Administration request of $20 million in ESF for Cuba democracy funding. S.Res. 140 (Rubio). Would have commemorated the 50 th anniversary of the Bay of Pigs operation and commend members of Assault Brigade 2506. Introduced April 12, 2011; referred to Committee on Foreign Relations. S.Res. 342 (Rubio). Would have honored the life and legacy of Laura Pollán, a founder of the "Ladies in White" human right group in Cuba. Introduced December 1, 2011; reported by the Committee on Foreign Relations February 14, 2012. Appendix A. Selected Executive Branch Reports and Web Pages Background Note, Cuba, State Department Date: November 7, 2011 Full Text: http://www.state.gov/outofdate/bgn/cuba/191090.htm U.S. Relations with Cuba, Fact Sheet, State Department Date: June 21, 2012 Full Text: http://www.state.gov/r/pa/ei/bgn/2886.htm Congressional Budget Justificati on for Foreign Operations FY2013 , Annex: Re gional Perspectives (pp. 768-769 of pdf), State Department Date: April 3, 2012 Full Text: http://www.state.gov/documents/organization/185015.pdf Country Report s on Human Rights Practices 2011 , Cuba, State Department Date: May 24, 2012 Full Text: http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm?dynamic_load_id=186505 C ountry Reports on Terrorism 2011 (State Sponsors of Terrorism chapter), State Department Date: July 31, 2012 Full Text : http://www.state.gov/j/ct/rls/crt/2011/195547.htm Cuba Country Page, State Department Full Text: http://www.state.gov/p/wha/ci/cu/ Cuba Country Page , U.S. Agency for International Development Full Text: http://www.usaid.gov/where-we-work/latin-american-and-caribbean/cuba/our-work Cuba Sanctions, Treasury Department Full Text: http://www.treasury.gov/resource-center/sanctions/Programs/pages/cuba.aspx Cuba: What You Need to Know About U.S. Sanctions Against Cuba, Treasury Department, Office of Foreign Assets Control Date: January 24, 2012 Full Text: http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba.pdf International Religious Freedom Report, 2011, Cuba, State Department Date: July 30, 2012 Full Text : http://www.state.gov/j/drl/rls/irf/religiousfreedom/index.htm?dlid=192965#wrapper International Narcotics Control Strategy Report 201 2 , Vol. I, Cuba (pp. 185-187) , State Department Date: March 2012 Full Text: http://www.state.gov/documents/organization/187109.pdf Tr afficking in Persons Report 2012 (Cu ba, pp. 133-134 of pdf), State Department Date: June 19, 2012 Full Text: http://www.state.gov/documents/organization/192594.pdf Appendix B. Earlier Developments in 2012 and 2011 On November 1, 2012, Cuba's Ministry of Foreign Affairs issued a statement denouncing the U.S. Interests Section in Havana for supporting activities to provoke a "regime change" in Cuba, including establishing "illegal Internet connections and networks" and providing training and offering courses. The U.S. Department of State maintained on November 2, 2012 that the U.S. Interests Section in Havana regularly provides computer access and offers free Internet courses to Cubans who sign up because the Cuban government restricts public access to the Internet and prevents its own citizens from getting technology training. On October 25, 2012, Hurricane Sandy struck eastern Cuban causing significant damage in the provinces of Santiago, Holguin, and Guantanamo. Eleven Cubans were killed in the storm, with damage to over 226,000 homes, including almost 17,000 destroyed. The storm also reportedly did significant damage to Cuba's agricultural sector, including coffee and sugar production. On October 16, 2012, the Cuban government announced that it would be updating its migration policy, effective January 14, 2013, by eliminating the long-standing policy of requiring an exit permit and letter of invitation for Cubans to travel abroad. On October 15, 2012, a Cuban court convicted Spanish political youth leader Angel Carromero Barrios of vehicular manslaughter for the accident that claimed the life of human rights activist Oswaldo Payá in July. On September 13, 2012, the Senate Caucus on International Narcotics Control released a report, Preventing a Security Crisis in the Caribbean , in which Caucus Chairman Senator Feinstein recommended that the Obama Administration consider taking four steps to increase U.S. collaboration with Cuban on counternarcotics, including the negotiation of a bilateral counternarcotics agreement with Cuba. On August 6, 2012, Cuba announced that an exploratory oil well being drilled by the Malaysian state-oil company Petronas in cooperation with the Russian company Gazprom was found not to be commercially viable because of its compact geological formation. On July 31, 2012, the Senate approved S.Res. 525 (Bill Nelson), recognizing and honoring the life and exemplary leadership of human rights activist Oswaldo Payá, who was killed in a car accident on July 22. The resolution also calls on the Cuban government to allow an impartial, third-party investigation into the circumstances surrounding the death of Payá. On July 31, 2012, the State Department issued its Country Reports on Terrorism 2011 report, which stated that "current and former members of Basque Fatherland and Liberty (ETA) continued to reside in Cuba," and that "press reporting indicated that the Cuban government provided medical care and political assistance" to the Revolutionary Armed Forces of Colombia (FARC). At the same time, the report maintained that there "was no indication that the Cuban government provided weapons or paramilitary training for either ETA or the FARC." The terrorism report also stated that the Cuban government continues "to permit fugitives wanted in the United States to reside in Cuba," and provides such support as housing, food ration books, and medical care. On July 18, 2012, Amnesty International (AI) issued an urgent action appeal calling on Cuban authorities to either charge or release three protestors (two members of the Ladies in White human rights group and a husband of one of the women) detained since March 2012 after participating in a peaceful protest. Subsequently, AI announced that one of the protestors was released on October 5, 2012, pending trial, while the other two reportedly continue to be incarcerated. AI also reported numerous short-term detentions of members of the Ladies in White in September 2012. On July 2, 2012, Cuba published new regulations that, beginning in September 2012, impose significantly higher duties on imported goods carried or shipped to individuals in Cuba. Many small entrepreneurs that depend on the imported goods could be threatened by the new duties. On June 18, 2012, the Cuban government reimposed duties on imported food that had been lifted in 2008 after several hurricanes hurt domestic production. The duties could have an impact on the flow of food parcels brought by visiting Cuban Americans. On June 12, 2012, the U.S. Departments of the Treasury and Justice announced a $619 million settlement with a Dutch bank, ING, for violating U.S. sanctions against Cuba, Burma, Sudan, Libya, and Iran. The Cuba sanction violations were the most extensive and stemmed from ING's processing of financial transactions valued at more than $1.6 billion. On June 7, 2012, the Senate Foreign Relations Committee, Subcommittee on Western Hemisphere, Peace Corps, and Global Narcotics, held a hearing on Cuba's human rights situation in which Assistant Secretary of State for Western Hemisphere Affairs Roberta Jacobson expressed strong U.S. support for democracy and human rights activists in Cuba and defended the Obama's Administration policy on travel and remittances. The hearing also included three human rights activists testifying from Cuba, one of whom—Jorge Luis García Pérez (also known as Antúnez)—was subsequently arrested and beaten on June 9 and held for five days. Several U.S. Senators strongly condemned Cuba's action, including Senate Foreign Relations Committee Chairman John Kerry. On May 31, 2012, the House Committee on the Judiciary, Subcommittee on Immigration on Policy Enforcement, held a hearing on H.R. 2831 (Rivera), a bill that would amend the Cuban Adjustment Act of 1966 (P.L. 89-732) by providing that an alien from Cuba would be ineligible for adjustment to permanent resident status if he or she returns to Cuba before becoming a U.S. citizen. The intent of the bill is to curb travel to Cuba by those who have recently emigrated from Cuba. On May 24, 2012, the State Department released its 2011 human rights report, which maintained that Cuba's "principal human rights abuses were: abridgement of the rights of citizens to change their government; government threats, intimidation, mobs, harassment, and detentions to prevent citizens from assembly peacefully; and a significant increase in the number of short-term detentions." On May 18, 2012, the Spanish oil company Repsol, which had begun exploratory drilling for oil off of Cuba's north coast in January 2012, announced that its exploratory well came up dry. On the same day, the House approved its version of the FY2013 National Defense Authorization Act, H.R. 4310 , with a provision that would prohibit the Department of Defense from contracting for the procurement of goods and services with any person that has business operations with a state sponsor of terrorism. The provision would affect Repsol from partnering with Cuba in oil exploration efforts while at the same time benefiting from DOD contracts. Repsol subsequently announced in late May that it would likely leave Cuba. On May 17, 2012, the House Foreign Affairs Committee, Subcommittee on the Western Hemisphere, held a hearing entitled "Cuba's Global Network of Terrorism, Intelligence, and Warfare," (available at http://foreignaffairs.house.gov/hearings/view/?1440 ). On March 26-28, 2012, Pope Benedict XVI visited Cuba, arriving first in Santiago and then traveling to Havana. The last papal visit was 1998, when Pope John Paul II visited the island. On March 7, 2012, the State Department released its 2012 International Narcotics Control Strategy Report, which maintained that "greater communication and cooperation among the U.S., its international partners and Cuba, particularly in the area of real-time tactical information-sharing and improved tactics, techniques and procedures, would likely lead to increased interdictions and disruptions of illegal trafficking." The report maintained that the United States was still reviewing a draft bilateral counternarcotics accord presented by Cuba, and that such an accord, if structured appropriately, "could advance the counternarcotics efforts undertaken by both countries." On February 22, 2012, Cuban police detained dissidents in Havana and in the eastern provinces of Guantánamo, Holguín, and Santiago de Cuba to disrupt any demonstrations to commemorate the two-year anniversary of the death of hunger striker Orlando Zapata Tamayo on February 23. On February 9, 2012, the nongovernmental Cuban Commission on Human Rights and National Reconciliation reported that there were at least 631 short-term detentions for political reasons in January 2012 while there were at least 4,123 such detentions in 2011, almost double the number in 2010. (See the report, available at http://www.cubanet.org/wp-content/uploads/2012/02/OVERVIEW-ENERO-2012.pdf .) On February 1, 2012, the Senate passed S.Res. 366 by Unanimous Consent, "honoring the life of dissident and democracy activist Wilman Villar Mendoza and condemning the Castro regime of the death of Wilman Villar Mendoza." The 31-year-old died on January 19, 2012, following a 50-day hunger strike after he was convicted of "contempt" of authority in November 2011 and sentenced to four years in prison after participating in a peaceful demonstration. On January 31, 2012, the Spanish oil company Repsol began exploratory drilling off of Cuba's northern coast about 50 miles northwest of Havana. On January 30, 2012, the House Committee on Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, held a Florida field hearing on the issue of offshore drilling in Cuba and the Bahamas that examined oil spill readiness and response planning. On January 28-29, 2012, the Cuban Communist Party held a national conference focusing on internal party changes. The party confirmed two five-year term limits for top positions in the party and government, although analysts expressed disappointment that more significant reforms were not addressed. On December 13, 2011, the Government Accountability Office issued a report on Cuba broadcasting that stated that a congressionally mandated strategic plan by the Broadcasting Board of Governors lacked key information, with five of six components required by Congress only partially addressed (the report is available at http://www.gao.gov/assets/590/586869.pdf ). On November 2, 2011, the House Natural Resources Committee, Subcommittee on Energy and Mineral Resources, held a hearing examining offshore drilling by Cuba and the Bahamas. (See http://naturalresources.house.gov/Calendar/EventSingle.aspx?EventID=260052 .) On October 18, 2011, the Senate Energy and Natural Resources Committee hearing held a hearing on the status of response capabilities and readiness for oil spills in foreign waters adjacent to U.S. waters. (See http://energy.senate.gov/public/index.cfm/hearings-and-business-meetings?ID=f37547ef-039b-373a-dc68-113595376178 .) On October 7, 2011, René González, one of the so-called "Cuban five" convicted in U.S. court for involvement in spying, was released from prison after serving 13 years of a 15-year sentence. González will still need to serve three years of probation, and a judge has ruled that he must serve it in the United States. On September 28, 2011, in response to questions at a roundtable discussion, President Obama indicated that his Administration has tried "to send a signal that we are open to a new relationship with Cuba if the Cuban government starts taking the proper steps to open up its own country and … provide the space and the respect for human rights that would allow the Cuban people to determine their own destiny." (See the President's remarks, available at http://www.whitehouse.gov/the-press-office/2011/09/28/remarks-president-open-questions-roundtable . ) On August 18, 2011, more than 40 members of the Ladies in White human rights group in Havana were attacked by a government-orchestrated mob. The group had been attempting to stage a protest to call attention to the recent harassment of their colleagues in the city of Santiago in eastern Cuba. On September 24, pro-government supporters prevented the Ladies in White from marching to Mass on the feast day of the Virgin of Mercy. On August 18, 2011, the State Department issued its 2010 Country Reports on Terrorism. The section on Cuba maintained that the government "maintained a public stance against terrorism and terrorist financing, but there was no evidence that it had severed ties with elements from the Revolutionary Armed Forces of Colombia (FARC) and recent media reports indicate some current and former members of the Basque Fatherland and Liberty (ETA) continue to reside in Cuba." (See the report, available at http://www.state.gov/j/ct/rls/crt/2010/index.htm .) On August 5, 2011, Cuba's Supreme Court rejected the appeal of Alan Gross, the USAID subcontractor imprisoned in Cuba since late 2009 and convicted in March 2011 for "actions against the independence and territorial integrity of the state" and sentenced to 15 years in prison. A White House Statement called for his immediate and unconditional release. On July 21, 2011, during its markup of H.R. 2583 , the FY2012 Foreign Relations Authorization Act, the House Committee on Foreign Affairs approved (36-6) a Rivera amendment that would require the President to fully enforce all U.S. regulations on travel to Cuba as in effect on January 19, 2009, and impose the corresponding penalties against individuals determined to be in violation of such regulations. The intent of the amendment was to reinstate tighter travel restrictions as they existed under the Bush Administration in January 2009. On July 13, 2011, the White House's Statement of Administration Policy on H.R. 2434 , the FY2012 Financial Services and General Government Appropriations bill, stated that the Administration opposes Section 901 because it would reverse the President's policy on family travel and remittances, and that the President's senior advisors would recommend a veto if the bill contained the provision. On July 13, 2011, more than 40 Cuban dissidents issued a document dubbed the "People's Path," that advocates for a peaceful transition toward a democratic system and for an assembly to rewrite the constitution. On June 24, 2011, during markup of the House FY2012 Financial Services and General Government Appropriations bill (subsequently introduced as H.R. 2434 ), the House Appropriations Committee approved an amendment by voice vote that would repeal amendments to the Cuba embargo regulations made since January 19, 2009, regarding family travel, carrying remittances to Cuba, and sending remittances to Cuba. The provision, which became Section 901 of the bill, would roll back President Obama's easing of restrictions on family travel and remittances in 2009 and his easing of restrictions on remittances for non-family members and religious institutions in 2011. From April 16-19, 2011, the Cuban Communist Party held its sixth party congress, focusing on making changes to Cuba's economic model. On April 8, 2011, the State Department issued its 2010 human rights reports on countries worldwide. The report documented continued significant human rights abuses, including harassment, beatings, and threats against political opponents by government-organized mobs and state security officials; harsh and life-threatening prison conditions; arbitrary detention of human rights advocates and members of independent organizations; selective prosecution and denial of fair trial; pervasive monitoring of private conversations; and severe limitations on freedom of speech and press. (See the full State Department human rights report on Cuba, available at http://www.state.gov/g/drl/rls/hrrpt/2010/wha/154501.htm .) On March 30, 2011, former President Jimmy Carter completed a three-day trip to Cuba, where he had meetings with President Castro, Catholic Cardinal Jaime Ortega, and several human rights activists. He also visited imprisoned U.S. government subcontractor Alan Gross. On March 23, 2011, the Cuban government released the last two of the "group of 75" political prisoners who were incarcerated in March 2003 in a severe crackdown on political dissidents. Overall, more than 125 political prisoners have been released since mid-2010. On March 12, 2011, a Cuban court convicted and sentenced USAID subcontractor Alan Gross to 15 years in prison for "actions against the independence and territorial integrity of the state." Gross has been imprisoned since December 2009, when he was arrested after distributing communications equipment to Jewish organizations in Cuba. On March 3, 2011, the State Department issued its 2011 International Narcotics Control Strategy Report (INCSR), which maintained that the United States was reviewing a draft bilateral accord for counternarcotics cooperation that Cuba had presented. The report maintained that such an accord, if structured appropriately, "could advance the counternarcotics efforts undertaken by both countries." On January 28, 2011, the Departments of Homeland Security and Treasury published changes to their Cuba regulations in the Federal Register (pp. 5058-5061 and pp. 5072-5078) designed to increase purposeful travel to Cuba (including people-to-people exchanges), allow any U.S. person to send remittances to non-family members in Cuba, and allow all U.S. international airports to apply to provide licensed charter flights to and from Cuba. The Treasury Department has not yet finalized guidelines for the new regulations so that applications for travel requiring specific licenses are not yet being processed. Appendix C. CRS and GAO Reports Active CRS Reports Discussing Cuba CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by [author name scrubbed]. CRS Report R40566, Cuban Migration to the United States: Policy and Trends , by [author name scrubbed]. CRS Report R41522, Cuba's Offshore Oil Development: Background and U.S. Policy Considerations , by [author name scrubbed]. CRS Report R40139, Closing the Guantanamo Detention Center: Legal Issues , by [author name scrubbed] et al. CRS Report R40754, Guantanamo Detention Center: Legislative Activity in the 111 th Congress , by [author name scrubbed]. CRS Report R42008, Financial Services and General Government: FY2012 Appropriations , coordinated by [author name scrubbed]. CRS Report R41340, Financial Services and General Government (FSGG): FY2011 Appropriations , coordinated by [author name scrubbed]. CRS Report R40801, Financial Services and General Government (FSGG): FY2010 Appropriations , coordinated by [author name scrubbed]. CRS Report RL34523, Financial Services and General Government (FSGG): FY2009 Appropriations , coordinated by [author name scrubbed]. CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean , by [author name scrubbed]. CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases , by [author name scrubbed]. Archived CRS Reports CRS Report RS20450, The Case of Elian Gonzalez: Legal Basics , by [author name scrubbed] (pdf). CRS Report RL33622, Cuba's Future Political Scenarios and U.S. Policy Approaches , by [author name scrubbed]. CRS Report RS22742, Cuba's Political Succession: From Fidel to Raúl Castro , by [author name scrubbed]. CRS Report RL32251, Cuba and the State Sponsors of Terrorism List , by [author name scrubbed]. CRS Report R40193, Cuba: Issues for the 111 th Congress , by [author name scrubbed]. CRS Report RL33819, Cuba: Issues for the 110 th Congress , by [author name scrubbed]. CRS Report RL32730, Cuba: Issues for the 109 th Congress , by [author name scrubbed]. CRS Report RL31740, Cuba: Issues for the 108 th Congress , by [author name scrubbed]. CRS Report RL30806, Cuba: Issues for the 107 th Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL30628, Cuba: Issues and Legislation In the 106 th Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL30386, Cuba-U.S. Relations: Chronology of Key Events 1959-1999 , by [author name scrubbed] (pdf). CRS Report RL33499, Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation , by [author name scrubbed]. CRS Report RS22094, Lawsuits Against State Supporters of Terrorism: An Overview , by [author name scrubbed]. CRS Report RL31258, Suits Against Terrorist States by Victims of Terrorism , by [author name scrubbed]. CRS Report 94-636, Radio and Television Broadcasting to Cuba: Background and Issues Through 1994 , by [author name scrubbed] and [author name scrubbed] (pdf). CRS Report RS21764, Restricting Trademark Rights of Cubans: WTO Decision and Congressional Response , by [author name scrubbed]. Selected GAO Reports Broadcasting Board of Governors Should Provide Additional Information to Congress Regarding Broadcasting to Cuba, December 13, 2011, http://www.gao.gov/assets/590/586869.pdf . Broadcasting to Cuba: Actions are Needed to Improve Strategy and Operations , U.S. Government Accountability Office, January 2009, http://www.gao.gov/new.items/d09127.pdf . Broadcasting to Cuba: Observations Regarding TV Martí's Strategy and Operations , Statement of Jess T. Ford, Director International Affairs and Trade before the Subcommittee on International Organizations, Human Rights, and Oversight, House Committee on Foreign Affairs, U.S. Government Accountability Office, June 17, 2009, http://www.gao.gov/new.items/d09758t.pdf . Foreign Assistance: Continued Efforts Needed to Strengthen USAID's Oversight of U.S. Democracy Assistance for Cuba, U.S. Government Accountability Office, November 2008, http://www.gao.gov/new.items/d09165.pdf . Foreign Assistance: U.S. Democracy Assistance for Cuba Needs Better Management and Oversight , U.S. Government Accountability Office, November 2006, http://www.gao.gov/new.items/d07147.pdf . U.S. Embargo on Cuba: Recent Regulatory Changes and Potential Presidential or Congressional Actions , U.S. Government Accountability Office, September 17, 2009, http://www.gao.gov/new.items/d09951r.pdf .
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Cuba remains a one-party communist state with a poor record on human rights. The country's political succession in 2006 from the long-ruling Fidel Castro to his brother Raúl was characterized by a remarkable degree of stability. The government of Raúl Castro has implemented limited economic policy changes, including an expansion of self-employment. A party congress held in April 2011 laid out numerous economic goals that, if implemented, could significantly alter Cuba's state-dominated economic model. Few observers expect the government to ease its tight control over the political system. The government has reduced the number of political prisoners over the past several years, but short-term detentions and harassment have increased significantly. U.S. Policy Since the early 1960s, U.S. policy has consisted largely of isolating Cuba through economic sanctions. A second policy component has consisted of support measures for the Cuban people, including U.S.-sponsored broadcasting and support for human rights activists. In light of Fidel Castro's departure as head of government, many observers called for a reexamination of policy. Two broad approaches have been at the center of debate. The first is to maintain the dual-track policy of isolating the Cuban government while providing support to the Cuban people. The second is aimed at changing attitudes in the Cuban government and society through increased engagement. Since taking office, the Obama Administration has lifted restrictions on family travel and remittances, moved to reengage Cuba on several bilateral issues, and eased restrictions on other types of purposeful travel and remittances. The Administration has criticized Cuba's repression of dissidents, but has welcomed the release of political prisoners. The Administration has continued to call for the release of U.S. government subcontractor Alan Gross, detained in 2009, and sentenced to 15 years in prison in March 2011. Legislative Action Strong interest on Cuba continued in the 112th Congress. In the first session, an attempt to roll back the Administration's easing of restrictions on travel and remittances was unsuccessful. The provision had been included in the House Appropriations Committee version of the FY2012 Financial Services appropriations bill, H.R. 2434, but was not included in the FY2012 "megabus" appropriations measure (H.R. 2055, P.L. 112-74). Both H.R. 2434 and the Senate version of the bill, S. 1573, also would have continued to clarify the definition of "payment of cash in advance" for U.S. agricultural exports to Cuba during FY2012, but the provision was not included in the "megabus" measure. In the second session, the Senate approved: S.Res. 366 on February 1, 2012, condemning the Cuban government for the death of democracy activist Wilman Villar Mendoza; S.Res. 525 on July 31, 2012, honoring prominent Cuban dissident Oswaldo Payá who was killed in a car accident, and S.Res. 609 on December 5, 2012, calling for the release of Alan Gross. With regard to Cuba democracy funding, the Senate Appropriations Committee version of the FY2013 foreign aid appropriations measure, S. 3241, would have provided $15 million as the Administration requested, while the House Appropriations Committee version of the bill, H.R. 5857, would have provided $20 million. With regard to Cuba broadcasting, S. 3241 would have provided $23.4 million ($194,000 less than the Administration's request) while H.R. 5857 would have provided $28.062 million ($4.468 million more than the request). The 112th Congress did not complete action on FY2013 appropriations, but it did approve a continuing appropriations resolution in September 2012 (H.J.Res. 117, P.L. 112-175) that continues FY2013 funding through March 27, 2013, at the same rate for projects and activities in FY2012, plus an across-the-board increase of 0.612%, although specific country accounts are left to the discretion of responsible agencies. The 113th Congress will need to address appropriations for the balance of FY2013. Among other initiatives not enacted, two would have increase sanctions: H.R. 2583 would have rolled back the easing of travel and remittance restrictions, and H.R. 2831 would have attempted to curb frequent travel to Cuba by Cubans who have recently immigrated to the United States. Several initiatives would have eased sanctions: H.R. 255 and H.R. 1887 (overall sanctions); H.R. 833 and H.R. 1888 (agricultural exports); and H.R. 380 and H.R. 1886 (travel). Two initiatives, S. 603 and H.R. 1166, would have modified a trademark sanction. Eight bills, H.R. 372, S. 405, H.R. 2047, H.R. 3393, H.R. 4310, H.R. 4135, H.R. 6067, and S. 1836, would have taken different approaches toward Cuba's offshore oil development. Two bills, S. 476 and H.R. 1317, would have discontinued Radio and TV Martí broadcasts. This report reflects legislative activity through the 112th Congress and will not be updated.
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The Trans-Pacific Partnership (TPP) is a proposed free trade agreement (FTA) among the United States and 11 Asia-Pacific countries. The U.S. Trade Representative (USTR) has described it as a "comprehensive and high standard" agreement, designed to eliminate and reduce trade barriers and to establish and extend the rules and disciplines of the trading system among the parties to the agreement (see Figure 1 ). If implemented, it would be the largest plurilateral FTA by value of trade, encompassing roughly 40% of world GDP, and could serve further to integrate the United States in the dynamic Asia-Pacific region. As a "living agreement," it has the potential to negotiate new rules and expand its membership. It could also mark a shift to the negotiation of "mega-regional" trade liberalization agreements in lieu of bilateral FTAs and broader multilateral trade liberalization in the World Trade Organization (WTO). The 12 countries concluded the TPP negotiations and released the text of the agreement in late 2015. Trade ministers from the TPP countries signed the final agreement text on February 4, 2016, and several countries are seeking to ratify the agreement this year. TPP draws congressional interest on a number of fronts, and Congress must approve implementing legislation for U.S. commitments under the agreement to enter into force. The TPP would be eligible to receive expedited legislative consideration under Trade Promotion Authority (TPA), P.L. 114-26 , unless Congress determines the Administration has failed to advance TPA negotiating objectives, or has not met various notification and consultation requirements. Furthermore, the TPP may affect a range of sectors and regions of the U.S. economy and could influence the shape and path of U.S. trade policy for the foreseeable future. It may also serve strategic goals of the United States by strengthening regional alliances and extending U.S. influence in the Asia-Pacific region. This report examines the key provisions of the proposed TPP, related policy and economic contexts, and issues of potential interest to Congress. The precursor to the TPP was the Trans-Pacific Strategic Economic Partnership (P-4). It was conceived in 2003 by Singapore, New Zealand, and Chile as a path to trade liberalization in the Asia-Pacific region—Brunei joined in 2005—and the P-4 agreement was concluded in 2006. U.S. trade policymakers took notice of the P-4's relative ambition as a possible template for a wider Asia-Pacific free trade agreement. President Bush notified Congress of his intention to negotiate with the existing P-4 members on September 22, 2008, along with Australia, Peru, and Vietnam, on December 30, 2008, as required under past and current TPA. President Obama recommitted to the TPP negotiations in November 2009 and renotified Congress of the Administration's intention to negotiate the renamed Trans-Pacific Partnership. In October 2010, the TPP participants agreed by consensus to the inclusion of Malaysia as a negotiating partner. The negotiating partners announced a framework for the agreement at the sidelines of the Asia-Pacific Economic Cooperation (APEC) Ministerial in Honolulu, HI, November 8-13, 2011. Thereafter, Canada, Mexico, and Japan consulted with the existing TPP partners on joining the negotiations. The North American Free Trade Agreement (NAFTA) partners—Canada and Mexico–acceded to the negotiations in December 2012, followed by Japan in July 2013. During the course of the negotiations, others countries, such as South Korea, Taiwan, and the Philippines expressed varying degrees of interest in joining, but the parties decided to conclude the agreement before contemplating new members. The agreement must be ratified by all parties to enter into force in the first two years from its 2016 signing. Thereafter, it requires at least six countries representing 85% of the bloc's 2013 gross domestic product (GDP) to accede to the agreement for it to take effect, thus requiring ratification by the United States and Japan for entry into force to occur. The Bipartisan Comprehensive Trade Priorities and Accountability Act of 2015 ( P.L. 114-26 ), the current grant of TPA (TPA-2015), sets the procedures governing congressional consideration of the proposed TPP. TPA is the authority by which Congress, for specific periods of time, sets trade negotiating objectives, establishes notification and consultation requirements, and enables implementing legislation for reciprocal trade agreements to be considered under expedited procedures if it meets certain statutory requirements. TPA-2015 was enacted into law on June 29, 2015, and expires in 2018, with a possible extension to 2021. Legislation to implement the TPP can be considered under the expedited procedures of TPA, since the TPP was signed during the time TPA has been effect. The TPP could be considered under expedited procedures during this Congress, the next Congress, or even after the present grant of TPA expires. TPP was signed and the final text of the agreement was released on February 4, 2016. Following signature, under TPA, implementing legislation can be introduced 30 days after the release of the final text of the agreement on a day when both Houses are in session. That day was March 14, 2016. The President notified Congress of the changes to U.S. law that TPP implementation would require on April 1, 2016. A TPA-required report by the U.S. International Trade Commission (USITC) on the potential economic effects of the agreement was released on May 18, 2016. Once the President submits the legislation for introduction, TPA sets a 90-legislative-day deadline for congressional consideration with set periods for committee and floor consideration by the House and Senate. The TPP could have significant implications beyond its direct economic impact, in what many term as broader "strategic" contexts. Obama Administration officials and other TPP proponents argue that these implications would be positive and felt in several ways, both geo-economic and geo-political. Though such implications are hard to define precisely, proponents of the TPP's strategic importance suggest that the United States could use the agreement as a tool to exert influence in the region and beyond, in not only economic, but also broader political and security spheres. Administration officials regularly emphasize the TPP's strategic value in arguing for its approval. USTR Ambassador Froman said in a 2014 speech: TPP is as important strategically as it is economically. Economically, TPP would bind together a group that represents 40 percent of global GDP and about a third of world trade. Strategically, TPP is the avenue through which the United States, working with nearly a dozen other countries (and another half dozen waiting in the wings), is playing a leading role in writing the [trade] rules of the road for a critical region in flux. Secretary of State John Kerry wrote in 2015: TPP also matters for reasons far beyond trade. The Asia-Pacific includes three of the globe's four most populous countries and its three largest economies. Going forward, that region is going to have a big say in shaping international rules of the road on the Internet, financial regulation, maritime security, the environment, and many other areas of direct concern to the United States. Remember that, in our era, economic and security issues overlap; we can't lead on one and lag on the other. Overall, proponents maintain that through the TPP, the United States can further a wide range of goals, including the following: liberalizing trade, encouraging market-oriented reforms, and driving economic growth; establishing and updating regional trade rules and disciplines consistent with U.S. interests and modern commercial realities; potentially strengthening the global trade architecture; strengthening regional alliances and partnerships; maintaining U.S. leadership and influence in the Asia-Pacific region; and enhancing U.S. national security. In terms of economic influence, some observers argue the TPP may present an alternative to FTAs constructed by other countries, especially in the Asia-Pacific region. Such agreements often exclude or have less extensive provisions on agriculture, services, investment, and intellectual property rights (IPR), which some see as among the most important FTA provisions for certain U.S. sectors; moreover, these agreements generally have few if any binding protections for worker rights and the environment. The TPP could provide participating governments political cover to enact reforms relating to these and other provisions, presenting them as a tradeoff for greater access to the large U.S. market. While debate continues, both in the United States and abroad, over the appropriate scope of various TPP provisions and the degree to which they differ from other regional pacts, some policymakers argue that the TPP would provide the United States with leverage to help shape regional and, perhaps, broader multilateral economic norms. In the geo-political realm, some analysts consider the TPP to be a litmus test for U.S. credibility in the Asia-Pacific region. Proponents argue the TPP signals the primacy of U.S. integration into Asia's economic and diplomatic structures, suggesting that congressional inaction or rejection of the TPP would make the Administration's rebalancing strategy look relatively weak and the United States look divided on how important it considers its leadership role in the region. Similarly, many Asian policymakers—correctly or not—could interpret a failure of the TPP in the United States as a symbol of declining U.S. interest in the region and its inability to assert leadership. Some critics of the TPP assert that such arguments are overstated, and that the strength or weakness of broader bilateral political and security relationships depend more on countries' assessment of their political and security interests than on whether they have a trade agreement with the United States. China is not a TPP member, but its emergence as a regional economic power with active overseas trade and investment initiatives forms an important backdrop to the TPP's consideration. Those championing the TPP, including President Obama, often cast it as a vehicle for maintaining U.S. leadership in Asia in the face of China's rise, arguing that through the agreement, the United States can "write the rules" for regional trade and investment and help foster a broader, rules-based regional order. Others contend that casting the TPP as an effort to "counter" Chinese initiatives is unproductive, and could create negative perceptions of U.S. intentions, both in China and elsewhere in the region. Some also argue that in many ways U.S. and Chinese goals for trade liberalization and rules and norms in the region could be mutually reinforcing, rather than competing, by promoting the goal of free trade in the Asia-Pacific region Trade agreements, and trade policy in general, inevitably exist at the intersection of domestic and foreign policy and include both economic and political elements. This can create a tension in balancing various policy priorities, particularly for those policymakers who may support the TPP on some grounds but not others. Some opponents of the agreement argue that focusing on the strategic elements of the TPP distracts the debate from what they view should be its main criteria: the agreement's potential impact on the U.S. economy. While both TPP critics and supporters cite different estimates of economic outcomes to support their positions, the broader strategic implications are highlighted largely by proponents, and can be difficult to quantify despite their potential significance. Preferential multi-country trade agreements, such as the TPP, generally are expected to alter trade relations among the participants by lowering tariffs on traded goods and by reducing nontariff barriers within countries. Most economists agree that reducing trade barriers enhances productivity by allocating resources towards their most efficient uses, increases consumer choice and lowers costs, stimulates economic growth, and at the national level improves economic welfare. The Japanese government, for example, hopes to use increased international competition achieved by TPP to revitalize its less productive sectors, including agriculture and services, and lower costs for consumers. The gains of trade, however, are not necessarily distributed equally throughout an economy, and the resource reallocation that can lead to efficiency and job gains in some sectors may reduce production in other industries and can cause worker dislocation and job losses, a concern for policymakers and workers and firms in certain industries. Removing formal barriers to trade, primarily tariffs and quotas, directly lowers the price of traded goods. For example, the 20% tariff on certain Vietnamese-made shoes imported into the United States would be eliminated, while U.S.-grown walnuts would receive a 10% tariff discount in Japan, once eliminated. In turn, lower prices may impact trade patterns by increasing the overall amount of trade that occurs (trade creation) and by shifting trade away from countries that are not party to the agreement to those that are in the agreement (trade diversion). At times, countries are motivated to participate in trade agreements to prevent this type of trade diversion. The magnitude of the trade creation and trade diversion effects that arise from TPP likely will be affected by a number of factors, including: the difference between pre-and post-agreement tariff rates, the speed with which tariff cuts are implemented, and a range of other external economic factors that affect global trade as a whole. For instance, the 2008-2010 global economic slowdown and the sharp drop in commodity prices and changes in exchange rates from 2014-2016 arguably had a greater impact on the volume of global trade and trade flows between countries than any FTA trade liberalization measures that might have gone into effect during this period. In addition, the impact of tariff cuts under the TPP may be muted to some extent due to the multiplicity of trade agreements that already exist among the participants and the already low tariff rates that are characteristic of trade among a number of the participants. (See "Tariffs" section below for more detail.) In addition to the economic effects expected to result from cuts in tariffs, the TPP may offer long-term benefits to bilateral and regional trade through changes in domestic nontariff barriers that form the structure under which trade is conducted. In broad terms, the TPP incorporates rules and disciplines for open, nondiscriminatory treatment for participants. These rules are expected to reduce market-distorting activities that not only may reduce the overall level of trade, but also may create market distortions and inefficiencies. Analysts have indicated that some TPP participants, such as Vietnam, may use the rules and disciplines incorporated in the TPP to support a market-oriented reform agenda within their economies. To the extent that countries undertake such reforms, the TPP could provide long-term economic benefits to the countries themselves and to other TPP participants. Other rules such as aspects of IPR protections and certain labor and environmental commitments are, in effect, less about economic openness and more about ensuring economic activity meets certain requirements. As such, the rationale behind them (i.e., encouraging innovation, protecting worker rights, and safeguarding the environment) can differ from the traditional economic arguments for trade liberalization. TPP would be significant among U.S. trade agreements, due to its size and the commitments reached. TPP would be the largest U.S. FTA by the number of parties and trade flows, though the majority of that trade is with countries with an existing U.S. FTA ( Figure 2 ). Japan's participation has greatly increased the potential economic significance of the agreement. Among the U.S. negotiating partners in the TPP, Japan is the largest economy and largest trading partner without an existing U.S. FTA (and hence, with greater scope for trade liberalization with the United States). In 2015, Japan was the United States' fourth largest goods export ($63 billion) and import ($131 billion) market. Malaysia and Vietnam also stand out among the TPP countries without existing U.S. FTAs, both in terms of their current trade and investment with the United States and their potential for future growth. Both countries have young, relatively large populations (above 30 million in Malaysia and 90 million in Vietnam) and their economies have experienced rapid growth in recent years. Moreover, Malaysia's and Vietnam's average applied most-favored nation tariffs—the average tariff on imports—are 6.1% and 9.5%, respectively, two of the highest levels among TPP members. Removal of various nontariff barriers in both countries is also a primary U.S. goal. Both nations also have substantial state sectors, which may be affected by TPP outcomes. U.S. trade with TPP countries was more than $1.5 trillion in merchandise in 2015 and more than $276 billion in services in 2014, the most recent periods for which data are available ( Table A-1 and Table A-2 , in Appendix). The flow of U.S. foreign direct investment (FDI) into TPP countries totaled $61 billion in 2014, while TPP countries invested nearly $59 billion in the United States ( Table A-3 ). The TPP would become the largest U.S. FTA by trade flows ( Figure 3 ). The TPP group of 12 countries is diverse in population, geographic location, and economic development, and U.S. trade relations with the countries reflect this diversity. The major U.S. merchandise exports are fairly similar to most TPP countries and include motor vehicles and parts; petroleum and coal products; computer equipment, semiconductors, and electronic components; agriculture and construction machinery; and aircraft. However, the top U.S. merchandise imports vary greatly by country. Agriculture and natural resources products are key U.S. imports from Australia, Chile, New Zealand, and Peru, while apparel products are the main U.S. imports from Vietnam. Canada and Mexico are both major suppliers of crude oil to the United States, but they also supply manufactured products like motor vehicles and motor vehicle parts. U.S. imports from Malaysia and Singapore consist primarily of manufactured products such as computers, semiconductors, and electronic components. Motor vehicles and motor vehicle parts make up nearly 35% of U.S. goods imports from Japan. In terms of value, Canada and Mexico are by far the largest U.S. trading partners among TPP countries in goods. Both countries share a long border with the United States and are among the oldest U.S. FTA partners. Japan is the third-largest U.S.-TPP goods trading partner, and second-largest services trade and investment partner. Among the other eight TPP partners, Singapore and Australia are the top U.S. goods export markets and top overall services trade and investment partners with the United States, while Malaysia, Vietnam, and Singapore are the top sources of U.S. goods imports. Though designed as a regional trade agreement, the TPP could have a number of implications for the multilateral trading system represented by the WTO. Fundamentally, the proliferation of FTAs over the past two decades calls into question the multilateral system's ability to negotiate and implement new trade disciplines and further international trade liberalization. Although WTO members agreed to a number of customs-related commitments as part of the Trade Facilitation Agreement in 2013, the goal of concluding a major multilateral trade round remains elusive nearly 15 years after the launch of the Doha Development Agenda negotiations in November 2001. Persistent differences among members about the extent and balance of trade liberalization continue to stymie progress in this forum and major issues, such as services trade liberalization are being negotiated among a subset of WTO members outside the body. The United States has pushed for the Doha Round to end and to be replaced by a more attainable package, but at the most recent WTO Ministerial in Nairobi, trade ministers were unable to agree on declaring an end to the Doha agenda, since developing countries fear that abandoning the Doha agenda may result in agricultural issues receiving less priority. The last major round of global trade negotiations—the Uruguay Round—was concluded in 1994. Since then, global commerce has adapted to rapid advances in technology, with the result that current multilateral trade rules do not address some critical aspects of today's trading environment, including digital trade and e-commerce. New trade patterns have emerged and new obstacles to the flow of goods and services have appeared. This has left countries, including the United States, to pursue new or advanced trade rules and further liberalization through bilateral and regional agreements like the TPP. Debate continues over whether or not bilateral and now "mega-regional" trade agreements help or hinder broader multilateral initiatives. On one hand, "mega-regionals," such as the TPP or the Trans-Atlantic Trade and Investment Partnership (T-TIP) negotiations between the United States and the European Union, could serve as alternative venues for establishing new rules and disciplines for the trading regime, and their size and economic significance could help spur negotiations at the multilateral level, influencing their direction. Some argue, for example, that the conclusion of the North American Free Trade Agreement (NAFTA), among the United States, Canada, and Mexico, effective since 1994, did in fact push the multilateral Uruguay Round negotiations to conclusion. On the other hand, if the locus of trade negotiations primarily shifts to "mega-regional" agreements, it could limit the overall effectiveness of the multilateral system. If the rules of the WTO no longer reflect the standards of trade policy to which much of the world has evolved, it could endanger the legitimacy of the organization in other aspects of its work, such as dispute settlement. A two-tier trading system, one working on more extensive rules and disciplines and one essentially dormant, could raise tensions by alienating those countries that feel they had no part in developing the new rules. Overlapping in membership with differing rules, these "mega-regional" agreements and other trade agreements could also add to the complexity of engaging in international commerce, as opposed to rules established at the WTO, which are applicable to nearly all world trading partners. They could also reduce economic efficiency in the global trading system if trade is diverted into these trading blocs due to preferential tariff treatment. The current 12 TPP countries form part of a growing network of Asia-Pacific FTAs ( Figure 4 ). All TPP countries have at least one FTA with a TPP partner country, although the extent of trade liberalization varies among them. The United States has FTAs with six TPP countries, including Australia, Canada, Chile, Mexico, Peru, and Singapore. Four TPP countries—Brunei, Malaysia, Singapore, and Vietnam—are part of the Association of Southeast Asian Nations (ASEAN), which has a free trade area among its membership as well as several external FTAs. New FTAs involving key markets in the region have been concluded in recent years. For example, Australia recently implemented FTAs with China, Japan, and South Korea, and the European Union has concluded FTAs with Canada, and, most recently, Vietnam. As tariffs fall for the countries party to these agreements, it could put U.S. firms at a disadvantage in those markets without existing U.S. FTAs. This is the idea of "competitive liberalization" in practice, whereby new trade agreements spur other countries to enter into similar pacts in order to maintain their firms' competiveness in foreign markets. If the TPP were to enter into force, such motivation would likely be a major factor in drawing other countries' interest in joining the agreement. All 12 TPP partners are also members of the Asia-Pacific Economic Cooperation (APEC) forum, which does not negotiate FTAs but serves as a forum for dialogue on, and establishes nonbinding commitments toward, the goals of open trade and investment within the region. In the context of this forum for dialogue and nonbinding commitments, APEC Leaders have repeatedly agreed to push forward the creation of a Free Trade Area of the Asia-Pacific (FTAAP). Twelve countries in APEC, seven of which are also in TPP, are currently negotiating the Regional Comprehensive Economic Partnership Agreement (RCEP). ASEAN leads the negotiations for this proposed FTA among its members and six ASEAN FTA partners (Australia, China, India, Japan, New Zealand, and South Korea). Both the RCEP and the TPP would encompass a significant share of regional economic activity, but each currently includes only one of the region's two economic leaders, the United States and China. The breadth and depth of trade liberalization resulting from two potential agreements is likely to differ. In their 2015 Declaration, APEC Leaders recognized both the TPP and the RCEP, which includes China, but not the United States, as "ongoing regional undertakings" on which to eventually achieve an FTAAP. As noted above, the TPP could not enter into force without the United States and Japan. It is conceivable, however, that the other 11 countries, after spending five years negotiating an agreement not only with the United States, but among themselves as well, could conclude a replacement agreement without the United States. It would not have the economic heft of an agreement with the United States, but it still would contain the third-largest economy (Japan) and could serve as a vehicle for further Asian integration. The text of the TPP agreement spans 30 chapters. The main goal as stated by the negotiating countries is "to establish a comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21 st -century challenges." FTA provisions are often discussed in two different categories: (1) the market access component addressing tariff and nontariff barriers to trade in goods, services, and agriculture, and government procurement; and (2) the rules component covering the procedures, standards, and regulatory considerations that relate to international trade, including such issues as investment and intellectual property rights. Market access can be affected by the process by which trade is conducted, and, hence, the distinction between these two categories is not always clear. While tariff negotiations are perhaps the most well-known component of trade agreements and the easiest to measure and verify, U.S. firms are often most competitive in the international trade of services and products involving high levels of research and development. These industries face mostly nontariff, behind-the-border barriers, making rules commitments such as transparent regulatory procedures or IPR protection particularly important for U.S. access to and ability to compete in overseas markets. U.S. FTAs also attempt to ensure that U.S. FTA partners meet certain requirements. In particular, internationally-recognized and other core principles for the protection of worker rights and the environment have become a significant aspect of U.S. trade agreement negotiations. In addition, the TPP includes an entirely new chapter that seeks to establish disciplines on how state-owned enterprises engage in international trade, with a goal of limiting potential negative impacts on private actors from nonmarket practices. The 12 TPP countries have varying competitive advantages, sensitivities, and levels of economic development. As a result of these differences and the "give and take" of trade negotiations, achieving common TPP rules and disciplines also involves certain exceptions in different forms, and phase-in periods of varying lengths. When examining the specific commitments of the agreement it is important to examine these exceptions, as they may impact the agreement's practical application. This section examines the major issues addressed in the TPP negotiations, beginning with the treatment of trade in merchandise goods. For each issue the report provides background information, a discussion of the provisions in the text, particularly as they relate to previous trade agreements, and a summary of the debate on the topic, including, where relevant, U.S. trade negotiating objectives. Stakeholders' views on the TPP agreement vary. Some groups generally oppose or support trade liberalization; others' positions hinge on specific provisions in the TPP text. Most business groups generally support the agreement, while most labor unions and certain nongovernmental organizations (NGOs) are generally opposed. The discussion that follows focuses on specific commitments in the agreement and debate over those measures. Although services are an increasingly important aspect of international trade, physical goods still account for the bulk of such activity. In 2015, merchandise trade accounted for over 75% of the nearly $5 trillion in U.S. trade. Expanding opportunities for trade in goods by reducing and eliminating tariff and nontariff barriers remains a top priority for U.S. trade negotiations, highlighted by Congress in its first principal negotiating objective in the TPA-2015. Like previous U.S. FTAs, TPP would eventually eliminate all industrial goods tariffs and most agriculture tariffs and quotas. These commitments would be phased in over varying periods. For some of the most sensitive agriculture products, tariff and quota protections would remain in place or only be partially removed. Each of the 12 TPP countries has its own unique tariff schedule laying out its product-specific tariff commitments. These schedules list each country's individual tariff lines (i.e., a list of products described by Harmonized Tariff Schedule (HTS) product codes at the 8-10 digit level of aggregation) and include the current tariff rate (base rate), the relevant staging category, and the post-TPP annual tariff rates. The staging categories explain the speed and scope of tariff elimination for a specific product. For example, "entry-into-force" signifies a removal of that product's tariff immediately when the agreement becomes effective. The categories may be simple, such as an annual equal decrease until the tariff is eliminated, or more complex, such as staying at current levels for a period of years before decreasing by varying amounts. The United States has 36 unique staging categories that apply to its tariff commitments, surpassed only by Japan, which has 60. The United States has the longest phase-out period of any TPP country, and longer than any previous U.S. FTA; it would delay the complete removal of tariffs on light trucks from Japan, for example, and certain dairy products from New Zealand for 30 years. While most TPP countries negotiated a single TPP tariff schedule with their partners, the United States negotiated bilaterally such that for certain import-sensitive products, U.S. tariff and quota commitments differ by partners. As a result, U.S. tariffs on some products may be eliminated according to different staging categories for different countries. This bilateral approach to tariff commitments within a multi-party agreement stands in contrast to the most-favored nation (MFN) approach in the WTO, which achieves a single tariff schedule for all trading partners. U.S. negotiators argue that this bilateral approach allows for more complete liberalization overall, but some observers question this assertion and raise concerns over setting this precedent for multi-party negotiations. Key factors impacting the potential significance of TPP tariff commitments include the following: Current Tariff Levels. Average MFN applied tariff rates among TPP countries currently range from 0.2% in Singapore to 9.5% in Vietnam (Appendix 1). Given the already low simple U.S. average tariff rate (3.5%), U.S. rates would change less through TPP than those for some other countries, especially Vietnam and Malaysia. Existing Trade Agreements. Each TPP country has existing FTAs with at least four other TPP countries, and Chile has existing FTAs with all 11 other TPP countries. In 2014, 85% of goods trade among TPP parties occurred between partners with existing trade agreements. Depending on the degree of tariff liberalization in these existing agreements, the tariff commitments in TPP may not require a significant adjustment for some TPP parties. For example, under NAFTA, the United States, Canada, and Mexico have eliminated nearly all tariffs on trade between the three countries. In cases where existing agreements offer different tariff rates than the TPP, exporters would be able to choose which agreement to utilize as long as they also met the relevant rules of origin. Product Mix. While tariffs are below 10% on average in all TPP countries, product-specific peaks can be much higher, above 100% on certain sensitive items. TPP tariff commitments may have a larger impact on countries that trade heavily in these high-tariff products. For example, U.S. imports from Vietnam are concentrated in high-tariff footwear and apparel products. U.S. exports facing relatively high tariffs in certain TPP markets include autos, agricultural products, and heavy machinery. Effective Tariff Rates . Calculated by dividing collected duties by the value of imports, this measure effectively incorporates the factors discussed above to provide an indication of the average duty actually paid on imports from a particular country. Among TPP countries, U.S. effective duty rates in 2015 were highest on imports from Vietnam ( Figure 5 ). Without readily available data on duties collected by other TPP countries, a similar calculation cannot be made for effective duty rates on U.S. exports. Given the existing U.S. FTAs with Australia, Canada, Chile, Mexico, Peru, and Singapore, which include comprehensive tariff coverage, this section focuses only on TPP tariff commitments between the United States and the five TPP countries without an existing U.S. FTA (Brunei, Japan, Malaysia, New Zealand, and Vietnam). Key aspects of TPP tariff commitments among these countries include (see Figure 6 ): More than one-third of tariff lines are already duty-free in each country: U.S. (37%), Brunei (76%), Japan (39%), Malaysia (65%), New Zealand (58%), and Vietnam (32%). Most tariff elimination would occur in the first years after the agreement's entry into force, with more than 80% of tariff lines duty-free in each country after three years, rising to approximately 90% after ten years. Eventually 95% or more tariff lines in each country would be duty-free. U.S. commitments would be phased in over the longest period, with tariff phase outs on two products up to 30 years after the agreement's entry into force, although on average U.S. tariff commitments are similar to the other countries. In terms of U.S. exports, more than 99% of tariff lines would eventually be duty-free in Brunei, New Zealand and Malaysia. Japan and Vietnam would maintain some level of tariff protection on more than 2% of their tariff lines (approximately 200 lines in Vietnam, mostly agricultural products like sugar, as well as used autos, and more than 400 lines in Japan comprised mostly of agricultural products, including pork and dairy). In terms of U.S. imports, more than 99% of tariff lines would eventually be duty-free for all five countries. The United States would maintain tariffs on some products from each country, with the highest number of tariffs remaining on imports from New Zealand (approximately 100 tariff lines, mostly dairy products). These rates of duty elimination are similar to previous U.S. FTAs, but with somewhat longer phase out periods and a slightly higher share of tariff lines excluded from liberalization. For example, in the KORUS FTA, both South Korea and the United States committed to eventually eliminate duties on more than 99% of tariff lines, with more than 92% of tariff lines duty-free within five years. Rules of origin (ROO) determine whether products "originate" within an FTA area and, therefore, are eligible to receive the benefits when imported into an FTA member state. Thus, they are used to ensure that the parties to an FTA receive the tariff liberalization benefits and to prevent transshipments. In practice, however, restrictive rules of origin can also be used to limit the impact of FTAs on import-sensitive sectors. In the TPP, as in other FTAs, rules of origin are laid out in detail in the agreement and would need to be approved by Congress as part of the implementing legislation. All FTAs and preference programs have distinctive ROO, but the ways that they are developed are similar. One ROO type requires that a product illustrate that it is "substantially transformed" (i.e., made into a "new and distinct" product) by showing a "tariff shift," a change in its HTS tariff classification. The degree of change required varies by product. The "yarn forward" rule, a tariff-shift rule that is a guiding principle in TPP for textiles and apparel, requires that all qualifying products must be produced in the FTA region beginning with the yarn. Some product-specific ROO in TPP and other FTAs require that a minimum ad valorem (value) percentage of the product must be produced in the FTA region. TPP uses regional value content rules for many products, including automobiles, appliances, and machine tools. Another kind of ROO specifies that the value of foreign content must not exceed a certain maximum percentage (i.e., a de minimis rule, which in TPP is 10%). Third, ROO for some products require that some kind of manufacturing or processing operation (e.g., a chemical reaction) must be completed in the region. TPP ROO allow for cumulation among TPP countries. This means a TPP country manufacturer can use unlimited inputs from other TPP partners and have the finished product qualify for TPP tariff benefits. This could provide an incentive for creation of new regional supply chains within the TPP area, and may encourage other countries to join the TPP to avoid being left out of supply chains. For the majority of goods, the ROO in most U.S. FTAs, including TPP, are quite similar in most areas. However, TPP ROO pertaining to certain import-sensitive manufacturing industries, especially in the textile, apparel, and footwear sectors and the automotive industry, have important distinctions from previous FTAs (see below). While the United States continues to produce certain yarns and fabrics, some of which are used in apparel production abroad, nearly all apparel sold in the United States is imported and most U.S.-headquartered apparel companies have limited or no U.S. manufacturing capabilities. Instead, they rely on extensive global supply chains, which, in turn, depend on costs, lead times, and other considerations. As a result of these dynamics, the U.S. textile industry generally supported gradual TPP textile and apparel tariff reductions, but only if the imported products are assembled using yarn produced in a TPP country (i.e., the "yarn-forward" rule of origin). Meanwhile, trade organizations representing U.S. apparel companies and retailers generally supported the immediate elimination of textile and apparel tariffs upon implementation of the TPP agreement, opposing the yarn-forward rule of origin as too restrictive. As with apparel products, most footwear consumed in the United States is imported from abroad, with import penetration in the industry well above 90%. Over a decade ago, the U.S. footwear industry reached a general agreement supporting immediate elimination of nearly all footwear tariffs in future trade agreements, except for a number of sensitive items determined still to be manufactured in the United States. Vietnam has been a major focus of U.S. negotiations over TPP commitments on textile, apparel, and footwear. Vietnam accounted for 12% of apparel and 15% of footwear imported by the United States in 2015, and was the second-largest supplier of apparel and footwear to the United States after China. It is the only large apparel and footwear producer among TPP partners without an existing FTA with the United States. Currently, Vietnam's apparel sector sources the overwhelming majority of its yarns and fabrics from non-TPP members, mainly China, Taiwan, and South Korea, and it purchases only a small amount of yarns and fabrics (about $100 million in 2015) from the United States. Although associations representing the U.S. textile industry ultimately support the TPP, domestic industry raised concerns over the potential for Vietnamese-made apparel displacing garments manufactured with U.S. fabric in Western Hemisphere countries such as Mexico, El Salvador, Honduras, and Nicaragua, where garment makers currently must use U.S. inputs to obtain duty-free access to the U.S. market under NAFTA and the U.S.-Central America-Dominican Republic FTA (CAFTA-DR). They also raised concerns over Mexico and Peru, both TPP members, potentially shifting sourcing of textile inputs from the United States to Vietnam should it develop an industry that can produce large quantities of textiles. On the other hand, proponents of FTAs as a tool for economic development would argue that encouraging movement up the value chain, such as from apparel to textile production, in a developing country like Vietnam is a goal of U.S. FTAs. Textile, apparel, and footwear tariffs differ considerably among TPP countries. The TPP countries currently face U.S. tariff rates as high as 25% on textiles, 32% on apparel, and up to nearly 50% on footwear. Other TPP countries also maintain high tariffs, including Vietnam, whose apparel tariffs range from 5% to 20%. The USITC, in its May 2016 report on the economic impact of TPP, estimated sector-specific outcomes for textiles and apparel, and footwear. Their study, which compares a TPP scenario in 2032 against a non-TPP baseline, estimated that the apparel industry would see an increase in imports over the 2032 baseline of 1.4% or $1.9 billion, and a smaller increase in exports of 0.3% or $10 million. Vietnam would account for much of this import growth, while imports from China would be expected to decline. Textile imports and exports would also be expected to increase over the baseline, by 1.6% ($869 million) and 1.3% ($257 million), respectively. The study estimated output and employment slightly above the baseline for the apparel industry (an increase of 1.0% and 0.9%, respectively), and slightly below for textiles (a decrease of 0.4% for both output and employment). Regarding footwear, USITC estimated a slight overall rise in total U.S. imports of 2.7% or $1.1 billion, but a major shift in sourcing toward TPP countries with imports from the region increasing by 23.4% or $1.6 billion. As most U.S. footwear is already imported, the agreement is not expected to have a significant impact on the U.S. industry, although the study estimated an increase above baseline in exports to Vietnam, mostly in intermediate components, and shows a slight (0.5%) increase in U.S. footwear output. Tariffs. All textile, apparel, and footwear tariffs will either be eliminated immediately or phased out in various stages over a decade or more following implementation of the TPP agreement. The United States has eight different tariff phase out schedules for textiles, apparel, and footwear. The longest phase out periods apply to the most sensitive products, such as certain men's and boys' overcoats, some women's and girls' blouses and skirts, men's leather boots and work shoes, and women's pumps. Tariffs on these products will be fully eliminated at the end of year 10 or 12, after an initial reduction of 50% or 55% when the pact enters into force. Safeguard. Like most U.S. FTAs, the TPP includes a textile and apparel safeguard that will allow the United States to reimpose tariffs if import surges cause or threaten to cause serious damage to domestic industry. This option will be available for five years after the agreement enters into force, and each safeguard action may last for two years with a possible two-year extension. In addition, the United States may unilaterally suspend future tariff phase outs after five years of implementation if it determines that Vietnam has failed to allow independent unions and grant them the right to strike by that time (see below section on labor provisions). Rules of Origin. To qualify for favorable tariff treatment, textiles and apparel must meet a yarn-forward rule of origin, which requires the use of U.S. or other TPP country yarns and fabrics, with only a few exceptions, in textile and apparel products traded within the TPP area. Footwear manufacturers can qualify their shoes as TPP-originated under (1) a tariff shift method, requiring that sufficient production occurred entirely within the TPP region to change the tariff classification of the goods, or (2) one of two different methods of measuring the share of a product's value that was added within the TPP region. These ROO may give Vietnamese producers of footwear an advantage in the U.S. market over producers in other Asian countries that do not benefit from tariff preferences. Short Supply List. Like other U.S. FTAs with a yarn-forward rule of origin for textiles and apparel, the TPP provides an exception for products that are deemed to be in "short supply" within the TPP region. The TPP short supply list includes 187 fibers, yarns, and fabrics, such as cashmere, certain wool yarns for sweaters, and polyester/wool blend fabrics. The agreement would allow goods made within the TPP region using non-TPP inputs from the short supply list to qualify for privileged access when exported to other TPP countries. Other exceptions to the textile and apparel ROO allow synthetic knit and woven baby clothes and brassieres cut and sewn in other TPP countries to be exported to the United States even if the yarn and fabric are not produced within the TPP region. Earned Import Allowance. The TPP pact includes a program called the Earned Import Allowance Program to encourage the use of American fabrics in Vietnamese-manufactured jeans and khaki pants. The provision exempts some U.S. apparel imports from Vietnam from the TPP yarn-forward rule provided Vietnam imports a specific quantity of U.S. fabrics. This would allow a limited amount of apparel cut, sewn, and assembled in Vietnam to enter the United States duty-free even if the garments include fabric from non-TPP countries. Importantly, because both the ROO and the Earned Import Allowance program are complex and have substantial compliance and reporting requirements, some manufacturers in previous FTAs have opted to simply pay import duties rather than prove a product meets the specified requirements. Customs Enforcement and Implementation . The TPP includes specific customs procedures to enforce each TPP country's commitments, such as visiting textile and apparel factories to conduct verification activities. A Committee on Textile and Apparel Matters is to be established under the TPP, where industry can raise concerns and issues can be resolved on trade in these products. The Industry Trade Advisory Committee (ITAC) on Textiles and Clothing (ITAC 13) summarizes the industry's divergent views. Committee members generally applauded the greater opening of global markets, but they differed sharply "over how that should be accomplished, whether that involves greater U.S. market access for foreign products, and what role consumer perspectives should play in this debate." There were also strong differences over how the trade negotiations could best accommodate industry adjustments to additional competition. The National Council of Textile Organizations (NCTO), the industry group representing the domestic textile industry, the American Apparel and Footwear Association (AAFA), the national trade association of the apparel and nonrubber footwear industries, and the Footwear Distributors and Retailers of America have endorsed the TPP. In contrast, Patagonia, an apparel retailer, has stated its opposition to the TPP, as has New Balance, a footwear company that maintains some production in the United States. The United States and Japan are the second- and third-largest auto manufacturing nations, respectively, which made motor vehicle market access issues central to the TPP negotiations ( Table 2 ). Other TPP signatories that produce motor vehicles are Canada, Mexico, Malaysia, and Vietnam. Japan, Mexico, the United States, and Canada all export large numbers of vehicles. As a result of market forces and the elimination of vehicle trade barriers in NAFTA, the North American auto industry has become highly integrated. The largest source of U.S. imports from outside the NAFTA region is Japan, which shipped over 1.5 million vehicles to the United States in 2014. U.S. vehicle exports have steadily risen since the 2007-2009 recession and exports to other TPP countries could grow further as tariffs fall and nontariff barriers (NTBs) are reduced or eliminated. In 2014, U.S. vehicle exports exceeded two million units for the first time, having doubled since 2009. Nearly half of those exports were sold in Canada (870,025 units). Other TPP destinations for U.S. vehicle exports were Mexico (151,902), Australia (61,052), Japan (19,003), Chile (16,631), Peru (6,354), and New Zealand (5,013). However, while TPP markets accounted for 56% of U.S. vehicle exports to the world, most of those exports already benefit from duty-free access under various regional and bilateral trade agreements. Japan is the only large vehicle market among TPP countries that is not covered by an FTA with the United States. TPA-2015 did not spell out specific TPP objectives for trade in motor vehicles. Rather, motor vehicle industry goals were subsumed under general objectives to reduce tariffs and NTBs and to refrain from foreign currency manipulation. TPP auto manufacturing countries sought the elimination or reduction of U.S. vehicle tariffs, which are currently 2.5% on passenger vehicles and 25% on pick-up trucks. A related goal was to develop rules of origin for TPP vehicle trade that would ensure parts supply chains could operate smoothly but with strong verification and enforcement procedures. Some of the rules for vehicle trade in NAFTA and the U.S.-South Korea FTA (KORUS) served as reference points for TPP negotiators. The USITC study estimated impacts on the passenger vehicle industry over 30 years given the long phaseout period for tariffs in this sector. The study highlights three significant periods during this transition: (1) after year 6, Canada, the top U.S. export market, would eliminate tariffs on imports from Japan potentially increasing competition for U.S. auto producers in that market; (2) by year 13 Malaysia and Vietnam would eliminate auto import duties, making U.S. exports more competitive in those markets; and (3) by year 30 the United States would eliminate its import tariffs on Japanese autos potentially increasing competition in the U.S. market for U.S. producers. Ultimately, the study predicts an increase from the 2047 baseline in vehicle and parts exports of 2% ($2.9 billion) and 1.5% ($2.1 billion), respectively. Imports are expected to be above baseline by 1.1% ($4.3 billion) for vehicles and 1.5% ($4.5 billion) for parts. Relative to the baseline, output and employment are expected to increase slightly for autos (2% for each), and decline slightly for parts (-0.2% for output and -0.3% for employment). T ariffs. If the TPP agreement comes into force, member countries will eventually eliminate import tariffs on most vehicles and parts. U.S. tariff commitments, including for motor vehicles, are on a bilateral basis, so tariff reduction speeds differ with respect to each country. The longest tariff phaseouts are applied to vehicle shipments from Japan to the United States. In that case, the 2.5% tariff on passenger cars will remain in place until year 15, after which it will be eliminated gradually through year 25 after the agreement's entry into force. The 25% U.S. light truck tariff with Japan is not phased out, but eliminated only in year 30 of the TPP. The U.S. rationale for longer tariff phase outs on Japanese vehicles than on those from other countries is that a longer transition is necessary for Japan to remove its own NTBs and move toward a "more open automotive market." The reduction in foreign barriers to U.S. vehicles is likely to be most significant in Malaysia and Vietnam, where current high tariff levels make imported vehicles costly. Malaysia's vehicle tariffs are as much as 40%; Vietnam's as much as 70%. Non t ariff Barriers. NTBs in the vehicle industry fall into two categories: (1) suppression of imports through tax breaks for local vehicles and local content requirements for domestically produced cars and parts; and (2) safety and environmental regulations that limit vehicle trade because the regulatory requirements differ among countries. Although Japan does not assess tariffs on vehicles, its consistently low level of vehicle imports has led to assertions that NTBs are used to restrict sale of foreign-made vehicles. Bilateral U.S.-Japan side letters to the TPP agreement establish a special joint dispute resolution process and commit Japan to adopt a more open automotive rulemaking process; accept a limited number of U.S. motor vehicle safety regulations on an equivalency basis with similar Japanese standards; reduce barriers to establishing vehicle distribution centers; and apply financial incentives equally to imported as well as domestic vehicles. Rules of Origin. The motor vehicle rules of origin, while focused to some extent on U.S.-Japan vehicle trade, are also of interest to Canada and Mexico, which seek to maintain their own large auto-making industries in the face of increased competition from Asian production. The NAFTA rules served as a model for the TPP. To receive reduced tariffs under NAFTA, 62.5% of a vehicle's content must be manufactured in the United States, Canada, or Mexico. The NAFTA net cost method takes total vehicle manufacturing costs, then subtracts costs of promotion, marketing, shipping and other factors. The resulting figure is then divided into the value of regional content—determined by subtracting the value of all the parts originating outside of the NAFTA area from the net cost—to find the percentage of regional content. In its own bilateral trade agreements, however, Japan has used a different calculation, known as the build-down method, and it argued that this should be the basis of vehicle rules of origin in the TPP. The build-down method does not subtract shipping and marketing before making the regional content determination, so cars using this method would have higher regional content than if the net cost method were used. The formula in the TPP allows either approach, requiring vehicles to have 45% TPP content using the net cost method or 55% using the build-down method to qualify for tariff preferences. The 45% net cost RVC in TPP is lower than the 62.5% level in NAFTA, but above the 35% level in KORUS. Vehicle and parts manufacturers producing and exporting within North America would be able to choose whether to use the NAFTA or TPP rules of origin. While the rules of origin differential between NAFTA and TPP may not impact vehicle trade, it may affect trade in auto parts. That is because the required TPP share of value for auto parts to receive preferential treatment is significantly lower than the threshold for vehicles, ranging from 35% to 45%, depending on the type of accounting used. While different regional value content standards for vehicles and parts were used in NAFTA—62.5% for vehicles and 60% for parts—the standards were closer than they are in TPP. Under TPP rules, some auto parts whose value was added mainly outside the TPP region may be able to enter the United States duty-free. This differential led ITAC 2 to note that its auto industry members "acknowledge the real concerns raised by some that the automotive origin RVC [regional value content] is not sufficiently strong, particularly for automotive parts." The motor vehicle industry does not have a unified position on the TPP; some automakers support it, others have raised concerns, and one company opposes it. The United Autoworkers union (UAW) opposes it. Concerns include the following: Currency M anipulation . Some automakers (as well as some other manufacturers) recommended that the TPP include an enforceable commitment to prohibit currency manipulation. Instead, the TPP establishes a Macroeconomic Policy Authority Forum (see below section on currency), which the International Trade Advisory Committee for autos (ITAC 2) says falls short of its recommendations, but which "could help mitigate the misuse of exchange rate policies and the adverse economic impact this policy practice has had on the United States...." U.S.-Japan S ide L etters and A ppendix . ITAC 2 considers Japan's vehicle NTB commitments as marginal improvements, but expects that they "will not lead to a substantially larger U.S. presence in the Japanese motor vehicle market." It contends that these commitments are not enforceable under the TPP's dispute resolution provisions. Long P hase out of U.S. T ariffs on I mported Japanese C ars and T rucks . With up to 30 years before these tariffs are eliminated completely, some experts alleged that the TPP tends to emphasize protection over liberalization. ITAC 2 sees the long phase out period as appropriate to provide Japan with a "sufficient transition period to a more open automotive market." Slow L iberalization S chedule for Malaysia and Vietnam . These countries will complete their vehicle and parts tariff reductions in year 13 year of TPP's implementation, although some of Vietnam's restrictions will remain after full implementation. (Almost all auto parts from TPP countries will be able to enter the United States duty free as soon as the TPP takes effect, as long as they meet the rules of origin.) Tracking and E nforcing C omplicated R ules of O rigin . TPP methods permit automakers to import vehicles and parts that contain some non-TPP content (from China or Thailand, for example). While supply chain sourcing is increasingly global, the impact on smaller U.S. parts manufacturers is not clear. ITAC 2 report calls for the U.S. government to monitor and enforce these rules to prevent non-TPP countries from benefiting from the preferential tariff benefits. Lack of R egulatory H armonization . There are no obligations to require TPP countries to accept motor vehicle imports engineered to U.S. regulatory standards. This means that U.S. producers may need to modify their vehicles before selling them in other TPP member countries. This can be costly, especially in countries where the prospective demand for U.S.-made vehicles is small. ITAC 2 calls the lack of recognition of U.S. standards a "retreat from the longstanding U.S. practice of securing concessions in new agreements that go beyond what had been achieved in prior pacts. As such, this represents a significant missed opportunity." A major priority for the United States in its negotiations of bilateral and regional FTAs is increased market access for services providers. Congress identified expanded market opportunities in services trade as a principal negotiating objective in the TPA-2015. Cross-border trade in services represents slightly less than one-fourth of total U.S. trade, and is an area of focus for the United States due to U.S. firms' competitiveness in these sectors. Services accounted for 78% of U.S. private sector gross domestic product (GDP) and 87 million (82%) private sector employees in 2013. The United States consistently runs a surplus in services trade; U.S. services exports surpassed imports by $233 billion in 2014. Some economists argue that the expanded commitments in international services may represent the greatest benefit for the United States in the TPP. The United States sought to expand on previous commitments the 11 partner countries have made on trade in services, particularly with the five countries with whom the United States does not have existing U.S. FTAs (Brunei, Japan, Malaysia, New Zealand, and Vietnam). For these countries, existing commitments with the United States are based on the multilateral WTO General Agreement on Trade in Services (GATS). Another major U.S. objective was to address new services trade barriers not covered, or covered only partially, in previous trade agreements, and in doing so, potentially influence other ongoing U.S. services trade negotiations, including the Trans-Atlantic Trade and Investment Partnership (T-TIP) with the EU and the plurilateral Trade in Services Agreement (TiSA) on the sidelines of the WTO. Emerging issues in services trade include the prohibition of restrictions on data flows and data localization requirements and treatment of electronic payment card systems. Unlike tariff barriers, nontariff barriers (NTBs) on services trade that the TPP seeks to reduce and eliminate can take many different forms, making them difficult to quantify and compare across countries. The Organization for Economic Cooperation and Development (OECD) has created indices that provide some measure of services trade restrictiveness. These indices, available for OECD countries and some selected other countries across 18 different services sectors, show considerable variation in services trade restrictiveness among TPP OECD countries (Australia, Canada, Chile, Japan, Mexico, New Zealand, and the United States) and hence the opportunity for liberalization through TPP negotiation efforts. For example, in telecommunications, the index, which takes a value from 0 to 1 (most restrictive), ranges from 0.12 for the United States to 0.30 for Japan and 0.34 for Mexico. Such restrictions are likely even greater among some of the lesser developed TPP countries not included in the OECD database. Similar work by researchers at the World Bank, which covers more countries but in less detail, supports this hypothesis. Their index for overall services trade restrictiveness, which takes a value from 0 to 100, ranges from 11 for New Zealand to 41.5 for Vietnam and 46.1 for Malaysia, although the middle income country of Peru (16.4) scores lower than the United States (17.7). Due to the complexity of services trade barriers, TPP commitments in several chapters may affect services trade. Chapters with a focus on services-related commitments discussed in more detail below include: Cross Border Trade in Services (Chapter 10), Financial Services (Chapter 11), Temporary Entry (Chapter 12), and Telecommunications (Chapter 13). The USITC predicts generally positive results for U.S. services industries from the TPP. The May 2016 study estimates that both services sector output and employment would see increases above a 2032 baseline as a result of the TPP. These gains are small in relative terms (0.1%), but large in absolute terms ($42.3 billion increase in output) given the scale of the U.S. services sector. Both exports and imports are expected to increase above the baseline ($4.8 billion and $7.0 billion, respectively) but the estimated larger growth in imports would lead to an overall decline in net U.S. exports of services. The authors attribute this to a few factors: increased expenditures on tourism abroad (a U.S. services import), due to higher U.S. incomes post TPP; a shift in U.S. productive resources to sectors experiencing greater liberalization in foreign markets, including food and agriculture; and increasing U.S. demand for services imports given output capacity constraints and greater demand for U.S. services exports in TPP countries. The increase in U.S. services exports is estimated to go largely to TPP countries without an existing FTA while the increase in U.S. services imports would come from non-TPP countries, particularly the EU. The TPP chapter on cross-border trade in services commits parties to provisions governing situations in which the buyer and seller are located in different territories. As with previous U.S. FTAs, the TPP employs the "negative list approach," that is, the provisions are to apply to all types of services, unless specifically excluded by a partner country in the chapter annex on NCMs. This approach is generally considered more comprehensive than the "positive list approach" used in the GATS, which requires each covered service to be identified. The negative list approach also implies that any new type of service that is developed after the agreement enters into force is automatically covered unless it is specifically excluded. Key provisions include the following: nondiscriminatory treatment of services from partner-country providers, including national treatment and MFN treatment; no limitations on the number of service suppliers, the total value or volume of services provided, the number of persons employed, or the types of legal entities or joint ventures that a foreign service supplier may employ; prohibition on locality requirements that a TPP-based service provider maintain a commercial presence in the country of the buyer; support of mutual recognition of professional qualifications for certification of service providers; transparency in the development and application of government regulations; and allowance for payments and transfers of capital flows that relate to the provision of services, with permissible restrictions in some cases including bankruptcy and criminal offences. The United States made market access of express delivery services a priority in the TPP negotiations, as it has in other recent FTAs, including KORUS. Covered in a chapter annex, the commitments on express delivery focus, in particular, on cases where a government-owned and operated postal system provides express delivery services competing with private sector providers. Japan Post, which also includes banking and insurance services, has been moving towards privatization with an initial public offering of a portion of its shares in 2015, but remains majority owned by the government. Even domestic Japanese competitors in express delivery have argued that the Japanese postal service receives a number of unique advantages. The TPP annex and a separate side letter between the United States and Japan attempt to eliminate those advantages. TPP, like KORUS, stipulates that the postal system cannot use revenue generated from its monopoly power in providing postal services to cross-subsidize an express delivery service. Vietnam would be exempt from such a rule for 3 years. TPP, however, goes beyond KORUS in its express delivery commitments, and would also require independence between express delivery regulators and providers, prohibit the requirement of providing universal postal service as a prerequisite for express delivery, and prohibit fees on express delivery providers for the purpose of funding other such providers. Unlike KORUS, TPP lacks a specific threshold for the customs de minimi s , a critical commitment for express delivery providers as shipments valued below the de minimis receive expedited customs treatment and pay no duties or taxes. Industry sought a $200 de minimis , like that in KORUS, and has noted that TPP parties agreed to periodically review their respective thresholds. Financial services, including insurance and insurance-related services, banking and related services, as well as auxiliary services of a financial nature, are addressed in a separate chapter as in previous FTAs. The financial services chapter adapts relevant provisions from the foreign investment chapter and the cross-border trade in services chapter. The prudential exception in TPP provides that nothing in the FTA would prevent a party to the agreement from imposing measures to ensure the integrity and stability of the financial system. TPP, like KORUS, distinguishes between financial services traded across borders and those sold by a provider with a commercial presence in the home country of the buyer. In the case of providers with a foreign commercial presence, TPP applies the negative list approach with commitments applying generally except where noted; in the case of cross-border trade, TPP limits coverage to specific banking and insurance services as defined by each country. Some critics have noted the long list of NCMs. The United States, for example, excludes Government-Sponsored Enterprises such as the Federal National Mortgage Association (Fannie Mae). One of Malaysia's NCMs has received particular scrutiny from the business community, as it would require the Malaysian government's approval for certain bank and insurance investments based on whether such investment is in "the best interest of Malaysia." Services industry representatives have raised concerns over the potential breadth of this exemption given its lack of a threshold or specific definition or criteria. Financial services are not covered under the e-commerce chapter and therefore not protected by that chapter's new obligations such as the prohibition of localization requirements for data servers and computing facilities. The chapter does, however, have a separate provision prohibiting restrictions on cross-border data flows based on KORUS, which is similar to that found in the e-commerce chapter. U.S. financial services firms and some Members of Congress are concerned about the distinct treatment of the sector because, like many other industries, financial services firms rely on cross-border data flows to ensure data security, create efficiencies and cost savings through economies of scale, and utilize internet cloud services that are often provided by U.S. technology firms. Localization requirements imposed by countries could require companies to have in-country servers and data centers to store data. These types of regulations can create additional costs and may serve as a deterrent for firms seeking to enter new markets or a disguised barrier to trade. Localization supporters, though, claim they increase local control and data security. In TPP, USTR negotiated for the position advocated by the U.S. Treasury Department and sought flexibility for financial regulators to impose localization requirements . While localization requirements are not currently in place in TPP countries, observers note that Malaysia and Vietnam are considering imposing such regulations. In addition, some stakeholders note concern about other countries, including potential future TPP parties such as South Korea and Indonesia, which have or are considering localization requirements. Treasury Secretary Lew cautioned that options for altering the 12-country agreement are limited and, on May 25, 2016, announced a proposal to resolve the issue in future trade agreements (which would not directly affect TPP commitments). TPP, like KORUS, also addresses insurance sold by government postal entities. U.S. providers have argued that government-owned and operated insurance providers are not regulated as stringently and, therefore, have a competitive advantage over privately-owned counterparts. TPP would require that parties to the agreement ensure that postal insurance entities are not given advantages over private suppliers, specifically including through regulations, requirements to maintain a license, and access to distribution channels. In some ways, these measures go beyond what was included in KORUS. The separate U.S.-Japan letter on nontariff measures specifically addresses Japan Post's insurance business with clarified and additional commitments by Japan. For the first time in a U.S. FTA, the TPP also includes commitments on electronic payment card services. The TPP would require that each country in the agreement allow for the supply, by persons of other TPP countries, of electronic payment services for payment card transactions, defined by each country, and generally including credit and debit cards. The provisions on card services would, however, allow for certain preconditions of access, including requiring a representative or office within country. While some services can be traded across borders, services are also traded by a person supplying the service traveling to the location where the service is consumed. This is known as mode 4 delivery in the GATS. TPP, like some previous U.S. FTAs, includes commitments on temporary entry for business persons in order to facilitate such trade. As temporary entry has been a controversial issue in the context of previous trade agreements, the United States did not offer or seek commitments on additional visas for temporary entry, and only agreed to measures on regulatory transparency and predictability. According to the Administration, these rules would not require any change in U.S. immigration laws or regulations, and dispute settlement for this chapter is limited to very specific circumstances. Other TPP parties, however, have made additional access commitments on the temporary entry of business persons, including on length of stay and types of occupations, but these will only apply to the other countries making commitments in this area (i.e., not the United States). Australia, for example, provides categories defining "business visitors" and spells out the conditions and limitations for each category such as "service sellers" who are permitted an initial stay of 6 months up to a maximum of 12 months. For the first time in a U.S. FTA, the telecommunications chapter covers mobile service providers. Television or radio broadcast or cable suppliers, though, are not covered. Overall, the chapter applies a market driven approach, enshrining competition and consumer choice in the sector, and promotes the independence of regulators from the regulated. According to the Administration and the industry advisory committee, given current competition in the U.S. mobile market, the United States would not have new obligations resulting from the TPP commitments, but U.S. mobile carriers would gain greater access to markets abroad. The chapter's provisions would require regulatory transparency; that providers can interconnect with one another; that there is reasonable and nondiscriminatory access to networks, infrastructure, government-controlled resources like spectrum bandwidth, for reasonable rates; and protection of the supplier's options for employing technology. The chapter would promote cooperation on charges for international roaming services and allow regulation for mobile roaming service rates. Other provisions aim to ensure that suppliers can resell and unbundle services. Services industries generally have reacted positively to the TPP provisions relating to U.S. trade in services, with some key exceptions. The International Trade Advisory Committee for services and finance industries (ITAC 10) reported that the agreement satisfies TPA negotiating objectives and "on balance promotes the economic interest of the United States." Business groups note that for the five countries without existing U.S. FTAs, the provisions in TPP would provide meaningful additional market access. They also highlight new provisions in TPP, particularly those related to data flows and digital trade, as advancing U.S. service firms' interests. Provisions on data flows also affect other (non-services) firms, such as manufacturers who rely on global supply chains and transmitting data across borders. The larger business community also sees additional advances in the TPP, include ensuring electronic payment card services and electronic signatures, as well as addressing mobile telecommunications carriers and international roaming rates. While business groups generally support the agreement and its impact on services, they have raised some concerns. There has been vocal opposition from some in the services sector, for example, over financial services firms' exclusion from TPP's e-commerce chapter and its provisions prohibiting localization requirements for computing facilities. The U.S. Treasury Department reportedly argued in favor of this exception to maintain regulatory flexibility for requiring local storage of financial firm data; opponents of the provision view it as unnecessary given the general prudential exception in the services chapter. Several Members of Congress have expressed their concerns over this exemption in a letter to USTR, urging the Administration to address the issue both in TPP and in ongoing negotiations. Other issues of concern for services industries include: the long list of nonconforming measures (NCMs) that limit the level of liberalization achieved; what some view as a narrow definition of SOEs, limiting these disciplines' applicability; and the U.S. decision not to negotiate additional commitments on temporary entry for business persons in TPP. The Communications Workers of America (CWA), a union representing workers in a number of service industries, opposes TPP. They argue that increased access to the U.S. services market and various provisions throughout the agreement, including on government procurement, investment, and data transfers, could have negative impacts on service workers including in jobs such as call centers and data processing. Other groups also oppose TPP, in part, due to certain services provisions, particularly those on financial services. They argue that TPP commitments will restrict the U.S. government's ability to regulate the financial services industry. Exports make a vital contribution to U.S. agriculture, absorbing about 20% of total agricultural production, while representing a far larger share of the production of certain commodities, including wheat, rice, soybeans, cotton, almonds, pecans, pistachios, and walnuts, to name a few. As such, foreign demand for U.S. food and fiber contributes materially to higher commodity prices and farm income. The positive ripple effects from farm trade extend beyond farmers and ranchers to rural communities to include: farm input industries that provide seed, fertilizer, and machinery; and commodity processors and food manufacturers with a stake in foreign markets. Exports also can contribute to higher input prices for food to the extent that additional foreign demand is not met by an increase in domestic supplies, although commodity costs amount to a fraction of overall retail food prices. Rising farm productivity, market-oriented U.S. farm policies, and the prospect of competing on more favorable terms for a larger share of the faster-growing food markets in many developing countries are among the reasons that negotiations aimed at liberalizing agricultural trade among TPP countries has elicited a high level of interest and broad-based engagement from U.S. agriculture and food industry interests. It appears the TPP agreement would improve market access for many U.S. food and agricultural products, thus enhancing U.S. competitiveness in a number of markets. At the same time, it also would provide TPP partners with greater access to U.S. markets, thus raising the level of competition from TPP partners. Three considerations around the TPP are particularly relevant for U.S. food and agriculture. A discussion of these issues and USITC estimates of TPP's economic impact on U.S agriculture is followed by a partial snapshot of some of the higher-profile improvements in market access for agricultural products in the agreement, a summary of selected provisions beyond market access that are of interest to food and agriculture, and a review of industry reactions to the agreement. An overarching consideration is that among significant TPP markets, the United States lacks FTAs with five TPP countries—of which the most significant are Japan, Vietnam, and Malaysia. With a combined population of roughly 250 million, these three countries likely offer the greatest potential for boosting U.S. farm and food exports via lower tariffs, or expanded tariff rate quotas (TRQs). Significantly, all three countries impose much higher average applied MFN agricultural tariffs than the United States, which could work to the advantage of U.S. farm and food exports versus domestic suppliers and non-TPP export competitors as tariffs decline under the agreement. In 2014, applied MFN tariffs on agriculture products averaged 5.1% in the United States, 9.3% in Malaysia, 14.3% in Japan and 16.3% in Vietnam. Moreover, existing tariff peaks are far higher for a number of product categories. Examples include dairy and poultry imports into Canada; bovine meat, rice and dairy products into Japan; and Vietnamese tariffs across a number of food categories. Japan is likely the leading agricultural market opportunity in the TPP due to its highly protected farm and food markets, large population, and high per capita gross domestic product. Vietnam, with the fourth largest population in the TPP and a fast growing economy, is generally viewed as a market that could hold significant future growth potential for U.S. farm and food products. Also significant is that potential key export expansion opportunities for U.S. food and agriculture interests, such as beef and pork to Japan and dairy products to Japan, Canada, and Vietnam, generally are to be phased in over a period of years, if not decades. For certain products in certain countries, including Japan for beef, pork, and whey powder, and the United States for some dairy products, safeguard measures allow for additional tariffs to be imposed if imports should exceed specified thresholds. Generally, the quantitative trigger level for invoking safeguard measures would increase over time, while the duties imposed under the safeguard are scheduled to be reduced or eliminated. At the same time, preferential access that U.S. food and agricultural interests have to markets in Canada and Mexico under the North American Free Trade Agreement (NAFTA) would become available to a wider group of potential competitors over time as tariffs are lowered for TPP countries. If the United States chooses not to implement the TPP agreement, U.S. agricultural export competitors would have the potential opportunity to gain a competitive edge over U.S. exports of certain products to Japan and elsewhere. This could occur as a result of existing preferential tariff arrangements—such as Australia's FTA with Japan—or by ratifying an agreement similar to TPP without U.S. participation. Also, while the European Union is not party to the TPP, it is negotiating FTAs with Japan, Malaysia, and Vietnam that could enhance its producers' competitive position in those markets. The USITC in its report on TPP of May 2016 concluded the agreement would provide significant benefits to U.S. agriculture. The model estimated TPP outcomes in 2032 for U.S. agriculture compared with a baseline scenario without TPP and reached the following conclusions: Agricultural exports would be $7.2 billion higher (2.6%), while imports would increase by $2.7 billion (1.5%). Agricultural output would expand by $10 billion (0.5%), while employment in agriculture also would increase by 0.5%. U.S. dairy product exports would increase by $1.85 billion (18%), while processed foods and beef would post gains of $1.54 billion (3.8%) and $876 million (8.4%), respectively. Fresh fruit, vegetables and nuts would see an estimated increase of $575 million (2%), while pork and poultry meat products post increases of $219 million (1.9%) and $174 million (1.3%), respectively. Corn and rice exports are estimated to be marginally lower with TPP by 0.1% and 0.3%, respectively. As for U.S. imports, processed food would increase by $427 million (1.1%), while beef imports would expand by $419 million (5.7%) and dairy products would be $349 million higher (10.3%). Export gains stem primarily from greater market access via lower tariffs and expanded TRQs, with the lion's share of the total increase of $7.2 billion concentrated in Japan ($3.6 billion) and Vietnam ($3.3 billion). A principal negotiating objective for agriculture in the TPA-2015 is to obtain competitive opportunities for U.S. exports of agricultural commodities that are substantially equivalent to those provided to foreign exports in U.S. markets. In part, this is to be achieved by reducing foreign tariffs on U.S. commodities, while providing a reasonable adjustment period for import-sensitive U.S. products. Accordingly, the TPP agreement would affect market access for a broad range of agricultural commodities and food products. What follows is a selection of some of the notable changes included in the agreement. It is not meant to be comprehensive. Beef: Japan ranks as the largest U.S. export market for beef and beef products, according to the U.S. Department of Agriculture (USDA). Under the TPP agreement, Japan would drop its current tariff on fresh, chilled, and frozen beef from 38.5% to 27.5% in year one, with subsequent annual reductions to 9% by year 16. Japan would lower tariffs on other beef products as well, while Vietnam would eliminate such tariffs, currently as high as 34%, over three to eight years. The United States, for its part, would eliminate tariffs on beef and beef products that range as high as 26.4% in no more than 15 years and in fewer than 10 years in most instances. Pork: Japan, which also ranks as the leading market for U.S. pork and pork product exports, would immediately cut its tariff of 4.3% on fresh, chilled, and frozen pork cuts to 2.2%, phasing out the residual over nine years. A separate duty on pork cuts under Japan's "gate price system," which acts as a minimum import price, would be lowered immediately to 125 yen per kilogram, from 482 yen now. This duty would then be cut to 70 yen in year five and subsequently lowered each year thereafter to reach 50 yen in year 10. A special U.S.-specific safeguard would allow Japan to temporarily increase the duty during this transition period if imports were to exceed a trigger level. Vietnam would eliminate tariffs that are as high as 34% on pork and pork products within 10 years, while the United States would immediately eliminate most such tariffs. Poultry: Canada would allow incremental increases in access to its highly protected poultry and egg markets over five years via new duty-free, TPP-wide TRQs amounting to 2.3% of domestic production for eggs, 2.1% for chicken, 2% for turkey, and 1.5% for broiler hatching eggs. Thereafter, the quotas would be raised moderately each year, plateauing in year 19 , at which point these TRQs would amount to 19 million dozen eggs, 26,745 metric tons of chicken, 3,983 tons of turkey and 1.14 million dozen broiler hatching eggs and chicks. Vietnamese tariffs on poultry of up to 40% would be eliminated within 13 years. U.S. tariffs of up to 18.6% ad valorem equivalent would be eliminated within 10 years. Dairy: Opening dairy markets to greater import competition was among the most difficult agricultural issues to resolve during TPP negotiations. Under the agreement, Canada would allow incremental additional access to its highly protected dairy product markets amounting to 3.25% of its output for 2016 under TRQs that would be phased in over five years, with moderate annual increases thereafter. For perspective, this additional access would amount to about 0.3% of current U.S. milk production and would be open to all TPP countries. These Canadian TRQs for dairy products, such as fluid milk, butter, cheese, and yogurt, would increase between 14 and 19 years and then remain fixed. In-quota dairy products would enter Canada duty free. Canada also would eliminate its over-quota tariff of 208% on whey powder over 10 years. Japan would eliminate many tariffs it imposes on cheese imports within 16 years and on whey within 21 years. The United States would gradually phase out tariffs and establish TRQs for dairy products from Australia and New Zealand that would be increased annually. Existing preferential access for Australian dairy products under the U.S.-Australia FTA would be transferred to perpetual TRQs. New U.S. TRQs for Canadian dairy products would be raised gradually each year until year 19, at which point the quantities would remain level. Rice: Japan, the second-largest overseas market for U.S. rice, would establish a new duty-free quota for U.S. rice of 50,000 tons initially, rising to 70,000 tons in year 13, but still well below the 165,000 tons the U.S. rice industry had sought. Japan also would allow a broader range of domestic entities to participate in tenders on this additional quota, as well as on 60,000 tons of rice under an existing quota. But Japanese officials indicate that the "minimum mark-up" Japan imposes on rice imports—equivalent to a 15-20% duty according to USA Rice—would continue to be applied to all imports. U.S. tariffs on rice products of up to 11.2% would be eliminated within 15 years. Cotton: U.S. tariffs on cotton that range up to $0.314 per kg generally would be eliminated by 2022, and in some cases would be removed immediately. Sugar: Access to the U.S. sugar market would be expanded incrementally by establishing new TRQs for sugar and sugar-containing products totaling 86,300 tons annually, representing 2.4% of U.S. sugar imports in 2014/2015. Australia and Canada would immediately receive new duty-free quotas totaling 65,000 tons and 19,200 tons per year, respectively. The residual would be split between Japan, Malaysia, and Vietnam. The Australian and Canadian TRQ s include the potential for expansion in years when additional U.S. sugar imports are required. The additional TRQ for sugar is not expected to threaten the budget neutral requirement of the U.S. sugar program. Japan would provide new TRQs that would expand access to its market for sugar and sweetener-related processed products on a duty-free or preferential-tariff-rate basis, including chewing gum, chocolates and products containing chocolate, confectionery goods and other such products, and would eliminate tariffs on various sweetener products over time. Tobacco: U.S. tariffs on tobacco of up to 350% would be eliminated within 10 years, while Japan would eliminate tariffs on smoking tobacco and cigars over 11 years, and Malaysia would eliminate all tariffs on tobacco and tobacco products over 16 years. Vietnam would create a TRQ of 500 metric tons for unmanufactured tobacco imports that increases gradually for 20 years with no limit from year 21, while eliminating in-quota tariffs over 11 years and for all tobacco leaf after 20 years. Vietnamese tariffs on blended tobacco, cigars, and other tobacco products would be eliminated over 16 years. A controversy has emerged over a provision in the Exceptions chapter of the agreement that allows countries to deny recourse to protections under the investor-state dispute settlement (ISDS) to tobacco product manufacturers for claims directed at tobacco control measures. This optional exclusion would not apply to leaf tobacco, although, to the extent that tobacco product sales could be blunted by this provision, it would appear to have the potential to affect sales of leaf tobacco. The agreement addresses a number of trade-related areas beyond tariffs and TRQs are import to exporters of food and agricultural products, among which are sanitary and phytosanitary measures (SPS), agricultural biotechnology and export programs. Geographic Indications (GIs) are geographical names that act to protect the quality and reputation of a distinctive product originating in a certain region. As such, GIs can be commercially valuable and, as intellectual property, can provide eligibility for relief from acts of infringement or unfair competition. GIs are most often, but not exclusively applied to wines, spirits and agricultural products. Examples of GIs include Parmesan cheese and Parma ham, Champagne, Florida oranges, Idaho potatoes, Washington State apples and Napa Valley wines. GIs have become a point of controversy in international trade because GIs that are considered by some to be protected intellectual property are considered by others to be generic or semi-generic names and thus not protected. For example, "feta" is considered a generic name for a type of cheese in the United States, but is a protected GI in the European Union (EU). As such, U.S.-produced "feta" cannot be sold under that name in the EU. This type of exclusivity can extend beyond the EU, for example, when a third country has agreed to recognize EU-approved GIs under a bilateral trade agreement. The TPP agreement obligates members that provide for recognition of GIs to make this process available and transparent to interested parties within the TPP, while also providing a process for canceling GI protection. Parties that recognize GIs also are to adopt a procedure by which interested parties may object to the provision of a GI. Among the reasons the agreement lists for opposing a GI are: the GI is likely to cause confusion with a trademark that is recognized within the country, a pre-existing application is pending, or the GI is the customary term for same item in the common language of the country. Specific to wines and spirits that are products of the vine, TPP members are not required to recognize a GI of another member if the GI is identical to the customary name of a grape variety existing in that party's territory. Factors that are relevant in determining whether a term is the customary common name for a good include whether the term is used to identify the good in dictionaries, newspapers and websites, and whether the term is the name by which the good is marketed and referenced in trade in the country. Finally, with respect to other international agreements involving TPP members that provide for the protection of GIs, the TPP agreement states that members are to make available to interested parties information concerning the GIs involved and to allow them a reasonable opportunity to comment and to oppose the prospective recognition of the GIs. These obligations would not apply to international agreements that were concluded, agreed in principle, ratified, or that had entered into force prior to the entry into force of the TPP agreement. As tariff rates have been lowered for food and agricultural products in recent decades, nontariff barriers have gained greater visibility as obstacles to trade. Among the nontariff measures the TPP seeks to address are SPS measures, which consist of actions that address issues of food safety, plant pests and animal diseases. Among SPS commitments the agreement addresses are: the establishment of an SPS committee composed of TPP member representatives; an obligation to base SPS measures either on international standards or on objective scientific evidence and to select risk management measures that are no more trade-distorting than necessary; a commitment to allow for public comment on the development of SPS measures; and the obligation to provide rapid notification of shipments held on importation. Importantly, SPS disputes are to be addressed first in technical consultations among relevant governmental authorities under a procedural timeline established in the agreement. If the issue cannot be resolved through technical consultations, parties may turn to dispute settlement procedures in the agreement. TPP builds on the WTO's SPS agreement with the introduction of a rapid notification requirement that obligates an importing country to provide notification within 7 days when an inbound shipment is restricted or prohibited. IT also establishes a new rapid response mechanism that allows parties to raise SPS concerns through recourse to Cooperative Technical Consultations by engaging national trade and regulatory agencies with the aim of resolving them within a defined procedural framework and timetable. As concerns agricultural products of modern biotechnology, the agreement commits the signatories to increase transparency and provide notification of national laws and regulations of biotech products. It also encourages information sharing on issues related to the occurrence of low-level presence (LLP) of biotech material in food and agricultural products. To minimize LLP occurrences and any disruptions to trade that may result from an LLP incident, both importers and exporters commit to exchange certain information, such as product risk assessments and new plant authorizations. The agreement also establishes a working group on agricultural biotechnology within the TPP Committee on Agricultural Trade. The working group is to function as a forum for exchanging information on issues such as national laws, regulations and policies affecting trade in biotech products. Finally, the agreement states that parties are under no obligation to adopt or modify existing laws, regulations or policies that apply to biotechnology. On the topic of agricultural export programs, signatories to the agreement commit to eliminate the use of export subsidies, a type of incentive the United States does not employ in any case. The export subsidy ban is seen mainly as setting a standard for future reform on a multilateral basis. A commitment around export credits, credit guarantees, and insurance programs—which the United States does employ—is less ambitious: the agreement merely states the parties will cooperate to develop multilateral disciplines around these programs. The agreement also discourages restrictions on exports of food and agricultural products. To this end, it commits TPP countries to limit such restrictions to six months, and requires a country that imposes such restrictions for more than 12 months to consult with interested TPP importing countries. As of the beginning of 2016 numerous interest groups in the food and agricultural sector have passed judgment on the TPP agreement. Supporters include broad agricultural groups such as the American Farm Bureau Federation, as well as specific meat (beef, pork, and chicken) and commodity (wheat, corn, soybean, and peanut) associations. The Grocery Manufacturers Association, representing food, beverage and consumer product companies has also endorsed the agreement. More recently, a number of U.S. dairy groups, including the National Association of Milk Producers, have endorsed the agreement. The Agricultural Policy Advisory Committee for Trade on the Trans-Pacific Partnership (APAC), which is composed of a broad array of agricultural interests from producer groups to processing and exporting companies, expressed strong support for the agreement, reflecting the views of a "clear majority" of its members. APAC is one of a number of advisory committees charged with assessing whether the agreement promotes the economic interests of the United States and achieves the negotiating objectives that Congress established in TPA-2015. Support for the TPP agreement, however, is not universal within the food and agriculture sectors. The National Farmers Union (NFU) opposes the deal, contending benefits on the export side of the trade ledger will be overshadowed by greater competition from imports, leading to lower revenues for farmers and ranchers and to job losses. Also opposed to the agreement is the United Food and Commercial Workers Union International (UFCW), which represents workers in the grocery, retail, meat packing and food processing industries. The UFCW faults the agreement for the lack of an enforcement mechanism against currency manipulation, which it contends will nullify the benefits of tariff reductions, while contributing to the transfer of U.S. jobs to lower-wage markets overseas. The NFU and UFCW issued a dissenting minority report as members of APAC. APAC Representatives of tobacco leaf growers also oppose the agreement. They contend that allowing TPP countries to deny dispute settlement protections to tobacco product manufacturers could have negative ripple effects for U.S. tobacco farmers and could establish a precedent for future trade agreements. Certain NGOs also oppose the agreement, in part, due to concerns with provisions related to agriculture. These groups argue that the TPP will limit the U.S. government's ability to regulate the country's food supply, raising particular concern with seafood imports from Malaysia and Vietnam. They also take issue with potential food labeling restrictions resulting from TPP commitments, noting that the Congress decided to change its country-of-origin-labeling (COOL) requirements for meat products as a result of a trade dispute with Canada and Mexico in the WTO. The Government Procurement chapter sets standards and parameters for government purchases of goods and services among TPP countries. The U.S. trade negotiating objective for government procurement in TPA seeks "transparency in developing guidelines, rules, regulations, and laws for government procurement," but does not address market access goals. The United States is a member of the plurilateral WTO Government Procurement Agreement (GPA) and has sought the inclusion of government procurement provisions in its FTAs. Among TPP partner countries, only Canada, Japan, New Zealand, and Singapore are members of the GPA. All U.S. FTAs—including those with TPP partners Australia, Peru, Chile, Singapore, and NAFTA—include chapters on government procurement. Similar to U.S. obligations in the GPA, although with different schedules of commitments for various government agencies, the FTA obligations provide opportunities for firms of each nation to bid on certain contracts over a set monetary threshold on a reciprocal basis. TPP contains first-ever reciprocal procurement commitments for Vietnam, Malaysia, and Brunei. Supporters of expanded procurement opportunities in FTAs argue that the reciprocal nature of the government procurement provisions in TPP will allow U.S. firms access to major government procurement market opportunities overseas. This market could be quite large. According to the WTO, government procurement typically accounts for 15-20% of a country's GDP, and the size of the government procurement market among GPA members was valued at $1.6 trillion in 2008. In addition, supporters claim open government procurement markets at home allow government entities to accept bids from partner country suppliers, potentially making more efficient use of public funds. However, others stakeholders contend that public procurement should primarily benefit domestic industries. The Buy American Act of 1933, as amended, limits the ability of foreign companies to bid on procurements of manufactured and construction products. Buy American provisions periodically are also proposed for legislation such as infrastructure projects requiring government purchases of iron, steel, and manufactured products. Such restrictions are waived for companies from countries with which the United States has FTAs or to countries belonging to the GPA. The United States negotiated only federal procurement, excluding additional state or local procurement commitments in the TPP negotiations. This may be due to resistance among U.S. states to providing access to their procurement markets. States must voluntarily opt in to government procurement commitments in FTAs, but the number of states doing so has dropped substantially from the 37 states that signed up to the GPA to 10 states that acceded to commitments under the most recent U.S. bilateral FTAs with South Korea, Panama, and Colombia. In negotiating government procurement agreements, countries set out schedules on: (1) the government entities that will accept bids from overseas companies; (2) the types of procurements that are eligible; (3) monetary thresholds; and (4) exceptions to these commitments. The TPP provides that for eligible procurement opportunities, countries will extend national and nondiscriminatory treatment among TPP partners; adopt a negative goods coverage schedule (i.e., all goods are eligible unless explicitly excluded, such as defense procurement). Some countries also adopt a negative list for services; promote transparency in the tendering process through online tender information and descriptions; provide online application and documentation processes without cost to the applicant, and provide for publication of post-award explanations of procurement decisions; broaden covered procurement to include public-private partnerships (PPP) and build-operate-transfer (BOT) projects, although Malaysia, Mexico, and Vietnam are excluded from this provision; and prohibit offsets. Countries have made incremental changes in the schedules of covered commitments to provide additional access to TPP partners. Yet, several countries have taken exceptions to their schedules. The United States and four other countries (Malaysia, Mexico, New Zealand, and Vietnam) exclude sub-central (state and local) procurement. Countries that do make sub-national commitments (Australia, Canada, Chile, Japan, and Peru), extend those concessions reciprocally only among themselves. Thresholds , Transitions and Exemptions . When fully effective, most countries will adopt a baseline threshold of SDR130,000 (about $180,000). However, Brunei, Malaysia, and Vietnam will apply transitional thresholds that shrink over time: 4 years for Brunei, 7 years for Malaysia, and 25 years for Vietnam. Thresholds for sub-federal procurement and construction projects are higher. In addition, Malaysia is allowed to retain its Bumiputera preferences to support the native Malay population, and Malaysia, Mexico, and Vietnam may continue to impose offsets, set-asides and price preferences for varying periods or permanently. For example, Vietnam will be able to set aside 100% of the value of pharmaceutical procurements for the first 3 years, transitioning in installments to 50% in year 16. In addition, Malaysia can exempt any procurements that will "affect Malaysia's essential security interests." Intellectual property (IP) is a creation of the mind embodied in physical and digital objects. IPR are legal, private, enforceable rights that governments grant to inventors and artists that generally provide time-limited monopolies to right holders to use, commercialize, and market their creations and to prevent others from doing the same without their permission. The use of trade policy to advance IPR internationally emerged with NAFTA and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). These agreements build on international treaties administered by the World Intellectual Property Organization (WIPO). U.S. trade negotiating objectives in TPA-2015 call for U.S. FTAs to "reflect a standard of protection similar to that found in U.S. law" ("TRIPS-plus") and to apply existing IPR protection to digital media through adherence to the WIPO "Internet Treaties." TPA-2015 also includes new objectives to address cybertheft and protect trade secrets and proprietary information. IP is a source of U.S. comparative advantage, and the Asia-Pacific region is a fast-growing market for U.S. IP-based exports. TPP countries represent more than one-fifth of the approximately $130 billion in IP royalties, license fees, and payments that U.S. exporters received in 2014. According to USITC modeling estimates, improvements in TPP countries' patent protections to meet TRIPS obligations, led to an 11% or $2.9 billion increase in U.S. IP receipts from these countries in 2010, which could have been even higher with greater levels of patent protection (17% or $5.0 billion higher in 2010). At the same time, the TPP region poses significant counterfeiting and piracy challenges, including in the digital environment. The USTR continued to designate five TPP parties (among 34 U.S. trading partners) as having IPR regimes of concern to the United States in the 2016 "Special 301" report (pursuant to Sec. 182 of the Trade Act of 1974, as amended). The report reviews the global state of IPR protection and enforcement and designated Chile on the "Priority Watch List" for significant IPR concerns; and Canada, Mexico, Peru, and Vietnam on the "Watch List" for lesser but still notable IPR concerns (see text box ). In its FTA negotiations, the United States generally seeks IP commitments that exceed the WTO TRIPS Agreement's minimum standards of IPR protection and enforcement. TRIPS includes provisions on a balance of rights and obligations between protecting private rights holders and securing broader public benefits. Debate persists in U.S. trade policy and more broadly, among developed countries (historically IP generators and exporters) and developing countries (historically IP importers), about this balance. Among the more controversial aspects of the TPP negotiations were protections for pharmaceuticals through patents and data exclusivity, which raise questions about the balance between supporting innovation and supporting affordable access to medicines. One view is that patents and data exclusivity provide incentives for innovation by enabling right holders to generate profits to recoup R&D and regulatory costs and invest in future innovations. Another view is that patents may raise the costs of drugs and delay the entry of generic competitors into the market, thereby impeding affordable access to medicines. Some observers argue that a narrow focus on patents and data exclusivity masks the other factors that can affect public health, such as the efficiency of health care delivery systems or infrastructure, while others emphasize the significant role of patents and data exclusivity. Such debates have come to a head in terms of TPP's treatment of biologics, a major U.S. innovation sector that can produce life-saving medicines, but for consumers, affordability is a concern both in the United States and abroad. With copyrights, a longstanding debate concerns the balance between granting copyright holders exclusive rights to control their works and providing certain limitations on that right for "fair use" (e.g., criticism, comment, news reporting, teaching, scholarship, and research). Stakeholders also debate the balance between allowing Internet Service Providers (ISPs) to operate their businesses and providing enforcement procedures to address copyright theft through their networks. During the negotiations, different stakeholders expressed concern over how TPP's IP chapter compared to other FTAs, chiefly the KORUS and the "May 10 th " FTAs, i.e., those then-pending FTAs revised to reflect the May 10, 2007, Bipartisan Trade Understanding (May 10 th addressed four different aspects of U.S. FTA provisions, see text box preceding this section for more). Some business groups, especially in the pharmaceutical sector, while broadly supportive of the IPR chapter, express concern that certain aspects of it may be less robust compared to KORUS, while others say that vigilant enforcement of TPP will not lead to any substantive differences from the level in KORUS. Some express concern about the length of transition periods for implementing IPR commitments for certain countries, while others argue that these transition periods reflect TPP countries' development levels and enforcement capacity. Some groups, particularly those concerned about the impact of strong IP provisions on affordable access to medicines in developing countries, favored maintaining the May 10 th approach to patents. Others argued that this approach was specifically tailored to certain FTAs and not intended to be the template for the U.S. approach to patent protections in FTAs going forward. In the end, TPP includes some provisions favorable to both sets of stakeholders, extending some patent and data protections beyond those of the May 10 th Agreement, while providing phase-in periods for those new commitments for developing countries. IP is addressed primarily in a separate chapter in TPP, though other chapters also have some relevance (e.g., investment). The patent section reflects some May 10 th elements, but departs in other areas. The IP chapter also contains some new provisions that go beyond existing U.S. FTAs, such as KORUS. IP provisions, including key changes, are discussed below. Patents protect new innovations and inventions, such as pharmaceutical products, chemical processes, new business technologies, and computer software. Patent protection in the TPP builds on the TRIPS provisions of the WTO and adapts provisions from previous U.S. FTAs. It broadly seeks to establish consistent and harmonized patent regimes throughout the TPP region. Some of these provisions are specific to pharmaceutical products and are designed, according to recently enacted U.S. trade negotiating objectives, to "encourage innovation and access to medicine." Patent Subject Matter. TPP reaffirms the familiar language of TRIPS requiring countries to provide a system of patents available for an invention, product or process "if the invention is new, involves an inventive step and is capable of industrial application." In addition to making patents available for "new uses or new methods of using a known product"—the language found in KORUS—TPP also provides for "new processes of a known product." TPP reaffirms the TRIPS language that a party may exclude from patents diagnostic, therapeutic and surgical methods, and animals other than microorganisms. While it allows parties to exclude plants other than microorganisms from patentability, it does provide for patents for inventions derived from plants. Access to Medicines. TPP provides that the chapter's obligations "do not and should not prevent a Party from taking measures to protect public health...and, in particular, to promote access to medicines for all." TPP affirms that the chapter should be interpreted as consistent with the WTO Doha Declaration on TRIPS and Public Health (TRIPS Declaration). Parties also may take measures consistent with the TRIPS Declaration in matters regarding protecting test data for pharmaceuticals and biologics. Patent Term Adjustment . TPP provides that for unreasonable delays (defined as more than five years from the date of filing, or three years from a request for examination) in the patent examination process, applicants may request an extension of the patent term. For pharmaceutical products subject to marketing approval by a regulatory authority, TPP also provides adjustment for a patent term to account for unreasonable delays, although in this case, "unreasonable" is not defined. These provisions follow the KORUS text, but allow Brunei, Malaysia, and Vietnam a five-year transition period. Patent term extension was optional under the May 10 th agreement for developing countries. Protection for Undisclosed Test Data (Data Exclusivity) . Often referred to as data exclusivity, this practice provides a period of protection for test data that prevents a generic company from relying on the test data submitted by the originator company in order to gain marketing approval for a generic version of the brand name drug. TPP provides at least five years of data exclusivity for small molecule pharmaceuticals, following the KORUS standard. The May 10 th FTAs also provided for five years of data exclusivity; however, they allowed, for countries relying on marketing approval granted in the United States, that period to run concurrently if the country grants marketing approval within six months of receiving an application. The purpose of concurrent period is to encourage the marketing of innovative drugs in developing countries. TPP does not provide for a concurrent exclusivity period. TPP also provides an additional three years of data exclusivity for clinical information supporting a new indication, formulation, or method of administration of an existing approved drug. Under the May 10 agreement, this type of extension was optional. In addition, under TPP, the expiration of the patent cannot limit the period of protection for test data. Biologics. The issue of data exclusivity for biologics has been especially contentious in TPP. The United States currently provides a 12-year exclusivity period for marketing data submitted with biologics for marketing approval, and sought that standard in the TPP negotiations in line with U.S. negotiating objectives. Other countries have had a range of exclusivity periods, from no period of exclusivity (Brunei) to five years (Australia, Malaysia, New Zealand, Singapore, and Vietnam) to eight years (Japan and Canada). Chile, Mexico, and Peru do not differentiate between data exclusivity for biologics and small-molecule pharmaceuticals, but have 5-year periods for the latter. TPP provides either eight years of data exclusivity, or five years coupled with "other measures" and "recognizing that market circumstances also contribute to effective market protection" to "deliver a comparable outcome in the market." Some Members of Congress have objected to this shortened period of exclusivity, and may seek side letters or other measures to clarify how this provision will be implemented. Australia and New Zealand have indicated that they would not have to make changes to their laws to be compliant with this language. The TPP is the first FTA specifically to include protections for biologics as an obligation. Patent Linkage. Under this practice, a national regulatory authority (e.g., U.S. Food and Drug Administration) cannot grant marketing approval to a generic version of a drug without the permission of the patent holder. If marketing approval is sought for a generic prior to the expiration of a patent, this patent could delay the access of generic medicines. Previous U.S. FTAs, such as KORUS, mandated the notification of the patent holder and obligated the marketing authority to prevent a generic manufacturer from seeking market approval without the rights holder's consent. TPP continues the notification requirement, but provides more flexibility on the notification system and the procedures (e.g., judicial or administrative proceedings, and remedies, such as preliminary injunctions) for a patent holder to assert his rights, as well as for a party to challenge the patent's validity. While the May 10 agreement required this flexibility only for developing countries, TPP extends it to all countries. U.S. law does not mandate patent linkage for biologics, and this may have been a motivating factor for flexibility concerning patent linkage in the TPP. Copyrights protect artistic and literary works, such as books, music, and movies. The TPP copyright section, broadly speaking, includes copyright protections similar to those in KORUS for literary and artistic works, performances, and phonograms (collectively referred to here as "creative works" and distinguished as needed), and some new features, such as for "fair use" and enforcement. International Agreements. TPP, like KORUS, requires each party to ratify or accede to several international agreements by the TPP's entry into force. These include the 1996 WIPO "Internet Treaties," which set forth international norms regarding copyright protection in the digital environment. To date, the WIPO Internet Treaties are in force for nine TPP countries, most recently Canada in 2014, although full implementation of the treaties remains a U.S. concern for some countries. Brunei, New Zealand, and Vietnam have yet to ratify or accede to these agreements. Length of P rotection. TPP, like KORUS, increases copyright terms to life plus 70 years, or 70 years from publication for most works. This is higher than the TRIPS Agreement baseline (life plus 50 years). TPP includes phase-in periods for countries currently providing life plus 50 years of protection, which include Brunei, Canada, Japan, Malaysia, New Zealand, and Vietnam. Exclusive R ights. TPP carries forward KORUS' core copyright protections. Each party must provide right holders the exclusive right to authorize or prohibit the reproduction, communication, and distribution of their works. Limitations , Exceptions, and " F air U se." TPP, like KORUS, requires each party to confine limitations or exceptions to copyrights subject to certain conditions. New in TPP is a provision that parties "shall endeavor to achieve an appropriate balance" between users and rights holders in their copyright systems, including digitally, through exceptions for legitimate purposes, such as criticism, comment, news reporting, teaching, scholarship, and research—known as "fair use" in the United States. Technological Protection Measures (TPMs). TPMs are measures such as encryption to limit unauthorized reproduction, transmission, and use of products. TPP, like KORUS, requires civil, administrative, and criminal penalties for circumventing TPMs or selling devices and services for breaking TPMs, subject to certain exceptions for noninfringing uses. While KORUS appears to confine exceptions and limitations to specified measures, TPP appears to set out broader parameters for providing exceptions and limitations regarding circumventing TPMs. According to USTR, "TPP's anti-circumvention of [TPMs] provisions do not preclude new exceptions, like cellphone unlocking, while still protecting new online services that engage in legitimate digital trade." Enforcement. The IP chapter's enforcement section includes a number of copyright-related provisions. New provisions in TPP compared to KORUS include extending copyright enforcement commitments to the digital environment and requiring criminal penalties and procedures for camcording in movie theaters. Similar to KORUS is a TPP provision requiring criminalization of the theft of encrypted satellite and cable signals. Collective M anagement S ocieties. TPP includes a new provision that recognizes the importance of collective management societies for copyrights in collecting and distributing royalties based on "fair, efficient, transparency and accountable" practices." Internet S ervice P roviders (ISPs). ISPs generally are defined as providers of online services for transmitting, routing, or providing connections for digital online communications. Key provisions related to ISPs include: ISP Liability . TPP requires parties to establish or maintain a legal framework and "safe harbors" to allow legitimate ISPs to develop their business while also providing effective enforcement procedures against digital copyright infringement. These include legal incentives for ISPs to cooperate with copyright owners to deter unauthorized storage and transmission of copyrighted materials, as well as limitations in law that preclude monetary relief against ISPs for copyright infringement that, generally speaking, the ISPs do not control but that takes place through their systems or networks. KORUS also contains provisions on liability for service providers and limitations. Notice and T akedown. TPP requires parties to adopt "notice and takedown" provisions to address ISP liability, i.e., a requirement for the ISP to remove or disable access to infringing materials on their networks or systems when they receive notice or become aware of the infringement and a liability exemption for an ISP that has taken proper action. It also contains safeguards to protect against abuse of notice and takedown systems. Some find TPP's "notice and takedown" approach similar to that in the U.S. law while others have questioned its consistency. TPP allows certain existing alternative systems for specific countries, such as Canada's "notice and notice" system. Trademarks protect distinctive commercial names, marks, and symbols. TPP includes provisions on trademark protection and enforcement. Key features are discussed below. Term of P rotection. Under TPP, like KORUS, the term of protection for the initial registration of a trademark and each renewal is no less than 10 years. Scope of P rotection. TPP includes several provisions regarding the scope of trademark protection: Sound and S cent M arks. TPP, like KORUS, extends trademark protections to sounds (stating that marks do not have to be "visually perceptible" in order to be registered). Unlike KORUS, TPP does not extend trademark protections to scents, instead requiring "best efforts" to do so. Some stakeholders may value the "best efforts" language as a positive development, but would prefer mandatory protection for scents. Certification and C ollection M arks. TPP, like KORUS, extends trademark protections to "certification marks" (e.g., such as the Underwriters' Laboratory or Good Housekeeping Seal) New in TPP is protection for "collective marks," which is not in KORUS. Certification marks are usually given for "compliance with defined standards," while collective marks are usually defined as "signs which distinguish the geographical origin, material, mode of manufacture or other common characteristics of goods or services of different enterprises using the collective mark." Well-known T rademarks. TPP, like KORUS, extends protection for "well-known marks" to dissimilar goods and services, whether or not registered, so long as the use of the mark would indicate a connection between the goods or services and the owner of the well-known mark and the trademark owner's interests are likely to be damaged by the use. TPP, similar to KORUS, require "appropriate measures" to refuse applications or cancel registrations and prohibit using trademarks that are identical or similar to well-known trademarks for identical or similar goods or services if doing so is likely to cause confusion with the prior well-known trademark. GI P rotection. Geographical indications (GIs) protect distinctive products from a certain region, applying primarily to agricultural products (e.g., feta cheese, Parma ham).TPP, like KORUS, requires geographical indications (GIs) to be eligible for protection as trademarks. This provision may be viewed as consistent with the U.S. approach which affords GIs protection through the trademark system. (See Agriculture, above, for more information.) Exceptions. TPP, like KORUS, allows parties to provide limited exceptions to trademark rights, such as "fair use of descriptive terms," subject to certain conditions. Trademark S ystem. TPP, like KORUS, includes provisions to enhance efficiency and transparency in parties' trademark systems, such as requiring a system for examining and registering trademarks, the ability to challenge a refusal of a mark, and an electronic system for application and maintenance of trademarks. TPP expands on KORUS to also prohibit parties from requiring that a mark be recorded as a condition for a trademark owner to be able to pursue certain legal proceedings relating to the acquisition, maintenance, or enforcement of trademarks. The removal of this administrative requirement is intended to enable easier protection and enforcement of trademarks. Domain Names. Similar to KORUS, TPP requires each party to have a system for managing its country-code top level domains (ccTLDs) and to make available online public access to a database of contact information for domain-name registrants. Going beyond KORUS, TPP requires parties to make available appropriate remedies in which a person registers or holds, with "bad faith intent to profit," a domain name that is identical or confusingly similar to a trademark. This provision is intended to protect against what is often referred to as "cybersquatting." Trade secrets are confidential business information that is commercially valuable because it is secret, including formulas, manufacturing techniques, and customer lists. TPP is the first FTA to require criminal procedures and penalties for trade secret theft, including through cyber means, and including such theft by State Owned Enterprises (SOEs). While some stakeholders view these new commitments on trade secrets as a good first step and a good precedent, others express concern that the provisions lack clarity and do not go far enough. Industrial designs constitute the ornamental or aesthetic aspects of a product. The section on industrial designs is a new provision in TPP. It adds protections beyond the TRIPS Agreement for designs embodied in a part of an article, or a part of an article "in the context of the article as a whole." TPP also contains hortatory language on parties improving their system of design registration. The United States, a major source of and destination for foreign direct investment (FDI), negotiates investment rules in its trade agreements to reduce restrictions on investment, protect investors, and advance other U.S. interests. The TPA-2015 includes a principal U.S. trade negotiating objective to reduce or eliminate discriminatory barriers to foreign investment while ensuring that, in the United States, foreign investors are not accorded "greater substantive rights" than domestic investors. The U.S. Model Bilateral Investment Treaty (BIT) also forms the basis of U.S. investment negotiations and contains "core" protections for investors (see text box ). In 2014, TPP countries represented more than 20% of U.S. global FDI (stock and flow), and TPP would cover more FDI than any U.S. FTA (save the potential T-TIP). The United States has bilateral FTAs in force with six TPP countries, all with investment obligations. Still, U.S. investors express concern about investment barriers in the TPP region, including restrictions on investing in certain sectors, discriminatory treatment, and local content requirements. Investment negotiations reportedly were among the most difficult in TPP. One issue is the relationship between protecting investors and TPP countries' national sovereignty. Supporters argue that investor protections are central to removing investment barriers and protecting investors from discriminatory treatment. Supporters also argue that U.S. investment agreements do not prevent governments from regulating in the public interest in a nondiscriminatory manner, and that ISDS remedies are limited to monetary penalties and cannot require governments to change their laws or regulations. Critics counter that companies use ISDS to restrict governments' ability to regulate in the public interest (such as for environmental or health reasons), leading to "regulatory chilling" even if an ISDS outcome is not in a company's favor. The United States, to date, has never lost a claim brought against it under ISDS in a U.S. investment agreement. Some opponents express concern that ISDS in TPP could open the United States to more litigation because of the presence in the United States of affiliates of companies from TPP countries like Japan. An ISDS claim brought in 2011 by a Philip Morris subsidiary against Australia under the Australia-Hong Kong BIT challenging its plain packaging requirement for tobacco as an uncompensated expropriation and a violation of minimum standard of treatment (MST) obligations heightened the TPP debate. In December 2015, a tribunal ruled that it lacked jurisdiction to consider the claim. Separately, TransCanada's notice in January 2016 of its intent to challenge the Obama Administration's Keystone XL pipeline decision under NAFTA Chapter 11's ISDS mechanism may further complicate the debate. Another issue is whether investment rules treat U.S. and foreign investors equally. Supporters stress that ISDS and other protections are reciprocal (i.e., a U.S. investor could use ISDS to resolve a dispute over its investment in a TPP country) and modeled after U.S. law, and, thus, do not afford foreign investors any greater substantive rights than U.S. investors domestically. Critics argue that the use of ISDS implies greater procedural rights by providing foreign investors in the United States with an additional choice of venue. The fairness and transparency of ISDS procedures have also been a focal point. In general, under U.S. investment agreements, the ISDS tribunal is to be composed of three arbitrators—one appointed by the investor claimant, one by the party, and one by agreement of the disputing sides. Most cases are conducted under rules of the World Bank-affiliated International Centre for Settlement for Investment Disputes (ICSID), or under comparable rules of the United Nations Commission on International Trade Law (UNCITRAL). Both sets of rules include procedures for disqualifying arbitrators for bias. The actual record on ISDS also suggests that tribunal outcomes favor states more often than investors. Critics nevertheless express concern about bias, noting that lawyers can rotate between acting as arbitrators in one case and representing investors in other cases. While transparency in ISDS proceedings has been a common part of U.S. investment agreements, some stakeholders argue that the proceedings are not transparent enough. Limited opportunity for third-parties to express their views in ISDS proceedings also has been an issue. Also debated is the creation of an appellate mechanism to review ISDS outcomes; such a mechanism is a TPA negotiating objective, but is not included in the TPP. Some argue that this kind of review mechanism could bring some coherence to inconsistent tribunal decisions, resulting in greater certainty about obligations under investment agreements, while others argue that it would lead to additional costs and delays in resolving disputes. Other ISDS reforms advanced may affect consideration of TPP. For example, in the T-TIP negotiations, the EU submitted a proposal for a new Investment Court System to replace ISDS; the proposal includes an appellate mechanism. U.S. government officials have questioned the proposal, favoring ISDS to protect investors while balancing other public policy interests. Some businesses argue that it would erode investor protections, while some civil society groups say it does not resolve their concerns. The United States may closely monitor how the EU pursues its new proposal in its other trade negotiations, including with TPP partners. For example, the EU-Vietnam trade agreement includes the main provisions of the EU's proposal, and the EU and Canada have agreed to include the proposal's main elements in the finalized text of their Comprehensive Economic and Trade Agreement (CETA). The investment chapter largely reflects the 2012 Model BIT's core investor protections and exceptions (see text box above). It also notes that such obligations apply to SOEs. Like other U.S. FTAs, TPP does not have an appellate mechanism. TPP also contains some new provisions that go somewhat beyond KORUS and the model BIT and significantly beyond WTO agreements, which address investment issues in a limited manner. Certain new provisions are highlighted below. Minimum Standard of Treatment (MST) . TPP requires parties to provide MST to investments in accordance with applicable customary international law. New in TPP is clarification that a party's action (or inaction) that may be inconsistent with investor expectations is not, on its own, a breach of the MST, even if loss or damage to the investment follows. Some stakeholders oppose the change as weakening investor protections; they view it as departing from the longstanding approach of linking the MST obligation with an investor's reasonable, investment-backed expectations. Others assert that TPP should clarify that investor expectations remain a criteria that may be considered. Others express concern that the MST obligation is ambiguous and could be used to expand investor protections unduly. Performance R equirements. Like prior approaches, TPP prohibits parties from imposing specific "performance requirements" in connection with an investment or related to the receipt of an advantage in connection with it. These include prohibitions on performance requirements such as to export a given level or percentage of goods, achieve a given level or percentage of domestic content, or transfer a particular technology. New features of TPP compared to KORUS include prohibitions on performance requirements related to the purchase, use, or according of a preference to a technology of the party (or of a person of the party), and related to certain royalties and license contracts. In addition to addressing concerns in TPP markets, these new features may be geared toward addressing "indigenous innovation" measures such as in China. Denial of Benefit s . TPP's denial of benefits article, among other things, permits a party to deny the investment chapter's benefits to an investor that is an enterprise of another party (and to the investments of that investor) if that enterprise does not have "substantial business activities" in the territory of any party other than the party denying benefits, provided that the enterprise is owned or controlled by a person of a nonparty or the denying party. According to USTR, the denial of benefits article allows a party to deny benefits to "shell companies." The article presumably is intended to address some stakeholders' concerns for instance, regarding the ISDS claim filed by Philip Morris (PM) under the Australia-Hong Kong BIT to challenge Australia's plain packaging requirement for tobacco, though PM has stated that its restructuring of PM Australia's ownership to PM Asia in Hong Kong was for legitimate business reasons. KORUS also contains a denial of benefits article, but with some variation. Government's Right to Regulate . Like KORUS, TPP contains a provision stating that, except in rare circumstances, nondiscriminatory regulatory action by a party to protect legitimate public welfare objectives (e.g., in public health, safety, and the environment) do not constitute indirect expropriation. Debate exists about what exactly are "rare circumstances." New in TPP is a statement that nothing in the Investment Chapter "shall be construed as preventing a government from regulating in a manner sensitive to "health, environmental, and other regulatory objectives," as long as the action taken is otherwise consistent with the chapter. In contrast, KORUS limited the affirmation of a government's right to regulate due to "environmental concerns." USTR contends that the "right to regulate" provision is a stronger safeguard that addresses prior ISDS criticism. Skeptics argue that the new provision does not adequately protect a government's right to regulate because the measures a government may take must be "otherwise consistent" with an Investment Chapter which, from their perspective, has vague provisions (such as for minimum standard of treatment) that can be interpreted in an overly broad manner. ISDS Proceedings . TPP, like most other U.S. FTAs, includes ISDS. It also contains new provisions on ISDS proceedings, including a: requirement that appointments of ISDS arbitrators take into account candidates' expertise or relevant experience with respect to the relevant governing law; requirement for parties to establish a code of conduct for arbitrators to provide additional guidance on issues of arbitrator independence, impartiality, and conflict of interest; provision allowing tribunals to accept and consider amicus curiae (third-party) submissions regarding a matter of fact or law within the scope of the dispute that may assist the tribunal in evaluating submissions and arguments of the disputing parties; expanded rules for dismissing "frivolous claims;" and clarification that a claimant has the burden of proving all elements of a claim. Supporters assert that these provisions appropriately balance investor protections and safeguards to protect the public interest. Some, including in the business community, argue that these new provisions weaken investor protections and may delay what can already be a lengthy arbitration process, although other civil society groups argue that the safeguards do not go far enough in protecting the public interest. While some support the clarifying language as reaffirming existing obligations, others express concern that it may be interpreted to change substantive obligations. For example, the clarifying statement on burden of proof potentially could be interpreted to require a different burden of proof for the investor. Tobacco "Carve-out" from ISDS . TPP gives parties the option to deny ISDS to investors' claims challenging tobacco control measures against manufactured products, for example, relating to the labeling or packaging of tobacco products. Some stakeholders support the carve-out as a way to protect public health interests and to protect tobacco control measures obligated by the World Health Organization's Framework Convention on Tobacco Control from challenge. Others question its need because the investment chapter elsewhere affirms a party's right to regulate to protect legitimate welfare objectives and are concerned about the possible precedent it may set for other products or sectors. Still others, particularly in the tobacco industry, oppose the carve-out as discriminatory against a legally-traded product. Breach of "Investment Agreement" and ISDS . In addition to permitting an investor to seek ISDS for alleged violations of TPP's core investor protections, TPP also allows an investor to pursue ISDS for a breach of an "investment agreement" (commonly called a "breach of contract") between an investor and a government. At the same time, TPP imposes limits on the use of ISDS to challenge investment agreement breaches, including, broadly speaking, allowing its use only if the investment agreement was signed after TPP's entry into force and the underlying agreement does not include an international arbitration clause. Mexico, Peru, and Canada include additional limitations on the use of ISDS for breaches of investment agreements. For instance, Mexico exempts from ISDS breaches of investment agreements if doing so would be inconsistent with certain sector-specific Mexican laws, such as its hydrocarbon sector. Financial Services . The Financial Services Chapter provides access to ISDS to resolve certain disputes concerning covered financial services investments. In contrast to prior U.S. FTAs, it allows investors to challenge certain actions by parties for alleged breaches of the MST obligation. Like some other U.S. investment agreements, TPP has a "prudential exception" allowing a party to employ measures for prudential reasons or to ensure the financial system's integrity and stability. The prudential exception in TPP appears to be broader than KORUS because it may be invoked with respect to obligations under the entire agreement except for those in goods and goods-related chapters, whereas the prudential exception in KORUS appears to be restricted to a few select chapters of that agreement (financial services, investment, telecommunications, cross-border trade in services concerning the supply of financial services by an investment). TPP also includes a state-to-state arbitration mechanism constituted under its general dispute settlement provisions that may be used when a party invokes a prudential exception as a defense to an ISDS claim and absent a joint determination by both parties that the regulation is exempt. KORUS also includes a state-to-state arbitration mechanism when a prudential exception is invoked as a defense, but it does not appear to be constituted under KORUS's general dispute settlement provisions. Exceptions . As with past FTAs, the TPP Investment Chapter has a number of country-specific exemptions. Some of these highlighted by U.S. business groups, include Foreign Investment Reviews. Under TPP, Australia, Canada, Mexico, and New Zealand are exempt from ISDS claims stemming from decisions by these countries under specified laws to reject certain types of investment. Claims Already Filed in Court or Administrative Tribunal . TPP exempts Chile, Mexico, Peru, and Vietnam from ISDS claims that investors have already submitted before a court or administrative tribunal in those countries. These exemptions illustrate the multiple interests with which investor protections may intersect. For example, in terms of claims exemptions, on the one hand, governments may have an interest in reducing duplicative actions. On the other hand, some business groups are concerned that such a prohibition may cause some investors (particularly small investors with limited experience) to lose access to ISDS by raising such issues in local proceedings. Nonco n forming Measures (NCMs) . Parties agreed to apply TPP's core investor protections on a "negative-list basis" to all sectors and activities except where they specifically took an exception (known as an NCM). Annex I lists each party's current measures that would otherwise violate the Investment Chapter, but which a party has deemed necessary to maintain. For these, the party agreed to a "standstill," (to not to make the measure more restrictive in the future); and also agreed to a "ratchet" (to use any future liberalization of a measure as the new benchmark for the standstill). TPP includes certain limits (exceptions) on the ratchet mechanism for Vietnam for the first three years after TPP's entry into force under specified conditions. In addition, New Zealand raised the monetary threshold for screening investments from TPP countries and the threshold will increase if New Zealand negotiates higher thresholds in other agreements. Annex II contains measures and policies on which a party retains full discretion in the future. NCMs vary by party and include restrictions on foreign ownership limitations and operation and on branch numbers, asset requirements, and residency or nationality requirements, for specified investments. On one hand, NCMs may allow parties the flexibility to undertake obligations in a manner sensitive to their needs and interests, while on the other hand, expansive NCMs may limit the extent to which TPP liberalizes investment in TPP countries. In Annex III, Malaysia has also exempted its "best interest to Malaysia" test for approving foreign investment in financial services. One of the more controversial issues of the TPP pertains to the scope and depth of provisions on worker rights. Supporters of strong worker rights, such as labor unions and certain nongovernment organizations (NGOs), are concerned that failure to promote and implement these rights, including protection of the right to organize and bargain collectively, could adversely affect wages and working conditions in other countries. This, in turn, could further increase competitive pressures on U.S. workers. Worker rights provisions in U.S. trade agreements have evolved over time. NAFTA included labor provisions in a side agreement that required all parties to enforce their own labor laws. The side agreement includes a consultation mechanism for addressing labor disputes and a special labor dispute settlement procedure. The enforcement mechanism applies mainly to a party's failure to enforce its own labor laws. Under provisions of the 2002 TPA, seven subsequent FTAs included a similar provision within the main text of the agreement. More recently, internationally recognized labor principles were included in FTAs with Peru, Colombia, Panama, and South Korea consistent with the May 10 th Agreement (see text box above). These four FTAs require parties to adopt and maintain in their statutes and regulations core labor principles of the International Labor Organization (ILO) (ILO Declaration). They also required countries to enforce their labor laws and not to waive or derogate from those laws to attract trade and investment. These provisions are enforceable under the same dispute settlement procedures that apply to other provisions of the FTA, and violations are subject to the same potential trade sanctions. These provisions are continued in the TPP. Labor and civil rights groups have raised concerns about the effects of the TPP on workers. Some labor leaders contend that the TPP's labor provisions are weak and that the agreement would provide incentives for businesses to move U.S. jobs to countries with poor protections for worker rights, such as Brunei, Malaysia, Mexico, and Vietnam. Some Members of Congress are particularly concerned about Vietnam. In order to comply with TPP labor obligations, Vietnam would have to make significant reforms to its labor regime. Some policymakers question whether this is possible. Others are concerned about labor conditions in Brunei, Malaysia, and Mexico and whether these countries would be able to meet TPP labor obligations. Proponents of the agreement contend that the TPP would help these countries build their capacity to support labor protections, enhance economic growth, and support thousands of high-paying U.S. jobs, particularly in the high tech and electronics sectors. The Obama Administration asserts that the TPP includes the strongest labor standards of any existing U.S. FTA and that it would allow the United States to "write the rules of the road in the 21 st century," especially in the Asia-Pacific region. TPP labor provisions are in the main text of the agreement and subject to the same dispute settlement mechanism, including potential trade "sanctions," that applies to other chapters of the TPP. TPP parties agreed: to adopt and maintain laws and practices consistent with the ILO Declaration (see box above); to adopt and maintain laws and practices governing acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health; not to waive or derogate from labor laws and practices mentioned above in a manner affecting trade or investment; and not to fail to effectively enforce their labor laws through a sustained or recurring course of action or action in a manner affecting trade or investment. For the first time in a U.S. FTA, the parties also agreed to protect against degradation of fundamental worker rights or working conditions in export processing zones. If a party believes that another TPP country is not meeting its labor commitments, the agreement establishes a means for the public to raise concerns with TPP governments. The agreement also provides for transparency and access to fair and equitable administrative and judicial proceedings, as well as for a mechanism for cooperation and coordination on labor issues, including opportunities for stakeholder input in identifying areas of cooperation. In addition, and new to the TPP, the United States negotiated separate labor consistency agreements with Vietnam, Malaysia, and Brunei, countries of particular concern for the United States in terms of labor protections. The consistency plans commit Vietnam, Malaysia, and Brunei to undertake specific legal reforms and implement other measures related to freedom of association and collective bargaining, forced labor, child labor, employment discrimination, acceptable conditions of work, institutional reforms and capacity building, transparency and sharing of information, and a review mechanism for implementation of the plan. Most of the commitments must take place before the TPP can enter into force with these countries. All three plans are subject to labor consultations under the Labor Chapter and to the dispute settlement provisions of the TPP agreement. A previous labor consistency plan was negotiated with Colombia in conjunction with the U.S.-Colombia FTA, but it was not part of the FTA itself, nor subject to the dispute settlement provisions of that agreement. In addition, the United States can suspend additional tariff reductions on Vietnamese products five years after entry-into-force on a U.S. determination that Vietnam has not implemented the plan's provision on the establishment of grassroots labor unions. Like the chapter on worker rights, the scope and depth of the TPP's environmental provisions are the subject of ongoing debate. Supporters of environmental provisions seek to ensure minimum standards of environmental protection in partner countries to stem a perceived "race to the bottom," in which countries reduce protection or do not enforce existing standards to attract trade or investment. Supporters of strong environmental provisions in FTAs also note that while many of the provisions in the environmental chapter are covered by multilateral environmental agreements (MEAs), those agreements do not have effective enforcement mechanisms, whereas FTAs contain a dispute settlement mechanism that could result in penalties (i.e., withdrawal of trade concessions). Other stakeholders, however, contend that environmental provisions are not germane to, and should not be included in FTAs. Several countries in the TPP negotiations reportedly sought weaker disciplines, and sought to remove those commitments from being subject to dispute settlement. Others claim that the enforcement of environmental provisions in existing FTAs is lacking. They point to continued disputes over illegal logging in Peru, despite commitments to protect against such acts in the U.S.-Peru FTA. As with the U.S. position on worker rights, environmental provisions in U.S. FTAs have evolved over time. Environmental provisions were originally placed in side-letters in the NAFTA agreement containing "enforce your own laws" provisions and a special consultation mechanism and dispute settlement procedure. Under TPA provisions of the 2002 Trade Act, seven subsequent FTAs included a similar enforce your own laws provision within the main text of the agreement. The May 10 th Agreement provisions (see text box in appendix) added an affirmative obligation for FTA partner countries to adhere to multilateral environmental agreements (MEAs) and allowed for environmental disputes under the FTAs to access the full dispute settlement provisions of the agreements. These provisions generally were followed in the TPA-2015. The TPP environmental chapter reflects some aspects of recent U.S. FTAs, differs in some aspects, and addresses additional topics not previously considered. The chapter obligates each party: not to fail to effectively enforce its environmental laws through a sustained or recurring course of action or inaction to attract trade and investment; not to waive or derogate from such laws in a manner that weakens or reduces the protections afforded in those law to encourage trade or investment; and to ensure that its environmental laws and policies provide for and encourage high levels of protection, and also strive to improve its levels of environmental protection. The agreement also: recognizes the sovereign right of each party to establish its own levels of domestic environmental protection, its own regulatory priorities, and to adopt or modify its priorities accordingly; acknowledges a party's right to exercise discretion with regard to enforcement resources; and provides for the resolution of disputes; a party may seek recourse to the dispute settlement mechanism of the agreement, following the exhaustion of consultations. Recent U.S. FTAs have required the parties to "adopt, maintain, and implement" seven enumerated MEAs. TPP requires parties to affirm their commitment to implement the multilateral environmental agreements to which they are a party. However, TPP only requires the "adopt, maintain, and implement" language with regard to CITES (see below), but variously addresses protections contained in other MEAs. Parties "shall maintain" measures consistent with the Montreal Protocol, which is referenced by footnote. To comply with the MARPOL agreement, each party "shall take measures" to prevent the protection of the marine environment from ships and maintains statutes in compliance with MARPOL, also referenced by footnote. The other MEAs are not referenced, but some provisions address the subject matter of those accords. One reason for this difference in treatment of the MEAs may be that all TPP parties are not signatories to each of the 7 accords. Fisheries and Fishing Subsidies. For the first time in an FTA, the TPP contains measures to combat overfishing and unsustainable utilization of fisheries, combats illegal, unreported and unregulated (IUU) fishing activities, and promotes conservation of marine mammals. Negotiations to restrict fishing subsidies occurred as part of the WTO Doha Round, but agreement remained elusive. The TPP requires the countries "to seek to operate" a fishing management system to prevent overfishing and overcapacity, reduce by-catch of nontarget species and juveniles, and promote the recovery of overfished stocks. It also prohibits specific subsidies that negatively affect stocks in an over-fished condition and prohibits subsidies to vessels engaged in IUU fishing. Subsidies negatively affecting fish stocks must be brought into conformity within three years, although Vietnam may request a two-year extension while it completes its stock assessment. TPP parties shall "promote the long term conservation of sharks, marine turtles, seabirds, and marine mammals." While measures concerning sharks "should include, as appropriate," collection of species data, fisheries by-catch mitigation, and finning prohibitions, these provisions have not been interpreted as not actually banning shark finning. Conservation. As noted above, TPP commits the parties to adopt, maintain, and implement laws and regulations to achieve compliance with the CITES treaty. The parties commit to combat the illegal take and trade in wild flora and fauna, including to prevent the trade of wild flora and fauna in violation of the laws of other countries. While TPP does not implement the Ramsar Convention protecting wetlands, it "commits" the parties to take measures to protect "specially protected natural areas, for example, wetlands." The chapter mentions illegal logging in the context of "exchanging information and practices" for protecting wild flora and fauna, and promoting government capacity for sustainable forest management. The parties also recognize the importance of cooperative measures—while not making any affirmative commitments—pertaining to trade and biodiversity, invasive alien species, transition to a low emissions economy, and the promotion of environmental goods and services. The volume of data transmitted across borders is growing ( Figure 7 ). With 43.4% of the world's population online today, cross-border data flows have increased 45 times since 2005. Digital trade includes not only end-products such as movies or video games, but also the means or "lifeblood" of the rest of the economy, enhancing productivity and overall competitiveness of an economy. Examples include transmitting information a manufacturer needs to manage global value chains, communication channels such as email and Voice over Internet Protocol (VoIP), and financial services used in e-commerce or electronic trading. In 2014, the United States exported $399.7 billion in digitally-deliverable services, and imported $240.8 billion, creating a surplus of $158.9 billion. Digitally-delivered services were half of all U.S. services imports and 56% of services exports. Furthermore, the United States is the largest producer of digital content that Internet users consume worldwide. Congress established principal negotiating objectives in TPA-2015 on digital trade in goods and services, as well as on cross-border data flows. The objectives include equal treatment of electronically delivered goods and services, as compared to physical products, protection of cross-border data flows, and prevention of data localization regulations, as well as duties on electronic transmissions. The Industry Trade Advisory Council on Information and Communication Technologies Services and Electronic Commerce (ITAC 8), in its report to USTR, endorsed the TPP, finding that the agreement meets the objectives, promotes the economic interests of the United States, and provides equity and reciprocity for the sectors represented by the ITAC. While most industry stakeholders support the digital trade provisions as breaking new ground in this emerging area, some have raised concerns over certain exceptions, particularly the exclusion of financial services from the data localization provisions (see Financial Services section). Other stakeholder groups have argued that the provisions go too far and may limit a government's flexibility to adopt strict privacy laws. The electronic commerce chapter broadly covers all industries but explicitly excludes government procurement and financial services, which each have separate chapters. Overall, the chapter aims to promote digital trade and the free flow of information, and to ensure an open internet. While the majority of the obligations related to digital trade are found in the E-commerce chapter, there are relevant provisions in other chapters, including the Financial Services, IPR, Technical Barriers to Trade, and Telecommunications. Some of the innovations in TPP on d igital trade include provisions to : prohibit cross-border data flows restrictions and data localization requirements, except for financial services and government procurement; prohibit requirements for source code disclosure or transfer as a condition for market access, with exceptions; require parties to have online consumer protection and anti-spam laws, and a legal framework on privacy; prohibit requiring technology transfer or access to proprietary information for products using cryptography; clarify IPR enforcement rules to provide criminal penalties for trade secret cybertheft; encourage cooperation between parties on e-commerce to assist Small and Medium-Sized Enterprises (SMEs), and on privacy and consumer protection; promote cooperation on cybersecurity; safeguard cross-border electronic card payment services; and cover mobile service providers and promotes cooperation for international roaming charges. U.S. government and business stakeholders have raised concerns over competition with companies linked to the state through ownership or influence. As a result, they supported new specific TPP disciplines to address such competition. According to analysis by the OECD, state-owned enterprises (SOEs), which traditionally have focused primarily on domestic markets, increasingly compete with international private sector actors. Governments may provide these state-owned or -supported businesses with preferential treatment—such as subsidies, low cost credit, preferential access to government procurement, and a different regulatory environment—compared to private sector competitors, thereby distorting competition and market access. Such advantages may also be directed toward companies not owned but significantly favored or supported by a government. In the context of the TPP, the SOE presence in Vietnam, which accounted for over 40% of all Vietnamese enterprise pre-tax profits in 2013, has been a particular focus, although Malaysia and Singapore also have important SOE sectors. In addition, as the TPP could become a template for a larger Asia-Pacific FTA or future WTO negotiations, wider applicability of these provisions to SOEs in other countries, particularly China, may be envisioned. In TPA-2015, Congress supported new rules and disciplines on SOEs in U.S. trade agreements as a principal negotiating objective. It directs the Administration to eliminate or prevent unfair trade advantages by state-owned or state-controlled enterprises and to ensure they act on the basis of commercial considerations. Reaction to the SOE provisions in TPP is mixed. Most groups argue that these disciplines represent a positive first step in establishing international commitments on SOEs and their competition with private firms. Given the potential impact of these provisions on a range of industries, several private sector Industry Trade Advisory Committees (ITAC) generally express support for the SOE commitments. Many of these reports, however, also acknowledge that there are a number of exceptions to these disciplines (nonconforming measures), including all sub-federal SOE activity, and they express concern about the effectiveness and enforceability of the commitments in practice. Other observers are more critical of the provisions, viewing their broad exemptions as a negative precedent. These analysts take particular issue with what they view as a limited definition of SOEs in the agreement, and argue that TPP negotiators should have directly restricted the presence of SOEs in certain sectors rather than attempt to address their potential harm to private sector actors. Chapter 17 of the TPP includes the most substantive disciplines on SOEs of any U.S. FTA. NAFTA and subsequent U.S. FTAs with Australia, Chile, Colombia, Peru, and South Korea have minimal disciplines on what they term "state enterprises." Though the specific details vary among these agreements, they are generally limited to two commitments: nondiscriminatory treatment in the sale of goods or services by state enterprises, and clarification that other commitments in the agreement also apply to such enterprises, whenever the state delegates some type of regulatory or administrative authority to the state enterprise. The U.S.-Singapore FTA includes somewhat more extensive provisions on SOEs. Related multilateral commitments under the WTO include Article XVII of the General Agreement on Tariffs and Trade (GATT 1994), but this provision focuses narrowly on state-trading enterprises, entities understood to have some influence on the exports and imports of a particular good. The provisions in TPP go beyond these existing commitments to address potential commercial disadvantages to private sector firms from state-supported foreign competitors receiving preferential treatment. Like previous U.S. FTAs, most TPP provisions on SOEs also apply to designated monopolies. TPP also includes an agreement to conduct further negotiations on SOEs after 5 years with the intent to reduce nonconforming measures, and extend SOE disciplines to cover competition in the services sector in a non-TPP market. Key provisions include: SOE Definition . Refers to an enterprise principally engaged in commercial activities if the government owns more than 50% of capital share, controls more than 50% of voting rights, or selects a majority of board members. Delegated Authority . Would require, like previous U.S. FTAs, that SOEs and designated monopolies adhere to all provisions of the agreement when governments delegate to them regulatory or administrative authority. Nondiscriminatory Treatment/Commercial Considerations . Would require SOEs and designated monopolies of a party to make their purchase and sale decisions based on commercial considerations and in a nondiscriminatory manner with respect to goods and services bought or sold by other TPP country firms. Non c ommercial Assistance/Adverse Effects/Injury. Would prohibit noncommercial assistance (i.e., funds, loans, or goods and services at more favorable rates than commercially available) provided by or to SOEs, if it adversely affects the interests of other TPP parties or causes injury to another TPP country's domestic industry. Domestic supply of services by SOEs would generally be excluded from these provisions. Transparency. Would require each TPP country to provide a list of all SOEs within six months of entry into force. Also would require countries to respond to requests for information regarding ownership, revenue, and management of SOEs and noncommercial assistance received. Brunei, Malaysia, and Vietnam are generally exempt from the chapter's transparency commitments for five years, though certain country-specific transparency commitments would apply. Exceptions. Generally excluded from these provisions are: SOEs with revenue below a certain threshold that adjusts for price level changes in three year intervals (starting at 200 million SDR generally and 500 million SDR for Brunei, Malaysia, and Vietnam for 5 years); a party's supply of goods and services for its own government functions; sub-central SOEs and designated monopolies for nearly all commitments; government actions in economic emergencies; government procurement; sovereign wealth funds; pension funds; and trade and investment financing provided it is not intended to displace commercially available financing or offered on terms more favorable than available through the market. In addition to these general exclusions there are a number of country-specific exemptions to some or all of the disciplines. Many of these exclusions relate to SOEs owned by sovereign wealth funds, as well as those dealing with natural resources, development financing, including housing finance, and national broadcasting associations. Most countries have also exempted government actions to support indigenous peoples. For some Members of Congress, a key issue in the TPP debate has been how to combat the "unfair" exchange rate policies of other countries. Some Members of Congress and policy experts argue that U.S. companies and jobs have been adversely affected by the exchange rate policies adopted by China, Japan, and a number of other countries. They allege that these countries use policies to "manipulate" the value of their currency in order to gain an unfair trade advantage against other countries, including the United States. Given the impact exchange rate values can have on trade flows, some Members have advocated that currency manipulation be addressed in trade agreements, including the TPP. Other Members and policy experts have questioned whether currency manipulation is a significant problem, how it can be measured, and whether it can be addressed effectively in trade agreements. They raise questions about whether government policies have long-term effects on exchange rates, whether it is possible to differentiate between "manipulation" and legitimate central bank activities, and the net effect of currency manipulation on the U.S. economy. They have also raised concerns that more aggressive measures to combat currency manipulation could lead to a tariff war or put restrictions on U.S. monetary policy. The June TPA-2015 included, for the first time, a principal negotiating objective addressing currency manipulation, calling on negotiators to seek related provisions. The principal negotiating objective outlined a number of possible remedies to prevent and combat unfair currency practices, including enforceable rules, transparency, reporting, monitoring, and cooperative mechanisms. Largely in response to the TPA-2015, monetary authorities from the 12 TPP countries initiated negotiations and in November 2015 released a declaration to address unfair currency practices. While the declaration was released concurrently with the text of the TPP, it is a separate agreement from the TPP. The declaration has three major parts: Commitment to A void Manipulation . Reaffirms IMF commitments to avoid manipulating exchange rates to gain an unfair competitive advantage, and commits countries to pursue exchange rate policies that reflect underlying economic fundamentals, avoid persistent exchange rate misalignments, and refrain from competitive devaluations and exchange rate targeting for competitive purposes. Transparency and Reporting . Requires public release of relevant data, including interventions in foreign exchange markets and foreign reserve holdings, as well as IMF's annual assessment of their exchange rate. Multilateral D ialogue . Establishes a group of TPP macroeconomic officials, with possible IMF participation, to meet at least annually to discuss macroeconomic and exchange rate policy issues, including transparency or reporting, and policy responses to address imbalances. The joint declaration would take effect when TPP enters into force and would apply to countries that accede to the TPP in the future, subject to additional transparency or other conditions determined by the existing TPP countries. The Treasury Department emphasizes that this declaration, for the first time in the context of a free trade agreement, addresses unfair currency practices by promoting transparency and accountability. However, the declaration does not include any enforcement mechanism on currency manipulation, the inclusion of which some Members advocated. Technical barriers to trade (TBT) are standards and regulations that are intended ostensibly to protect the health and safety of consumers or other legitimate purposes, but through design or implementation, may discriminate against imports. In order to minimize trade distortion, WTO members must adhere to the Agreement on Technical Barriers to Trade. The WTO TBT Agreement and subsequent U.S. FTA TBT chapters cover voluntary standards that industries apply, technical regulations that governments impose for health and safety purposes, and assessment procedures that governments employ to determine that a product meets required standards. FTA provisions establish rules and procedures for member countries to follow, including making sure that standards, technical regulations, and conforming assessment procedures are applied without discrimination and in a manner not more trade restrictive than necessary. It addition, they require that members practice transparency as regulations are developed and applied, that international standards are used where appropriate, and that the domestic technical regulations of trading partners are recognized as equivalent to domestic regulations when possible. A key provision of the WTO TBT Agreement is that members have a central point of inquiry from which firms can ask for information on standards and regulations. The TPP builds on the TBT agreement and prior U.S. FTAs in several ways. It would: provide opportunities for partner countries to comment on proposed standards and regulations and the implementation of regulations; require nondiscriminatory treatment for conformity assessment bodies, including nongovernmental bodies; extend transparency obligations to include placing new TBT proposals and rules on a single website, broadening the range of TBT measures notified to the WTO; allow interested stakeholders from others parties to participate in the development of technical regulations, standards, and conformity assessment procedures by central government bodies, and adopt U.S. style notice and comment periods; mandate a "reasonable interval"—generally defined as no less than 6 months—between adoption and implementation of new standards, as well as business compliance with new standards; establish a Committee on Technical Barriers to Trade to promote and monitor the implementation and administration of the agreement and strengthen cooperation. The TBT chapter includes seven sectoral annexes: wine and distilled spirits, pharmaceuticals, medical devices, cosmetics, proprietary formulas for prepackaged food and food additives, information and communications technology products, and organic products. These include sector-specific obligations aimed at reducing unnecessary barriers to trade in these products. With average tariffs already low in many countries throughout the Asia-Pacific, nontariff barriers, including inefficient and unpredictable regulatory processes, can be a significant impediment to market access for U.S. goods and services exports. While nontariff and regulatory barriers are addressed in provisions throughout the agreement, the TPP includes a new stand-alone chapter specifically on regulatory coherence. The goal of this new chapter, according to the USTR, is to ensure a regulatory environment throughout the Asia-Pacific that includes hallmarks of the U.S. regulatory system, such as transparency, impartiality, due process, and coordination across government, while affirming the rights of TPP countries to regulate their economies to promote legitimate public policy objectives. To achieve these dual goals the chapter focuses on recognized best practices and good governance frameworks, rather than proscribing specific regulatory actions or outcomes. The regulatory coherence chapter recommends that TPP partner countries "endeavor" to establish domestic regulatory structures similar to the U.S. Office of Information and Regulatory Affairs in the Office of Management and Budget, a venue to vet proposed regulations and their compliance with domestic law and policy, as well as with trade agreements and other international obligations. Aside from seeking to assure regulatory consistency among various domestic agencies, TPP countries would also be encouraged to conduct regulatory impact assessments that would assess the need for a given regulation, conduct cost-benefit analysis, and assess alternatives to the proposed regulation, as well as seek to assure transparency and openness in the rule-making process. TPP would establish a regulatory coherence committee among TPP members to review implementation of the chapter's commitments and consider future priorities related to regulatory coherence. In addition, TPP would encourage cooperation among the countries on regulatory coherence activities, and would require notification to the committee of steps taken to implement the chapter. While the agreement establishes new commitments related to regulatory process, the commitments appear largely to require self-enforcement among the 12 countries. Each TPP party would make its own determination of what regulations are covered under the agreement. Nothing in the chapter is subject to TPP's dispute settlement mechanism. The debate over access to medicines encompasses other issues beyond pharmaceutical patent protections. Several TPP negotiating partners administer a national formulary for medicines purchased by the government for their national health services. These formularies often rely on generic drugs to the extent possible to maintain availability and contain costs. The U.S. pharmaceutical industry has expressed concern that the practices and procedures in national healthcare programs, including New Zealand's Pharmaceutical Management Agency (PHARMAC), which maintains the New Zealand formulary, put "innovative pharmaceutical products," often made in the United States, at a disadvantage. They contend that access to the country's health care technology markets can be blocked by government's use of nontransparent procedures that do not provide due process. The annex on "Transparency and Procedural Fairness for Pharmaceutical Products and Medical Devices" (Annex 26-A) is located in the chapter on Transparency and Anti-corruption (Chapter 26). As its name suggests, it is dedicated to promoting transparent and fair procedures to parties, concerning the listing of new pharmaceutical products or medical devices for reimbursement purposes. The key provision of the annex requires countries to make available to an applicant either (1) an independent review procedure, or (2) an internal review process, to reconsider a determination not to list a pharmaceutical or medical device for reimbursement. The addition of an internal review process differentiates the TPP from KORUS, which required the establishment of an independent review process. In addition, the parties agreed to consider reimbursement funding in a specified time frame. The annex does not apply to government procurement of pharmaceuticals or medicals, nor does it "modify a Party's system of health care in any other respect." The provisions are not subject either to state-to-state or investor-state dispute settlement. Customs valuation and trade facilitation have been long-standing, if unheralded, provisions in U.S. FTAs that aim to ease and expedite the passage of goods over borders through streamlined, transparent, and more accountable customs procedures, and reduce associated transaction costs. OECD research has shown that addressing these issues, which provide the basic framework for how goods move from country to country, can reduce overall trade costs by 10-15%, with the greatest reduction in costs in lower income countries. Because of the potential benefits to the global trading system, improvements in customs and logistical procedures have figured prominently in WTO negotiations and form the core of the 2013 WTO Trade Facilitation Agreement (TFA). Such provisions have taken on new significance as global supply chains have increased the number of times intermediate goods cross borders and, hence, the cost of customs bottlenecks to the world economy. Industry stakeholders generally support the commitments achieved on customs and trade facilitation in the TPP. On the whole, the Industry Trade Advisory Committee on Customs Issues (ITAC 14) found the agreement "fair and balanced" with similar but expanded provisions to recent agreements. ITAC 14 and other advisory committees, including those representing the services industries, have expressed concerns over the lack of a fixed de minimis threshold for customs duties given the importance of this provision in streamlining trade. They note that the parties have agreed to review this issue periodically and encourage the U.S. government to pursue a commercially relevant value. The TPP chapter on customs and trade facilitation would generally seek to ensure an efficient, timely, and transparent customs process, with relevant information readily available and easily accessible to businesses. Issues addressed include publication and sharing among TPP parties of customs information, the release of goods and issuance of advance rulings by customs authorities, treatment of express delivery shipments, nature of penalties for violation of customs laws, and risk management techniques for targeting inspection efforts on high-risk shipments. Given the magnitude and frequency of U.S. trade with TPP partners, changes in customs procedures could have a significant impact on companies engaged in trade throughout the region. Some commitments in TPP are similar to those in previous U.S. trade agreements and are already in force between the United States and its current FTA partners. On some customs issues, the TPP has more extensive commitments than previous FTAs. In other aspects, TPP commitments are less stringent. Generally, the TPP would go beyond the commitments included in the WTO TFA. Differences with existing agreements include: Automation . A new provision would encourage creation of a single-access window whereby importers and exporters can electronically complete any requirements in one entry point. Advance Rulings . TPP would require advance rulings to be issued within 150 days of receipt by the customs authority, an increase over the 90 days allowed in the KORUS FTA. There is no deadline in the WTO TFA. Advice/Information . A new provision would require parties to provide an expeditious response to requests for information regarding issues such as quotas, country of origin markings, and eligibility requirements for repaired and altered goods. Express Shipments . TPP would require special customs procedures for express shipments, including release within six hours, and a de minimi s threshold—no specific amount is required—below which goods are not subject to customs duties. The KORUS FTA required release within four hours for express shipment and fixed the de minimis threshold at $200 or more. Penalties . A new provision would place parameters on penalties imposed by a customs administration that go beyond previous U.S. FTAs. Such penalties may be imposed only to the person legally responsible for the breach of law, must be commensurate with the degree and severity of the breach, must be accompanied by an explanation in writing, and proceedings must be initiated within a fixed and finite time period. Release of Goods . TPP would require general release of goods no longer than the time required to comply with laws and within 48 hours of arrival, where possible. New provisions would provide some protections to importers when customs authorities release goods while holding some type of financial collateral. National competition laws and regulations are intended to protect consumers by ensuring that one firm does not so dominate a sector of the economy as to inhibit market entry and stifle competition. Some U.S. FTAs have included provisions to limit the trade-distorting effects of such laws. Among other things, U.S. FTAs require that the United States and the partner country(ies) inform persons from a partner country, who may be subject to administrative actions under domestic antitrust laws, of related hearings and provide them the opportunity to make their case. Under these FTAs, the partner countries agree to cooperate in enforcing competition laws through the exchange of information and consultation. The TPP includes commitments on competition policy similar to previous U.S. FTAs, including that such commitments are not subject to dispute settlement. Previously, the limited U.S. FTA commitments on SOEs and designated monopolies were included in the competition policy chapter. In TPP, these issues are addressed in a separate and more extensive chapter (see " State-Owned Enterprises "). TPP includes some commitments that go beyond the recent KORUS FTA. These include provisions related to: protection of confidential business information, private rights of action in pursuing enforcement of national competition laws, and laws protecting consumers from fraudulent or deceptive commercial practices. In addition to the general carve out from dispute settlement, the competition provisions largely will not apply to Brunei until after either 10 years or its establishment of a national competition authority and laws. Transparency. Like the commitments on regulatory coherence, the TPP provisions on transparency relate to the broader governance framework within which each TPP party will administer its laws, rules, and regulations that may affect TPP commitments. These provisions largely follow those included in previous U.S. FTAs, including KORUS. Such provisions would require the publication of all TPP-relevant measures a country may take, with time allowed for comments before such measures take effect. TPP would require countries to "endeavor to publish" proposed regulations no less than 60 days prior to the date on which comments are due, whereas KORUS requires that parties "should in most cases" publish not less than 40 days before comments are due. The agreement would also require due process with respect to administrative proceedings, including a review and appeal of such determinations. Anti-Corruption. TPP also includes commitments that would require measures to fight corruption, a number of which are not included in the KORUS FTA. Like KORUS, the TPP would require laws or measures making corruption and bribery criminal offenses, substantive penalties for such offenses, and protections for parties that report bribery. TPP includes additional commitments, not found in KORUS, such as requiring monetary sanctions for bribery offences and disallowing the deduction of those sanctions from tax liabilities, prohibiting specific corrupt acts relating to financial reporting and accounting standards, and requiring that no party fail to effectively enforce its anti-corruption commitments as a means to encourage trade and investment, subject to discretion on domestic allocation of resources. TPP also includes language that would require parties to endeavor to adopt a number of measures to prevent corruption among public officials and the private sector such as training, transparency, and disciplinary actions. The agreement would also require Japan to ratify the U.N. Convention against Corru ption (UNCAC). As of December 1, 2015, Japan is the only TPP country that has not yet ratified UNCAC. Dispute settlement applies both to the transparency and anti-corruption commitments with some limitations with respect to enforcement of anti-corruption laws. Additional commitments related to transparency and procedural fairness for pharmaceuticals and medical devices are included in an annex to this chapter. For more on these commitments, see " Transparency and Pricing of Health Care Technology and Pharmaceuticals ." In its chapter on transparency, the KORUS FTA also includes a provision that prohibits the United States and South Korea from discouraging their residents' purchase of goods and services from one another. A similar clause is not found in TPP. Trade remedies are measures designed to provide relief to domestic industries that have been injured or threatened with injury by imports. They are regarded by many in Congress as an important trade policy tool to mitigate the adverse effects of unfairly traded imports and import surges on U.S. industries and workers. The three most commonly used trade remedies are: (1) antidumping (AD) remedies, which are designed to provide relief from the adverse price effects of imports sold at less than fair-market value; (2) countervailing duty (CVD) remedies, which are used to counter the adverse effects on domestic industry of foreign government subsidies that lower the cost of imports; and (3) safeguard actions, which are employed to permit temporary relief so that domestic industries can adjust to the adverse effects of surges in fairly-traded imports. These actions are sanctioned by the WTO as long as they are undertaken in a nondiscriminatory and transparent manner and are consistent with rules specified in WTO agreements. Congress has repeatedly insisted, including most recently through the TPA-2015, that the United States retain the right to use trade remedies to counter unfair trade practices and import surges and rigorously enforce its trade laws. This objective is reflected in existing U.S. FTAs. TPP would preserve each party's rights and obligations under the General Agreement on Tariffs and Trade (GATT) regarding global safeguard and AD/CVD measures, as previous U.S. trade agreements have done. TPP includes additional provisions on transparency and due process in pursuing AD/CVD remedies. With regard to safeguard actions, TPP, like previous U.S. FTAs, also describes the precise terms of their use in the context of injury due to increased imports under the agreement, including guidelines on addressing import injury from multiple parties. Following an investigation and affirmative determination of injury by relevant domestic authorities, TPP would allow for a withdrawal of trade concessions for affected products (i.e., returning duties to their pre-agreement levels). The agreement also stipulates certain standards regarding safeguard measures such as their duration (generally no more than two years) and would require notification among the TPP parties of any safeguard actions. If one party implements a safeguard measure, TPP would provide that other affected parties be afforded additional liberalization or may suspend tariff concessions of an equivalent nature. A notable aspect of the TPP is the variation among partners in terms of economic development. TPP does not have a distinct set of provisions applicable only to developed or developing countries. Some of the countries, however, particularly Brunei, Malaysia, and Vietnam, have longer phase-in periods before several of their commitments take full effect, and many have extensive nonconforming measures excluding certain sectors, industries, and practices from various TPP provisions. The agreement includes two related chapters (development, and cooperation and capacity building) addressing issues dealing with this variation in economic status among the countries. Neither chapter is subject to dispute settlement and the commitments in both are largely hortatory, with the exception of establishing committees to exchange information and discuss further possible actions. The chapter on development would require TPP countries to recognize the importance of broad-based economic growth, consider activities to help women take advantage of the agreement, and encourage developing skills in science and technology. The chapter on cooperation and capacity building would require the TPP countries to establish a contact person for coordination on capacity building, and would commit the countries to work to provide the resources necessary to implement the agreement. As in previous trade agreements, the TPP would not commit the United States to a particular level of funding for trade capacity building (TCB). The U.S. government, however, provides ongoing assistance to a number of FTA partners relating to implementation of trade agreement commitments. For example, a 2008-2011 U.S. Agency for International Development (USAID) project provided $6.2 million to support efforts by the Dominican Republic to implement the DR-CAFTA, including assistance related to customs, SPS, environmental standards, labor standards, and other provisions. TCB is a major component of U.S. foreign assistance—the United States committed $594 million to TCB in FY2014, with major categories including trade-related agriculture ($109.5 million), competition policy, business environment and governance ($69.4 million), trade-related labor ($56.9 million), and customs operations ($54.3 million). Small- and medium-sized enterprises (firms with less than 500 employees by the U.S. definition, or SMEs) account for the majority of firms involved in international trade (about 97%), but they account for a relatively small share of the value of direct U.S. trade (about 30%). In fact, in 2013, eight firms alone accounted for more than 10% of all U.S. exports and imports. SMEs, however, also participate in trade indirectly as suppliers, providing parts and components into the supply chain of larger, finished products that can be exported. That contribution may not always be reflected in U.S. trade data. Though SMEs represent a relatively small share of U.S. trade by value, they employ approximately half of the U.S. workforce in the nonfarm private sector. In addition, academic studies have shown that small businesses are important for job growth, but this appears to be due more to their age than their size—small firms are typically also young firms—suggesting policies aimed at job growth may be better targeted toward young firms than small firms. The characteristics of SMEs and their relatively small presence in U.S. trade have led to government efforts to improve SME access to international markets. The USTR commissioned a series of reports from the USITC regarding the role of SMEs in U.S. exporting activities. Those reports identified barriers limiting SME access to foreign markets, and surveyed SMEs for suggestions on policy changes that could ease SME exporting activities. An increased focus on FTAs and other trade agreements was among the top three most frequent responses provided. Seeking to enhance SME engagement in international trade, the TPP negotiators agreed to a stand-alone SME chapter. Although this goes beyond previous U.S. FTAs, the chapter includes few commitments. Disciplines would require TPP countries to make the agreement and some analysis of its SME-relevant provisions available on a website. In addition, TPP would establish a committee to consider further efforts to assist SMEs in trade matters. Nothing in the chapter would be subject to the agreement's dispute settlement mechanism. Negotiators originally described SME's ability to engage in trade as a "cross-cutting" issue in the TPP, noting that disciplines throughout the agreement could impact SMEs. For example, new provisions on digital trade could be salient for SMEs in allowing them to reach new markets. While stakeholders generally support the transparency measures in TPP for SMEs, some have argued that negotiators missed an opportunity to facilitate trade for SMEs by failing to establish a fixed de minimis threshold on customs shipments, the value beneath which imports receive expedited and duty-free customs treatment. They argue this would have been particularly beneficial for SMEs as a way to minimize burdensome customs procedures for small-value shipments. The TPP contains provisions related to dispute settlement and governance of the agreement. Given that the TPP is viewed as a "living agreement," it contains procedures for the accession of new members, the negotiation of new provisions, and the creation of a Free Trade Commission to oversee the agreement. Generally, U.S. FTAs have minimal structures; they do not have free-standing secretariats and TPP is no exception. From NAFTA onward, they have included a commission co-chaired by USTR and trade ministers of the respective parties to the agreement. In keeping with this practice, the TPP provides for the establishment of a Free Trade Commission (Commission). The Commission is tasked with: (1) supervising the implementation and operation of the agreement; (2) considering any proposals to amend or modify the agreement; (3) supervising work of committees established under the agreement; and (4) seeking to resolve disputes arising from its interpretation or application (also see dispute settlement, below). Examples of modifications could, for example, be agreements to accelerate tariff elimination, modify rules of origin, or amend the list of covered goods and services in the government procurement chapter. The Commission would meet within one year of the entry into force of the agreement and periodically as the parties decide thereafter. All decisions would be taken by consensus. Any changes to the agreement made by the Commission that require changes to U.S. law would need congressional approval. The TPP, as well as previous U.S. FTAs, provide options to resolve disputes arising under the agreement. These are in addition to procedures with regard to investor-state dispute resolution (discussed above). In general, TPP is designed to resolve disputes in a cooperative manner. A party first seeks redress of a grievance through a request for consultation with the other party. These steps include: initial consultations between the parties; good offices, conciliation, or mediation; and (if no resolution); and establishment of a dispute settlement panel. Panels would be composed of three arbiters, of whom each side appoints one and the third is appointed by mutual consent. Failing that, the third is selected from a list of individuals who are not nationals of either side. After the panel makes its decision, the unsuccessful party would be expected to remedy the measure or practice under dispute. If it does not, compensation, suspension of benefits, or fines have been traditional remedies. In cases in which a dispute is common to both WTO and FTA rules, a party can choose the forum in which to bring the dispute, but cannot bring the dispute to multiple fora. Although State-State dispute settlement use has been infrequent under U.S. FTAs, the size of the potential TPP, the inclusion of new members, and the negotiation of new provisions may cause increased utilization of the dispute settlement forum among the parties. The applicability of DS for certain provisions was an issue in the negotiations. For example, the labor consistency plans for Vietnam, Malaysia, and Brunei are subject to DS, whereas Colombia's separate labor action plan was not subject to DS. As noted above, the applicability of DS to the environmental provisions was a subject of contention in the negotiations. Some provisions not subject to dispute settlement include: the regulatory coherence chapter; the competition chapter; the SME, development, and cooperation and capacity building chapters; certain commitments by Malaysia in the SOE chapter for two years after entry into force; and the Annex on pharmaceutical and medical device reimbursement. The TPP is envisaged as a "living agreement," one that is open to new members willing to sign up to its commitments and to addressing new issues as they evolve. The TPP provides that countries can amend the agreement by consensus, through consideration by the TPP Commission. Such an amendment, however, could only take effect after each party's legal process is completed. Any amendment requiring changes to U.S. law would need passage of implementing legislation to take effect. The TPP provides for accession by "any State or separate customs territory that is a member of APEC," or other state by consensus of the parties, that is prepared to meet the standards of the agreement. Following a request to join addressed to the depository of the agreement (New Zealand), the TPP Commission would establish a working group to negotiate the proposed terms and conditions. All parties must agree to the terms and conditions negotiated by the working group through their domestic ratification process. For the United States, that would mean the introduction and passage of implementing legislation by Congress. While the expansion of the TPP's membership beyond Asia-Pacific countries has been contemplated, as a trans-Pacific agreement, to date, it has focused on APEC countries. Of these, there are many potential candidates, from relatively advanced economies such as South Korea and Taiwan, to middle-income states with dynamic economies and youthful populations like Thailand or the Philippines. Other countries beyond APEC, such as Colombia and Costa Rica, have expressed interest, and it is conceivable that additional countries or trade blocs beyond the Pacific shores could link up to the agreement in the future. Policymakers in TPP countries have ventured that China may seek to join at some point, provided that it could adhere to the standards of the agreement. The accession process raises the question of whether a country, especially one with political or economic heft, can be expected simply to join an agreement already negotiated or whether it would or should have input on the existing agreement, especially if the goal is to produce a free trade area for the Asia-Pacific, or beyond. Yet, reopening the agreement's substantive provisions with each new entrant—as opposed to its market access provisions which presumably would need to be negotiated with each existing member regardless—offers up its own difficulties. The WTO accession process, whereby countries agree to the established WTO rules, but negotiate on market access, could serve as a template. Each party to the TPP previously has concluded FTAs with multiple TPP members. This circumstance has raised the issue of the relationship of the TPP to previous agreements. Article 1.2 of TPP declares the intention of the parties for it to "coexist" with their international agreements, and in a situation of inconsistency, for the relevant parties to work toward a mutually agreeable solution. The Vienna Convention on the Law of Treaties also provides guidance on the interpretation of precedence between agreements: When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation .... the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty. (Article 30.3) This provision can be interpreted to mean that the latter treaty applies when there is a conflict, but that an earlier provision could apply in situations where the subject matter of a provision of the earlier treaty is not addressed in the later agreement. In cases where the market access provisions differ between a previous agreement and a later one, it could be up to the exporter as to whether to seek the benefits under the old agreement or the new. Given that the new agreement is likely to achieve further liberalization, the new agreement would most likely be used by the exporter. However, in some cases, such as the phased elimination of tariffs or cases of more favorable ROO, exporters may continue to invoke the provisions of the old agreement, at least until the transition periods of the new agreement are completed. Congress has taken a strong interest in the TPP since the negotiations were launched in 2008. Hearings have been held, and many Members have expressed views on the negotiations through letters and consultations with the Administration and with stakeholder groups. Congress may consider the agreement from several perspectives if it considers implementing legislation. As the largest FTA negotiated by the United States, the TPP brings together a large and expanding group of countries representing various levels of development. Likewise, with 30 chapters in the agreement, it is the most comprehensive FTA in terms of breadth of commitments undertaken by the United States. On one hand, the TPP would incorporate provisions on new trade barriers, such as digital trade and additional intellectual property rights. On the other hand, certain aspects of the agreement differ from previous U.S. FTAs, and are considered by some stakeholders as less ambitious. For example, the agreement includes the longest U.S. tariff phase-out (30 years) ever in an FTA and excludes more agricultural product lines from complete liberalization than many previous FTAs. Some industry stakeholders have raised concerns over such issues as: less than 12 years of data exclusivity for biologic drugs, as found in U.S. law; the exclusion of tobacco control measures from the ISDS procedures of the investment chapter, unlike any prior FTA; the exclusion of financial services from disciplines on data localization, one of the TPP's innovative provisions; and the more flexible rules of origin for autos and auto parts than those prescribed in NAFTA, among other issues. Meanwhile, some NGO stakeholders were disappointed in certain provisions in the environmental chapter, as compared with previous U.S. FTAs. The negotiators and other stakeholders, however, would argue that these provisions were the result of compromise in order to achieve a final agreement among such a diverse membership. Key questions for Congress include: Did the United States achieve its objective of creating a "comprehensive, high-standard" agreement, including in comparison with previous FTAs and commitments in the WTO? Has the TPP set the appropriate framework and precedent for future trade negotiations, particularly on new issues? TPA-2015 sets forth U.S. negotiating objectives for future U.S. trade agreements as a condition for their expedited legislative consideration, and provides a method to remove expedited treatment if an agreement does not make sufficient progress toward those goals. TPA objectives include traditional goals such as reducing barriers to various types of trade (e.g., goods, services, agriculture, electronic commerce); protecting foreign investment and intellectual property rights; encouraging transparency, fair regulatory practices, and anti-corruption measures; ensuring that countries protect the environment and worker rights; providing for an effective dispute settlement process; and protecting the U.S. right to enforce its trade remedy laws. They also include goals reflecting recent developments and emerging issues, such as objectives on state-owned enterprises, regulatory coherence, trade in the digital environment, and trade in green technologies. In practice, negotiating objectives are written to be flexible enough to allow the Administration to negotiate agreements with other countries, as well as keep current with an evolving international trading system. This flexibility, however, leaves open to interpretation what constitutes "progress in achieving the purposes, policies, priorities, and objectives" of TPA: the standard an agreement must meet in order for its implementing legislation to receive expedited congressional consideration. Key questions for Congress include: Does the TPP make progress in achieving the trade negotiating objectives of TPA? Under what circumstances could the expedited procedures of TPA be removed for TPP? The current debate over the TPP and its potential impact on the U.S. economy is one component of a larger national conversation on employment opportunities, income and wealth distribution, and the general economic well-being of the U.S. middle class. Economic theory and empirical evidence during the post-war period support the lowering of international trade barriers as a tool for economic growth as a result of increased efficiency, productivity, cost savings, and consumer choice due to greater competition. At the same time, increased trade can lead to job loss and economic dislocation in importing-competing sectors. Jobs with expanding firms may require new skills or relocation, potentially making it difficult for dislocated workers to find new employment. Estimates of the economic impact of the TPP will likely form an important part of the congressional debate. Deriving these estimates, however, is a difficult and imprecise task. Beyond changes in tariffs and quotas, which form only a portion of the TPP commitments, economic modeling efforts are limited by difficulties in accurately measuring existing trade barriers and their potential changes. In addition, the choice of modeling techniques and assumptions necessary to generate estimates can alter outcomes. Already a number of studies on the TPP have been released, some with very different conclusions. In May, the USITC released the official USG nonpartisan and objective analysis of the agreement's potential economic impact, estimating a small positive benefit to the U.S. economy from the TPP. Key questions for Congress include: Do U.S. worker dislocation and retraining programs provide adequate adjustment support for workers disadvantaged by trade, including the retraining and relocation assistance that may be necessary to find alternate employment in competitive industries? Do U.S. workers have the skills needed to take advantage of opportunities in a globalized world? If not, who should provide those skills? What criteria should be used to evaluate the reliability of the various estimates of TPP's economic impact? The U.S. pursuit of the TPP and the outcome of the negotiations raise questions regarding its possible impact on the status and shape of current and future U.S. trade policy. With the Doha Round in abeyance, the United States has turned to the negotiation of 'mega-regional' FTAs such as the TPP and T-TIP as alternative venues for negotiating trade liberalization. These negotiations offer some advantages, namely the potential for deeper liberalization than that achievable through the consensus-based multilateral trading system. These agreements also have the potential to guide and encourage further liberalization through other venues both multilateral and regional. However, as with previous FTAs, the TPP may create trade diversion (i.e., trade patterns that reflect preferential tariff treatment rather than comparative advantage), undermining the broader economic goals of U.S. trade policy. In addition, they could create a two tier global economy, where the rules of the multilateral trading system are different from these mega-regional agreements and potentially impeding trade between the two tiers. Key questions for Congress include: Does the TPP signal the beginning of the end of WTO trade negotiations or could it serve as a building block for a more viable multilateral trade system through the WTO that responds to trade challenges of the 21 st century? What impact will the TPP have on the WTO as an institution, including on some of its most effective functions, such as the resolution of international trade disputes? Supporters also frame the TPP in terms of its potential strategic value for the United States, relating to U.S. influence in geo-political and economic spheres in the Asia-Pacific region. China is not a signatory to the TPP agreement, but, in some ways, the debate over the accord includes China. During a time when China's rise and North Korea's growing nuclear and missile capabilities are testing the U.S.-based status quo, TPP proponents argue that the TPP is part of a broad foreign policy strategy to promote greater respect for, and ensure a primary U.S. role in establishing, the next generation of international trade rules and norms in the Asia-Pacific region. The Administration has touted the importance of writing these rules, warning that if the United States does not, China will. The implication is that the rules and disciplines China would seek to impose would be less robust and, perhaps, would be counter to U.S. economic and geo-political interests. Key questions for Congress include: How do the potential strategic effects of the TPP compare to its economic value, and how should one weigh such considerations in an overall assessment of the agreement? Are U.S. and Chinese visions of international trading norms fundamentally different or do initiatives by both regional powers advance the same underlying goals? Some analysts have asserted that failure to pass the TPP could have significant implications for the United States both economically and strategically. Given the recent flurry of concluded or implemented trade agreements between major U.S. trading partners (e.g., Australia-Japan, China-South Korea, EU-Vietnam), and the progress in the RCEP negotiations, it is clear that the regional and international trade architecture will continue to evolve with or without U.S. participation. Economically, this means that without the TPP, U.S. goods and services could be at a further disadvantage in foreign markets in which other countries, but not the United States, have negotiated trade agreements. Strategically, they argue that ratification of the TPP may be tied to perceptions of U.S. credibility as a negotiating partner and that countries could interpret a failure of TPP in the United States as a symbol of the United States' declining interest in the region and its inability to assert leadership. Key questions for Congress include: What would be the impact on U.S. trade policy and perceptions of U.S. leadership in the Asia-Pacific region if the TPP is rejected by Congress or is delayed indefinitely? How will congressional consideration of TPP affect U.S. credibility in future bilateral, regional, and international trade negotiations? Congress may look forward as it debates the TPP, considering issues relating to the agreement's potential implementation and expansion. FTA implementing legislation typically requires that the Administration certify the partner countries are prepared to meet their obligations before an agreement can enter into force for the United States. A number of commitments, however, will continue to be phased in over time. Some Members have questioned the commitment of future administrations to ensure that TPP provisions are adequately and equally enforced. Specific issues have been raised with regards to the implementation of IPR commitments, labor and environment provisions, and the removal of nontariff barriers, among other matters. Congress may also consider the institutional structure of the TPP agreement—potentially the largest U.S. FTA—including the congressional role in any expansion of TPP, both in terms of members and content. The accession of new members likely would require implementing legislation, thus requiring congressional approval, if only to amend the U.S. tariff code and impose requisite rules of origin. Implementing legislation would also be required for changes to the agreement that would alter U.S. law. While TPA requires congressional notification for beginning trade negotiations, Congress may also consider whether to require prior congressional approval to negotiate with potential new participants due to the expandable nature of the TPP. Has the United States adequately funded implementation and enforcement efforts for past FTAs? How should the U.S. government ensure that TPP commitments are fully implemented, and subsequently enforced? What factors should be considered in assessing the suitability of a country for membership? Would amendments or changes to the agreement not requiring changes to U.S. law be subject to congressional approval? The potential Trans-Pacific Partnership agreement has both economic and broader strategic policy implications for the United States. The TPP is ambitious in at least four ways: (1) its size—it would be the largest U.S. FTA by trade flows and could expand in a region that represents over half of all U.S. trade; (2) the scope and scale of its liberalization—the parties, while not always at the desired level of ambition, have agreed to reduce barriers to goods, services, and agricultural trade and to establish rules and disciplines on a wide range of topics, including new policy issues that neither the WTO nor existing FTAs yet cover; (3) its potential evolution as a "living agreement"—it may continue to be expanded in terms of its membership and its rules and disciplines, and a number of countries officially have expressed an interest in joining TPP if it goes into effect; and (4) its geo-political significance—it has become, for some observers in the United States and Asia, a symbol of U.S. commitment to and influence in the Asia-Pacific, a region of growing economic and military importance where U.S. leadership increasingly is being challenged. As Congress debates potential implementing legislation, it has a wide and complex set of issues to consider.
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The Trans-Pacific Partnership (TPP) is a proposed free trade agreement (FTA) among 12 Asia-Pacific countries, with both economic and strategic significance for the United States. The proposed agreement is perhaps the most ambitious FTA undertaken by the United States in terms of its size, the breadth and depth of its commitments, its potential evolution, and its geo-political significance. Signed on February 4, 2016, after several years of negotiations, if implemented, TPP would be the largest FTA in which the United States participates, and would eliminate trade barriers and establish new trade rules and disciplines on a range of issues among TPP partners not found in previous U.S. FTAs or the World Trade Organization (WTO). In addition, the TPP is designed to better integrate the United States into the growing Asia-Pacific region and has become the economic centerpiece of the Administration's "rebalance" to the region. Congress would need to enact implementing legislation for the agreement to enter into force for the United States. Such legislation would be considered under Trade Promotion Authority (TPA) procedures, unless Congress determines the Administration has not met TPA requirements. TPP Members Currently, the TPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam, which together comprise 40% of the world's GDP. TPP is envisioned as a "living agreement," potentially addressing new issues and open to future members, including as a possible vehicle to advance a wider Asia-Pacific free trade area. The United States currently has FTAs with six TPP partner countries. Japan is the largest economy and trading partner without an existing U.S. FTA. Malaysia and Vietnam also stand out among TPP countries without existing U.S. FTAs, given the rapid growth in U.S. trade with the two nations over the past three decades and their generally higher level of trade restrictions. Potential Outcomes of TPP The TPP would provide several principal trade liberalization and rules-based outcomes for the United States. These include the following: lower tariff and nontariff barriers on U.S. goods through eventual elimination of all tariffs on industrial products and most tariffs and quotas on agricultural products; greater service sector liberalization with enhanced disciplines, such as nondiscriminatory and minimum standard of treatment, along with certain exceptions; additional intellectual property rights protections in patent, copyrights, trademarks, and trade secrets; first specific data protection provisions for biologic drugs and new criminal penalties for cybertheft of trade secrets; investment protections that guarantee nondiscriminatory treatment, minimum standard of treatment and other provisions to protect foreign investment, balanced by provisions to protect a state's right to regulate in the public interest; enforceable provisions designed to provide minimum standards of labor and environmental protection in TPP countries; commitments, without an enforcement mechanism, to avoid currency manipulation, provide transparency and reporting concerning monetary policy, and engage in regulatory dialogue among TPP parties; digital trade commitments to promote the free flow of data and to prevent data localization, except for data localization in financial services, alongside commitments on privacy and exceptions for legitimate public policy purposes; enhanced regulatory transparency and due process provisions in standards-setting; and the most expansive disciplines on state-owned enterprises ever in a U.S. FTA or the WTO, albeit with exceptions, to advance fair competition with private firms based on commercial considerations. The U.S. International Trade Commission (USITC) has estimated that the TPP would bring modest overall benefits to the U.S. economy once implemented, slightly increasing both output (0.15%) and employment (0.07%) above a baseline scenario without the agreement. According to the USITC study, most agriculture and services sectors would see expansions, while some manufacturing and natural resources sectors would be expected to contract relative to baseline projections as resources shifted within the U.S. economy. TPP Debate Views on the likely effects of the agreement vary. Proponents argue that the TPP is in the national interest and has the potential to boost economic growth and jobs through expanded trade and investment opportunities in what many see as the world's most economically vibrant region. Opponents of TPP voice concerns over possible job loss and competition in import-sensitive industries. Other concerns include how a TPP agreement might limit the government's ability to regulate in areas such as health, food safety, and the environment. The Obama Administration and others have argued that the strategic value of a TPP agreement parallels its economic value, while others argue that past trade pacts have had a limited impact on broad foreign policy dynamics. In analyzing the agreement and its implementing legislation, Congress may consider the agreement from several of these perspectives, as well as how the TPP promotes progress on U.S. trade negotiating objectives.
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Policymakers continue to be concerned with securing the economic health of the United States—including combating those crimes that threaten to undermine the nation's financial stability. Identity theft, for one, poses both security and economic risks. By some estimates, identity fraud cost Americans nearly $21 billion in 2012. Federal Trade Commission (FTC) complaint data indicate that the most common fraud complaint received (18% of all consumer fraud complaints) is that of identity theft. In 2012, for instance, about 12.6 million Americans were reportedly victims of identity fraud. This is an increase from the approximately 11.6 million who were victimized in 2011 and 10.2 million who were victimized in 2010. Mirroring this increase in the overall number of reported identity fraud incidents, consumer costs relating to these incidents increased in 2012; the average identity fraud victim incurred a mean of $365. Nonetheless, this cost is about 42% less than the average expense roughly a decade ago. An increase in globalization and a lack of cyber borders provide an environment ripe for identity thieves to operate from within the nation's borders—as well as from beyond. Federal law enforcement is thus challenged with investigating criminals who may or may not be operating within U.S. borders; may have numerous identities—actual, stolen, or cyber; and may be acting alone or as part of a sophisticated criminal enterprise. In addition, identity theft is often interconnected with various other criminal activities. These activities range from credit card and bank fraud to immigration and employment fraud. In turn, the effects felt by individuals and businesses who have fallen prey to identity thieves extend outside of pure financial burdens; identity thieves affect not only the nation's economic health, but its national security as well. Consequently, policymakers may debate the federal government's role in preventing identity theft and its related crimes, mitigating the potential effects of identity theft after it occurs, and providing the most effective tools to investigate and prosecute identity thieves. This report first provides a brief federal legislative history of identity theft laws. It analyzes selected trends in identity theft, including prevalent identity theft-related crimes, the federal agencies involved in combating identity theft, and the trends in identity theft complaints and prosecutions. The report also discusses the relationship between data breaches and identity theft as well as possible effects of the FTC's Identity Theft Red Flags Rule. It also examines possible issues for Congress to consider. When does taking and using someone else's identity become a crime? Current federal law defines identity theft as a federal crime when someone knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, or in connection with, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law. The current federal law also provides enhanced penalties for aggravated identity theft when someone "knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person" in the commission of particular felony violations. Aggravated identity theft carries an enhanced two-year prison sentence for most specified crimes and an enhanced five-year sentence for specified terrorism violations. Identity theft is also defined in the Code of Federal Regulations (CFR) as "fraud committed or attempted using the identifying information of another person without permission." Identity theft can both facilitate and be facilitated by other crimes. For example, identity theft may make possible crimes such as bank fraud, document fraud, or immigration fraud, and it may be aided by crimes such as theft in the form of robbery or burglary. Therefore, one of the primary challenges in analyzing the trends in identity theft (e.g., offending, victimization, or prosecution rates)—as well as the policy issues that Congress may wish to consider—arises from this interconnectivity between identity theft and other crimes. Identity theft and identity fraud are terms that are often used interchangeably. Identity fraud is the umbrella term that refers to a number of crimes involving the use of false identification—though not necessarily a means of identification belonging to another person. Identity theft is the specific form of identity fraud that involves using the personally identifiable information of someone else. Both identity fraud and identity theft are crimes often committed in connection with other violations, as mentioned above. Identity theft, however, may involve an added element of victimization, as this form of fraud may directly affect the life of the victim whose identity was stolen in addition to defrauding third parties (such as the government, employers, consumers, financial institutions, and health care and insurance providers, just to name a few). This report, however, maintains a focus on identity theft rather than the broader term of identity fraud. Another definitional issue is one that went before the U.S. Supreme Court. The statutory definitions of identity theft and aggravated identity theft indicate that they are crimes when someone " knowingly [emphasis added] transfers, possesses, or uses, without lawful authority, a means of identification of another person" in conjunction with specified felony violations outlined in the U.S. Code. The definitional element under question was the word "knowingly." In Flores-Figueroa v. United States , the Court decided that in order to be found guilty of aggravated identity theft, a defendant must have knowledge that the means of identification he used belonged to another individual. It is not sufficient to only have knowledge that the means of identification used was not his own. Although the case before the Court specifically involved aggravated identity theft, the issue may apply to the identity theft statute as well, due to its overlap in wording about the element of knowledge. Since the Court has issued its final decision in Flores-Figueroa v. United States , Congress may wish to consider whether there is a need to clarify the difference between these two types of knowledge in the U.S. Code. If a clarification is warranted, Congress may wish to consider whether the identity theft and aggravated identity theft statutes should be amended to reflect the definitions of both types of knowledge. Until 1998, identity theft was not a federal crime. Leading up to Congress designating identity theft as a federal crime, identity fraud was on the rise, and the Internet was increasingly being used as a method of defrauding innocent victims. Law enforcement and policymakers suggested that the current laws at the time were ineffective at combating the growing prevalence of identity theft; the laws were not keeping up with technology, and stronger laws were needed to investigate and punish identity thieves. In addition, policymakers also suggested that industries that handled records containing individuals' personally identifiable information—such as credit, medical, and criminal records—needed superior methods to ensure the validity of the information they collected and utilized. In 1998, Congress passed the Identity Theft Assumption Deterrence Act ( P.L. 105-318 ), which criminalized identity theft at the federal level. In addition to making identity theft a crime, this act provided penalties for individuals who either committed or attempted to commit identity theft and provided for forfeiture of property used or intended to be used in the fraud. It also directed the FTC to record complaints of identity theft, provide victims with informational materials, and refer complaints to the appropriate consumer reporting and law enforcement agencies. The FTC now records consumer complaint data and reports it in the Identity Theft Data Clearinghouse; identity theft complaint data are available for 2000 and forward. Congress further strengthened the federal government's ability to prosecute identity theft with the passage of the Identity Theft Penalty Enhancement Act ( P.L. 108-275 ). This act established penalties for aggravated identity theft , in which a convicted perpetrator could receive additional penalties (two to five years' imprisonment) for identity theft committed in relation to other federal crimes. Examples of such federal crimes include theft of public property, theft by a bank officer or employee, theft from employee benefit plans, false statements regarding Social Security and Medicare benefits, several fraud and immigration offenses, and specified felony violations pertaining to terrorist acts. Most recently, Congress enhanced the identity theft laws by passing the Identity Theft Enforcement and Restitution Act of 2008 (Title II of P.L. 110-326 ). Among other elements, the act authorized restitution to identity theft victims for their time spent recovering from the harm caused by the actual or intended identity theft. In addition to congressional efforts to combat identity theft, there have been administrative efforts as well. The President's Identity Theft Task Force (Task Force) was established in May 2006 by Executive Order 13402. The task force was created to coordinate federal agencies in their efforts against identity theft, and it was charged with creating a strategic plan to combat (increase awareness of, prevent, detect, and prosecute) identity theft. It was composed of representatives from 17 federal agencies. In April 2007, the task force authored a strategic plan for combating identity theft in which it made recommendations in four primary areas: preventing identity theft by keeping consumer data out of criminals' hands, preventing identity theft by making it more difficult for criminals to misuse consumer data, assisting victims in detecting and recovering from identity theft, and deterring identity theft by increasing the prosecution and punishment of identity thieves. With respect to identity theft prevention, the task force suggested that decreasing the use of Social Security numbers (SSNs) in the public sector and reviewing the use of SSNs in the private sector could help prevent identity theft. Also, the task force suggested that educating employers and individuals on how to safeguard data, as well as establishing national data protection and breach notification standards, could further aid in preventing identity theft. Relating to victim assistance, the task force suggested that identity theft victims may be better served if first responders were specially trained to assist this particular class of victim. It also addressed victim redress by recommending that identity theft victims be able to obtain an alternative identification document after the theft of their identities. Through the Identity Theft Enforcement and Restitution Act of 2008 (Title II of P.L. 110-326 ), Congress responded to the task force's recommendation that criminal restitution statutes allow victims to be compensated for their time in recovering from the actual or attempted identity theft. Regarding identity theft deterrence, the task force recommended enhancing information gathering and sharing between domestic law enforcement agencies and the private sector, ramping up identity theft training for law enforcement and prosecutors, and increasing enforcement and prosecution of identity theft. The task force also promoted international cooperation to decrease identity theft through identifying countries that may be safe havens for identity thieves, encouraging anti-identity theft legislation in other countries, and increasing international cooperation in the investigation and prosecution of identity theft. More specifically, the task force recommended that Congress close gaps in the federal criminal statues to more effectively prosecute and punish identity theft-related offenses by amending the identity theft and aggravated identity theft statutes so that thieves who misappropriate the identities of corporations and organizations—and not just the identities of individuals—can be prosecuted, amending the aggravated identity theft statute by adding new crimes as predicate offenses for aggravated identity theft violations, amending the statute criminalizing the theft of electronic data by eliminating provisions requiring that the information be stolen through interstate communications, amending the computer fraud statute by eliminating the requirement that damage to a victim's computer exceed $5,000, amending the cyber-extortion statute by expanding the definition of cyber-extortion, and ensuring that the Sentencing Commission allows for enhanced sentences imposed on identity thieves whose actions affect multiple victims. Congress has already taken steps to address some of these task force recommendations. Through the Identity Theft Enforcement and Restitution Act of 2008 (Title II of P.L. 110-326 ), Congress, among other things, eliminated provisions in the U.S. Code requiring the illegal conduct to involve interstate or foreign communication, eliminated provisions requiring that damage to a victim's computer amass to $5,000, and expanded the definition of cyber-extortion. However, Congress has not yet addressed the task force recommendation to expand the identity theft and aggravated identity theft statutes to apply to corporations and organizations as well as to individuals, nor has it addressed the recommendation to expand the list of predicate offenses for aggravated identity theft. Issues surrounding these recommendations are analyzed in the section " Potential Issues for Congress ." The Identity Theft Red Flags Rule, issued in 2007, requires creditors and financial institutions to implement identity theft prevention programs. It is implemented pursuant to the Fair and Accurate Credit Transactions (FACT) Act of 2003 ( P.L. 108-159 ). The FACT Act amended the Fair Credit Reporting Act (FCRA) by directing the FTC, along with the federal banking agencies and the National Credit Union Administration, to develop Red Flags guidelines. These guidelines require creditors and financial institutions with "covered accounts" to develop and institute written identity theft prevention programs. According to the FTC, the identity theft prevention programs required by the rule must provide for identifying patterns, practices, or specific activities—known as "red flags"—that could indicate identity theft and then incorporating those red flags into the identity theft prevention program; detecting those red flags that have been incorporated into the identity theft prevention program; responding to the detection of red flags; and updating the identity theft prevention program periodically to reflect any changes in identity theft risks. Possible "red flags" could include alerts, notifications, or warnings from a consumer reporting agency; suspicious documents; suspicious personally identifiable information, such as a suspicious address; unusual use of—or suspicious activity relating to—a covered account; and notices from customers, victims of identity theft, law enforcement authorities, or other businesses about possible identity theft in connection with covered accounts. The deadline for creditors and financial institutions to comply with the Red Flags Rule was originally set at November 1, 2008. However, many of the organizations affected by the Red Flags Rule were not prepared to institute their identity theft prevention programs by this date. Therefore, the FTC moved the deadline to May 1, 2009, further extended the compliance date to November 1, 2009, and later to June 1, 2010. The final enforcement date was set at December 31, 2010, and this last extension was, in part, a result of the debate over whether Congress wrote the FACT Act Red Flags provision too broadly by including all entities qualifying as creditors and financial institutions (discussed further below). The effect that the Red Flags Rule will have on the prevalence of identity theft remains uncertain. One potential effect is that the Red Flags Rule may help creditors and financial institutions prevent identity theft by identifying potential lapses in security or suspicious activities that could lead to identity theft. This could possibly lead to an overall decrease in the number of identity theft incidents reported to the FTC, as well as the number of identity theft cases investigated and prosecuted. Once detected, the Red Flags Rule requires that the creditor or financial institution respond to the identified red flag. One response option that creditors and financial institutions might include in their prevention programs is to notify consumers or law enforcement of data breaches that could potentially lead to the theft of consumers' personally identifiable information. While notification is not a required element in the identity theft prevention programs, early notification could lead to consumers taking swift action to prevent identity theft or mitigate the severity of the damage that could result if they had not been notified as quickly. When the Red Flags Rule was created, the FTC originally estimated that it would impact approximately 11.1 million creditors and financial institutions required to implement the identity theft prevention programs. The FTC estimated the total annual labor costs (for each of the first three years the rule is in effect) for all creditors and financial institutions covered by the rule to be about $143 million. Some entities considered creditors or financial institutions under the rule expressed concern that the burden of the rule overlaps with burdens already incurred under other regulations. For example, the American Bar Association (ABA) questioned whether lawyers are considered "creditors" under the Red Flags Rule because they generally do not require payment until after services are rendered. Further, the American Medical Association indicated that physicians should be exempt from the Red Flags Rule because of patient privacy and security protections required by the Health Insurance Portability and Accountability Act (HIPAA). In addition, there may have been concern that to avoid being considered creditors, some physicians could possibly require full payment at the time of service (rather than allowing deferred payments). This could in turn lead to some patients avoiding potentially necessary treatment if they are unable to pay in full at the time of service; on the other hand, the rule may have no effect on patients' willingness to seek medical treatment. The Red Flag Program Clarification Act of 2010 ( P.L. 111-319 ) limited the Red Flags Rule's definition of a creditor, excluding any creditor "that advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person." This legislation did not exempt any broad categories of businesses or entities, but the majority of businesses in certain categories—such as physicians—would be exempt from Red Flags Rule compliance. Any actual effects of the Red Flags Rule—including effects on identity theft rates as well as any indirect consequences—have not yet been evident. Congress may consider monitoring the effects of the impending Red Flags Rule on subsequent identity theft rates. A number of studies have aimed to measure the prevalence of identity theft. Due to a number of factors, including a lack of a consistent definition of identity theft victimization across studies and differing survey populations, there is not a clear understanding of the true scope of identity theft in the United States. For instance, a Bureau of Justice Statistics (BJS) study estimates that 16.6 million U.S. residents were victims of at least one identity theft incident. Another study by Javelin Strategy & Research estimates that in 2012, about 12.6 million Americans were victims of identity theft; this is an increase from the approximately 11.6 million estimated to have been victimized in 2011. In addition to survey research on identity theft victimization, trends in consumer complaints of victimization provide additional insight into the issue. Similar to the increase in estimated victimization exhibited in surveys, consumer complaints of identity theft to the FTC exhibited a corresponding increase. The FTC received 369,132 consumer complaints of identity theft in 2012, up from 279,156 complaints in 2011. Nonetheless, identity theft incidents reported to the FTC remain a fraction of the estimated victim population. There is a noted difference between the 369,132 complaints received by the FTC in 2012 and survey data indicating that between 12.6 million and 16.6 million people may have actually been victimized. This disparity between research on identity theft victimization and consumer reports could be a result of several factors. For one, while some identity theft victims may file a report with the FTC, others may file complaints with credit bureaus, while still others may file complaints with law enforcement. Not all victims, however, may file complaints with consumer protection entities, credit reporting agencies, and law enforcement. Another possible factor contributing to the disparity is that victims may not—for any number of reasons—report an identity theft incident. These individuals, however, may be more likely to indicate the incident on a survey prompting them about their experiences with identity theft or fraud. Since the FTC began recording consumer complaint data in 2000, identity theft has remained the most common consumer fraud complaint. Figure 1 illustrates the number of identity theft complaints received by the FTC between 2000 and 2012 in relation to the number of all other fraud complaints received. According to CRS analysis, since 2000, the number of identity theft complaints has averaged about 32% of the total number of consumer complaints received by the FTC. Identity theft has remained the dominant consumer fraud complaint to the FTC. However, while the number of overall identity theft complaints generally increased between 2000 (when the commission began recording identity theft complaints) and 2008, the number of complaints decreased in both 2009 and 2010 before rising again in 2011 and 2012. Figure 2 illustrates these trends in identity theft complaints reported to the FTC. Increasing globalization and the expansion of advanced technology have provided a challenging environment for law enforcement to both identify and apprehend identity thieves targeting persons residing in the United States. For one, these criminals may be operating from within U.S. borders as well as from beyond. There is no publically available information, however, delineating the proportion of identity theft (or other crimes known to be identity theft-related) committed by domestic and international criminals. Secondly, while some identity thieves operate alone, others operate as part of larger criminal networks or organized crime syndicates. The FBI has indicated that it, for one, targets identity theft investigations on larger criminal networks. These criminal networks may involve identity thieves located in various cities across the United States or in multiple cities around the world, and these criminals may be victimizing not only Americans, but persons living in countries across the globe. In a joint study by Verizon and international law enforcement partners, including the U.S. Secret Service, of selected data breaches of businesses around the globe during 2012, 55% of data breaches by external actors—sources outside the compromised organization—were attributed to organized crime. It is unknown, however, how many of these records compromised by organized crime were used in identity theft and related crimes. A third challenge in identifying identity thieves is that perpetrators may operate under multiple identities including actual identities, various stolen identities, and cyber identities and nicknames. As mentioned earlier, identity theft is defined broadly, and it is directly involved in a number of other crimes and frauds. As a result, there are practical investigative implications that influence analysts' abilities to understand the true extent of identity theft in the United States. For instance, only a proportion (the exact number of which is unknown) of identity theft incidents are reported to law enforcement. While some instances may be reported to consumer protection agencies (e.g., the FTC), credit reporting agencies (e.g., Equifax, Experian, and Trans Union), and law enforcement agencies, some instances may be reported to only one. For example, the FTC indicates that of the 42% of identity theft complaints that included information on whether the theft was reported to law enforcement, 68% were reported to law enforcement. Another issue that may affect analysts' abilities to evaluate the true extent of identity theft is that law enforcement agencies may not uniformly report identity theft because crime incident reporting forms may not necessarily contain specific categories for identity theft. In addition, there may not be standard procedures for recording the identity theft component of the criminal violations of primary concern. Issues such as these may lead to discrepancies between data available on identity theft reported by consumers, identity theft reported by state and local law enforcement, and identity theft investigated and prosecuted by federal law enforcement. Various federal agencies are involved in investigating identity theft, including the Federal Bureau of Investigation (FBI), the U.S. Secret Service, the U.S. Postal Inspection Service, the Social Security Administration Office of the Inspector General (SSA OIG), and the U.S. Immigration and Customs Enforcement (ICE). In addition, federal law enforcement agencies may work on task forces with state and local law enforcement as well as with international authorities to bring identity thieves to justice. The Department of Justice (DOJ) is responsible for prosecuting federal identity theft cases. The FBI investigates identity theft primarily through its Financial Crimes Section. However, because the nature of identity theft is cross-cutting and may facilitate many other crimes, identity theft is investigated in other sections of the FBI as well. The FBI is involved in over 20 identity theft task forces and working groups around the country. It is also involved in over 80 other financial crimes task forces, which may also investigate cases with identity theft elements. The FBI focuses its identity theft crime fighting resources on those cases involving organized groups of identity thieves and criminal enterprises that affect a large number of victims. The FBI partners with the National White Collar Crime Center (NW3C) to form the Internet Crime Complaint Center (IC3). The IC3 serves the broad law enforcement community to receive, develop, and refer Internet crime complaints—including those of identity theft. The Secret Service serves a dual mission of (1) protecting the nation's financial infrastructure and payment systems to safeguard the economy and (2) protecting national leaders. In carrying out the former part of this mission, the Secret Service conducts criminal investigations into counterfeiting, financial crimes, computer fraud, and computer-based attacks on the nation's financial and critical infrastructures. The Secret Service has 43 Financial Crimes Task Forces and 33 Electronic Crimes Task Forces that investigate identity theft, as well as a number of other crimes. In FY2012, the Secret Service arrested 4,277 suspects for crimes related to identity theft, and in FY2013, they arrested 3,868 such suspects. The U.S. Postal Inspection Service is the federal law enforcement arm of the Postal Service and is the lead federal investigative agency when identity thieves have used the postal system in conducting their fraudulent activities. The most recent Postal Inspection Service data indicate that in FY2012, the Postal Inspection Service sponsored 15 multi-agency task forces across the country that specialized in financial crimes, including identity theft. Further, postal inspectors arrested 627 identity theft suspects—from both Postal Inspection Service investigations and task force investigations in which the Postal Inspection Service was involved. In addition to investigating identity theft, the Postal Inspection Service has been involved in delivering educational presentations to consumer groups to assist in preventing identity theft, and inspectors are involved in sponsoring outreach programs for victims of identity theft. Examples of victim services include notifying victims of potential identity theft if the Postal Inspection Service discovers compromised identities as well as assisting in victim restitution by providing victims money from the funds forfeited as a result of Postal Inspection Service identity theft investigations. Because the theft and misuse of Social Security numbers (SSNs) is one of the primary modes of identity theft, the SSA OIG is involved in investigating identity theft. The SSA has programs to assist victims of identity theft who have had their SSNs stolen or misused by placing fraud alerts on their credit files, replacing Social Security cards, issuing new Social Security numbers in specific instances, and helping to correct victims' earnings records. The SSA OIG protects the integrity of the SSN by investigating and detecting fraud, waste, and abuse. It also determines how the use or misuse of SSNs influences programs administered by the SSA. The SSA OIG is involved in providing a limited range of SSN verification for law enforcement agencies. Further, the SSA OIG maintains a hotline for consumers to report identity theft, and then these data are transferred to the FTC to be included in their consumer complaint database. The U.S. Immigration and Customs Enforcement (ICE) investigates cases involving identity theft, particularly immigration cases that involve document and benefit fraud. In 2006, ICE created Document and Benefit Fraud Task Forces (DBFTFs). These DBFTFs, located in 19 cities throughout the United States, are aimed at dismantling and seizing the financial assets of criminal organizations that threaten the nation's security by engaging in document and benefits fraud. The U.S. Attorneys Offices (USAOs) prosecute federal identity theft cases referred by the various investigative agencies. CRS was unable to determine the proportion of identity theft cases referred to the USAOs by each investigative agency for several reasons. For one, some of the investigations reported by each agency are investigations conducted by a task force, to which several agencies may have contributed. Consequently, these investigations may be reported by each participating agency. If the total number of reported investigations from each agency were combined, it is likely that the overall number of identity theft investigations would be inflated because of double (or more) reporting of an investigation from multiple agencies. A second factor is that the USAOs do not track the proportion of case referrals by statute; rather, they track case referrals by program area. For instance, the proportion of identity theft (18 U.S.C. §1028) and aggravated identity theft (18 U.S.C. §1028A) case referrals from each agency are not tracked according to the charging statutes. Identity theft cases fall under several programmatic categories—including white collar crime and immigration—which also contain several other crimes. Thus, trends in federal identity theft and aggravated identity theft cases may be better tracked by the number of total cases referred to and prosecuted by the USAOs, irrespective of the referring agency. While the number of identity theft complaints to the FTC has fluctuated over the past several years, so too has the number of identity theft cases prosecuted by DOJ. Figure 3 illustrates the number of identity theft (18 U.S.C. §1028) and aggravated identity theft (18 U.S.C. §1028A) cases filed with the USAOs as well as convictions between FY1998 and FY2013. The number of identity theft and aggravated identity theft cases filed both increased in FY2013 relative to FY2012; conversely, the number of identity theft and aggravated identity theft case convictions decreased in FY2013 relative to FY2012 levels. Identity theft case filings and convictions peaked in 2007 and 2008, and have generally declined since. Aggravated identity theft case filings and convictions, on the other hand, have largely continued to increase since aggravated identity theft was added as a federal offense in 2004. Still, if the identity theft and aggravated identity theft data are combined, total case filings and convictions have mostly declined since 2008. There are several possible explanations for these trends. One possibility is that there has been a decrease in the overall number of actual identity theft incidents, and law enforcement has been responding proportionally by arresting fewer identity thieves and filing fewer cases with the U.S. Attorneys' Offices. However, research indicating that the number of individuals victimized by identity thieves is actually continuing to increase, which would suggest this is not a viable explanation. A second possibility is that there has actually been an increase in the number of identity theft incidents, but that either these criminals are evading federal law enforcement or law enforcement has dedicated fewer resources toward combating identity theft, which has resulted in decreased investigations and prosecutions. Yet another explanation may be that fewer perpetrators are actually impacting a greater number of victims. As criminals become more technologically savvy, they may be able to expand their reach to a greater number of victims. As illustrated in Figure 3 , the number of identity theft cases filed in FY2013, while larger than the number filed in FY2012, maintained the largely downward trend beginning in FY2008. This was accompanied by a sustained increase in aggravated identity theft case filings. Several factors could possibly contribute to these divergent trends. One explanation is that some cases in which defendants would have been charged with identity theft in earlier years may more recently have resulted in defendants being charged with aggravated identity theft. Therefore, a decrease in identity theft case filings may be complemented with an increase in aggravated identity theft case filings. As mentioned before, aggravated identity theft became a federal crime in 2004, and is reflected in Figure 3 by the increase in aggravated identity theft case filings and convictions in later years. As noted, survey data suggest that between 12.6 million and 16.6 million people may have been victimized by identity thieves and fraudsters in 2012. And these are the known cases. The FTC recognizes two primary forms of identity theft: existing account fraud and new account fraud. Existing account fraud refers to the misuse of a consumer's existing credit card, debit card, or other account, while new account fraud refers to the use of stolen consumer identifying information to open new accounts in the consumer's name. Figure 4 illustrates the most common misuses of victims' identities. Between 2000—when the FTC began tracking identity theft complaints—and 2008, the FTC consistently reported that the most common misuse of a victim's identity was credit card fraud. In 2008, government documents and benefits fraud became the second most prevalent misuse of a victim's identity, and in 2010, it became the most prevalent—remaining the leading category in 2012. Within the documents/benefits fraud category, the FTC has reported a particularly large increase in identity theft related to tax return fraud. And, tax return-related fraud was involved in about 43% of the identity theft complaints received by the FTC in 2012 and about 24% of these complaints in 2011. Identity theft and the various crimes it facilitates affect the economy and national security of the United States. Selected crimes facilitated by identity theft are outlined in the section below. After a victim's identity is stolen, the primary criminal use of this information is credit card fraud. Beyond amassing charges on a victim's credit card, identity thieves may sometimes change the billing address so that the victim will not receive the bills and see the fraudulent charges, allowing the thief more time to abuse the victim's identity and credit. If a victim does not receive the bill, and therefore does not pay it, this could adversely affect the victim's credit. In addition to abusing existing credit card accounts, a thief could also open new accounts in the victim's name, incurring more charges on the victim's line of credit. These actions could in turn affect not only the victim's immediate pocketbook, but future credit as well. The Identity Theft Resource Center (ITRC) has predicted that organized crime groups will become more involved in identity theft-related crime such as credit card fraud and that these crimes will become increasingly transnational. As mentioned, criminals are no longer constrained by physical borders, and they can victimize U.S. persons and businesses both from within the United States and from beyond. In February 2011, Operation Power Outage led to the arrest of 83 individuals associated with Armenian Power, an Armenian and Eastern European transnational criminal organization. These individuals were allegedly involved in a range of criminal activities including credit card fraud. One scheme is reported to have used skimming devices, secretly installed on cash register machines, to steal customer account information. This information was subsequently used to create counterfeit credit and debit cards. In September 2013, eight individuals pleaded guilty to charges "relating to the activities of the Armenian Power criminal enterprise," and 51 persons "previously pleaded guilty for their roles." Identity thieves can use personally identifiable information to create fake or counterfeit documents such as birth certificates, licenses, and Social Security cards. One way that thieves can use the stolen information is to obtain government benefits in a victim's name. This directly affects the victim if the victim attempts to legitimately apply for benefits and then is denied because someone else may already be (fraudulently) receiving those benefits under the victim's name. The creation of fraudulent documents may, among other things, provide fake identities for unauthorized immigrants living in the United States or fake passports for people trying to illegally enter the United States. In addition, DOJ has indicated that identity theft is implicated in international terrorism. In May 2002, former Attorney General John Ashcroft stated that [I]dentity theft is a major facilitator of international terrorism. Terrorists have used stolen identities in connection with planned terrorist attacks. An Algerian national facing U.S. charges of identity theft, for example, allegedly stole the identities of 21 members of a health club in Cambridge, Massachusetts, and transferred the identities to one of the individuals convicted in the failed 1999 plot to bomb the Los Angeles International Airport. Identity theft and resulting document fraud can thus have not only an economic impact on the United States, but a national security impact as well. In September 2013, three defendants pleaded guilty for their roles in "a sophisticated scheme to produce and sell high-quality false identification documents throughout the nation ... generating profits of more than $3 million over several years." The fraudsters, through their illegitimate business, "Novel Design," sold over 25,000 fraudulent driver's licenses throughout the nation. They even outsourced some of the manufacturing of these fake documents to entities in Bangladesh and China. Identity theft can facilitate employment fraud if the thief uses the victim's personally identifiable information to obtain a job. With the recent elevated levels of unemployment, policymakers may wish to monitor trends in employment fraud. This form of fraud could adversely affect a victim's credit, ability to file his or her taxes, and ability to obtain future employment, among other things. Not only can identity theft lead to employment fraud, but employment fraud may be a means to steal someone's identity. Identity thieves may use scams that falsely advertise employment as a means to phish for personally identifiable information. The thief can then use this information to commit other crimes while the job-seeking individual remains unemployed and victimized. The Identity Theft Resource Center (ITRC) is one organization that tracks data breaches across the nation, and the resulting statistics indicate that the total number of reported data breaches generally increased between 2005 and 2008 and then fluctuated through 2013 (during which year, there were 619 reported breaches). Figure 5 illustrates this trend. Breaches are recorded across five industries: banking/credit/financial, business, educational, government/military, and medical/healthcare. In 2013, the medical/healthcare industry experienced the greatest number of data breaches (43.1%) for the first time since the ITRC began tracking this information in 2005 (from 2007-2012, the business sector had filled this top spot). The medical sector was followed in number of breaches by the business (33.9%), government (10.2%), educational (9.0%), and banking (3.7%) sectors. Several factors may influence the number of reported breaches. One such factor may be the increasing number of states that have enacted laws requiring data breach notification. California was the first state to enact such legislation in 2002. As of December 2013, 46 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands have enacted data breach notification laws. The increasing prevalence of state laws requiring breach notification could lead to an increase in reported breaches to law enforcement, media, or the individuals affected. Nonetheless, the actual number of data breaches remains underreported, and the number of reported breaches does not reflect the magnitude of data breaches. Because of these factors, analysts are unable to say with certainty whether the increase in the number of reported data breaches in 2013 is an accurate reflection of the trend in data breaches. Furthermore, the number of records affected by each data breach is variable, and in many cases unknown. In 2013, for example, at least 57,868,922 records were put at risk, but information on the exact number of records exposed was only available for 366 (about 59%) of the 619 reported data breaches. Of note, however, "due to the mandatory reporting requirement for healthcare industry breaches affecting 500 or more individuals, 84% of [the] healthcare breaches publicly stated the number of records exposed." Because available data on known data breaches and reported identity theft incidents are not comprehensive, and because year-to-year changes in one measure may not trend with changes in the other, it can be difficult to determine whether there is a relationship between the two. Intuitively, the data breaches and identity theft may seem to correlate, but some analysts have found that the link may not be very strong. There are several ways to analyze the relationship between data breaches and identity theft. One is to examine the set of data breach victims and determine the proportion of those victims that are also victims of identity theft. Some claim that data breaches are a direct cause of identity theft and may rely on this position to advocate the need for increased data security and data breach notification laws to protect consumers and help with quickly mitigating any potential damage from such data breaches. Meanwhile, other experts claim that less than 1% of data breach victims are also victims of identity theft. Some may use this data to argue against the need for increased data security and breach notification laws, suggesting that such laws could produce a larger cost for businesses than prevention for consumers. Results from one study note that 25% of surveyed individuals had, at some point, received a "notification about a data breach that involved the loss or theft of their personal information" (and 51% of respondents couldn't recall whether they had received such a notification. And, Javelin Strategy & Research data suggest that nearly one in four (22.5%) individuals receiving breach notifications became victims of fraud. Another means to evaluate the relationship between data breaches and identity theft is to examine identity theft victims and analyze the proportion of those victims whose identity was stolen as a result of a data breach. Javelin Strategy and Research found that about 11% of victims' identities that were stolen had been under the control of a company and were stolen from the company through methods such as data breaches. Most victims (65%) did not know how their identities had been stolen, and some proportion of these could have occurred as a result of a data breach. Synovate conducted a similar study on behalf of the FTC and found that about 12% of victims' stolen identities had been under the control of a company and were thus accessed via a data breach. The Center for Identity Management and Information Protection at Utica College evaluated identity theft cases handled by the U.S. Secret Service between 2002 and 2006 and found that in nearly 27% of the cases, a breach of company-controlled data was the source of the identity theft. It appears that the stronger relationship between identity theft and data breaches is found when analyzing identity theft victims whose data were obtained through a data breach rather than in analyzing data breaches that result in identity theft. In efforts to curb identity theft, policymakers are left with the issue of how to target data breaches. The question is whether the federal government's role in curbing identity theft should be more preventative, more responsive, or both. One policy option may be for Congress to increase data security for the purpose of preventing those data breaches that could potentially result in identity theft. Congress has already enacted data breach laws targeting certain components of the public and private sectors, such as the Veterans Administration and healthcare providers. Another option could be for Congress to dedicate resources to assisting victims of identity theft and providing sufficient deterrence and punishment measures (in the form of penalties or sanctions). These options are analyzed further below. As Congress debates means to prevent identity theft, mitigate the potential effects of identity theft, and investigate and prosecute identity thieves, there are several issues policymakers may wish to consider. One issue surrounds the extent to which reducing the availability of SSNs may reduce the prevalence of identity theft. A second issue involves the degree to which increasing breach notification requirements may reduce both identity theft and the monetary burden incurred by victims. Yet another issue concerns the adequacy of (1) the current legal definitions of identity theft and aggravated identity theft and (2) the list of predicate offenses for aggravated identity theft. Policymakers may question what the extent of the federal government's role should be in preventing identity theft. One element of this discussion centers around the fact that identity theft is often committed to facilitate other crimes and frauds (e.g., credit card fraud, document fraud, and employment fraud). Consequently, preventing identity theft could proactively prevent other crimes. When policymakers consider the federal government's role in preventing identity theft, they necessarily consider the government's role in preventing interrelated crimes. Congress may also consider the various means available to prevent identity theft and evaluate the federal government's role—if any—in implementing them. Possible ways to prevent identity theft include securing data in the private sector, securing data in the public sector, and improving consumer authentication processes. The prevalence of personally identifiable information—and in particular, of Social Security numbers (SSN)—has been an issue concerning policymakers, analysts, and data security experts. There are few restrictions on the use of SSNs in the private sector, and therefore the use of SSNs is widespread. Some industries, such as the financial services industry, have stricter requirements for safeguarding personally identifying information. There are greater restrictions on the use of SSNs in the public sector, as Congress has already taken direct steps in reducing the prevalence of SSNs in this arena. For example, in the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), Congress prohibited states from displaying or electronically including SSNs on driver's licenses, motor vehicle registrations, or personal identification cards. One document that continues to display SSNs, however, is the Medicare identification card. Congress may consider whether the continued display of SSNs on Medicare cards places individuals at undue risk for identity theft as well as for becoming a victim of other crimes facilitated by identity theft and whether it should enact legislation to prohibit the display of SSNs on Medicare cards. Proponents of legislation to remove SSNs from Medicare cards cite reports that as of 2013, approximately 50 million Medicare cards displayed Social Security numbers, potentially placing these individuals at risk for identity theft. Opponents of such legislation may cite that transitioning to a different Medicare identifier has most recently been estimated to cost between $255 million and $317 million. Another policy option to safeguard personally identifiable information that Congress may consider is increasing restrictions on the disclosure of certain forms of personally identifiable information, such as SSNs, in connection with federally funded grant programs. One example of Congress taking such action is in the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ). Provisions in this act prohibit grantees that receive funds under the Violence Against Women Act of 1994 from disclosing certain personally identifiable information—including SSNs—collected in connection with services through the grant program. Congress may consider whether existing SSN restrictions for federal grant recipients are sufficient or whether the federal government should play a larger role in limiting the use of SSNs—and more specifically, whether it should set limitations as part of eligibility requirements for federal assistance. The Government Accountability Office (GAO) has identified vulnerabilities in federal laws protecting personally identifiable information—and specifically, SSNs—across industries. For one, some industries, such as the financial services industry, have more restrictions on safeguarding this information, while information resellers are not covered by the same restrictions. In order to reduce discrepancies across industries, one policy option may be to provide certain federal agencies with authority to curb the prevalence of SSN use in the private sector; for example, GAO has recommended that Congress provide SSA with the authority to enact standards for uniformly truncating SSNs so that the entire nine-digit numbers are not as readily available. A similar option may be to provide the Attorney General, the FTC, or the SSA with the authority to set rules and standards for the sale and purchase of SSNs. Others have suggested that policies should be focused on eliminating the use of SSNs as authenticators rather than on securing their use. The premise is that SSNs are often public information and, if not already available, they can be predicted with relative ease. For instance, researchers have demonstrated how the public availability of names and birth data allow for SSN predictability and subsequent vulnerability. As such, some have recommended that efforts not be focused on securing SSNs that are often already public and predictable. Rather, they have suggested that private sector entities abandon the SSN in favor of an alternative identity authenticator. One issue that Congress may consider involves the relationship between data breaches and identity theft. Although there is not a large body of research examining this relationship, existing data suggest that between 12% and 27% of identity theft incidents may result from data breaches. However, this proportion is truly unknown because most victims of identity theft do not know precisely how their personally identifiable information was acquired. In order to prevent any proportion of identity theft that may result from data breaches, or to mitigate the extent of the damage resulting from breach-related identity theft, Congress may wish to consider whether to strengthen data breach notification requirements. Such requirements could affect both the notification of the relevant law enforcement authorities as well as the notification of the individual whose personally identifiable information may be at risk from the breach. Proponents of increasing breach notification requirements point to research on recent trends in identity theft and the resulting monetary loss. As mentioned, the sooner people become aware that they are victims of identity theft, the faster they take compensatory steps to mitigate the damage. Proponents also argue that placing enhanced reporting requirements on industries may influence businesses to increase their data security standards, which could, in effect, decrease data breaches and any possibly resulting identity theft. Results from one study suggest that the adoption of state-level data breach disclosure laws could reduce the identity theft from these breaches by, on average, 6.1%. On the other hand, opponents of increasing notification requirements point to research suggesting that the percentage of data breaches that result in identity theft could be less than 1%, as previously discussed. Opponents may then argue that the costs that businesses could incur from increased notification (in terms of dollars and personnel time) could thus exceed the costs incurred by potential identity theft victims from the small proportion of data breaches that may actually result in identity theft. In addition to strengthening post-breach notification requirements, another policy option aimed at decreasing data breach-related identity theft involves strengthening data security. Several options to reduce the availability of personally identifiable information were discussed in the preceding section. However, a broader data security issue concerns overall information security. Because many incidents of identity theft may occur over the Internet, enhancing cyber security measures could reduce the incidents of identity theft. As mentioned, identity theft is broadly defined in current law. This is in part because it is a facilitating crime, and the criminal act of stealing someone's identity often does not end there. Consequently, investigating and prosecuting identity theft often involves investigating and prosecuting a number of related crimes. In light of this interconnectivity, the President's Identity Theft Task Force recommended expanding the list of predicate offenses for aggravated identity theft, as discussed earlier. The task force specifically suggested adding identity theft-related crimes such as mail theft, counterfeit securities, and tax fraud. However, the task force did not cite specific data to support the claim that these specifically mentioned crimes are in fact those most often related to (either facilitating or facilitated by) identity theft. If Congress considers expanding the list of predicate offenses for aggravated identity theft, it may request that the U.S. Attorneys as well as the appropriate investigative agencies (e.g., FBI, USSS, ICE, and USPIS) provide a report detailing the relationship between identity theft and other federal crimes not yet codified as predicate offenses. A second question that Congress may raise if it considers expanding the list of predicate offenses regards which identity theft-related crimes may most affect national priorities such as economic health and national security. As more information is stored online by individuals and organizations, there is a risk that online identity thieves may take advantage of this large body of data. And there need not be an increasing number of data breaches in order for criminals to reach a large pool of information. As illustrated in Figure 5 , the number of reported data breaches does not necessarily trend with the number of potentially exposed records. As mentioned, the range of potential victims includes not only individuals but organizations as well. The task force cites "phishing" as a means by which identity thieves assume the identity of a corporation or organization in order to solicit personally identifiable information from individuals. For reasons such as this, the task force recommended that Congress clarify the identity theft and aggravated identity theft statutes to cover both individuals and organizations targeted by identity thieves.
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In the current fiscal environment, policymakers are increasingly concerned with securing the economic health of the United States—including combating those crimes that threaten to undermine the nation's financial stability. Identity theft is one such crime. In 2012, about 12.6 million Americans were reportedly victims of identity fraud, and the average identity fraud victim incurred a mean of $365 in costs as a result of the fraud. Identity theft is often committed to facilitate other crimes such as credit card fraud, document fraud, or employment fraud, which in turn can affect not only the nation's economy but its security. Consequently, in securing the nation and its economic health, policymakers are also tasked with reducing identity theft and its impact. Identity theft has remained the dominant consumer fraud complaint to the Federal Trade Commission (FTC). Nevertheless, while the number of overall identity theft complaints generally increased between when the FTC began recording identity theft complaints in 2000 and 2008, the number of complaints decreased in both 2009 and 2010 before rising in 2011 and 2012. Identity theft case filings and convictions peaked in 2007 and 2008, and have generally declined since. Aggravated identity theft case filings and convictions, on the other hand, have largely continued to increase since aggravated identity theft was added as a federal offense in 2004. Congress continues to debate the federal government's role in (1) preventing identity theft and its related crimes, (2) mitigating the potential effects of identity theft after it occurs, and (3) providing the most effective tools to investigate and prosecute identity thieves. With respect to preventing identity theft, one issue concerning policymakers is the prevalence of personally identifiable information—and in particular, the prevalence of Social Security numbers (SSNs)—in both the private and public sectors. One policy option to reduce their prevalence may involve restricting the use of SSNs on government-issued documents such as Medicare identification cards. Another option could entail providing federal agencies with increased regulatory authority to curb the prevalence of SSN use in the private sector. In debating policies to mitigate the effects of identity theft, one option Congress may consider is whether to strengthen data breach notification requirements. Such requirements could affect the notification of relevant law enforcement authorities as well as any individuals whose personally identifiable information may be at risk from the breach. Congress may also be interested in assessing the true scope of data breaches, particularly involving government networks. There have already been several legislative and administrative actions aimed at curtailing identity theft. Congress enacted legislation naming identity theft as a federal crime in 1998 (P.L. 105-318) and later provided for enhanced penalties for aggravated identity theft (P.L. 108-275). In April 2007, the President's Identity Theft Task Force issued recommendations to combat identity theft, including specific legislative recommendations to close identity theft-related gaps in the federal criminal statutes. In a further attempt to curb identity theft, Congress directed the FTC to issue an Identity Theft Red Flags Rule, requiring that creditors and financial institutions with specified account types develop and institute written identity theft prevention programs.
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Recent breakdowns in U.S. financial markets have prompted congressional interest in criminal provisions available to federal prosecutors in cases involving mortgages. Because the role of weak mortgage loans in the economic downturn involves complex and systemic factors, criminal prosecution will necessarily be only one part of a broader governmental response. Numerous federal agencies enforce laws and regulations designed to stabilize markets and ensure the integrity of financial transactions within their respective areas of jurisdiction. Thus, regulatory reform will likely be an important response to the downturn. However, although regulations might provide an adequate means of enforcement in many situations, criminal provisions support prosecution in egregious cases involving criminal intent. This report focuses on federal criminal provisions relevant to prosecutions of mortgage fraud and related criminal actions. Mortgage fraud, per se , is not a federal crime. However, several federal criminal provisions – most notably mail and wire fraud, financial institutions fraud, and a number of crimes involving false statements – may encompass various fraudulent activities at issue in mortgage fraud cases. The mail and wire fraud statutes have a relatively broad application and are perhaps most likely to apply to those at the high end of the mortgage transaction ladder. Various provisions criminalizing false statements will also apply in some circumstances. In addition, financial institutions fraud provisions apply to instances in which an entity against whom a fraud is perpetrated falls within the definition of "financial institution" under federal law. Money laundering, conspiracy, and racketeering provisions may provide additional grounds for federal criminal liability. Other statutes, such as securities fraud provisions, may apply to fraudulent transactions within the secondary mortgage market. Finally, some provisions criminalize violations of federal regulations, creating an important connection between regulatory reforms and the scope of authorities for federal criminal liability. Looking forward, legislative proposals address a perceived need to expand the scope of federal statutory authority for mortgage fraud prosecutions. Although the U.S. Constitution's ex post facto clauses prohibit the states and federal government from imposing retroactive criminal penalties, Congress may choose to amend existing law to enhance liability for future crimes and deter fraud which targets people who are newly vulnerable to foreclosure proceedings in the current market or to ensure that wrongdoers are held liable in future situations. The Fraud Enforcement and Recovery Act of 2009 (FERA, S. 386 ), versions of which have been passed by the Senate and House, would, in addition to authorizing funding for prosecution efforts and other measures, expand federal criminal law authorities for combating mortgage fraud and related crimes. The many relevant federal criminal statutes, discussed infra , are indicative of the various types of activities related to mortgages that might constitute criminal fraud. However, despite the diversity of schemes and motives, mortgage fraud can be broadly described as involving material misstatements, misrepresentations, or omissions made with an intent to deceive an individual or entity in connection with a mortgage. It is also possible to describe general categories and trends. For example, the Federal Bureau of Investigation has drawn a general distinction between fraud-for-housing and fraud-for-profit schemes. Fraud for housing is committed by an individual, usually a borrower, for the purpose of fraudulently obtaining (or maintaining ownership of) a property. A common fraud-for-housing scenario involves false statements made to obtain a mortgage loan. Although the aggregate impact of all fraud-for-housing activity might be high, the impact of each individual fraud will typically be limited to a single property. Such crimes are generally prosecuted at the state level. Fraud for profit typically involves an ongoing scheme and an "industry insider" such as a mortgage broker or loan processor. Types of fraud-for-profit schemes that the FBI has identified as having "currently rising" incidences include equity skimming, property flipping, mortgage related identity theft, and foreclosure rescue scams. One example of equity skimming involves entities which offer to improve a homeowner's credit or help with mortgage payments by placing title to a home with a third-party "straw borrower," ostensibly to increase the original borrower's credit but actually to draw on the home's equity through the straw borrower. New York State law enforcement authorities brought charges against five people in connection with one such scheme in the Hamptons on Long Island. Similarly, foreclosure rescue scams advertise help with a foreclosure process but collect fees without providing any actual assistance. Property flipping involves "purchasing properties and artificially inflating their value through false appraisals" – a process which is typically repeated several times, until the property ultimately enters foreclosure. Because of the connection between deficient mortgage lending, the collapse of the burgeoning market for mortgage-backed securities, and the ultimate collapse of key financial institutions, many appear to include corporate and institutional fraud in discussions of the mortgage fraud problem. For example, in the context of testimony regarding the FBI's mortgage fraud investigations, the FBI's Deputy Director has referred to "mortgage and related corporate fraud" and to "mortgage fraud and related financial institutions fraud." This broad approach to the issue results in the inclusion of some activities which are best described as belonging to a criminal law category other than mortgage fraud but which, if kept separate, could result in an incomplete picture of the role of mortgage fraud. These related types of corporate, financial institutions, or securities fraud might relate to mortgages in one of at least two ways. First, a financial institution's officer or employee might play an "industry insider" role in a mortgage fraud scheme, for example by approving a loan but hiding pertinent information from the lending institution, thus participating directly in mortgage fraud. Alternatively, an employee might have committed an action constituting corporate, securities, or financial institutions fraud in relation to mortgage-backed financial instruments, utilizing mortgage assets that might or might not have been fraudulently obtained, for example by intentionally misstating the value of a mortgage-backed security to shareholders or to the Securities and Exchange Commission. Regardless of the categorization of fraudulent activities, many believe that mortgage fraud has played an important role in the recent economic downturn. A Senate Judiciary Committee report states: While the full scope of the fraud that helped trigger the economic crisis is still unknown, we do know a great deal about what went wrong. As banks and private mortgage companies relaxed their standards for loans, approving ever riskier mortgages with less and less due diligence, they created an environment that invited fraud. Private mortgage brokers and lending businesses came to dominate the home housing market, and these companies were not subject to the kind of banking oversight and internal regulations that had traditionally helped to prevent fraud. In other words, although such fraud is not the only cause of the crisis, fraudulently obtained mortgages, home loan scams, and other mortgage fraud activities likely contributed to instability in the mortgage markets, which in turn spurred breakdowns in financial markets dependent on mortgage-backed securities. Many perceive mortgage fraud and related behavior as a pervasive issue, indirectly affecting the nation's and world's economy and directly affecting thousands, and perhaps even millions, of homeowners. The FBI Deputy Director noted that "the current financial crisis has produced one unexpected consequence: it has exposed prevalent fraud schemes that have been thriving in the global financial system." In response to "rising public anger" in the wake of the economic downturn, some have called for increased mortgage fraud prosecutions on both the state and federal levels. Such calls prompt questions regarding the respective roles of federal and state prosecutors. For schemes perpetrated for the purpose of defrauding a federal regulatory agency, federal prosecutors are likely to have sole prosecutorial authority. For other schemes, including schemes involving federally regulated institutions, federal and state prosecutors are likely to have overlapping prosecutorial jurisdiction. In those situations, generally speaking, the federal focus is on the prosecution of relatively large fraudulent schemes. However, state prosecutors are not limited to prosecution of smaller schemes and often pursue fraud involving institutions or industry insiders. As discussed, numerous federal regulatory agencies play vital roles in the enforcement and supervision of financial institutions. Since the recent financial downturn, some agencies have implemented regulatory reforms on their own initiative, whereas others have implemented new regulations in response to congressional mandates. For example, as part of the 2009 omnibus spending legislation, Congress directed the Federal Trade Commission to initiate a rulemaking proceeding to regulate mortgage loans pursuant to its existing regulatory authority within 90 days of the act. Regulatory agencies also often partner with the Justice Department during criminal investigations, although the discretion to pursue criminal prosecution at the federal level ordinarily rests with the Justice Department. Since the breakdown in financial markets, resources for federal criminal investigations and prosecutions have shifted or expanded to emphasize mortgage fraud. The Federal Bureau of Investigation (FBI) has more than 2,000 active mortgage fraud investigations and has increased the number of mortgage fraud investigators. The United States has obtained guilty pleas in some cases involving "straw borrower" schemes. In addition, in June 2008, the Department of Justice conducted "Operation Malicious Mortgage," wherein U.S. Attorneys, with help from the FBI and others, brought charges against more than 400 defendants involved in lending fraud, foreclosure rescue scams, and mortgage-related bankruptcy schemes. In addition, the Treasury and Justice Departments have announced that the Obama Administration will initiate a coordinated crackdown on foreclosure-rescue and mortgage loan modification fraud in an effort to protect homeowners from new frauds that might be perpetrated to take advantage of individuals "during these challenging times." The role of mortgage fraud in the economic downturn has prompted concerns regarding the adequacy of existing federal criminal statutes. In particular, noting the large role that private (i.e., non-federally-chartered) mortgage lending businesses played in the residential mortgage market during the years preceding the recent financial crisis, some perceive a need for an expansion of federal criminal liability to encompass actions perpetrated to defraud such institutions. Such proposals have noted that false statements and schemes to defraud a private mortgage lending businesses currently escape liability under several traditional federal fraud statutes. Namely, neither the institutions fraud statute nor the statute criminalizing false statements on mortgage applications, both discussed infra , applies to frauds perpetrated against a private mortgage lending business. Because many such institutions relaxed their loan standards and are perceived as having contributed to an environment that invited fraud, proposals for expanded authorities generally deemphasize the victimization of such institutions and emphasize the importance of holding accountable the mortgage brokers and others who may have taken advantage of mortgage lending businesses' lax loan standards. On the other hand, other federal fraud statutes, most notably the mail and wire fraud statutes, also discussed infra , authorize criminal liability over frauds perpetrated against private mortgage lenders in many circumstances. In addition, the Sarbanes Oxley Act of 2002 and other measures enacted during the past few decades have substantially increased the penalties pertaining to the mail and wire fraud federal statutes, making the provisions very powerful prosecutorial tools. Consequently, some have indicated that existing statutes provide a sufficient basis for prosecutions connected with the current economic downturn. The Fraud Enforcement and Recovery Act of 2009 ( S. 386 ), a bill introduced by Senators Leahy, Grassley, and Kaufman and passed by the Senate – together with authorizing new funding for the Justice Department, establishing a new federal crime for the misuse of the Troubled Assets Relief Program funds, and amending the federal False Claims Act – would amend several federal criminal statutes to expand federal criminal liability "to improve enforcement of mortgage fraud, securities fraud, financial institution fraud, and other frauds." The amendments most relevant to mortgage fraud include: (1) expanding the definition of "financial institution," which applies in the context of institutions fraud and other sections, to include a "mortgage lending business," defined as "an organization which finances or refinances any debt secured by an interest in real estate ..."; (2) adding "mortgage lending business whose activities affect interstate or foreign commerce, or any person or entity that makes ... a federally related mortgage loan" to the list of entities to which the crime of false statement on a loan or credit application applies; (3) expanding the crime of major fraud against the United States to apply to grants, loans, subsidies, insurance, and other categories, rather than only contracts received from the government; and (4) expanding the definition of "proceeds" for money laundering to include gross receipts (as discussed infra , courts currently interpret the definition as encompassing only profits and not gross receipts); and (5) amending the federal securities fraud statute to extend to commodities, including derivatives comprised of mortgage-backed securities. The House passed S. 386 after replacing the text with a substitute amendment. The House version includes some measures from the Fight Fraud Act of 2009 ( H.R. 1748 ), which was favorably reported by the House Judiciary Committee and would have similarly amended federal criminal statutes, including expanding the "financial institution" definition to cover private mortgage lending businesses. The measure has drawn support from the Obama Administration and some commentators. Statements of support have generally focused on the likely return on investment from added resources for prosecutions or on the need for amendments to the False Claims Act and have not emphasized the perceived inadequacy of criminal provisions related to mortgage fraud. Multiple, interrelated federal criminal provisions provide alternative bases for criminal liability in mortgage fraud prosecutions. Federal criminal statutes most commonly relied upon include mail and wire fraud, financial institutions fraud, and false statements. Other criminal provisions, including some arising from banking law and others that establish criminal penalties to enforce federal regulations in specified areas, are also relevant. In addition, federal money laundering, conspiracy, and Racketeer Influenced and Corrupt Organizations provisions may provide secondary bases for federal criminal liability in some situations. A few preliminary points regarding federal criminal law are relevant. First, although criminal provisions provide maximum penalty amounts, which serve as upper limits for federal courts during the sentencing process, courts determine specific sentences in individual cases after considering recommendations in the U.S. Sentencing Guidelines. Second, under federal law, those who aid and abet a perpetrator are treated as principals and are typically punishable for commission of the underlying offense. Because mail and wire (including internet) are common, and often necessary, modes of communication, the federal mail and wire fraud statutes, 18 U.S.C. §1341 and 18 U.S.C. §1343, are perhaps federal prosecutors' most powerful tools for combating white collar crimes. Because of their broad reach, they are regarded as especially useful in addressing complex white-collar frauds, which might otherwise fall through the cracks in the array of more narrowly focused federal crimes. Except for the instrument (the mail system versus telecommunications) used, the mail and wire fraud statutes share identical elements and are generally interpreted in the same manner by the federal courts. The mail fraud statute subjects anyone to criminal liability who, "having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises," deposits or causes to be deposited, knowingly causes to be delivered, or takes or receives, any "matter or thing whatever" in a post office or "authorized mail depository" or with "any private or commercial interstate carrier ... for the purpose of executing [a fraudulent] scheme." The wire fraud statute includes the same "having devised or intending to devise any scheme or artifice to defraud ..." and "for the purpose of executing such scheme" language but applies to transmittals of "any writings, signs, signals, pictures, or sounds" "by means of wire, radio, or television communication in interstate or foreign commerce," including by internet. Because the statutes require only the very common act of using mail or telecommunications, or the knowledge of such an act, a prosecutor has a relatively low bar to prove that a defendant committed the relevant act involved in a mail or wire fraud case. Thus, the success of mail or wire fraud prosecutions typically turns on whether a defendant had the requisite mental state – namely, whether he or she had devised or had intended to devise a "scheme or artifice to defraud." Both crimes require a specific intent to defraud; in other words, they require an intent to defraud, not just to conduct activity that happens to be fraudulent. Courts have interpreted "any scheme or artifice to defraud" relatively broadly – i.e., as any act or omission that "wrong[s] one in his property rights by dishonest methods or schemes and usually signif[ies] the deprivation of something of value by trick, deceit, chicane or overreaching." The scheme need not be intended to deceive a person of at least "ordinary prudence." Although the Supreme Court ruled in 1987 that the definition extended only to tangible property, Congress, in response to that case, amended the statutory definition of "scheme or artifice to defraud" to encompass schemes to "deprive another of the intangible right of honest services." Prosecutions against mortgage fraud involving home-loan scams such as those that utilize a "straw borrower" will typically involve tangible property. In such cases, the "scheme or artifice to defraud" definition will be relatively easily satisfied. In cases involving lenders or other entities, the analyses will likely turn on whether an action constituted deprivation of "honest services." The U.S. Supreme Court has not yet interpreted this phrase, and the federal circuit courts of appeal have adopted differing interpretations of the scope of "honest services." However, it appears that the mail and wire fraud statutes now apply at least to some fraudulent activities involving intangible property. Materiality presents another necessary component to the analysis in mail and wire fraud cases. The deception that is part of a scheme to defraud must be material; that is, it must have a natural tendency to induce reliance to the victim's detriment or to the offender's benefit. Mail and wire fraud are punishable regardless of the success of the fraudulent scheme. Although financial institutions crimes are codified in a statute entitled the "Bank Fraud Statute," they apply to fraudulent activities perpetrated not just against banks but against any "financial institution." Thus, the scope of the "financial institution" definition provides a key preliminary threshold in financial institutions fraud cases. Specifically, the definition covers nine types of entities, including: (1) insured depository institutions; (2) specified credit unions; (3) federal home loan banks and members of the federal home loan bank system; (4) specified farm credit institutions; (5) small business investment companies; (6) depository institution holding companies; (7) Federal Reserve banks and members of the Federal Reserve System; (8) organizations operating under section 25 or section 25(a)(1) of the Federal Reserve Act, known as "Edge Act Corporations" and chartered by the Federal Reserve; and (9) foreign banks operating in the United States through branches or agencies. It does not currently include mortgage lending entities unless they fit within one of the nine enumerated categories. Under the existing statute, 18 U.S.C. §1344, criminal liability will apply if a person "knowingly executes, or attempts to execute, a scheme or artifice" in order to: (1) defraud a financial institution; or (2) obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises. Applicable penalties include up to 30 years imprisonment and a fine of no more than $1 million. The statutory language prompts several questions that a federal prosecutor must address. First, was the knowledge requirement satisfied? To determine whether the "knowing" mental state requirement is satisfied, courts examine the totality of the evidence, including circumstantial evidence. For example, a defendant's prior fraudulent actions might serve as evidence that he knowingly executed the scheme against the financial institution. Second, was there an "execution" (or an attempted execution) of the scheme? Determinations regarding whether an execution was attempted or conducted are fact specific. Examples of relevant factors include "the ultimate goal of the scheme, the nature of the scheme, the benefits intended, the interdependence of the acts, the number of parties involved." Third, was the activity a "scheme or artifice"? As with the definition of "scheme to defraud" in the mail and wire fraud context, the definition is relatively broad in this context, extending to any conduct intended to deceive another of something of value. Finally, is one of the two purpose prongs satisfied? The two prongs require different elements, and at least one court has held that violations under both prongs can give rise to two independent convictions. Only the second prong requires that a defendant make fraudulent representations and actually deprive the institution of property. Several federal statutes impose criminal liability for false statements. The provision most commonly relied upon is the general provision, 18 U.S.C. §1001, which applies to false statements made in a matter within the jurisdiction of the federal government. In order for statements made to non-government entities such as private borrowers or lenders to serve as a basis for criminal liability, one of the more specific types of false statements must apply. The false statements provision most relied upon by federal prosecutors imposes liability for "knowingly and willfully": (1) falsifying or concealing by trick, scheme or device; (2) making a false or fictitious statement or representation; or (3) making or using "any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry." The provision is a frequently relied upon as a basis for criminal liability because it applies to all types of false statements made to the government and serves as either a complementary or supplementary basis of criminal liability along with more specific provisions. As interpreted by the U.S. Supreme Court, the "knowingly and willfully" standard requires that a person had actual knowledge as to a statement's falsity but does not require that a person had knowledge that the statement will be transmitted to a government agency. In addition to the "knowingly and willfully" requirement, a prosecutor must prove that any statement or concealment is false, material (i.e., has consequence), and made within the jurisdiction of one of the three branches in the federal government. In this context, jurisdiction is typically interpreted relatively broadly; for example, it exists even if a person was not aware that a federal agency exercised authority over the area in question. Specific false statement provisions most applicable to mortgage fraud make it a crime to: (1) possess false or forged papers with an intent to defraud the United States or a federal agency for the purpose of "enabling another to obtain any sum of money"; (2) make a false statement on a loan or credit application; (3) make, pass, utter, or publish any false statement or alter, forge, or counterfeit a document in connection with a Department of Housing and Urban Development or Federal Housing Administration transaction; (4) produce or possess false identification documents; (5) make, draw, issue, put forth, or assign a mortgage as an employee, officer, or agent of a federally insured or otherwise federally related bank without authorization from the bank's directors; (6) make a false entry in "any book, report, or statement" of a bank with intent to defraud the bank or deceive a bank officer; or (7) provide a fictitious name or address in connection with mail fraud. A related provision imposes penalties of up to 30 years imprisonment and a $1 million fine for anyone who "participates or shares in or receives (directly or indirectly) any money, profit, property, or benefits through any transaction, loan, commission, contract, or any other act of any such financial institution" with an intent to defraud the United States or a federally insured or otherwise federally related financial institution. The provision criminalizing false statements on a loan or credit application, 18 U.S.C. §1014, applies not only to an individual borrower's provision of false information on a loan application but also to the overvaluation of a property or security for the purpose of influencing a protected financial institution in any way. Thus, for example, it could arguably apply to entities misrepresenting the value of mortgage-backed securities. Like the general false statements provision, all of the provisions mentioned above, except for providing a fictitious name or address, require that a defendant had at least a "knowing" mental state. Thus, accidental mistakes on applications or forms will generally not give rise to criminal liability. Several defenses are applicable in false statements prosecutions. First, relying on the self-incrimination clause of the Fifth Amendment to the U.S. Constitution, the "exculpatory no" doctrine suggests that a person should not be held criminally liable under the false statements provision for answering "no" to a question that would trigger an admission of guilt. Although the Supreme Court has discredited the defense, the U.S. Attorneys, as a general policy, avoid prosecutions in situations that would implicate the doctrine. Second, an "ambiguity" defense applies in some circumstances. In particular, criminal liability cannot apply if the question answered was "truly" or "fundamentally" ambiguous. If, on the other hand, the question or request was only arguably ambiguous, it might be up to a jury to determine whether the question asked was sufficiently clear that a statement's falsity can be ascertained. Together with embezzlement and theft, federal law criminalizes "willful misapplication" of an institution's money or property by its officers or employees. In the context of mortgages, misapplication – i.e., the unlawful use of funds or property that is lawfully held – might be especially relevant. In particular, willful misapplication might apply in cases in which an officer or employee of a bank or lending institution gives a mortgage to an uncreditworthy borrower or approves a mortgage that lacks sufficient collateral. However, the bank or lending institution's consent, "with full knowledge of all the facts," to a mortgage is a valid defense to a criminal misapplication charge. Also, although "[i]mproper lending is probably the most obvious type of misapplication, ... it should be noted that a badly made loan in and of itself might be mere maladministration as opposed to criminal misapplication." If criminal misapplication is proven, potential criminal penalties include a fine of up to $1 million and up to 30 years imprisonment. One category of criminal provisions, found throughout the United States Code, imposes criminal penalties as a result of a person's violation of validly promulgated federal regulations implementing statutory provisions. For example, in the context of regulatory authority governing bank holding companies, 12 U.S.C. §1847 imposes criminal penalties, including imprisonment of up to one year and fines up to $1 million per day of violation, for bank holding companies which violate "any regulation or order issued by the [Federal Reserve] Board under this chapter." Another provision imposes criminal penalties of up to five years imprisonment and a $250,000 fine for violations of regulations promulgated pursuant to the code chapter on monetary transactions. In some cases, statutes impose harsher penalties for regulatory violations in cases in which the violation was committed to further a federal crime. Because they impose criminal liability only for activity to which a regulation applies, the scope of liability established under such regulations depends on decisions made by the relevant agency. By deferring to regulatory agencies' expertise to determine which activities should be prohibited, this approach has the advantage of flexibility. A disadvantage may be that activity which falls outside an agency's policy priorities as expressed through regulation will not give rise to criminal liability. Another set of criminal provisions addresses responses to federal regulatory agencies' enforcement activities. One statute provides criminal fines and imprisonment for up to five years for knowingly concealing an asset from the Federal Deposit Insurance Corporation (FDIC) or any conservator or receiver of a federally insured institution or for "corruptly impeding" the functions of the FDIC, the Office of the Comptroller of the Currency (regulator of national banks), the Office of Thrift Supervision (regulator of federal and federally-insured thrifts), or the National Credit Union Administrator (regulator of federal and federally-insured credit unions). Other provisions make it a crime to participate in the control of an insured depository institution without FDIC approval after a conviction for a specified crime involving dishonesty or a breach of trust and to offer a loan or gratuity to a federal examiner of financial institutions without authorization. In addition, some provisions impose criminal penalties for the unauthorized use of federal agency names, for the likely purpose of preventing any misleading appearance that an entity is federally operated or supported. For example, one provision makes it a crime to use, without express statutory authorization, the term "Federal Home Loan Mortgage Corporation," or any combination of words including the words "Federal," and "Home Loan," and "Mortgage" as part of a business name, design, or insigne. Another provision imposes criminal penalties for unauthorized use of "the words 'national,' 'Federal,' 'United States,' 'reserve,' or 'Deposit Insurance' as part of the business or firm name of a person, corporation, partnership, business trust, association or other business entity engaged in the banking, loan, building and loan, brokerage, factorage, insurance, indemnity, savings or trust business." A final set of provisions impose criminal penalties for failing to comply with federal agencies' investigations and enforcement actions. For example, one provision authorizes penalties including a fine of up to $1,000 and up to a year in prison for failing to comply with a subpoena validly issued and served in connection with a Securities and Exchange Commission enforcement action. More broadly, another statute makes it a federal crime to "corruptly" obstruct any federal agency's examination of a financial institution. Because money laundering occurs under federal law any time that money used or obtained illegally is used in a financial transaction or in connection with further criminal conduct, anti-money laundering provisions could provide a secondary basis for criminal liability in mortgage fraud cases. Federal law imposes criminal liability on any individual or entity who, "knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity" with an intent to engage a specified offense or with the knowledge that the transaction is being conducted for the purpose of concealing the money's illegal source. For purposes of the money laundering provision, "proceeds" includes profits only and not gross receipts. The statute authorizes a penalty of up to 20 years imprisonment and a fine up to the greater of $500,000 or twice the value of the funds involved. The federal statute also imposes criminal liability for anyone who "knowingly engages or attempts to engage in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity." The maximum penalty under this provision is 10 years imprisonment or a fine. Like other entities, financial institutions can be prosecuted on federal money laundering charges. However, to ensure "consistency and uniformity" for such prosecutions, the Department of Justice requires that federal prosecutors obtain approval from the Department's Criminal Division before an indictment or complaint may be filed against a financial institution on money laundering grounds. Likewise, in cases involving both money laundering and mortgage fraud or another financial crime, the Department's criminal division must give approval before an indictment or complaint may be brought. Such approval requirements seek to avoid issues that might otherwise arise in cases in which the money laundering is difficult to distinguish from the underlying financial crime. Conspiracy is an independent basis for criminal liability under federal law. The general federal crime of conspiracy occurs anytime "two or more persons conspire either to commit any offense against the United States ... and one or more of such persons do any act to effect the object of the conspiracy." Additional federal statutes provide criminal penalties for conspiracy to commit crimes under a particular subchapter. Under these provisions, conspiracy could provide an alternative or supplemental basis for criminal liability in any case in which two or more people were involved in an attempt to commit one of the crimes discussed above. In most cases, the maximum federal penalties for conspiracy include a fine or five years imprisonment. As with money laundering, criminal penalties under the Racketeering Influenced and Corrupt Organizations Act (RICO) might apply only when other criminal activities are also alleged. RICO outlaws acquiring or conducting the affairs of an "enterprise" through the patterned commission of a series of underlying federal or state crimes. Although RICO provides an independent basis for criminal liability, it applies only when two or more underlying offenses, called "predicate acts," are involved. In the mortgage fraud context, the most likely predicate offenses are crimes discussed supra – especially mail or wire fraud and institutions fraud. Although it appears that evidence of at least two such offenses must be demonstrated, "a person does not have to be formally convicted of any predicate act before liability under [RICO] may attach." Penalties include imprisonment for up to "20 years (or for life if the violation is based on a racketeering activity for which the maximum penalty includes life imprisonment)" and forfeiture of specified interest or property obtained as part of the criminal enterprise. Similarly, the federal criminal code contains another provision prescribing criminal penalties for organizing, managing or supervising a "continuing financial crime enterprise" and receiving $5 million or more in gross receipts during any 24-month period. A "continuing financial crime enterprise" is defined in terms of "a series of violations" of specified other provisions "affecting a financial institution, committed by at least 4 persons acting in concert." Several additional provisions may provide bases for criminal liability in cases involving mortgage fraud and related activities. One provision makes it a crime to knowingly or intentionally violate 15 U.S.C. §6821, which prohibits accessing "customer information of a financial institution relating to another person" by false pretenses. Another provides criminal penalties for the unauthorized participation in profits from a loan with intent to defraud. A third makes it a crime to transfer, including by wire, securities or money with a value of $5,000 or more with knowledge that the property was converted or taken by fraud. In addition, a few provisions address kickbacks received in exchange for procurement of loans. One provides a criminal penalties, namely up to 30 years imprisonment and fine up to $1 million (or three times the value of the gift, whichever is greater), for receiving gifts to procure loans. Another provides criminal penalties, including a fine of up to $10,000 and up to one year imprisonment, for giving or accepting kickbacks in exchange for a business referral related to a "federally related mortgage loan" and for splitting fees in connection with such loans. Another provision criminalizes a government contractor's knowing execution (or attempted execution) of a "scheme or artifice" with intent to either defraud the United States or to obtain money or property from the United States by false pretenses. Such "major fraud" must involve a prime contract with the United States, and the value of the contract or a part of the contract must be $1 million or more. Finally, federal securities fraud provisions could impose criminal liability in situations involving fraudulent behavior related to mortgage-backed securities. The crime of securities fraud applies to activities in connection with "any security of an issuer with a class of securities" that is registered under or must file reports pursuant to the Securities and Exchange Act. Specifically, penalties including fines and up to 25 years imprisonment apply in cases involving either of the following related to such securities: (1) "defraud[ing of] any person"; or (2) "obtain[ing], by means of false or fraudulent pretenses, representations, or promises, any money or property." This provision could provide a basis for criminal liability in a case involving a mortgage-backed security. However, it would not necessarily reach derivative contracts and other financial transactions that involve mortgage-backed securities. Some individuals have raised concerns regarding additional federal criminalization of white collar crimes. This caution might be especially relevant given the increased penalties that have been established for existing federal crimes over the past few decades. However, as discussed, Congress may choose to amend federal criminal statutes, such as the financial institutions fraud and false statement on a mortgage loan application provisions, to include a broader basis for federal prosecutorial authority in cases involving criminal actions taken related to mortgages. Any legislative proposal to amend criminal provisions will inevitably be shaped by the broader response to the financial downturn. In the mortgage fraud arena, many activities likely walk a fine line between maneuvers that were legal under loose regulatory enforcement, on one hand, and illegal activity, on the other. Partly for that reason, there has been renewed attention given to revamping the federal financial institution regulatory structure. For example, the acting director of the federal Office of Thrift Supervision has called for amendments to existing regulatory authorities that would ensure that more housing debt and finance entities would be subject to federal supervision. In addition, some agencies, such as the Federal Reserve Board and the Securities and Exchange Commission, have recently enacted new regulations for which statutory authority already existed or are considering boosting enforcement activities under current authorities. In many cases, such actions would trigger the existing criminal provisions which provide penalties for violations of regulatory provisions. Thus, in some cases, regulatory reforms might effectively expand the scope of federal authority in criminal prosecutions involving mortgage fraud.
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Although criminal prosecutions will likely be only one part of a broader governmental response to the recent financial crisis, the perceived role of fraudulent activity in the downturn, and of mortgage fraud in particular, has spurred interest in the criminal provisions available to federal prosecutors. This report analyzes statutory sources of federal criminal liability for fraudulent actions taken in the primary mortgage market – i.e., fraud committed by borrowers, brokers, lenders, or others during the mortgage origination process. It also discusses some statutes implicated by fraudulent actions in the secondary mortgage market. In general, federal regulation of financial institutions is handled by numerous regulatory agencies. However, criminal liability applies in instances involving criminal intent. Mortgage-related criminal schemes range from fraud committed by an individual borrower for the purpose of obtaining a loan to fraud-for-profit schemes that involve institutions or industry insiders. In general, federal criminal enforcement efforts have focused on schemes involving industry insiders. Although there is no one federal crime of "mortgage fraud," many federal statutes may impose criminal liability for mortgage fraud and related schemes. Relevant federal provisions include, among others, those criminalizing mail and wire fraud, financial institutions fraud, and false statements, together with those that impose criminal penalties for violations of federal regulations. Money laundering, conspiracy, and racketeering provisions may provide additional bases for federal criminal liability. In addition, to a limited extent, securities fraud and corporate fraud provisions may apply to fraudulent actions taken in the secondary mortgage market. Looking forward, a debate has emerged regarding the adequacy of existing federal criminal provisions. Some have suggested that existing statutory authorities are sufficiently broad and that regulatory reforms are the most appropriate response. Others have argued that several key federal criminal statutes need to be expanded because they do not cover all mortgage companies. The Fraud Enforcement and Recovery Act of 2009 (FERA, S. 386), versions of which have been passed by the Senate and House, would expand the scope of existing criminal provisions, for example by expanding the definition of "financial institution" under U.S. criminal law to include mortgage lending businesses.
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Federal civilian employees may be compensated for periods of illness, disability, or injury through one of three systems: paid sick leave, disability retirement, or workers' compensation benefits for injuries sustained at work. In most cases, short-term illness or injury is compensated through paid sick leave. A federal employee who experiences a permanent disability can take a disability retirement before reaching the statutory retirement age. Disability retirement benefits differ between the two federal retirement systems: the Civil Service Retirement System (CSRS) and the Federal Employees' Retirement System (FERS). Federal employees hired before 1984 are covered by CSRS and those who were hired in 1984 or later are covered by FERS. Employees enrolled in CSRS do not pay Social Security taxes and do not earn Social Security benefits while employed by the federal government. Employees enrolled in FERS pay Social Security taxes and earn Social Security benefits. Until the age of 62, disability retirement annuities under FERS are offset in part by the amount of Social Security benefits the annuitant receives. Workers who experience short-term illnesses or injuries can use paid sick leave to take time off from work. Federal employees accrue sick leave at the rate of 4 hours for each two-week pay period up to a total of 104 hours (13 days) per year. Unused sick leave continues to accrue without limit throughout a federal employee's career. If an employee has exhausted his or her accrued sick leave balance, the worker's employing agency can advance up to 30 days of sick leave per year. Ill or injured workers who have exhausted their accrued sick leave but who expect to be able to return to work can use their accrued annual leave or, in some cases, can take leave without pay until they have recovered and can return to work. The federal government does not offer short-term disability insurance to workers who have exhausted their accrued sick leave and annual leave. The Federal Employees Leave Sharing Act of 1988 ( P.L. 100-566 ) authorizes a voluntary leave bank program through which federal agencies may allow employees to donate unused annual leave to employees who have exhausted their accrued sick leave. Employees cannot donate unused sick leave. When a worker covered by CSRS or FERS retires, any unused sick leave that he or she has accrued is added to the employee's length of service for purposes of computing the employee's annuity. A federal employee enrolled in CSRS is eligible for a disability retirement if he or she has completed at least five years of creditable civilian service; the employee has a disability that results in deficient performance, conduct, or attendance or that is incompatible with the individual continuing to perform useful and efficient service in his or her job; a physician certifies that the disability is expected to last a year or more; the worker's employing agency is unable to accommodate the disability in the worker's current job or in an existing vacant position at the same grade or pay and in the same commuting area; and an application for disability retirement is filed with the employing agency before separation or with the Office of Personnel Management within one year of the date of separation from employment. Unlike the eligibility requirements for benefits under the Social Security Disability Insurance Income (SSDI) and Supplemental Security (SSI) programs, eligibility for a CSRS disability retirement annuity does not require the employee to be disabled for any employment in the national economy. Instead, to be eligible for a CSRS disability retirement annuity, the employee must be unable to perform the job to which he or she was assigned or a job at the same pay in the same commuting area. Unless the Office of Personnel Management (OPM) certifies that the individual's disability is permanent, an employee who has retired due to disability is required to undergo periodic medical reevaluations until the age of 60. If the individual recovers, disability annuity payments continue temporarily while the individual seeks reemployment. The disability annuity terminates at the earliest of (1) the date on which the individual is reemployed by the government, (2) one year from the date of a medical examination showing that the individual has recovered from the illness or disability, or (3) six months from the end of the calendar year in which the individual demonstrates that his or her earning capacity has been restored. The individual's earning capacity is deemed to have been restored if, in any calendar year, his or her income from wages, self-employment, or both is equal to at least 80% of the current rate of pay for the position he or she occupied immediately before retiring. Under CSRS, a disabled worker is eligible for a retirement annuity equal to the greater of (1) the annuity that he or she would receive under the regular retirement formula, or (2) a minimum benefit that is the lesser of 40% of the average of the employee's highest three consecutive years of basic pay ("high-three" pay), or the annuity that would be paid if the employee continued working until the age of 60 at the same high-three pay, including in the annuity computation the number of years of service and the years between the date of retirement and the date on which the individual would reach the age of 60. The method of computing a CSRS disability retirement annuity assures that an employee will not receive a larger annuity through a disability retirement than he or she would receive from having worked to the minimum age and years of service required for a normal retirement. In general, a worker who becomes disabled after 22 or more years of federal service will receive an annuity computed under the regular CSRS annuity formula, regardless of his or her age. Because CSRS has been closed to new entrants since 1984, most federal employees covered by CSRS now have 30 or more years of service. Under CSRS, a regular retirement annuity for 30 years of service would replace 56.25% of the worker's high-three average pay. A federal employee covered by CSRS can take regular retirement with an immediate, unreduced annuity at the age of 55 or later with at least 30 years of service, at the age of 60 or later with at least 20 years of service, or at the age of 62 with at least five years of service. CSRS retirement annuities are indexed annually to the rate of growth of the Consumer Price Index (CPI), regardless of whether the individual retired due to disability or under normal retirement rules. A federal employee who is enrolled in FERS must have completed at least 18 months of service to be eligible for a disability retirement. All other eligibility rules for disability retirement under FERS are the same as under CSRS. Federal employees enrolled in FERS also are covered by Social Security, and the amount of a disability annuity under FERS is offset until the age of 62 by a portion of any Social Security Disability Insurance (SSDI) benefit that the individual receives. Federal employees covered by FERS who apply for disability retirement also must apply for Social Security disability benefits. Eligibility for Social Security disability benefits requires a determination by the Social Security Administration that the individual is unable to perform substantial gainful activity in any job in the national economy. Therefore, an individual covered by FERS may be determined to be disabled for purposes of his or her job with the federal government, but not with respect to other employment. In such a case, the individual would be eligible to receive a FERS disability annuity but be ineligible for SSDI. A federal employee who is disabled under both the FERS and Social Security statutes would be eligible to receive both a FERS disability annuity and a Social Security benefit, subject to the provisions of federal law integrating the two benefits. For federal employees under 62 years of age, the FERS disability retirement annuity in the first year of disability is 60% of the individual's high-three average pay minus 100% of any Social Security benefit that he or she is receiving. In years after the first year of disability, the FERS disability annuity is 40% of the individual's high-three average pay minus 60% of any Social Security benefit that he or she is receiving. The FERS disability annuity remains at that level—adjusted annually by the FERS cost-of-living adjustment—until the individual reaches the age of 62. When a FERS disability annuitant reaches the age of 62, the FERS annuity is adjusted to the amount that the individual would have received if he or she had continued to work until the age of 62. This ensures that an individual who retires from federal employment as the result of disability does not receive a higher annuity after this age than he or she would have received as the result of taking a normal retirement. The adjusted annuity at the age of 62 is equal to 1.0% of the individual's high-three average pay (increased by the FERS cost-of-living adjustments since the date of the disability retirement) multiplied by the sum of years of service performed before the date of disability retirement plus the number of years since that date. If the total number of years is 20 or more, the annuity is 1.1% of high-three average pay multiplied by this number of years. If an employee covered by FERS becomes disabled at the age of 62 or later, his or her FERS annuity is computed under the regular FERS retirement rules. In most cases, the adjusted FERS benefit payable at the age of 62 will be lower than the annuity that was paid before age 62. However, at the age of 62 and later, the offset to the FERS annuity for any Social Security benefits that the individual may be receiving will cease. Also, a worker who was receiving a FERS annuity but was not eligible for SSDI can apply for Social Security retired worker benefits at the age of 62, provided that he or she has completed the required 40 quarters of employment covered by Social Security. The Social Security benefit will compensate in part for the reduction in the FERS annuity. FERS disability annuities are adjusted for inflation beginning in the second year of payment. If the CPI has increased by 2.0% or less during the year ending on September 30, the FERS cost-of-living adjustment in the following January is equal to the percentage change in the CPI. If the CPI has increased by more than 2.0% but less than 3.0%, the FERS COLA is 2.0%. If the CPI has increased by 3.0% or more, the FERS COLA is one percentage point less than the increase in the CPI. FERS retirement benefits consist of the FERS annuity, Social Security, and the Thrift Savings Plan. P.L. 108-92 (October 3, 2003) changed the computation of the FERS annuity for federal employees who are injured on the job. An injured employee cannot contribute to Social Security or to the Thrift Savings Plan while receiving workers' compensation under the Federal Employees' Compensation Act. Social Security taxes and TSP contributions must be paid from earnings , and workers' compensation payments are not classified as earnings under either the Social Security Act or the Internal Revenue Code. As a result, the employee's future retirement income from Social Security and the TSP may be reduced. P.L. 108-92 increased the FERS basic annuity from 1.0% of the individual's high-three average pay to 2.0% of high-three average pay for the duration of the period when the individual received workers' compensation. This is intended to replace income that may have been lost from lower Social Security benefits and reduced income from the TSP. The Federal Employees' Compensation Act (FECA) provides benefits to federal employees who suffer a partial or total disability as the result of an injury incurred at work. In the event of the worker's death as the result of an on-the-job injury, FECA pays benefits to the worker's surviving dependents. FECA pays benefits only in the case of an illness, injury, or disability that is determined to be work-related. Federal workers are covered by FECA immediately upon employment. FECA benefits consist of cash compensation, payment of medical expenses related to the illness or injury, vocational rehabilitation assistance, and payment for attendant care services. The cash payment is calculated as a percentage of average annual earnings prior to the individual's injury or death. FECA benefits are indexed annually to the rate of growth of the CPI. FECA benefits are not subject to income taxes. FECA cash compensation equals two-thirds of lost earning capacity if the worker has no dependents or three-fourths of lost earning capacity if the worker has dependents. FECA payments may not exceed 75% of the maximum rate of pay for grade GS-15 of the general schedule, and in case of total disability, may not be less than the minimum pay for the GS-2 pay grade. FECA cash benefits continue as long as the disability lasts. Compensation does not end when the individual reaches retirement age. An injured employee may elect to receive a disability retirement annuity instead of FECA benefits, but may not receive both simultaneously. If an employee covered by FERS elects to receive FECA compensation, it will be reduced by the amount of any Social Security benefits that are based on the period of his or her federal employment. An election between FECA and a disability retirement annuity may be changed at any time. For certain listed injuries, minimum cash benefits are provided, regardless of how long the disability lasts. In case of injuries resulting from a specific incident, the employee's full pay continues for the term of the disability up to a maximum of 45 days, after which regular FECA compensation payments begin if the disability continues. If a federal employee dies from a work-related injury, FECA pays cash compensation to the worker's surviving dependents. A surviving spouse receives annual compensation equal to 50% of the worker's last annual rate of pay. Benefits terminate if the surviving spouse remarries before age 60, although in the event of remarriage before the age of 60, the surviving spouse is paid a lump sum equal to two years of benefits. If the worker had both a spouse and dependent children, the spouse's benefit is equal to 45% of the worker's last annual rate of pay, and each dependent child receives a benefit equal to 15% of pay, up to a maximum family benefit equal to 75% of pay. If the worker had dependent children but no spouse, the compensation is equal to 40% of pay for one child and an additional 15% for each additional child up to a maximum of 75% of pay. A dependent child's benefit ends at the age of 19, unless he or she is incapable of self-support due to disability. In some cases, other surviving dependent relatives, including parents, siblings, grandparents, and grandchildren may be eligible for compensation, according to the extent of their financial dependence on the deceased worker. Section 651 of P.L. 104-208 , the Omnibus Consolidated Appropriations Act for FY1997, authorizes the heads of federal agencies to pay a gratuity payment of up to $10,000 to the executor of the estate of a federal employee who dies as the result of injury sustained in the performance of official duties after August 1, 1990.
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Paid sick leave, disability retirement, or workers' compensation may provide benefits for federal civilian employees during periods of illness, disability, or workplace injury, respectively. Federal civilian employees earn 13 days of paid sick leave per year. Sick leave can be used because of the worker's own illness or injury or to care for an ill or injured family member. A worker's employing agency can advance up to 30 additional days of sick leave to an employee who has exhausted his or her accrued sick leave. A federal worker with a long-term disability can separate from service through a disability retirement. A federal employee who sustains a disabling injury on the job can receive benefits under the Federal Employees' Compensation Act (FECA), the workers' compensation program for federal employees. FECA benefits consist of cash compensation, payment of medical costs related to the injury, vocational rehabilitation assistance, the cost of attendant care services, and burial benefits. A disabled federal employee may not receive a disability retirement annuity and FECA benefits simultaneously.
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On December 6, 2002, recently released political prisoner Oscar ElÃas Biscet was arrestedat a human rights demonstration in Havana. The Cuban government had released Biscet on October31 2002, after three years of imprisonment for displaying the Cuban flag upside down. (See "HumanRights" below). In early November 2002, the U.S. Department of State ordered the expulsion of four Cubandiplomats in the United States in response to the espionage case of a Defense Intelligence Agency(DIA) analyst spying for Cuba. Cuba strongly asserted that the diplomats were not involved inintelligence activities. (See "Cuban Spies in the United States" below.) From September 26-30 2002, a U.S. Food & Agribusiness Exhibition was held in Havanafeaturing 288 exhibitors marketing 1,000 products from more than 30 states, the District ofColumbia, and Puerto Rico. (See "Food and Medical Exports" below.) On July 24, 2002, the House approved the FY2003 Treasury Department appropriations bill, H.R. 5120 , by a vote of 308-121, that contained three amendments easing Cubaembargo restrictions on travel, remittances, and agricultural exports. On July 24, White Housespokesman Ari Fleischer stated that the President would veto the measure if it contained suchprovisions. On July 16, 2002, President Bush again suspended for a six-month period 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 ). On June 26, 2002, Cuba's National Assembly approved amendments to the CubanConstitution stating that "socialism and the revolutionary political and social system in theConstitution ... are irrevocable; and Cuba will never again return to capitalism." (See "PoliticalConditions" below.) A speech by Fidel Castro at the National Assembly session raised concernsamong some observers that Castro was planning another mass migration exodus like the ones in1980 and 1994. Subsequently, however, both Cuban and U.S. officials stated the importance ofmaintaining the migration accords. (See "Migration" below.) On June 10, 2002, the Senate approved (by a vote of 87-0) S.Res. 272 (Nelson),which expresses support for the Varela Project that is working for a national referendum in Cubato bring about political change. (See "Human Rights" section below.) On June 6, 2002, the House International Relations Committee's Subcommittee onInternational Operations and Human Rights held a hearing on Radio and TV Marti featuringAdministration and outside witnesses. (See "Radio and TV Marti" section below.) On June 5, 2002, the Senate Foreign Relations Committee, Subcommittee on WesternHemisphere, Peace Corps, and Narcotics Affairs, held a hearing on the issue of Cuba and biologicalweapons. On May 6, 2002, Under Secretary of State for Arms Control and International SecurityJohn Bolton stated that "the United States believes that Cuba has at least a limited offensivebiological warfare research-and-development effort" and "has provided dual-use technology toother rogue states." When questioned on the issue at that time, Secretary of State Powell assertedthat the United States believes Cuba has the capacity and the capability to conduct research onbiological weapons but emphasized that the Administration had not claimed that Cuba had suchweapons. (See "Cuba and Terrorism" below.) On May 20, 2002, President Bush announced a new initiative on Cuba that includes severalmeasures designed to reach out to the Cuban people. (See "U.S. Policy Toward Cuba" below.) On May 12, 2002, former President Jimmy Carter arrived in Cuba for a six-day visit. During the trip, Carter raised human rights issues, and included the topic in an address televisedin Cuba. (See "U.S. Policy Toward Cuba" below.) On May 5, 2002, the Cuban government released prominent political prisoner VladimiroRoca from jail about two months before his 5-year sentence was complete. (See "Human Rights"below.) On May 1, 2002, the conference report ( H.Rept. 107-424 ) to the 2002 Farm Bill was filedwithout a provision from the Senate version of the bill (Section 335) that would have eliminatedrestrictions in U.S. law against U.S. private financing of agricultural sales to Cuba. On April 23,2002, the House had approved (273-143) a nonbinding motion to instruct the House conferees toaccept the Senate provision. (See"Food and Medical Exports" below.) On April 19, 2002, the U.N. Commission on Human Rights approved a resolution (by a voteof 23-21, with 9 abstentions) calling on Cuba to improve its human rights record "in accordancewith the Universal Declaration of Human Rights and the principles and standards of the rule oflaw."(See "Human Rights" below.) On March 19, 2002, former Defense Intelligence Agency (DIA) analyst Ana Montes pledguilty to spying for the Cuban government for 16 years. Federal prosecutors reportedly agreed toa 25-year prison term if Montes provides information on what she knows about Cuban intelligenceactivities. (See "Cuban Spies in the United States" below.) On March 12, 2002, the Cuban government delivered three diplomatic notes to the StateDepartment proposing bilateral agreements on drug-interdiction, migration, and cooperationagainst terrorism. (See "Drug Interdiction Cooperation" below.) With the cutoff of assistance from the former Soviet Union, Cuba experienced severeeconomic deterioration from 1989-1993, although there has been some improvement since 1994. Estimates of economic decline in the 1989-93 period range from 35-50%. Recovery began in 1994,with the economy growing 0.7% in 1994, 2.5% in 1995, and 7.8% in 1996. While the Cubangovernment originally was predicting a growth rate of 4-5% for 1997, growth for the year was just2.5%, largely because of disappointing sugar production. For 1998, the government's goal was fora growth rate of 2.5-3.5%, but another poor sugar harvest, a severe drought in eastern Cuba, and theeffects of Hurricane Georges resulted in an estimated growth rate of just 1.2%. In 1999 and 2000,the economy rebounded with growth rates of 6.2% and 5.6%, respectively. Growth slowed to 3% in 2001 in the aftermath of the effects of Hurricane Michelle and theSeptember 11 terrorist attacks in the United States. The terrorist attacks severely affected Cuba'stourist industry, with reports of some hotels closing and restaurants empty. Hurricane Michelledamaged some 45,000 homes and severely hurt the agricultural sector. Low world prices for sugarand nickel, a decline in the number of tourists since September 2001, and Venezuela'sApril-September 2002 suspension of oil shipments to Cuba because of Cuba's slow payment allcontributed to the economic downturn in 2002. (2) For 2002, a flat economic growth rate of 0% is forecast, while arate of 3.2% is forecast for 2003, assuming an improvement in the global economy. (3) An oil strike and politicalturmoil in Venezuela that began in December 2002 has caused further concern in Cuba about its oilsupplies since Venezuela provides Cuba with one-third of its oil needs. (4) Socialist Cuba has prided itself on the nation's accomplishments in health and education. Forexample, according to the World Bank, the literacy rate is 94% and life expectancy is 76 years,compared to 79% and 68 years average for other middle-income developing countries. The UnitedNations Children's Fund (UNICEF) reports that Cuba's infant mortality rate (per 1,000 live births)was just 7.9 in 1996, the lowest rate in Latin America and among the world's top 20 countries forthis indicator. Nevertheless, the country's economic decline has reduced living standardsconsiderably 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. Moreover, some analysts fear that the government has begun to backtrack on its reform efforts. Regulations and new taxes have made it extremely difficult for many of the nation's self-employed(at one point estimated at more than 200,000, but now estimated at 160,000 or lower, out of a totallabor force of some 4.5 million). Some home restaurants have been forced to close because of theregulations. Some foreign investors in Cuba have also begun to complain that the government hasbacked out of deals or forced them out of business. Although Cuba has undertaken some limited economic reforms, politically the countryremains a hard-line Communist state. Fidel Castro, who turned 76 on August 13, 2002, has ruledsince the 1959 Cuban Revolution, which ousted the corrupt government of Fulgencio Batista frompower. Castro soon laid the foundations for an authoritarian regime by consolidating power andforcing moderates out of the government. In April 1961, Castro admitted that the Cuban Revolutionwas socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. From 1959until 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 601 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. From October 8-10, 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 held for a second time in January1998, but voters again were not offered a choice of candidates. Elections for the National Assemblywill be held again in 2003. 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 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." (5) 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. According to the State Department's human rights report for 2001, human rights groupsinside Cuba estimate the number of political prisoners to be between 249 and 300 people, imprisonedon such charges as dissemination of enemy propaganda, illicit association, contempt for theauthorities (usually for criticizing President Castro), clandestine printing, and the broad charge ofrebellion. This reflected a decrease in the estimate of 300-400 reflected in the State Department'shuman rights report for 2000. The Cuban Commission for Human Rights and NationalReconciliation notes that the number of prisoners has decreased because the government hasincreased its use of short-term detentions instead of prison sentences. The State Department reportfor 2001 notes that the government "routinely engaged in arbitrary arrest and detention of humanrights advocates, subjecting them to interrogations, threats, and degrading treatment and unsanitaryconditions for hours or days at a time." On May 5, 2002, the Cuban government released prominent political prisoner VladimiroRoca from jail about two months before his 5-year sentence was complete. Roca was imprisoned inJuly 1997 along with three other leaders of the "Dissident Working Group," Rene Gomez Manzano,Marta Beatriz Roque, and Felix Bonne. The Cuban government had released Manzano, Roque, andBonne in May 2000. All four leaders had been convicted by a Cuban court on March 15, 1999, oncharges of "sedition" under the Cuban penal code after a one-day trial. Sentences ranged from 3 ½years for Roque to 4 years for Bonne and Gomez Manzano and 5 years for Roca. Just before thedissidents' trial, scores of human rights advocates, independent journalists, and other activists weredetained so that they could not cover or protest the trial. The four dissidents had released a documentin June 1997 entitled, "The Homeland Belongs to Us All" (6) that strongly criticized a draft report of the 5th Congress of theCuban Communist Party that was going to be held that October. The dissidents also urged Cubansnot to vote in legislative elections and encouraged foreign investors not to invest in Cuba. Uponhis release, Roca maintained that he would continue working for dialogue and reconciliation inCuba. (7) On October 31, 2002, the Cuban government released another prominent political prisoner,Oscar ElÃas Biscet, who had been imprisoned since November 1999 after displaying Cuban flagsupside down as a sign of protest and distress. But Biscet was jailed again on December 6, 2002 afterhis arrest at a human rights demonstration in Havana. Among Cuba's remaining political prisoners, Amnesty International has called attention toseveral detained in a wave of arrests in February and March 2002. These include Leonardo BruzónAvila, Carlos Alberto DomÃnguez González, Emilio Leyva Pérez, and Lázaro Miguel RodrÃguezCapote. (8) In late October2002, the U.S. Department of State called for the release of Leonardo Bruzón Avila, who reportedlywas in serious medical condition because of a hunger strike. Varela Project. A human rights initiative withinCuba that has received attention in recent months is the Varela Project (named for the 19th centurypriest, 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, but it is supported by other notableCuban human rights activists such as Elizardo Sanchez of the Cuban Commission for Human Rightsand National Reconciliation. On May 10, 2002, organizers of the Varela Project submitted 11,020 signatures to theNational Assembly calling for a national referendum, more than the 10,000 required under the CubanConstitution (Article 88). Former President Jimmy Carter noted the significance of the VarelaProject in his May 14, 2002 address in Havana that was broadcast in Cuba. Carter noted that "whenCubans exercise this freedom to change laws peacefully by a direct vote, the world will see thatCubans, and not foreigners, will decide the future of this country." (9) 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. On June 10, 2002, the Senate approved (by a vote of 87-0) S.Res. 272 (Nelson),which expresses support for the Varela Project and "urges the President to support the right of thecitizens of Cuba who have signed the Varela Project to petition the Cuban National Assembly fora referendum and the peaceful transition to democracy." In the House, H.Res. 453 (Pallone), introduced June 20, 2002, would also express support for the Varela Project. 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. For four years now, the UNCHR has again approved resolutions criticizing Cuba for itshuman rights record, although without appointing a Special Rapporteur. In 1999, the UNCHRresolution was approved by a vote of 21-20, with 12 abstentions. In 2000, the resolution, sponsoredby the Czech Republic and Poland, was approved by a vote of 21-18, with 14 abstentions. On April18, 2001, the resolution, sponsored by the Czech Republic and co-sponsored by 16 other nations,including the United States, was approved by a vote of 22-20, with 10 abstentions. A U.S.Congressional delegation traveled to Geneva to encourage adoption of the resolution. Mexicoabstained but, in a shift under the new Fox administration, publicly stated its concern about humanrights in Cuba. On April 19, 2002, the UNCHR approved a resolution, by a vote of 23 to 21, with 9abstentions, calling on Cuba to improve its human rights record "in accordance with the UniversalDeclaration of Human Rights and the principles and standards of the rule of law." Uruguaysponsored the resolution, which was supported by six other Latin American nations: Argentina,Chile, Costa Rica, Guatemala, Mexico, and Peru. Brazil and Ecuador abstained, while Venezuelawas the only Latin American country besides Cuba to vote against the resolution. Compared toprevious years, the 2002 resolution was milder in that it recognized Cuba's efforts to fulfill the"social rights" of its people "despite an adverse international environment," while at the same timecalling on Cuba "to achieve similar progress in respect of human, civil, and political rights." Theresolution also called on Cuba to allow a visit by a representative of the U.N. High Commission for Human Rights. Cuba lashed out at Uruguay for sponsoring the resolution and accused the country of "beingservile" to the United States and its president of being a liar. Uruguay responded to Cuba'sinvectives by breaking diplomatic relations. Cuba also lashed out at Mexico for supporting theresolution; the Cuban government also stepped up its complaints of Mexican pressure on Castro toleave the United Nations development conference held in Monterrey, Mexico in March 2002 beforethe arrival of President Bush. Observers are divided over the future of the Castro government. Although some believe thatthe demise of the government is imminent, there is considerable disagreement over when or how thismay occur. Some point to Castro's age and predict that the regime will collapse without Fidel at thehelm. Other observers maintain that reports of the impending collapse of the Cuban governmenthave been exaggerated and that Castro may remain in power for years. 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 from manyCubans. 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. (10) Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the islandnation through comprehensive economic sanctions. The principal tool of U.S. policy remainscomprehensive sanctions, which were made stronger with the Cuban Democracy Act (CDA) of 1992and with the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 ), often referredto as the Helms/Burton legislation. The CDA prohibits U.S. subsidiaries from engaging in trade withCuba and prohibits entry into the United States for any vessel to load or unload freight if it hasengaged in trade with Cuba within the last 180 days. The Helms/Burton legislation -- enacted in theaftermath of Cuba's shooting down of two U.S. civilian planes in February 1996 -- combines avariety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once itbegins the transition to democracy. Among the law's sanctions is a provision in Title III that holdsany person or government that traffics in U.S. property confiscated by the Cuban government liablefor monetary damages in U.S. federal court. Acting under provisions of the law, President Clintonsuspended the implementation of Title III at 6-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, U.S.government support for democracy-building efforts for Cuba, and U.S.- sponsored radio andtelevision broadcasting to Cuba, Radio and TV Marti. 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 thecurrent flights from Miami (direct flights later in the year began from Los Angeles and New York);and an expansion of people-to-people contact by loosening restrictions on travel to Cuba for certaincategories of travelers, such as professional researchers and those involved in a wide range ofeducational, religious, sports competition, and other activities. Bush Administration Policy. President Bushmade his first major statement on his Administration's policy toward Cuba on May 18, 2001. Hestated that his Administration would "oppose any attempt to weaken sanctions against Cuba'sgovernment ... until this regime frees its political prisoners, holds democratic, free elections, andallows for free speech." He added that he would "actively support those working to bring aboutdemocratic change in Cuba." (11) Although President Bush has announced stronger measures to enforce the embargo, he alsohas continued in the same vein as the Clinton Administration by suspending implementation of TitleIII of the Helms-Burton legislation. On July 13, 2001, President Bush asked the TreasuryDepartment to enhance and expand the enforcement capabilities of the Office of Foreign AssetsControl. The President noted the importance of upholding and enforcing the law in order to prevent"unlicensed and excessive travel," enforce limits on remittances, and ensure that humanitarian andcultural exchanges actually reach pro-democracy activists in Cuba. Just three days later, on July 16,2001, President Bush decided to continue to suspend for a 6-month period the Title III provisionsof the Cuban Liberty and Democratic Solidarity Act ( P.L. 104-114 ) that allows U.S. nationals to suefor money damages in U.S. federal court those persons who traffic in property confiscated in Cuba. He cited efforts by European countries and other U.S. allies to push for democratic change in Cuba.President Bush again suspended implementation of Title III on January 16, 2002, for a 6-monthperiod. On May 20, 2002, President Bush announced a new initiative on Cuba that includes fourmeasures designed to reach out to the Cuban people: 1) facilitating humanitarian assistance to theCuban people by U.S. religious and other non-governmental organization (NGOs); 2) providingdirect assistance to the Cuban people through NGOs; 3) calling for the resumption of direct mailservice to and from Cuba (12) ; and 4) establishing scholarships in the United States for Cubanstudents and professional involved in building civil institutions and for family members of politicalprisoners. President Bush also called on Cuba to take steps to ensure that the 2003 National Assemblyelections are free and fair and to adopt meaningful market-based reforms. If those conditions weremet, the President maintained that he would work with Congress to ease the ban on trade and travel. However, the President maintained that full normalization of relations (diplomatic recognition, opentrade, and a robust aid program) would only occur when Cuba has a fully democratic government,when the rule of law is respected, and when the human rights of all Cubans are fully protected. ThePresident's initiative did not include an explicit tightening of restrictions on travel to Cuba that someobservers had expected. The President, did state, however, that the United States would "continueto enforce economic sanctions on Cuba, and the ban on travel to Cuba, until Cuba's governmentproves that it is committed to real reform." Carter Visit to Cuba. Former President JimmyCarter arrived in Cuba on May 12, 2002 for a six-day visit. During the trip, Carter repeatedly raisedhuman rights issues. On May 13, 2002, Carter met with two leading human rights activists, ElizardoSanchez of the Cuban Commission of Human Rights and National Reconciliation and OswaldoPaya, who heads the Christian Liberation Movement and is the main organizer of the Varela Projectthat has the goal of a national referendum to change Cuba's laws (see "Human Rights" section abovefor more on the Varela Project). He met with a number of human rights and religious organizationsand activists on May 16. Perhaps most significantly, however, was President Carter's address inHavana that was broadcast live on television and radio on May 14. Carter criticized Cuba's one-partyrule that does not allow opposition movements to organize. He asked Cuba to permit theInternational Committee of the Red Cross to visit Cubans prisons and to receive the U.N. HumanRights Commissioner to visit in order to address such issues as prisoners of conscience and thetreatment of inmates. He also called attention to the Varela Project. In addition to his advocacy of democracy and respect for human rights, Carter also called forthe United States to take the first step of improving the U.S.-Cuban bilateral relationship. He calledon Congress "to permit unrestricted travel between the United States and Cuba, establish opentrading relationships, and repeal the embargo." Carter acknowledged that U.S. policy was not thesource of Cuba's economic problems, but he maintained that "the embargo freezes the existingimpasse, induces anger and resentment, restricts the freedoms of U.S. citizens, and makes it difficultfor us to exchange ideas and respect." (13) In response to Carter's call to lift the embargo, the BushAdministration reiterated its stance of maintaining the embargo as a "vital part of American foreignpolicy." (14) 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 adhere to someconsistency in its policies with the world's few remaining Communist governments, and alsomaintain that moderating policy will help advance human rights in Cuba. 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 what steps Cuban 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. Legislative Initiatives. Legislative initiativesintroduced in the 107th Congress reflected divergent views on the direction of U.S. policy towardCuba (whether sanctions should be eased or intensified) and also covered a range of issues includinghuman rights, drug interdiction cooperation, and broadcasting to Cuba. (For a complete listing, see"Legislative Initiatives in the 107th Congress" toward the end of this report.) Several bills would have strengthened sanctions on Cuba. H.R. 160 (Ros-Lehtinen) would prohibit rescheduling or forgiving any outstanding bilateral debt owed to theUnited States by Russia until the President certifies that Russia has ceased all its operations, removedall personnel from, and permanently closed the intelligence facility at Lourdes, Cuba (see sectionbelow on "Russian Intelligence Facility in Cuba," which discusses Russia's October 2001 decisionto close the facility). H.R. 2292 (Rothman) would amend the Cuban Liberty andDemocratic Solidarity Act of 1996 to require, as a condition for the determination that ademocratically elected government in Cuba exists, that the government extradite to the United Statesconvicted felon Joanne Chesimard and all other U.S. fugitives from justice. In addition, someMembers opposed to easing sanctions have proposed legislation, H.R. 1271 (Diaz-Balart) and S. 894 (Helms), providing increased support to the democraticopposition within Cuba. On the other side of the policy debate, numerous measures were introduced to ease U.S.sanctions policy toward Cuba. In the first session of the 107th Congress, the House debated twoamendments that would ease U.S. sanctions on Cuba during July 25, 2001 floor action on H.R. 2590 , the FY2002 Treasury Department appropriations bill. The House approvedone amendment that would prohibit spending for administering Treasury Department regulationsrestricting travel to Cuba and rejected a second that would prohibit Treasury Department funds fromadministering the overall U.S. embargo on Cuba. Ultimately, the Cuba travel provision was notincluded in the conference report to the bill (see "Travel Restrictions" below.) In the second session of the 107th Congress, the Senate version of the 2002 "Farm Bill," H.R. 2646 , would have eliminated language from the Trade Sanctions Reform andExport Enhancement Act of 2000 ( P.L. 106-387 , Title IX) that prohibits private financing ofagricultural sales to Cuba. Although the House version of the Farm Bill had no such financingprovision, the House on April 23, 2002, approved (273-143) a non-binding motion to instruct theconferees to accept the Senate provision. Ultimately, however, the House-Senate conference reporton the bill ( H.Rept. 107-424 , filed May 1, 2002) did not include the Senate provision. (For furtherinformation, see "Food and Medical Exports" below and CRS Issue Brief IB10061, Exempting Foodand Agriculture Products from U.S. Economic Sanctions: Status and Implementation .) During July 23, 2002 consideration of the FY2003 Treasury Department appropriations bill, H.R. 5120 , the House approved three amendments on Cuba sanctions that wouldprohibit funds in the bill from being used to enforce regulations on travel, remittances, and U.S.agricultural sales to Cuba; the House subsequently approved H.R. 5120 with the threeCuba provisions on July 24, 2002. The Senate version of the bill, S. 2740 , as reportedout of committee, included a provision that would prohibit funds from being used to enforceTreasury Department regulations on travel to Cuba. Final action on the Treasury bill was notcompleted before the end of the 107th Congress. In the second session of the 107th Congress, a bipartisan group of over 40 House Membersformed a Cuba Working Group, with the overarching goal of shifting U.S. policy toward Cuba fromone of isolation to one of engagement. The group is critical of Cuba's refusal to allow free electionsand its failure to respect basic freedoms but maintains that U.S. policy has not brought aboutmeaningful political and economic reform in Cuba. On May 15, 2002, the group set forth ninerecommendations for U.S. policy: 1) repeal the travel ban; 2) allow normal unsubsidized exports ofagricultural and medical products; 3) end restrictions on remittances; 4) sunset the Helms/Burton lawin March 2003; 5) repeal a provision of U.S. law (Section 211 of the FY1999 omnibusappropriations measure, P.L. 105-277 ) that prevents the United States from accepting payment fortrademark licenses used in connection with a business or assets in Cuba that were confiscated; 6)terminate TV Marti and improve Radio Marti; 7) promote scholarships; 8) expand U.S.-Cubansecurity cooperation; and 9) consider creative approaches to resolve U.S. property claims. (15) Major Provisions. The Cuban Liberty andDemocratic Solidarity Act ( P.L. 104-114 ) was enacted into law on March 12, 1996. Title I, Section102(h) , codifies all existing Cuban embargo Executive Orders and regulations. No presidentialwaiver is provided for any of these codified embargo provisions. This provision is significantbecause of the long-lasting effect on U.S. policy options toward Cuba. In effect, the ClintonAdministration and subsequent administrations will be circumscribed in any changes in U.S. policytoward Cuba. Title III allows U.S. nationals to sue for money damages in U.S. federal court those personsthat traffic in property confiscated in Cuba. It extends the right to sue to Cuban Americans whobecame U.S. citizens after their properties were confiscated. The President has authority to delayimplementation for 6 months at a time if he determines that such a delay would be in the nationalinterest and would expedite a transition to democracy in Cuba. 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 of 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. Implementation of Title III and IV. With regardto Title III, beginning in July 1996 then-President Clinton suspended -- for 6-month periods, asprovided for under the act -- the right of individuals to file suit against those persons benefitting fromconfiscated U.S. property in Cuba. At the time of the first suspension on July 16, 1996, the Presidentannounced that he would allow Title III to go into effect, and as a result liability for trafficking underthe title became effective on November 1, 1996. According to the Clinton Administration, this putforeign companies in Cuba on notice that they face prospects of future lawsuits and significantliability in the United States. At the second suspension on January 3, 1997, President Clinton statedthat he would continue to suspend the right to file law suits "as long as America's friends and alliescontinued their stepped-up efforts to promote a transition to democracy in Cuba." He continued, at6-month intervals, to suspend 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, 2002. 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. With regard to Title IV of the legislation, to date the State Department has banned from theUnited States a number of executives and their families from three companies because of theirinvestment in confiscated U.S. property in Cuba: Grupos Domos, a Mexican telecommunicationscompany; Sherritt International, a Canadian mining company; and BM Group, an Israeli-ownedcitrus company. In 1997, Grupos Domos disinvested from U.S.-claimed property in Cuba, and asa result its executives are again eligible to enter the United States. Action against executives ofSTET, an Italian telecommunications company was averted by a July 1997 agreement in which thecompany agreed to pay the U.S.-based ITT Corporation $25 million for the use of ITT-claimedproperty in Cuba for ten years. For several years, the State Department has been investigating aSpanish hotel company, Sol Melia, for allegedly investing in property that was confiscated from U.S.citizens in Cuba's Holguin province in 1961. Press reports in March 2002 indicated that a settlementwas likely between Sol Melia and the original owners of the property, but by the end of the yearsettlement efforts had failed; some Members of Congress are likely to press the State Departmentto enforce the Title IV provisions. (16) 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 obligationsunder NAFTA and the World Trade Organization (WTO). Until mid-April 1997, the EU had been pursuing its 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 success at obtaining a waiver from Congress for the legislation's Title IV visarestrictions. Future investment in expropriated property would be barred. For past illegalexpropriations, government support or assistance for transactions related to those expropriatedproperties would be denied. A Registry of Claims would also be established to warn investors andgovernment agencies providing investment support that a property has a record of claims. Theseinvestment disciplines were to be applied at the same time that President Clinton's new Title IVwaiver 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.In a letter to then-Secretary of State Albright, Representative Gilman and Senator Helms criticizedthe understanding for not covering companies already invested in expropriated property. Amongother criticisms, they argued that the understanding only proposes a weak sanction (denyinggovernment support) that may not deter companies that are willing to invest in Cuba. (17) On the other side,however, some Members support the EU-U.S. understanding. They maintain that the understandingis important because it increases protection for the property of Americans worldwide and discouragesinvestment in illegally confiscated property in Cuba. The Bush Administration initially indicated that the Administration was looking into thepossibilities of legislation to enact a presidential waiver for the provision, but during the June 2001U.S.-EU summit, President Bush noted the difficulty of persuading Congress to amend the law. (18) The ClintonAdministration had lauded the 1998 EU-U.S. understanding on investment disciplines and attemptedat the time, but without success, to win congressional support for a waiver of Title IV so that theinvestment disciplines could be implemented. Legislative Initiatives to Repeal or Sunset the Helms/BurtonLegislation. Several legislative initiatives introduced in the 107th Congress -- H.R. 174 (Serrano), H.R. 798 (Rangel), H.R. 2662 (Paul), and S. 400 (Baucus)-- would have repealed the Cuban Liberty and Democratic SolidarityAct as part of overall efforts to lift the embargo on Cuba. In addition, H.R. 5616 (Dooley), would sunset the Helms/Burton legislation on March 21, 2003. Another EU challenge of U.S. law regarding Cuba in the WTO involves a dispute betweenthe French spirits company, Pernod Ricard , and the Bermuda-based Bacardi Ltd. Pernod Ricard entered into a joint venture with the Cuban government to produce and export Havana Club rum, but Bacardi maintains that it holds the right to the Havana Club name. A provision in the FY1999omnibus appropriations measure (Section 211 of Division A, title II, P.L. 105-277 , signed into lawOctober 21, 1998) prevents the United States from accepting payment for trademark licenses thatwere used in connection with a business or assets in Cuba that were confiscated unless the originalowner of the trademark has consented. The provision prohibits U.S. courts from recognizing suchtrademarks without the consent of the original owner. Although Pernod Ricard cannot marketHavana Club in the United States because of the trade embargo, it wants to protect its futuredistribution rights when the embargo is 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. After formalU.S.-EU consultations on the issue were held in 1999 without resolution, the EU initiated a WTOdispute settlement panel on the issue in June 2000, maintaining that the U.S. law violates theAgreement on Trade-Related Aspects of Intellectual Property (TRIPS). An August 6, 2001 ruling by the WTO panel was described as mixed, with both sidesclaiming a partial victory. The panel ruled that international rules on intellectual property rights didnot cover trademarks but also ruled that a portion of the law (Section 211(a)(2)) prohibiting U.S.courts from recognizing such Cuban trademarks is in violation of the TRIPS because it denies accessto U.S. courts by trademark holders. In early October 2001, the EU formally notified the WTO thatit was appealing the ruling. The WTO appeals panel issued its ruling on January 2, 2002, and again the ruling wasdescribed as mixed. According to the United States Trade Representative, the appellate panel upheldthe "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. (19) 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. On March 28, 2002, the United States agreed that it would come intocompliance with the WTO ruling by January 3, 2003. (20) 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. Some in the business community argued that the changes in policy did not amount to muchbecause they still do not allow financing for the sales. Nevertheless, U.S. agribusiness companiescontinued to explore the Cuban market for potential future sales. The Cuban government told agroup of U.S. farmers who traveled there in November 2000, after passage of the new law, thatalthough it was interested in U.S. agricultural exports, it refused to buy any under the financingrestrictions imposed by that new law. 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 legislation in the 106th Congress. In March2002, the Cuban government agreed to purchase additional agricultural products from the UnitedStates. Overall, press reports indicate that Cuba has purchased over $100 million in agriculturalproducts, including grains, eggs, frozen chicken, corn, apples, and other products from U.S.companies since late 2001. The companies include Archer Daniel Midland, which has sold about$42 million in agricultural products to Cuba, American Rice Inc., Cargill Corporation, CherokeeTrading, ConAgra Foods, Gold Kist, Marsh Supermarkets, Perdue Farms, Radlo Foods, RicelandFoods, Soufflet USA, and Tyson Foods. (21) In late September 2002, a U.S. Food & Agribusiness Exhibitionwas held in Havana featuring 288 exhibitors marketing 1,000 products from more than 30 states, theDistrict of Columbia, and Puerto Rico. (22) The trade fair reportedly yielded almost $100 million inadditional contracts for U.S. agricultural exports to Cuba. (23) In March 2002, the State Department revoked the visas of several Cuban officials who wereplanning to visit the United States. This included Pedro Alvarez, the head of Cuba's import buyingagency Alimport. Several Senators expressed concern that future agricultural sales to Cuba couldbe jeopardized by the State Department's action. In a subsequent hearing before the SenateAppropriations Committee on April 30, 2002, Senator Byron Dorgan expressed concern that theState Department policy was discouraging food sales to Cuba. Secretary of State Powell indicatedthat the visa for Alvarez should never have been issued because on a previous visit, "a good part ofhis time was spent lobbying against the policy of the United States government." Secretary Powellmaintained that the Administration was pleased that Cuban agricultural sales were taking place butindicated that the visit of Alvarez was not necessary for such sales. (24) 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 theU.S. government may have licensed more than $4.3 billion in humanitarian donations to Cuba since1992, in fact much smaller amounts have actually been sent to Cuba. Some supporters of easingsanctions believe the embargo plays into Castro's hands by allowing him to use U.S. policy as ascapegoat for his failed economic policies and as a rationale for political repression. U.S.agribusiness companies that support the removal of trade restrictions on agricultural exports to Cubabelieve that U.S. farmers are missing out on a market of some $700 million so close to the UnitedStates. Legislative Initiatives in the 107th Congress. Numerous initiatives focused in whole or in part on easing restrictions on food and medical exportsto Cuba. Several focused on lifting private financing restrictions for agricultural sales set forth inthe Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX, Section908(b)). In July 23, 2002 consideration of the FY2003 Treasury Department appropriations bill, H.R. 5120 , the House approved an amendment offered by Representative Moran(Kansas), H.Amdt. 554 , by voice vote, that provides that no funds in the bill can be usedto implement any sanction on private commercial sales of agricultural commodities or medicines toCuba. Some observers suggest that 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. (25) 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. The Senate version of the 2002 "Farm Bill," H.R. 2646 (which the Senate passedFebruary 13, 2002, after incorporating the language of S. 1731 as an amendment) wouldhave lifted such financing restrictions, but the provision ultimately was not included in theconference report on the bill ( H.Rept. 107-424 , filed May 1, 2002). The Bush Administrationstrongly opposes lifting the financing restrictions because of "Cuba's denial of basic civil rights toits citizens as well as its egregious rejection of the global coalition's efforts against terrorism." (26) The Senate report to S. 1731 ( S.Rept. 107-117 ) noted that lifting the private financing restrictions wouldpermit U.S. exporters to gain access to a potential market of about $400 million annually but wouldnot commit U.S. government funds. Although the House version of H.R. 2646 did notcontain the financing provision, the House approved (273-143) a nonbinding motion offered byRepresentative Calvin Dooley to instruct the conferees on H.R. 2646 to accept theSenate provision. Despite the House vote, the conference report ( H.Rept. 107-424 ) did not includethe Senate provision. Several Senators reportedly are interested in adding the provision to theFY2003 agriculture appropriations bill. (27) During consideration of S. 1731 on December 18, 2001, the Senate tabled(61-33) an amendment offered by Senator Bob Smith, S.Amdt. 2596 , that would haveconditioned the lifting of restrictions on private financing of agricultural sales to Cuba on apresidential certification that Cuba is not a state sponsor of international terrorism. A secondaryamendment offered by Senator Torricelli, S.Amdt. 2597 , fell when S.Amdt. 2596 was tabled. The Torricelli amendment would have conditioned the liftingof private financing restrictions on a presidential certification that all convicted felons who are livingas fugitives in Cuba have been returned to the United States for incarceration. In additional action, during May 17, 2002 Senate consideration of "trade promotionauthority" (TPA) legislation (manager's amendment, S.Amdt. 3401 , to H.R. 3009 ), Senator Dorgan offered an amendment, S.Amdt. 3439 , that would havepermitted private financing of agricultural sales to Cuba. The amendment was identical to theprovision that had been included in the Senate version of the Farm Bill. Senator Dorgansubsequently withdrew the amendment on May 21, 2002, because he maintained that somecosponsors did not want to jeopardize the TPA legislation. Several other legislative initiatives -- S. 171 (Dorgan), introduced January 24,2001, S. 239 (Hagel), introduced February 1, 2001, and H.R. 173 (Serrano), introduced January 3, 2001 -- would also have lifted the restrictions on private financingof agricultural sales to Cuba. S. 1017 (Dodd) and H.R. 2138 (Serrano), the Bridges to the CubanPeople Act of 2001, introduced June 12, 2001, would, among other provisions, ease restrictions onfood and medical exports to Cuba and allow for the importation of certain Cuban medicines. OnJune 19, 2002, the Senate Foreign Relations Committee's Subcommittee on Western Hemisphere,Peace Corps, and Narcotics Affairs held a hearing on S. 1017 . Identical bills S. 402 (Baucus) and H.R. 797 (Rangel), the Cuban Humanitarian TradeAct of 2001, introduced February 27 and 28, 2001, respectively, would make an exception to theembargo for the export of agricultural commodities, medicines, medical supplies, medicalinstruments, and medical equipment. Finally, several broad bills would have lifted all sanctions on trade, financial transactions,and travel to Cuba: H.R. 174 (Serrano), the Cuban Reconciliation Act, introducedJanuary 3, 2001; identical bills S. 400 (Baucus) and H.R. 798 (Rangel),the Free Trade with Cuba Act, introduced February 27 and 28, 2001, respectively; and H.R. 2662 (Paul), a bill that would also prohibit any federal funds to provide assistanceto Cuba. For additional information, see CRS Issue Brief IB10061, Exempting Food and AgricultureProducts from U.S. Economic Sanctions: Status and Implementation. 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 5 years, from 1977 until 1982, therewere no restrictions on travel. Major arguments made for lifting the Cuba travel ban are: it hinders efforts to influenceconditions in Cuba and may be aiding Castro by helping restrict the flow of information; it abridgesthe rights of ordinary Americans; and Americans can travel to other countries with communist orauthoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are thatAmerican tourist travel would support Castro's rule by providing his government with millions ofdollars in tourist receipts; that there are legal provisions allowing travel to Cuba for humanitarianpurposes that are used by thousands of Americans each year; and that the President should be freeto restrict travel for foreign policy reasons. Legislative Actions and Initiatives in the 107thCongress. In the first session, on July 25, 2001, the House approved an amendmentto H.R. 2590 , the FY2002 Treasury Appropriations bill, that would prohibit spendingfor administering Treasury Department regulations restricting travel to Cuba. H.Amdt. 241 , offered by Representative Flake (which amended H.Amdt. 240 offered byRepresentative Smith) would prohibit funding to administer the Cuban Assets Control Regulations(CACR) with respect to any travel or travel-related transaction. The CACR are administered by theTreasury Department's Office of Foreign Assets Control. The Flake amendment was approved bya vote of 240 to 186, compared to a vote of 232-186 for a similar amendment in the FY2001Treasury Department appropriations bill. The Senate version of H.R. 2590 , as approved September 19, 2001, did notinclude any provision regarding U.S. restrictions on travel to Cuba. In floor debate, Senator Dorgannoted that he had intended to offer an amendment on the issue, but that he decided not to becausehe did not want to slow passage of the bill. He also indicated his support for the House provisionwhen it came up in conference, but ultimately Congress did not include the provision in theconference report to the bill ( H.Rept. 107-253 ). The Cuba travel issue received further consideration in the second session of the 107thCongress. A bipartisan House Cuba working group of 40 Representatives vowed as one of its goalsto work for a lifting of travel restrictions. On February 11, 2002, the Senate AppropriationsCommittee's Subcommittee on Treasury and General Government held a hearing on the issue,featuring Administration and outside witnesses. The travel issue was part of the debate during consideration of the FY2003 TreasuryDepartment appropriations bill ( H.R. 5120 and S. 2740 ). Secretary of StateColin Powell and Secretary of the Treasury Paul O'Neill said they would recommend that thePresident veto legislation that includes a loosening of restrictions on travel to Cuba (or a weakeningof restrictions on private financing for U.S. agricultural exports to Cuba). The White House alsostated that President Bush would veto such legislation. In July 23, 2002 floor action on H.R. 5120 , the House approved three Cubasanctions amendments, including one on the easing of travel restrictions offered by RepresentativeJeff Flake. The House approved the Flake travel amendment ( H.Amdt. 552 ), by a voteof 262-167, that would provide that no funds could be used to administer or enforce the TreasuryDepartment regulations with respect to travel to Cuba. The Flake amendment would not prevent theissuance of general or specific licenses for travel to Cuba. Some observers have raised the questionof whether the effect of this amendment would be limited since the underlying embargo regulationsrestricting travel would remain unchanged; enforcement action against violations of the relevantembargo regulations could potentially take place in future years when the Treasury Departmentappropriations measure did not include the funding limitations on enforcing the travelrestrictions. (29) During consideration of H.R. 5120 , the House also rejected two Cubaamendments. A Rangel amendment ( H.Amdt. 555 ), rejected by a vote of 204-226,would have prevented any funds in the bill from being used to implement, administer, or enforce theoverall economic embargo of Cuba, which includes travel. A Goss amendment( H.Amdt. 551 ), rejected by a vote of 182-247, would have provided that any limitationon the use of funds to administer or enforce regulations restricting travel to Cuba or travel-relatedtransactions would only apply after the President certified to Congress that certain conditions weremet regarding biological weapons and terrorism. (For further information, see sections below on"Cuba and Terrorism" and "Cuba and Biological Weapons?".) The Senate version of the Treasury Department appropriations measure, S. 2740 ,as reported by the Senate Committee on Appropriations on July 17, 2002 ( S.Rept. 107-212 ),included a provision, in Section 516, that was similar, although not identical, to the Flakeamendment described above. It provides that no funds may be used to enforce the TreasuryDepartment regulations with respect to any travel or travel-related transactions, but would notprevent the Office of Foreign Assets Control, which administers the sanctions, from issuing generaland specific licenses for travel to Cuba as currently allowed. In addition, Section 124 of the Senatebill stipulated that no Treasury Department funds for "Departmental Offices, Salaries, and Expenses"may be used by OFAC, until OFAC has certain procedures in place regarding license applicationsfor travel to Cuba. Final action on the FY2003 Treasury Department appropriations measure was not completedbefore the end of the 107th Congress. Numerous other initiatives introduced in the 107th Congresswould have eased U.S. restrictions on travel to Cuba, but action was not taken on these bills: H.R. 5022 (Flake), introduced June 26, 2002, would lift allrestrictions on travel to Cuba. Several broad bills would lift all sanctions on trade, financial transactions, andtravel to Cuba: H.R. 174 (Serrano), the Cuban Reconciliation Act, introduced January3, 2001, and identical bills S. 400 (Baucus) and H.R. 798 (Rangel), theFree Trade with Cuba Act, introduced February 27 and 28, 2001, respectively. S. 1017 (Dodd) and H.R. 2138 (Serrano), the Bridgesto the Cuban People Act of 2001, introduced June 12, 2001, would, among other provisions, easerestrictions on travel by U.S. nationals or lawful permanent resident aliens to Cuba. Several bills, among other provisions, would repeal the travel restrictionsimposed in the 106th Congress by the Trade Sanctions Reform and Export Enhancement Act of 2000( P.L. 106-387 , Title IX, Section 910). These include identical bills S. 402 (Baucus) and H.R. 797 (Rangel), the Cuban Humanitarian Trade Act of 2001, introduced February27 and 28, 2001, respectively; S. 171 (Dorgan), introduced January 24, 2001; and S. 239 (Hagel), the Cuba Food and Medicine Access Act of 2001, introduced February1, 2001. 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. In 1999, someMembers of Congress wanted Cuba to be added to the annual list of major drug transit countries,but the Clinton Administration decided not to add Cuba to the list. According to the Department ofState at the time, "Cuba was not placed on the list of major drug transit countries because there isno clear evidence that cocaine or heroin are transiting Cuba on the way to the United States inquantities that significantly affect the United States." (30) According to President Bush, in his November 1, 2001 determination of majordrug-producing or drug-transit countries, "for the last several years, much of the suspect air trafficthat previously crossed Cuban airspace has shifted to Hispaniola (Haiti and the DominicanRepublic)." He indicated that the traffic that occurs does not carry significant quantities of cocaineor heroin to the United States but noted that Cuba will be kept "under observation for any changesto the current transit patterns." Over the past several years, Cuban officials have expressed concerns over the use of theirwaters and airspace for drug transit as well as increased domestic drug use. The Cuban governmenthas taken a number of measures to deal with the drug problem, including legislation to stiffenpenalties for traffickers, increased training for counternarcotics personnel, and cooperation with anumber of countries on anti-drug efforts. Cuba has bilateral counternarcotics agreements with 29countries and less formal arrangements with 12 others, according to the Department of State. Britainand France have provided counternarcotics training. In November 2001, Cuba hosted a regionalcounternarcotics conference focusing on strategies to prevent drug abuse, drug trafficking, andmoney 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 officer at the U.S. Interests Section inHavana. The Coast Guard official was posted to the U.S. Interests Section in September 2000, andsince that time, according to the State Department's International Narcotics Control Strategy Reportfor 2001, coordination between the U.S. and Cuban governments has increased. Cuba has called for even more cooperation and has asked for a bilateral anti-drug cooperationagreement with the United States. (31) In January 2002, Cuba deported to the United States JesseJames Bell, a U.S. fugitive wanted on drug charges, and in early March 2002, Cuba arrested aconvicted Colombian drug trafficker, Rafael Bustamante, who escaped from jail in Alabama in 1992. While Drug Enforcement Administration head Asa Hutchison expressed appreciation for Cuba'sactions, he indicated that cooperation would continue on a case-by-case basis, not through a bilateralagreement. (32) StateDepartment spokesman Richard Boucher said that if Cuba "were to demonstrate a willingness towork across the board with us on law enforcement issues, then we might consider some more formalstructure," but he indicated that Cuba has not demonstrated that kind of commitment. As anexample, Boucher maintained that "there are still dozens of fugitives from U.S. justice who havebeen provided safe haven by the Cuban government." (33) Although the current level of case-by-case cooperation willprobably continue, it is unlikely that the level of cooperation will increase significantly given theAdministration's position. Some Members have called for greater cooperation with Cuba on drugtrafficking and view Cuba's proposal as a good-will gesture, while others view the effort as a ployto sway public opinion and influence views in the U.S. Congress. (34) 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 first session of the 107th Congress, the Senate version of the FY2002 ForeignOperations Appropriations bill, H.R. 2506 , had a provision (Section 580) that wouldhave made available $1.5 million for preliminary work for the Department of State and otheragencies "to establish cooperation with appropriate agencies of the Cuba government oncounter-narcotics matters." The money was conditioned on a presidential certification that (1) Cubahas in place appropriate procedures to protect against loss of innocent life in the air and on theground in connection with drug interdiction and that (2) there is no evidence of the involvement ofthe government of Cuba in drug trafficking. The House version of the bill, however, did not includethe Cuba drug cooperation, and the conference report was filed without the Senate provision. Nevertheless, the conference report to H.R. 2506 ( H.Rept. 107-345 ) called fora report by the Secretary of State within 6 months on 1) the extent, if any of the direct involvementof the government of Cuba in illegal drug trafficking; 2) the likelihood that U.S. internationalnarcotics assistance to the government of Cuba would decrease the flow of drugs transiting throughCuba; and 3) the degree to which the government of Cuba is exchanging with U.S. agenciesdrug-related law enforcement information. The conference report also encouraged theAdministration to transmit to Congress, not later than 9 months, any legislation necessary to decreasethe flow of drugs to or from Cuba. H.R. 2506 was signed into, P.L. 107-115 , on January10, 2002. In addition to provisions in foreign operations measures, a bill was introduced( H.R. 1124 ) early in the 107th Congress to authorize the Director of the Office ofNational Drug Control Policy to negotiate with Cuban government officials for increasedcooperation between the two countries on drug interdiction efforts. A number of U.S. fugitives from justice are in Cuba, including Joanne Chesimard, who wasconvicted for the killing of a New Jersey state trooper in 1973; Charles Hill and Michael Finney,wanted for the killing of a state trooper in new Mexico in 1971; Victor Manuel Gerena, member ofa militant Puerto Rican separatist group, wanted for carrying out the robbery of a Wells Fargoarmored car in Connecticut in 1983; and Guillermo Morales, another member of a Puerto Ricanmilitant group, who was convicted of illegal possession of firearms in New York in the 1970s. Cubareportedly would be interested in considering negotiation of a mutual extradition of fugitives; forexample, Cuba would like to see the extradition of Orlando Bosch, a Miami resident accused ofbombing a Cuban airliner in 1976. (35) In the 107th Congress, legislation was introduced, H.R. 2292 , to amend theCuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 ) to require, as a condition forthe determination that a democratically elected government in Cuba exists, that the governmentextradite to the United States convicted felon Joanne Chesimard and all other U.S. fugitives fromjustice. During July 25, 2001 consideration of H.R. 2590 , the FY2002 TreasuryDepartment appropriations bill, Representative Smith offered an amendment, H.Amdt. 240 , that would have prohibited funds in the bill from being used to enforce restrictions on travel toCuba once the President certified to Congress that the Cuban government has released all politicalprisoners and has returned to the United States all persons residing in Cuba who are wanted in theUnited States for crimes of air piracy, narcotics trafficking, or murder. Before it was approved,however, the amendment was amended by H.Amdt. 241 offered by RepresentativeFlake, which eliminated the presidential certification regarding political prisoners and U.S. fugitivesin Cuba. Cuba has recently deported two fugitives from justice to the United States. As noted above,the Cuban government deported U.S. drug fugitive Jesse James Bell to the United States in January2002. According to the U.S. State Department, in December 2001 the Cuban government alsodeported William Joseph Harris, wanted on child abuse charges. In addition, in early March 2002,Cuba also arrested a convicted drug trafficker, Rafael Bustamante, who escaped from jail in Alabamain 1992. Cuba was added to the State Department's list of states sponsoring international terrorism in1982 for its complicity with the M-19 insurgent group in Colombia. Communist Cuba has had ahistory of supporting revolutionary movements and governments in Latin America and Africa, butin 1992 Fidel Castro said that his country's support for insurgents abroad was a thing of the past. Cuba's change in policy was in large part because of the breakup of the Soviet Union, which resultedin the loss of billions in annual subsidies to Cuba, and led to substantial Cuban economic decline. Cuba remains on the State Department's terrorism list today. According to the StateDepartment's May 21, 2002 Patterns of Global Terrorism report, Castro continues "to view terroras a legitimate revolutionary tactic." The report maintained that Cuba provides safehaven to at least20 Basque ETA terrorists from Spain and has provided "some degree of safehaven and support" tomembers of two Colombian insurgent groups, the Revolutionary Armed Forces of Colombia (FARC)and the National Liberation Army (ELN). (Cuba has been the site of peace talks between theColombian government and the ELN.) The report noted that one of three Irish Republican Army(IRA) members arrested in Colombia on suspicion of providing explosives training to the FARC hadbeen based in Cuba for 5 years. The report also noted that numerous U.S. fugitives from justiceresided in Cuba (see "Cuba and U.S. Fugitives from Justice" above). It also asserted that "sinceSeptember 11, Fidel Castro has vacillated over the war on terrorism." The report noted that whileCuba signed all 12 U.N. counterterrorism conventions and the Ibero-American declaration onterrorism in 2001, it has also issued strong rhetoric against the U.S.-led war on terrorism. Although Cuba offered support to the United States in the aftermath of the World TradeCenter and Pentagon attacks, Fidel Castro also stated that the attacks were in part a consequence ofthe United States having applied "terrorist methods" for years. (36) Cuba's subsequentstatements became increasingly hostile, according to press reports, which quote 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." (37) 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." (38) 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. Guantanamo has been U.S. base since 1903, and under a 1934 treaty that remains inforce, the U.S. presence can only be terminated by mutual agreement or by abandonment by theUnited States. In 1994-1995, the base was used to house thousands of Cubans and Haitians fleeingtheir homeland. As of late November 2002, almost 600 detainees from more than 30 countries werebeing held at Guantanamo. Although the Cuban government objects to the U.S. presence atGuantanamo as a national security threat and opposes the presence as illegal, it has not opposed thenew mission of housing detainees from Afghanistan. Defense Minister Raul Castro noted that, in theunlikely event that a prisoner would escape into Cuban territory, Cuba would capture the prisonerand return him to the base. (39) On September 17, 2002, a State Department official, Deputy Assistant Secretary of StateDaniel Fisk, accused Cuba of impeding U.S. efforts to defeat the threat against terrorism. Fiskaccused the Cuban government of distracting U.S. attention and resources from anti-terrorist effortsby setting up false leads. The Cuban government strongly denied the allegations that it has tried tomislead investigators. Cuba itself has been the target of various terrorist incidents over the years. In 1976, a Cubanplane was bombed, killing 73 people. In 1997 almost a dozen bombings targeted the tourist sectorin Havana and in the Varadero beach area in which an Italian businessman was killed and severalothers injured. Two Salvadorans were convicted and sentenced to death for the bombings in March1999, and three Guatemalans were sentenced to prison terms ranging from 10-15 years in January2002. Cuban officials maintain that Cuban exiles funded the bombings. On December 19, 2002,Juan Pablo Roque, a Cuban spy that had infiltrated the Cuban American group Brothers to theRescue (whose plane was shot down by Cuba in 1996) reportedly was shot and wounded in Havana;an anti-Castro paramilitary group known as Comando F-4 claimed responsibility. (40) During December 18, 2001 consideration of the Farm Bill, S. 1731 , the Senatedefeated an amendment, S.Amdt. 2596 , that would have conditioned a lifting ofrestrictions on private financing of agricultural sales to Cuba on a presidential certification that Cubawas not a state sponsor of international terrorism. A recent controversy that has arisen is the question of whether Cuba, which has an advancedbiotechnology sector, is involved in developing biological weapons. (41) On May 6, 2002, UnderSecretary of State for Arms Control and International Security John Bolton stated that "the UnitedStates believes that Cuba has at least a limited offensive biological warfareresearch-and-development effort" and "has provided dual-use technology to other rogue states." Bolton called on Cuba "to cease all BW-applicable cooperation with rogue states and to fully complywith all of its obligations under the Biological Weapons Convention." Although Bolton's statementreceived considerable media attention, it was similar to a March 19, 2002 statement by AssistantSecretary of State for Intelligence and Research Carl Ford before the Senate Committee on ForeignRelations. 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. (42) Some observers, includingsome Members of Congress, view Powell's statement as contradicting that of Under SecretaryBolton. The State Department's annual Patterns of Global Terrorism report issued May 21, 2002,did not mention the issue of Cuba and biological weapons. 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. (43) The Senate Foreign Relations Committee's Subcommittee on Western Hemisphere, PeaceCorps, and Narcotics Affairs held a hearing on the issue on June 5, 2002. (44) 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 developmentnecessary to create biological weapons. U.S. government concerns about Cuba's capability to produce biological weapons dates backseveral years. In 1998, then U.S. Secretary of State 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..." 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. (45) In 1999, the Britishpharmaceutical company Glaxo SmithKline announced an agreement to test and market a newCuban meningitis vaccine that might eventually be used in the United States. (46) 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 sentences. 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 lesser prison terms of 7 years and 3 ½ 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 5 years in prison in June 2001. The case led to theState Department's expulsion of a Cuban diplomat working in Washington. 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. (47) 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. Inresponse to the espionage case, in early November 2002 the U.S. Department of State ordered theexpulsion of four Cuban diplomats in the United States, two from the Cuban Interests Section inWashington and two from Cuba's U.N. Mission in New York. Cuba strongly asserted that thediplomats were not involved in intelligence activities. 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 GovernorsFY2003 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 daily broadcasts for four and one-half hours daily; on May 20, 2002, the broadcastschedule 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. Radio Marti broadcasts 24 hours a day on short and medium wave (AM) channels. Surveys have showed a Radio Marti listenership of 9% in 2000 and 5% in 2001. (48) 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 program 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. (49) (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 FY2002, Congress appropriated almost $407 million for broadcastingto Cuba, with about $249 million for Radio Marti (since FY1984) and $158 million for TV 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 some $150 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 many 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 1994, which stated "the Cuban people have an ardent desire and a genuine need toreceive the programming produced by TV Marti." (50) 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. FY2001 Funding. For FY2001, the ClintonAdministration requested $23.456 million for broadcasting to Cuba for both Radio and TV Marti. Of that amount, $650,000 was for the purchase of a 100-kilowatt solid state transmitter to improvethe operation, reliability, and efficiency of Radio Marti broadcasts to Cuba. H.R. 5548 , a bill making appropriations for the Departments of Commerce,Justice, and State; the Judiciary; and related agencies, was incorporated into the H.R. 4942 conference report ( H.Rept. 106-1005 ). Signed into law December 21, 2000 ( P.L. 106-553 ),it provided $22.095 million for radio and television broadcasting to Cuba. A subsequent rescissionbrought the amount down to $22.046 million. FY2002 Funding. The FY2002 State Departmentand Related Agencies Appropriations measure ( P.L. 107-77 , H.R. 2500 ) fully funds theAdministration's request and provides $24.872 million for broadcasting to Cuba for FY2002, $2.826million more than the amount provided in FY2001. Both the House and Senate versions of H.R. 2500 had fully funded the request. During Senate consideration of the bill onSeptember 10, Senator Dorgan filed an amendment, S.Amdt. 1542 , that would haveeliminated funding for TV Marti, but in light of the September 11 attacks in New York andWashington, Senator Dorgan withdrew the amendment on September 13, 2001. H.R. 1646 , the Foreign Relations Authorization Act for FY2002 and FY2003,approved by the House May 16, 2001, would authorize $25 million for broadcasting to Cuba for eachfiscal year. In addition, the House version authorizes $750,000 for the enhancements of transmissionfacilities in Belize and the cost of transmissions from that country. According to the report to thebill ( H.Rept. 107-57 ), such enhancements to the Belize facility "will help increase the capacity ofthe Office of Cuba Broadcasting to evade the jamming by the Cuban regime." The bill would alsoeliminate staff positions, including the staff director, from the Advisory Board for CubaBroadcasting, which had often been the source of political controversy. FY2003 Funding. The Bush Administrationrequested $25.362 million for broadcasting to Cuba for FY2003, with about $15 million for RadioMarti and $10 million for TV Marti. The Senate Appropriations Committee reported out its version of the FY2003 Commerce, Justice, State and Related Agencies (CJS) appropriations bill, S. 2778 ( S.Rept. 107-218 ) on July 24, 2002, which would provide $24.996 million forCuba broadcasting. Final action on the measure was not completed before the end of the 107thCongress. In September 2002, both houses approved the conference report ( H.Rept. 107-671 ) to theForeign Relations Authorization Act for FY2003 ( H.R. 1646 ) that authorizes $25.923million for Cuba broadcasting for FY2003. The House approved the conference report on September25 by voice vote, and the Senate agreed to the conference report by Unanimous Consent onSeptember 26. The President signed the measure into law on September 30, 2002 as P.L. 107-228 . On June 6, 2002, the House International Relations Committee's Subcommittee onInternational Operations and Human Rights held a hearing on Radio and TV Marti featuringAdministration and outside witnesses. (51) 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. (52) These efforts are funded through the annual foreign aid appropriations bill. In FY2001,$4.989 was provided for various Cuba projects. In FY2002, $5 million was provided. For FY2003,the Administration has requested $6 million as part of its foreign aid request. While the FY2003assistance is not earmarked in either the House or Senate version of the Foreign Operations bill forFY2003, H.R. 5410 and S. 2779 , the House Appropriations Committeereport to the bill ( H.Rept. 107-663 ) states that the committee fully supports the Administration'srequest of $6 million for the goal of promoting a peaceful transition to democracy in Cuba. Finalaction on the FY2003 Foreign Operations measure was not completed before the end of the 107thCongress. Some Members of the 107th Congress again raised concerns about the Russian signalsintelligence facility at Lourdes, Cuba. The facility at Lourdes was built in the aftermath of the Cubanmissile crisis of 1962. It allows Russia to monitor U.S. communications, including militarycommunications that Russians contend ensure compliance with arms control agreements. The Cuban Liberty and Democratic Solidarity Act ( P.L. 104-114 ) contains a provision thatwould reduce U.S. assistance for Russia by an amount equal to the sum of assistance and creditsprovided in support of intelligence facilities in Cuba. However, the legislation also provides thatsuch a restriction does not apply to most categories of assistance. Moreover, the legislation alsoprovides a presidential waiver if such assistance is important to U.S. national security and if Russiahas assured the United States that it is not sharing intelligence collected at the Lourdes facility withofficials or agents of the Cuban government. H.R. 160 (Ros-Lehtinen), introduced January 3, 2001, would prohibit therescheduling or forgiveness of any outstanding bilateral debt owed by the Russian government to theUnited States until the President certifies to the Congress that the Russian government has ceasedall its operations and permanently closed the Lourdes intelligence facility. In the 106th Congress, asimilar bill ( H.R. 4118 ) was approved by the House (275-146), but stalled in the Senate,where the Senate version ( S. 2748 ) remained in committee at the end of the 106thCongress. On October 17, 2001, Russian President Vladimir Putin announced that the Russian militarywould close the Lourdes facility. The announcement was met with approval from President Bushwho said that both Russia and the United States "are taking down relics of the Cold War and buildinga new, cooperative and transparent relationship for the 21st century." (53) On the other hand, Cubastrongly criticized Russia's move, saying that it had not agreed to the Russian pullout. Cubareportedly received about $200 million annually for the facility. The Cuban government is turningthe 70-square mile facility into a computer science university that will reportedly have 2,000 residentstudents. (54) In 1994 and 1995, Cuba and the United States reached two migration accords designed tostem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S.policymakers was the 1980 Mariel boatlift in which 125,000 Cubans fled to the United States. Inresponse to Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not toallow another exodus. Amidst escalating numbers of fleeing Cubans, on August 19, 1994, PresidentClinton abruptly changed U.S. migration policy, under which Cubans attempting to flee theirhomeland were allowed into the United States, and announced that the U.S. Coast Guard and Navywould take Cubans rescued at sea to the U.S. naval base at Guantanamo Bay, Cuba. Despite thechange 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. Periodic U.S.-Cuban talks have beenheld on the implementation of the migration accords. Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubansat sea and returned them to their country, while those deemed at risk for persecution have beentransferred to Guantanamo and then found asylum in a third country. Those Cubans who reach shoreare allowed to apply for permanent resident status in one year. Tensions in South Florida heightened after a June 29, 1999 incident -- televised live by localnews helicopters -- in which the U.S. Coast Guard used a water cannon and pepper spray to preventsix Cubans from reaching Surfside beach in Florida. The incident prompted outrage from the CubanAmerican community in Florida and several Members of Congress. President Clinton characterizedthe incident as "outrageous," and stated that the treatment was not authorized (Associated Press, July1, 1999). Another incident occurred on July 9, 1999, when a boat being interdicted by the CoastGuard capsized and resulted in the drowning of a Cuban woman. The State Department expressedregret over the incident and noted that the Department of Justice and the Immigration andNaturalization Service would investigate whether this was a case of alien smuggling. 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. As of earlyJuly 2002, Cuba maintained that it had arrested and imprisoned more than 130 immigrant smugglerssince 1998. (56) U.S.prosecution against migrant smugglers in Florida has also increased in recent years with numerousconvictions. (57) From late November 1999 through June 2000, national attention became focused on Cubanmigration policy as a result of the Elian Gonzalez case, the five-year old boy found clinging to aninner tube off the coast of Fort Lauderdale. The boy's mother drowned in the incident, while hisfather who resided in Cuba, called for his return. Although the boy's relatives in Miami wanted himto stay in the United States, the Immigration and Naturalization Service ruled that the boy's fatherhad the sole legal authority to speak on his son's behalf. After numerous legal appeals by the Miamirelatives were exhausted, the boy returned to Cuba with his father in June 2000. In Cuba, FidelCastro orchestrated numerous mass demonstrations and a media blitz on the issue until the boy'sreturn. The case generated an outpouring of emotion among the Cuban population as well as insouth Florida. A June 26, 2002 speech by Fidel Castro raised concerns among some observers that Castrowas planning another mass exodus like the ones in 1980 and 1994. Castro stated that the Cubanmigration accords could be dissolved and the U.S. Interest Section in Havana could be withdrawnif Cuba's sovereignty was violated and if diplomatic norms were flouted by U.S. officials inCuba. (58) Subsequently,however, both Cuban and U.S. officials stated the importance of maintaining the migration accords. On February 24, 1996, Cuban Mig-29 fighter jets shot down two Cessna 337s in the FloridaStraits, which resulted in the death of four members of the Cuban American group Brothers to theRescue. The group was known primarily for its humanitarian missions of spotting Cubans fleeingtheir island nation on rafts but had also become active in flying over Cuba and dropping leaflets. In 1996, President Clinton authorized $300,000 to each of the families of the four victims,which was drawn from a pot of Cuban assets frozen in the United States. In addition, on December17, 1997, a U.S. federal judge awarded $187.6 million ($49.9 million in compensatory damages and$137.7 million in punitive damages) to the families of three of the shootdown victims who suedunder a provision in the Antiterrorism and Effective Death Penalty Act of 1996 ( P.L. 104-132 ). (Thefourth shootdown victim was not a U.S. citizen, and therefore not eligible to sue under the Act.)However, Cuba refused to recognize the court's jurisdiction. A provision in the FY1999 omnibus appropriations measure ( P.L. 105-277 , H.R. 4328 ) could have affected the payment of the December 1997 judgment from Cuba's frozen assetsin the United States. That provision stipulates that foreign states are not immune from U.S.judgments for violations of international law. However, the provision also includes a presidentialwaiver for national security interests, which the President exercised October 21, 1998. The ClintonAdministration opposed the provision, maintaining that it would undermine the authority of thePresident to use assets of countries under economic sanctions as leverage when sanctions are usedto modify the behavior of a foreign state. Supporters maintain that it would let those nations whosponsor terrorism know that if they are found guilty in U.S. court, their assets will be liquidated inorder to serve justice. Nevertheless, in light of further congressional action on the issue in October 2000, theClinton Administration agreed to go forward with payments to relatives of three of the shootdownvictims. The Victims of Trafficking and Violence Protection Act of 2000 ( P.L. 106-386 , Sections2002 and 2003) directed the Secretary of the Treasury to pay compensatory damages for certainclaims against Cuba (and Iran). Subsequently, on January 19, 2001, the day before he left office,President Clinton signed an order unfreezing Cuban funds in the United States to pay almost $97million to the relatives of the shootdown victims. The money came from a pot of $193.5 million inCuban assets frozen in the United States, consisting of funds from long-distance telephone fees thatAT&T paid for access to Cuba's telephone system from the mid-1960s until 1994. While supportersof the relatives, the Cuban American community, and many in Congress supported the President'saction, other U.S. citizens with claims against Cuba maintain that the large judgment drained the potof money that might have been available for other claims. (60) At the end of 2001, about $112 million in Cuban assets in theUnited States remained frozen or blocked. P.L. 106-113 ( H.R. 3194 ) Enacts by reference H.R. 3421 , the Commerce, Justice and State appropriationsbill for FY2000, and H.R. 3427 , the Foreign Relations Authorization Act for FY2000and FY2001, as introduced November 17, 1999. H.R. 3194 signed into law November29, 1999. H.R. 3421 appropriates $22.095 million for Cuba broadcasting for FY2000. H.R. 3427 includes the following Cuba provisions: Section 108 (b) (3) authorizes$6,000 for each of FY2000 and FY2001 for the investigation and dissemination of information onviolations of freedom of expression by Cuba; Section 121 authorizes $22.743 million forbroadcasting to Cuba for each of FY2000 and FY2001; Section 206 requires a report from theSecretary of State not later than 120 days after enactment of the Act on the extent of internationaldrug trafficking through Cuba since 1990. P.L. 106-429 ( H.R. 4811 ) On October 28, the conference report ( H.Rept. 106-997 ) struck H.R. 4811 andenacted by reference H.R. 5526 . Section 507 prohibits direct funding of assistance orreparations to Cuba (and other countries). Section 523 prohibits indirect assistance or reparationsto Cuba unless the President certifies that withholding such funds is contrary to U.S. nationalinterests. P.L. 106-386 ( H.R. 3244 ) Victims of Trafficking and Violence Protection Act of 2000. Sections 2002 and 2003 directthe Secretary of the Treasury to pay compensatory damages for certain claims against Cuba (andIran). As provided for in the bill, President Clinton waived such payments in the interest of nationalsecurity when he signed the bill into law on October 28, 2000. (On January 19, 2001, he signed anexecutive order unfreezing the funds.) P.L. 106-387 ( H.R. 4461 ) Agriculture, Rural Development, Food and Drug Administration, and Related AgenciesAppropriations Act, FY2001. Title IX of the bill, Trade Sanctions Reform and Export Enhancement,terminates unilateral sanctions on food and medical exports from economic sanctions imposed forforeign policy purposes. It allows one-year licenses for exports of these goods to countries classifiedas state sponsors of international terrorism, which includes Cuba, but without any U.S. financing (thePresident may waive the prohibition of U.S. assistance for commercial exports to Iran, Libya, NorthKorea, or Sudan for national security or humanitarian reasons but may not do so for Cuba). Prohibitstravel to Cuba for tourism, restricts non-tourist travel to Cuba to that expressly authorized in currentfederal regulations. Signed into law October 28, 2000. H.Res. 99 (Ros-Lehtinen) Introduced March 9, 1999. House approved March 23, 1999, by voice vote. Expresses thesense of the House regarding the human rights situation in Cuba, including a condemnation of Cuba'srepressive crackdown against the internal opposition and independent press; a call for theAdministration to secure support for a UNCHR resolution condemning Cuba for its human rightsabuses and for the reinstatement of a UNCHR Special Rapporteur on Cuba; and a call for theAdministration to nominate a special envoy to advocate internationally for the establishment of therule of law for the Cuban people. S.Res. 57 (Graham) Introduced March 4, 1999. Senate approved (98-0) March 25, 1999. Expresses the sense ofthe Senate that the United States should make all efforts to pass a UNCHR resolution criticizingCuba's human rights abuses and securing the appointment of a Special Rapporteur. P.L. 106-553 ( H.R. 4942 ) Appropriations for the District of Columbia government and for other purposes. H.R. 5548 , making appropriations for the Departments of Commerce, Justice, and State;the Judiciary; and related agencies, was incorporated into the H.R. 4942 conferencereport ( H.Rept. 106-1005 ). Signed into law December 21, 2000. Provides $22.095 million for radioand television broadcasting to Cuba. P.L. 107-115 ( H.R. 2506 ) Foreign Operations Appropriations, FY2002. Similar to past foreign operationsappropriations measures, the bill contains provisions (Section 507 and Section 523) that prohibitdirect and indirect assistance to Cuba. The House committee report to the bill notes that theAppropriations Committee fully supports the Administration's budget request of at least $5 millionaimed at promoting democracy in Cuba. Introduced and reported by the Committee onAppropriations July 17, 2001 ( H.Rept. 107-142 ). House passed (381-46) July 24, 2001. SenateCommittee on Appropriations reported its version September 4, 2001 ( S.Rept. 107-58 ). Conferencereport ( H.Rept. 107-345 ) filed December 19, 2001. House agreed (357-66) to the conferenceDecember 19; Senate agreed (unanimous consent) December 20. Signed into law January 10, 2002.(Also see "Drug Interdiction Cooperation" below for conference report language.) H.Res. 91 (Smith, Christopher) Expressing the sense of the House of Representatives regarding the human rights situationin Cuba. Condemns the repressive and totalitarian actions of the Cuban government against theCuban people. Expresses the sense of the House of Representatives that the President should (1)have an action-oriented policy of directly assisting the Cuban people and independent organizationsto strengthen the forces of change and to improve human rights within Cuba; and (2) made all effortsnecessary at the meeting of the United Nations Human Rights Commission in Geneva in 2001 toobtain passage of a resolution condemning the government of Cuba for its human rights abuses andto secure the appointment of a Special Rapporteur for Cuba. Introduced March 19, 2001. Housepassed (347-44, 22 present) April 3, 2001. P.L. 107-228 ( H.R. 1646 ) Foreign Relations Authorization Act, FY2002 and FY2003. H.R. 1646 Introduced April 27, 2001; Committee on International Relations reported the bill May 5, 2001( H.Rept. 107-57 ). House passed (352-73) May 16, 2001. Section 101 of the House version wouldauthorize $70,000 for each fiscal year for the establishment and operation of a mobile library at theUnited States Interests Section in Cuba primarily for use by dissidents and democracy activists. Section 107 of the House version would authorize $6,000 for each fiscal year for the Office of theSpecial Rapporteur for Freedom of Expression in the Western Hemisphere of the Organization ofAmerican States for the investigation and dissemination of information on violations of freedom ofexpression by the government of Cuba. Senate passed, amended, May 1, 2002, with a substituteamendment, the Security Assistance Act of 2002, that did not have Cuba provisions. Conferencereport ( H.Rept. 107-671 ) filed September 23, 2002, without the Cuba provisions described above.House agreed to conference report by voice voted September 25, 2002; Senate agreed by UnanimousConsent September 26, 2002. Signed into law September 30, 2002 (Also see legislative initiativeson "Broadcasting to Cuba" below for additional provisions in H.R. 1646 .) H.R. 5410 (Kolbe)/ S. 2779 (Leahy) Foreign Operations Appropriations FY2003. S. 2779 introduced and reportedby the Senate Committee on Appropriations July 24, 2002 ( S.Rept. 107-219 ). H.R. 5410 introduced and reported by the House Committee on Appropriations September 19, 2002 ( H.Rept.107-663 ). As part of its FY2003 foreign aid request, the Administration requested $6 million for aCuba democracy program. The House committee report to the bill states that the committee fullysupports the $6 million request for Cuba and its goal of promoting a peaceful transition todemocracy. Final action was not completed before the end of the 107th Congress. H.Con.Res. 123 (Andrews) Calling for the immediate release of all political prisoners in Cuba, including Dr. Oscar EliasBiscet, and for other purposes. Introduced and referred to Committee on International Relations May3, 2001. H.R. 1271 (Diaz-Balart) To assist the internal opposition in Cuba, and to further help the Cuban people to regain theirfreedom. Introduced and referred to International Relations Committee March 28, 2001. H.Res. 453 (Pallone) Expresses support for the Varela Project and "urges the President and his representatives totake all appropriate steps to support the Varela Project and any future efforts by the Cuban peopleto assert their constitutional right to petition the National Assembly in support of a referendum.Introduced June 20, 2002; referred to the Committee on International Relations. H.R. 5737 (Ros-Lehtinen) Posthumously revokes the naturalization of Eriberto Mederos, who reportedly directedtorture against political prisoners in Cuba. Introduced November 14, 2002; referred to HouseCommittee on the Judiciary. S.Res. 272 (Nelson) Expresses support for the Varela Project and "urges the President to support the right of thecitizens of Cuba who have signed the Varela Project to petition the Cuban National Assembly fora referendum and the peaceful transition to democracy." Introduced May 20, 2002. Senate ForeignRelations Committee reported May 29, 2002. Senate approved (87-0) June 10, 2002. S.Res. 62 (Lieberman) A resolution expressing the sense of the Senate regarding the human rights situation in Cuba. Introduced and referred to Foreign Relations Committee March 22, 2001. S. 894 (Helms) A bill to authorize increased support to the democratic opposition and other oppressed peopleof Cuba to help them regain their freedom and prepare themselves for a democratic future, and forother purposes. Referred to as the Cuban Solidarity, or Solidaridad, Act of 2001. Introduced andreferred to Foreign Relations Committee May 16, 2001. P.L. 107-67 ( H.R. 2590 / S. 1398 ) Treasury and General Government Appropriations Act, 2002. Introduced and reported( H.Rept. 107-152 ) by the House Committee on Appropriations July 23, 2001. House approved(334-94), amended, July 25, 2001.The Senate Committee on Appropriations reported its version ofthe bill, S. 1398 , on September 4, 2001 ( S.Rept. 107-57 ). On September 19, 2001, theSenate approved its version of H.R. 2590 , amended, which substituted the language of S. 1398 . Conference report ( H.Rept. 107-253 ) filed October 26, 2001. The House andSenate approved the conference on October 31, 2001, and November 1, 2001, respectively. Signedinto law on November 12, 2001. Section 648 (Title VI) of the House version provided that none ofthe funds in the Act could be used to administer or enforce the Cuban Assets Control Regulations(31 CFR, part 515) with respect to any travel or travel-related transaction. This section was addedby H.Amdt. 241 (Flake) that the House approved by a vote of 240-186. Anotheramendment, H.Amdt. 242 (Rangel), that would have prohibited the use of TreasuryDepartment funds to implement or enforce the economic embargo of Cuba, failed by a vote of201-227. The Senate version did not have a provision regarding Cuba travel regulations, and theconference report ( H.Rept. 107-253 ), did not include the Cuba travel provision. P.L. 107-171 ( H.R. 2646 / S. 1731 ) 2002 Farm Bill. H.R. 2646 introduced July 26, 2001. House passed (291-120)October 5, 2001. S. 1731 introduced November 27, 2001; Senate Committee onAgriculture, Nutrition, and Forestry reported the bill ( S.Rept. 107-117 ) on December 7, 2001. Senate passed (58-40) H.R. 2646 on February 13, 2002, after incorporating thelanguage of S. 1731 , as an amendment. Conference report ( H.Rept. 107-424 ) filed May1, 2002. The House and Senate approved the conference report on May 2 and May 8, respectively.Signed into law May 13, 2002. Section 335 of the Senate version would have eliminated restrictionson private financing of agricultural sales to Cuba that were set forth in the Trade Sanctions Reformand Export Enhancement Act of 2000 ( P.L. 106-387 , Title IX). The House version did not have sucha provision, but on April 23, 2002, the House approved (273-143) a nonbinding motion offered byRepresentative Calvin Dooley to instruct the House conferees to accept the Senate provision. Ultimately, however, the financing provision was not included in the conference report. In earlieraction, during consideration of S. 1731 on December 18, 2001, the Senate tabled(61-33) an amendment offered by Senator Bob Smith, S.Amdt. 2596 , that would haveconditioned the lifting of restrictions on private financing of agricultural sales to Cuba on apresidential certification that Cuba is not a state sponsor of international terrorism. A secondaryamendment offered by Senator Torricelli, S.Amdt. 2597 , fell when S.Amdt. 2596 was tabled. The Torricelli amendment would have conditioned the liftingof private financing restrictions on a presidential certification that all convicted felons who are livingas fugitives in Cuba have been returned to the United States for incarceration. P.L. 107-210 , H.R. 3009 Andean Trade Preference Expansion Act. House passed (voice vote) November 16, 2001. Senate passed (66-30) May 23, 2002, after incorporating (voice vote) a manager's amendment(S.Amdt 3401) that included "trade promotion authority" (TPA) legislation. During May 17, 2002Senate consideration of S.Amdt. 3401 , Senator Dorgan offered an amendment, S.Amdt. 3439 , that would permit private financing of agricultural sales to Cuba. Theamendment was identical to the provision that had been included in the Senate version of the FarmBill. Senator Dorgan subsequently withdrew the amendment on May 21, 2002, because hemaintained that some cosponsors did not want to jeopardize the TPA legislation. House approvedconference report ( H.Rept. 107-624 ) July 27, 2002; Senate approved conference August 1, 2002. H.R. 3009 signed into law August 8, 2002. H.R. 5120 (Istook)/ S. 2740 (Dorgan) Treasury and General Government Appropriations Act, 2003. H.R. 5120 introduced July 15, 2002; reported by House Committee on Appropriations ( H.Rept. 107-575 ). Therule for consideration of the bill, H.Res. 488 , was reported by the Rules Committee July17, 2002 ( H.Rept. 107-585 ); House approved the rule July 18, 2002 (224-188). On July 23, theHouse approved three Cuba sanctions amendments that would prohibit funds in the bill from beingused to enforce regulations on travel (Flake, H.Amdt. 552 , by a vote of 262-167),remittances (Flake, H.Amdt. 553 , by a vote of 151-177), and U.S. agricultural sales toCuba (Moran (KS), H.Amdt. 554 , by voice vote); the House also rejected twoamendments to H.R. 5120 that would have prevented any funds in the bill from beingused to enforce the overall economic embargo (Rangel, H.Amdt. 555 , by a vote of204-226) and that would have tied the limitation of funds in the bill for enforcing the travelregulations to certain conditions regarding biological weapons and terrorism (Goss, H.Amdt. 551 , by a vote of 182-247). House passed H.R. 5120 July 24,2002, by a vote of 308-121. S. 2740 introduced July 17, 2002; reported by SenateCommittee on appropriations ( S.Rept. 107-212 ). S. 2740 includes two provision relatedto Cuba travel sanctions. Section 516 provides that no funds may be used to enforce the TreasuryDepartment regulations with respect to any travel or travel-related transactions, but would notprevent the Office of Foreign Assets Controls (OFAC), which administers the sanctions, fromissuing general and specific licenses for travel to Cuba currently allowed by the regulations. Section124 of the Senate bill stipulates that no Treasury Department funds for "Departmental Offices,Salaries, and Expenses" may be used by OFAC, until OFAC has certain procedures in placeregarding license applications for travel to Cuba. Final action on H.R. 5120 was not completedbefore the end of the 107th Congress. H.R. 160 (Ros-Lehtinen) To prohibit the rescheduling or forgiveness of any outstanding bilateral debt owed to theUnited States by the government of the Russian Federation until the President certifies to theCongress that the Government of the Russian Federation has ceased all its operations at, removedall personnel from, and permanently closed the intelligence facility at Lourdes, Cuba. Introducedand referred to International Relations Committee January 3, 2001. H.R. 173 (Serrano) To amend the Trade Sanctions Reform and Export Enhancement Act of 2000 to allow forthe financing of agricultural sales to Cuba. Introduced January 3, 2001; referred to Committees onAgriculture, Financial Services, and International Relations. H.R. 174 (Serrano) To lift the trade embargo on Cuba, and for other purposes. Introduced January 3, 2002;referred to Committees on Agriculture, Financial Services, International Relations' GovernmentReform, Energy and Commerce, Judiciary; and Ways and Means. H.R. 796 (Rangel)/ S. 401 (Baucus) To normalize trade relations with Cuba, and for other purposes. H.R. 796 introduced and referred to House Ways and Means Committee February 28, 2001. S.401 introduced and referred to Finance Committee February 27, 2001. H.R. 797 (Rangel)/ S. 402 (Baucus) To make an exception to the United States embargo on trade with Cuba for the export ofagricultural commodities, medicines, medical supplies, medical instruments, or medical equipment,and for other purposes. H.R. 797 introduced and referred to Committees onInternational Relations and Ways and Means February 28, 2001. S.402 introduced and referred toFinance Committee February 27, 2001. H.R. 798 (Rangel)/ S. 400 (Baucus) To lift the trade embargo on Cuba, and for other purposes. H.R. 798 introducedand referred to Committees on Agriculture, Financial Services, Government Reform, Energy andCommerce, Judiciary, and Ways and Means on February 28, 2001. S. 400 introducedand referred to Finance Committee on February 27, 2001. H.R. 2138 (Serrano)/ S. 1017 (Dodd) To provide the people of Cuba with access to food and medicine from the United States, toease restrictions on travel to Cuba, to provide scholarships for certain Cuban nationals, and for otherpurposes. Referred to as the "Bridges to the Cuban People Act of 2001." H.R. 2138 introduced and referred to Committees on Agriculture, Financial Services, International Relations,Judiciary, and Ways and Means June 12, 2001. S. 1017 introduced and referred to theForeign Relations Committee June 12, 2001. On June 19, 2002, the Foreign Relations Committee'sSubcommittee on Western Hemisphere, Peace Corps, and Narcotics Affairs held a hearing on thebill. H.R. 2292 (Rothman) The No Safe Harbor in Cuba Act. To amend the Cuban Liberty and Democratic SolidarityAct of 1996 to require, as a condition for the determination that a democratically elected governmentin Cuba exists, that the government extradite to the United States convicted felon Joanne Chesimardand all other U.S. fugitives from justice. Introduced June 21, 2001; referred to House Committee onInternational Relations. H.R. 2662 (Paul) To lift the trade embargo on Cuba and to prohibit any federal funds to provide assistance toCuba. Introduced July 26, 2001; referred to the Committee on International Relations and in additionto the Committees on Ways and Means, Energy and Commerce, the Judiciary, Financial Services,Government Reform, and Agriculture. H.R. 5022 (Flake) Freedom to Travel to Cuba Act of 2002. Removes restrictions on travel to Cuba. IntroducedJune 26, 2002; referred to Committee on International Relations. H.R. 5616 (Dooley) Provides for the expiration of the Cuban Liberty and Democratic Solidarity Act of 1996,known as the Helms-Burton Act, on March 31, 2003. Introduced October 10, 2002; referred toCommittees on International Relations, Ways and Means, Judiciary, and Financial Services. S. 137 (Gramm) To authorize negotiation of free trade agreements with countries of the Americas, and forother purposes. Section 4 outlines restrictions prior to restoration of freedom in Cuba, standards fordetermining restored freedom in Cuba, and establishes priority for negotiating free trade with Cubaonce the President determines that freedom has been restored in Cuba. Introduced and referred toFinance Committee January 22, 2001. S. 171 (Dorgan) To repeal certain travel provisions with respect to Cuba and certain trade sanctions withrespect to Cuba, Iran, Libya, North Korea, and Sudan, and for other purposes. Introduced andreferred to Foreign Relations Committee January 24, 2001. S. 239 (Hagel) To improve access to the Cuban market for American agricultural producers, and for otherpurposes. Introduced and referred to Foreign Relations Committee February 1, 2001. H.R. 26 (Serrano) To waive certain prohibitions with respect to nationals of Cuba coming to the United Statesto play organized professional baseball. Introduced and referred to International Relations andJudiciary Committees January 3, 2001. H.R. 5751 (Meek) Provides the same immigration adjustment rights for Haitians as is provided for Cubans. Introduced November 14, 2002; referred to the Committee on the Judiciary. P.L. 107-115 ( H.R. 2506 ) Foreign Operations Appropriations, FY2002. Introduced and reported by the HouseCommittee on Appropriations July 17, 2001 ( H.Rept. 107-142 ). House passed (381-46) July 24,2001. Senate Committee on Appropriations reported its version September 2, 2001 ( S.Rept. 107-58 ).Senate passed (96-2) October 24, 2001. The Senate version would provide $1.5 million for theDepartment of State and other agencies to establish cooperation with Cuba on counter-narcoticsmatters. Conference report ( H.Rept. 107-345 ) filed December 19, 2001, without the Senate provisionon counter-narcotics cooperation with Cuba. However, the conference report called for a report bythe Secretary of State within 6 months on 1) the extent, if any of the direct involvement of thegovernment of Cuba in illegal drug trafficking; 2) the likelihood that U.S. international narcoticsassistance to the government of Cuba would decrease the flow of drugs transiting through Cuba, and3) the degree to which the government of Cuba is exchanging with U.S. agencies drug-related lawenforcement information. The conference report also encouraged the Administration to transmit toCongress, not later than 9 months, any legislation necessary to decrease the flow of drugs to or fromCuba. House agreed (357-66) to the conference December 19; Senate agreed (unanimous consent)December 20. Signed into law January 10, 2002. (Also see "Human Rights Issues" above for Housereport language on U.S. support for U.S. funding of democracy and human rights funding regardingCuba.) H.R. 5410 (Kolbe)/ S. 2779 (Leahy) Foreign Operations Appropriations FY2003. S. 2779 introduced and reportedby the Senate Committee on Appropriations July 24, 2002 ( S.Rept. 107-219 ). Section 585 of the billprovides that $3 million in International Narcotics Control and Law Enforcement assistance shouldbe made available for preliminary work by the Department of State and other entities to establishcooperation with appropriate agencies of the Cuban government on counter-narcotics matters. Themoney would not be available if the President certified (1) that Cuba does 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 (2) that there is evidence of involvement of theCuban government in drug trafficking. H.R. 5410 introduced and reported by the HouseCommittee on Appropriations September 19, 2002 ( H.Rept. 107-663 ). Section 581 of the billprovides that none of the funds appropriated for "International Narcotics Control and LawEnforcement" may be made available for assistance to the Cuban government. Final action on H.R.5410 was not completed before the end of the 107th Congress. H.R. 1124 (Rangel) To authorize the Director of the Office of National Drug Control Policy to enter intonegotiations with representatives of the government of Cuba to provide for increased cooperationbetween Cuba and the United States on drug interdiction efforts. Introduced and referred toInternational Relations Committee March 20, 2001. P.L. 107-77 ( H.R. 2500 ) State Department and Related Agencies Appropriations, FY2002. The measure fully fundsthe Administration's request of $24.872 million for broadcasting to Cuba for FY2002. H.R. 2500 reported by the House Committee on Appropriations ( H.Rept. 107-139 ) July13, 2001. House passed (408-19), amended, July 18, 2001. S. 1215 reported by theSenate Committee on Appropriations July 20, 2001 ( S.Rept. 107-42 ). On September 10, 2001, theSenate substituted the language of S. 1215 as its version of H.R. 2500 , andon September 13, 2001 the Senate passed (97-3) the bill, amended. Conference report ( H.Rept.107-278 ) filed November 9, 2001. House agreed to conference (411-15) on November 14, 2001, andthe Senate approved it (98-1) on November 15, 2001. Signed into law November 28, 2001. P.L. 107-228 ( H.R. 1646 ) Foreign Relations Authorization Act, FY2002 and FY2003. H.R. 1646 introduced April 27, 2001; Committee on International Relations reported the bill May 5, 2001( H.Rept. 107-57 ). House passed (352-73) May 16, 2001. In the House version, section 121 wouldauthorize $25 million for broadcasting to Cuba for each fiscal year. The section would also authorize$750,000 for enhancements to and costs of transmission from the facilities in Belize, whichaccording to the bill's report, would increase the capacity of the Office of Cuba Broadcasting toevade jamming by the Cuban government. Section 501 would eliminate staff positions for theAdvisory Board for Cuba Broadcasting. Senate passed, amended, May 1, 2002, with a substituteamendment, the Security Assistance Act of 2002, that did not have Cuba provisions. Conferencereport ( H.Rept. 107-671 ) filed September 23, 2002; Section 121 of the conference report version ofthe bill authorizes $25.923 million for FY2003 for Cuba broadcasting. House agreed to conferencereport by voice vote September 25, 2002; Senate agreed by Unanimous Consent September 26, 2002. Signed into law September 30, 2002. S. 2778 (Hollings) State Department and Related Agencies Appropriations, FY2003. Introduced July 18, 2002;Senate Appropriations Committee reported the measure July 24, 2002 ( S.Rept. 107-218 ). Asreported, the bill would provide $24.996 million for Cuba broadcasting. Final action on the measurewas not taken before the end of the 107th Congress. H.R. 1270 (DeFazio) To increase accountability for government spending and to reduce wasteful governmentspending. Would repeal (1) the Television Broadcasting to Cuba Acts; and (2) the United StatesInternational Broadcasting Act of 1994. Introduced and referred to Committees on Armed Services;Financial Services; International Relations; Energy and Commerce; Resources; Science; Veterans'Affairs; Ways and Means; and Select Committee on Intelligence March 28, 2001; referred tosubcommittees April 24, 2001. CRS Electronic Briefing Book on Trade, Cuba Sanctions , by [author name scrubbed]. http://www.congress.gov/brbk/html/ebtra108.html CRS Electronic Briefing Book on Trade, Economic Sanctions and Agricultural Exports , by RemyJurenas. http://www.congress.gov/brbk/html/ebtra13.html CRS Report RL31302 , Appropriations for FY2003: Treasury, Postal Service, Executive Office ofthe President, and General Government, by [author name scrubbed]. CRS Report RS20450(pdf) , The Case of Elian Gonzalez: Legal Basics, by [author name scrubbed]. CRS Report RL30837, Cuba: An Economic Primer, by [author name scrubbed]. 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 Legislative Initiatives, by Mark P.Sullivan. CRS Report RL30386(pdf) , Cuba-U.S. Relations: Chronology of Key Events 1959 -1999, by Mark P.Sullivan. CRS Report 94-759(pdf) , Cuba-U.S. Relations: Should the United States Reexamine Its Policy? , by MarkP. Sullivan. CRS Report RS20468 , Cuban Migration Policy and Issues, by [author name scrubbed]. CRS Report RL30384 , Economic Sanctions: Legislation in the 106th Congress, by Dianne E.Rennack. CRS Report 97-949(pdf) , Economic Sanctions to Achieve U.S. Foreign Policy Goals: Discussion andGuide to Current Law, by [author name scrubbed] and [author name scrubbed]. CRS Report RL30570, Elian Gonzalez: Chronology 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 Issue Brief IB93107, Normal-Trade-Relations (Most-Favored-Nation) Policy of the UnitedStates, by [author name scrubbed]. CRS Report RS20449, Private Bills for Citizenship or Permanent Residency: A Brief Overview, 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 RL31258 , Suits Against Terrorist States , by [author name scrubbed]. CRS Report RS21003, Travel Restrictions: U.S. Government Limits on American Citizens' TravelAbroad , by [author name scrubbed] and [author name scrubbed].
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Cuba remains a hard-line Communist state, with a poor record on human rights. Fidel Castrohas ruled since he led the Cuban Revolution, ousting the corrupt government of Fulgencio Batistafrom power in 1959. With the cutoff of assistance from the former Soviet Union, Cuba experiencedsevere economic deterioration from 1989 to 1993. There has been some improvement since 1994as Cuba has implemented limited reforms. Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the islandnation through comprehensive economic sanctions. The Bush Administration has essentiallycontinued this policy. The principal tool of policy remains comprehensive sanctions, which weremade stronger with the Cuban Democracy Act (CDA) in 1992 and the Cuban Liberty andDemocratic Solidarity Act in 1996, often referred to as the Helms/Burton legislation. Anothercomponent of U.S. policy consists of support measures for the Cuban people, including privatehumanitarian donations and U.S.-sponsored radio and television broadcasting to Cuba. In May 2002,President Bush announced a new initiative that includes several measures designed to reach out tothe Cuban people. There appears to be broad agreement on the overall objective of U.S. policy toward Cuba --to help bring democracy and respect for human rights to the island. But there are several schools ofthought on how to achieve that objective. Some advocate a policy of keeping maximum pressureon the Cuban government until reforms are enacted, while continuing current U.S. efforts to supportthe Cuban people. Others argue for an approach, sometimes referred to as constructive engagement,that would lift some U.S. sanctions that they believe are hurting the Cuban people, and move towardengaging Cuba in dialogue. Still others call for a swift normalization of U.S.-Cuban relations bylifting the U.S. embargo. Policy debate in the past several years has focused on whether to maintainU.S. restrictions on food and medical exports as well as on travel to Cuba. Legislative initiatives introduced in the 107th Congress reflected these divergent views on thedirection of U.S. policy toward Cuba and also covered a range of issues including human rights, foodand medical exports, travel restrictions, drug interdiction cooperation, and broadcasting to Cuba.Many of these will likely be introduced in the 108th Congress. In the second session of the 107thCongress, the House version of the FY2003 Treasury Department appropriations bill, H.R. 5120 , included three Cuba provisions that would have eased restrictions on travel,remittances, and U.S. agricultural sales to Cuba; the Senate version of the bill, S. 2740 ,as reported out of committee, would have eased restrictions on travel to Cuba. Final action on themeasure was not completed before the end of the 107th Congress; the 108th Congress will face earlyaction on these and other appropriations measures with Cuba provisions. This report will not be updated. It reflects legislative action through the end of the 107thCongress.
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By virtue of his constitutional role as commander-in-chief and head of the executive branch, the President has access to all national intelligence collected, analyzed, and produced by the Intelligence Community. Because the intelligence agencies are part of the executive branch, the President's position affords him the authority—which, at certain times, has been asserted —to restrict the flow of intelligence information to Congress and its two intelligence committees, which are charged with providing legislative oversight of the Intelligence Community. The issue of restricting the flow of intelligence information to Congress, a perennial point of conflict between the legislative and executive branches, has most recently resurfaced in the wake of the Fort Hood Army base shootings in November 2009, the subsequent Christmas Day airline bombing plot, and the Afghanistan suicide bombing that killed seven Central Intelligence Agency employees later that year. Together, these incidents underscored the degree of sensitivity with which Congress views the executive branch's statutory obligation to keep the legislative branch fully and currently informed of all intelligence activities. While some Members of Congress reportedly voiced satisfaction with executive branch efforts to keep them informed about some of these attacks, other Members have generally criticized the White House's notification efforts, particularly with regard to the Fort Hood shootings are concerned. House Intelligence Committee Chairman Reyes reportedly said that he has been "very satisfied" with the Administration's response with regard to information sharing pertaining to the Christmas Day airline bombing attempt. Representative Peter Hoekstra, however, reportedly asserted that the White House has done a poor job of keeping Congress informed of national security issues, generally, and criticized the White House for continuing to "put up roadblocks and hurdles to prevent us form getting information or answers to even basic questions." As a result of its control over intelligence, the executive branch, including the President, the vice president and a small number of presidentially-designated Cabinet-level officials —in contrast to Members of Congress —arguably have access to a greater overall volume of intelligence and to more sensitive intelligence information, including information regarding intelligence sources and methods. Top Administration officials, unlike Members of Congress, also have the authority to more extensively task the Intelligence Community, and its extensive cadre of analysts, for follow-up information. As a result, some contend, the President and his most senior advisors are better positioned to assess accurately the quality of the Intelligence Community's intelligence than is Congress. In addition to their greater access to intelligence, the President and his senior advisors also are arguably better equipped than is Congress to assess intelligence information by virtue of the primacy of their roles in formulating U.S. foreign policy. Their foreign policy responsibilities often require active, sustained, and often personal interaction, with senior officials of many of the same countries targeted for intelligence collection by the Intelligence Community. Thus the President and his senior advisors, some contend, are better positioned to glean additional information and impressions—information that, like certain sensitive intelligence information, is generally unavailable to Congress—that can provide them with additional perspective with which to judge the quality of intelligence. The President is able to control dissemination of intelligence information to Congress because the Intelligence Community is part of the executive branch. The Intelligence Community was created by law and executive order to principally serve the government's executive branch in the execution of its responsibilities. Thus, as the head of the executive branch, the President generally is acknowledged to be "the owner" of national intelligence. The President's otherwise exclusive control over national intelligence, however, is tempered by a statutory obligation to keep Congress, through its two congressional intelligence committees, "fully and currently informed of all intelligence activities." Current law also prevents the executive branch from withholding intelligence information from the committees on the grounds that providing such information would constitute the unauthorized disclosure of classified information, or information relating to intelligence sources and methods. In 2004, Congress further strengthened its access claims to national intelligence when it approved intelligence reform legislation explicitly directing that the Director of National Intelligence (DNI) provide the legislative branch access to national intelligence. Under previous statute, the head of the Intelligence Community was legally required to provide the legislative branch national intelligence, but only "where appropriate." Congress never defined, either in statute, report language, or during debate, what it considered to be "appropriate," essentially ceding to the executive branch the freedom to adopt its own interpretation of congressional intent in this regard. Despite the unqualified directive adopted in 2004, however, its impact on the Intelligence Community, as is so often the case, turns on how aggressively Congress chooses to assert its statutory prerogative. Despite certain conflicting legal authorities governing congressional access to national intelligence, the U.S. Judicial Branch has not had to address the issue, since no case involving an executive-legislative branch dispute over access to intelligence has reached the U.S. courts. Absent a court ruling more clearly defining executive and legislative branch authorities in this area, which most observers view as unlikely, the executive branch has contended that it is under no legal obligation to provide Congress access to all national intelligence. By contrast, Congress, through its congressional intelligence oversight committees, has asserted in principle a legal authority for unrestricted access to intelligence information. The Committees, historically, have interpreted the law as allowing room to decide how , rather than whether , they will have access to intelligence information, provided that such access is consistent with the protection of sources and methods. In practice, however, Congress has not sought all national intelligence information. Unless the intelligence committees have asserted a compelling need, the committees generally have not routinely sought access to certain sensitive intelligence information, such as intelligence sources and methods. When the committees have cited a compelling need for such access, Members generally have reached an accommodation with the executive branch, but not always. Perhaps, in part, because of these differing legal views, the executive and legislative branches apparently have not agreed to a set of formal written rules that would govern the sharing and handling of national intelligence. Rather, according to one observer, writing in a 1997 monograph: The current system is entirely the product of experience, shaped by the needs and concerns of both branches over the last 20 years. While some aspects of current practice appear to have achieved the status of mutually accepted "policy," few represent hard-and-fast rules. "Policy" will give way when it has to. In 2001, and again in 2002, the Senate Select Committee on Intelligence (SSCI) directed that the Director of Central Intelligence prepare a comprehensive report that would examine the role of Congress as a consumer of intelligence, and explore the development of mechanisms that would provide Members tailored intelligence products in support of their policymaking responsibilities. CRS is unaware whether the Director produced such a report. Subsequently, both intelligence committees attempted to ensure that the full membership of each committee were kept fully and currently informed of that intelligence viewed by executive branch as being the most sensitive. In the fiscal year (FY) 2006 intelligence authorization bill ( S. 1803 ), the SSCI included language requiring that the Intelligence Community, upon the request of either the chairman or ranking Member of either of the congressional intelligence committees, provide "any intelligence assessment, report, estimate, legal opinion, or other intelligence information," within 15 days of the request being made, unless the President certifies that the document or information is not being provided because the President is asserting "a privilege pursuant to the Constitution of the United States." Subsequently, both intelligence committees have attempted to address so-called Gang of Eight notifications, which are notifications of especially sensitive covert actions that by statute can be limited to the chairmen and ranking minority members of the two congressional intelligence committees, the Speaker and minority leader of the House, and Senate majority and minority leaders if the President determines that doing so is essential in order to protect vital U.S. interests. In its version of the FY2010 Intelligence Authorization bill, the House Intelligence Committee replaced the current Gang of Eight statutory provision, by adopting a statutory requirement that each of the intelligence committees establish written procedures as may be necessary to govern such notifications. The Senate Intelligence Committee, in its version of the FY2010 Intelligence Authorization bill, left the Gang of Eight statutory structure unchanged, adopting instead, language requiring that the full membership of the intelligence committees be informed of all covert actions and that all members of the two intelligence committees be notified when the executive branch notified the Gang of Eight of any covert action activities. The enacted version of the legislation, P.L. 111-259 , provided that in cases where findings or notifications are not made available to all members of the intelligence committees, within 180 days the President shall notify all committee members that notification has been provided only to the Gang of Eight, and provide all intelligence members a general description of the activity planned. The executive branch generally does not routinely provide with Congress four general types of intelligence information: 1. the identities of intelligence sources; 2. the "methods" employed by the Intelligence Community in collecting and analyzing intelligence; 3. "raw" intelligence, which can be unevaluated or "lightly" evaluated intelligence, which in the case of human intelligence, sometimes is provided by a single source, but which also could consist of intelligence derived from multiple sources when signals and imagery collection methods are employed; and 4. certain written intelligence products tailored to the specific needs of the President and other high-level executive branch policymakers. Included is the President's Daily Brief (PDB), a written intelligence product which is briefed daily to the President, and which consists of six to eight relatively short articles or briefs covering a broad array of topics. The PDB emphasizes current intelligence and is viewed as highly sensitive, in part, because it can contain intelligence source and operational information. Its dissemination is thus limited to the President and a small number of presidentially-designated senior Administration policymakers. In not providing Congress routine access to source identities, executive branch officials cite the need to protect against "leaks" or unauthorized disclosures of information that the Intelligence Community generally considers to be its most sensitive. The argument is made that as more individuals are briefed about sources, the greater is the risk that this information will be disclosed, inadvertently or otherwise. Consequently, such disclosures, it is asserted, could endanger the lives of sources, or, at the very least, jeopardize current or future access to those intelligence sources. Executive branch officials point to similar security-related concerns in explaining why Congress is not routinely provided information on intelligence methods, particularly collection methods. As in the case of source protection, officials argue that effective intelligence collection demands that intelligence collection methods—human and technical—must be protected. Officials also attribute security concerns, in part, as the reason for generally withholding raw intelligence from the legislative branch. Raw intelligence, it is argued, is sometimes necessarily derived from a single source, thus making the source more vulnerable to identification and ultimate exposure. Moreover, it is asserted, even when intelligence is collected from multiple sources, as it sometimes is when signals and imagery intelligence collection efforts are employed, knowledge of these collection methods can be determined from the underlying raw intelligence. Intelligence Community officials generally cite two additional reasons for restricting congressional access to raw intelligence. First, they contend that it would be "dangerous" if a Member of Congress were to gain access to, and possibly make policy decisions based upon, raw, unevaluated intelligence that has not been analyzed and placed into proper context. Second, they argue that, as a practical matter, Congress lacks the physical capacity to securely store the volume of raw intelligence the Intelligence Community generates. Finally, executive branch officials generally restrict congressional access to written intelligence products—including PDBs—that are tailored to the needs of individual policymakers. They assert that it would be inappropriate to provide such products to Congress, because these products are tailored to the specific needs of individual policymakers, and often include information about the policymaker's contacts with foreign counterparts, as well as the reactions of those counterparts. Although PDB consumers have access to all such intelligence, intelligence sources, methods, and operational information historically have been tightly restricted, even within the executive branch. Intelligence Community analysts, for example, often have access to such information, only on a need-to-know basis. While congressional intelligence officials have not routinely requested access to the types of intelligence information discussed above, they have questioned the executive branch's security concerns with regard to certain raw intelligence, noting that it generally is more widely available to executive branch officials. They have disputed whether Congress is less capable than is the Executive in its ability to evaluate and safeguard sensitive intelligence. Although Congress generally has not had access to information pertaining to intelligence sources and methods, raw intelligence, or to intelligence products tailored to high-level policymakers—including PDBs—notably, Congress occasionally has successfully obtained such intelligence information from the executive branch. For example, while investigating Central Intelligence Agency (CIA) covert action operations in Nicaragua in the 1980s, the intelligence committees requested and obtained the identities of certain intelligence sources. The committees also sought and gained access to certain raw intelligence. On other occasions, committee members have successfully requested raw intelligence in order to verify certain Intelligence Community judgments contained in various National Intelligence Estimates (NIE). Intelligence committee staff also has been granted access to PDBs, and PDB articles in the course of conducting certain investigations and oversight. Generally, however, various Administrations, sooner or later, have been reluctant to share certain intelligence information. In 2002, for example, President Bush rejected a request by the Congressional Joint Inquiry investigating the September 11 th terrorist attacks to review the August 6, 2001, PDB, which contained an article titled Bin Ladin Determined To Strike in U.S. The Bush Administration also denied a request by the SSCI to review PDBs relevant only to Iraq's weapons of mass destruction capabilities and links to terrorists as part of the Committee's review of the Intelligence Community's prewar intelligence assessments on Iraq. (The Bush Administration, however, did provide limited access to PDBs to two commissions: the 9/11 Commission and the Commission on the Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction (hereafter, cited as the WMD Commission).) Critics also have faulted President Barack Obama in this regard, asserting that he and his Administration has failed to keep Congress informed of certain national security issues and specifically criticizing the Administration for not briefing the intelligence committees on the Fort Hood shootings. Congress generally receives access to most finished intelligence products that are published for general circulation within the executive branch. A finished intelligence product is one in which an analyst evaluates, interprets, integrates, and places into context raw intelligence. Although congressional access is limited to finished intelligence products, the volume of such products provided to Congress has increased over time. Between 1947, when the National Security Act establishing the CIA was enacted, and the mid-1970s, the executive branch shared relatively little intelligence with Congress, and congressional overall access to intelligence information was quite limited. But after two special congressional investigative committees headed by former Senator Frank Church and Representative Otis Pike, respectively, investigated the Intelligence Community in the mid-1970s, the executive branch permitted the Intelligence Community to increase the flow of intelligence information to Congress. The Intelligence Community says it continues in its efforts to strike an appropriate balance between protecting its intelligence sources while providing intelligence analysts and consumers—including those in Congress—more information about the reliability of those sources. The issue of source protection gained prominence when it became clear that critical sourcing for the 2002 NIE on Iraq turned out to be inaccurate. In its 2004 report on the U.S. Intelligence Community's prewar intelligence assessments on Iraq, the Senate Select Committee on Intelligence (SSCI) criticized the Intelligence Community for not providing more information about its sources. The Senate Committee concluded that source protection policies within the Intelligence Community direct or encourage "reports officers" to exclude relevant detail about the nature of their sources. As a result, according to the Committee, Intelligence Community analysts are unable to make fully informed judgments about the information they receive, relying instead on nonspecific source lines to reach their assessments. Moreover, relevant operational data is nearly always withheld from analysts, putting them at a further analytic disadvantage, the Committee stated in its final report. The DNI in 2007 promulgated a new policy intended to provide more source information to intelligence analysts. In a directive to the Intelligence Community, the DNI called for "consistent and structured sourcing information for all significant and substantive reporting or other information upon which the product's analytic judgments, assessments, estimates, or confidence levels depend." Doing so, the DNI asserted, would enable "consumers to better understand the quantity and quality of information underlying the analysis." Some observers have suggested that because of the new policy, the Intelligence Community is now more fully and, thus, more accurately characterizing the reliability of it sources. Some of these same observers, however, assert that the DNI may have gone too far by requiring such precise sourcing that analysts my find themselves being hampered in interjecting their own informed views in the final intelligence product because of the new emphasis being placed on source information and its evaluation. Critics, however, contend that the DNI's directive has had limited impact and that it is still difficult for analysts to judge the reliability of certain intelligence sources because of their lack of access to information about sources. Although Congress receives numerous written intelligence products, it receives the preponderance of its intelligence information through briefings, which generally are initiated at the request of congressional committees, individual members, or staff. Such briefings can include a discussion of more sensitive information pertaining to intelligence sources and methods, particularly when the briefings involve the congressional intelligence committees. But even then, if the executive branch determines that such information is particularly sensitive, it will brief only the chairmen and ranking members of the two intelligence committees, or in lieu of the committee leadership, the committees' majority and minority staff directors. Based upon the executive branch's perspective that it is not legally obligated to provide Congress access to all intelligence, an Administration could choose not to share certain sensitive information with Congress at all. Congress, particularly its two congressional intelligence committees, could decide to explore ways to better ensure that it is kept fully and currently informed of all intelligence activities, as required under statute. In this regard, the FY2010 Intelligence Authorization Act ( P.L. 111-259 ) gave the full membership of each committee access to intelligence information deemed to be extremely sensitive by the executive branch and which previously had been limited to committee and Senate and House leadership although the statute permits the President to limit notification but provide all members of the intelligence committees a general description of the activity. Congress could also assess the suitability of source transparency, and could require that the DNI revisit the issue if it is determined that further changes are necessary to make sourcing more transparent for consumers. The congressional intelligence committees could also make a more concerted effort to require that analysts and collectors make joint presentations during certain hearings and briefings, in order to be better able to determine the degree of credibility Intelligence Community analysts attach to certain intelligence sources and to be able to more easily identify any disagreements between collectors and analysts as to source credibility. Finally, in those cases where the credibility of sourcing is of particular importance—for instance, those situations involving the possibility of war—the intelligence committees might opt to explore with the executive branch appropriate mechanisms that would allow at minimum, committee leadership to gain access to more detailed sourcing information. In general, Congress has the option of exploring various mechanisms that would permit it to achieve more equal footing with executive branch policymakers as a consumer of intelligence. It also could explore ways that it could become a better and more disciplined consumer and thus better able to assess the quality of the Intelligence Community's analysis and collection.
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This report examines the role of Congress as a consumer of national intelligence and examines several issues that Congress might address during the second session of the 112th Congress. The President, by virtue of his role as commander-in-chief and head of the executive branch, has access to all national intelligence collected, analyzed and produced by the Intelligence Community. By definition, the President, the Vice President, and certain Cabinet-level officials, have access to a greater overall volume of intelligence and to sensitive intelligence information than do members of the congressional intelligence committees. Moreover, since the intelligence agencies are part of the executive branch, the President has the authority to restrict the flow of intelligence information to Congress and its two intelligence committees. The Fort Hood Army base shootings in November 2009, followed later that year by the Christmas Day airline bombing plot and the Afghanistan suicide bombing that killed seven Central Intelligence Agency employees refocused congressional attention on a number of intelligence issues, including the role Congress plays as a consumer of intelligence. Each of these cases serves to underscore the sensitivity with which Congress views the executive branch's statutory obligation to keep the legislative branch fully and currently informed of all intelligence activities. While some Members of Congress reportedly have voiced satisfaction with executive branch efforts to keep them informed about some of these attacks, other Members generally have criticized the White House's notification efforts on national security issues and particularly its efforts to keep Congress apprised of the results of some of its reviews of the Fort Hood shootings. Congress generally has routine access to "finished intelligence," or to those intelligence products that are published for general circulation within the executive branch. A finished intelligence product is one in which an analyst evaluates, interprets, integrates and places into context raw intelligence. Congress receives the preponderance of its intelligence information through briefings, which generally are initiated at the request of congressional committees, individual members or staff. Congress does not routinely have access to the identities of intelligence sources, methods employed by the Intelligence Community in collecting analyzing intelligence, "raw" or unevaluated intelligence, or certain written intelligence products tailored to the specific needs of the President and other high-level executive branch policymakers. Among the issues the 112th Congress may choose to examine is whether the executive branch is meeting its statutory obligation to keep Congress fully and currently informed of all intelligence matters. Congress also may choose to review what the Intelligence Community says is its intention to strike an appropriate balance between protecting intelligence sources while providing intelligence analysts and consumers—including those in Congress—more information about the reliability of those sources.
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The Federal Home Loan Bank system is a cooperative, government-sponsored enterprise, created to provide liquidity to the nation's lenders with a special focus on low and moderate-income housing and community development, all under the supervision of the recently created Federal Housing Finance Agency. The Federal Home Loan Bank (FHLBank) essentially acts as a lender to lenders. The 12 regional banks engage in no direct lending to the public. Instead, member banks turn to the FHLBank for on-demand low interest loans which the member bank can then use to issue mortgages or other loans to the general public. The 12 regional banks that make up the FHLBank system, though unfamiliar to many, have been key players throughout the financial crisis and are likely to continue to play an important role in the ongoing economic recovery. Many of the FHLBanks, however, like so many other entities involved in providing or financing mortgages, are suffering serious financial stress as a result of the collapse of the housing market. With the regional FHLBanks suffering various degrees of financial difficulty, and a number reporting capital shortages, concerns have been raised as to the stability of the FHLBank system as well as the consequences of an FHLBank failure. Anxiety over a struggling FHLBank system may be warranted, as the banks as a whole are equal in size to failed mortgage giants Fannie Mae and Freddie Mac and just as interconnected with the national mortgage market. This report discusses the FHLBanks' creation, purpose, structure, and position within the overall financial system so as to clarify the functions of the FHLBank. The report then outlines the FHLBanks' current financial state and the statutory options for handling a potential failure. Until the Depression, mortgages were designed to be refinanced every five to 10 years. During the Depression, depositors withdrew their money from banks, leaving banks unable to fund replacement mortgages for the loans that came due. Unable to refinance, many homeowners had insufficient resources to pay off the mortgages and defaulted. The weak economy and previous defaults and foreclosures depressed home prices and exacerbated the problem. The Federal Home Loan Bank Act of 1932 created the Federal Home Loan Bank (FHLB) system to make loans, known as "advances," to member banks that lent the money as mortgages to homeowners. The banks pledged existing mortgages as collateral for the advances and to assure that the funds were used to finance housing. Mortgage lenders wishing access to advances had to join the system and were regulated for safety and soundness by the Federal Home Loan Bank Board. The FHLBank underwent significant reforms in 1989, 1999, and 2008. In 1989, the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) made major changes to the system in response to severe failures in the savings and loan industry. FHLBank system membership was opened to any depository institution engaging in significant mortgage lending. The new Federal Housing Finance Board replaced the Federal Home Loan Bank Board in regulating members. Each FHLBank had to set aside at least 10% of net earnings for low and moderate-income housing programs. The Federal Home Loan Bank System Modernization Act of 1999 expanded the membership and mission of the FHLBank system by dropping minimum mortgage asset requirements, and making voluntary membership available to a broader range of financial institutions. The mission of the FHLBanks was also expanded by allowing the banks to secure advances with assets other than housing loans such as agricultural and small business loans. In 2008, the Housing and Economic Recovery Act (HERA) instituted a new FHLBank system regulator in response to concerns that the FHLBank Board lacked sufficient powers and a desire to combine FHLBank system regulation with that for two other housing government-sponsored enterprises (GSE), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). The new regulator, the Federal Housing Finance Agency (FHFA), was granted broad supervisory and regulatory powers, including the new authority to set risk-based capital requirements, liquidate an FHLBank, or act as either a conservator or a receiver of an FHLBank facing potential insolvency. HERA also made the FHFA Director a presidential appointee subject to Senate confirmation, who would serve a five year term and hold broad discretion over the regulation of the housing. Regulation of FHLBank members depends on the form of legal organization, such as a state charter or federal savings association, that the member has selected. Similar to the Federal Reserve System, the FHLBank system consists of 12 regional member-owned and federally chartered banks, each with its own individual board of directors. There are regional FHLBanks in Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, Seattle, and Topeka. The Office of Finance is jointly owned by the FHLBanks and coordinates the sale of debt securities, the system's chief means of raising funds. Each regional bank has its own independently operating 13-member board of directors. Although member banks are free to elect the directors, the majority of each board must be officers of member banks, and at least two-fifths of board members must be independent (non-member bank) directors. While each regional bank operates independently, all FHLBanks are responsible for the debts and obligations of the other banks. This relationship of joint and several liabilities adds reliability to FHLBank debt securities and is one reason why the banks are usually considered a single GSE rather than a collection of separate entities. All 12 of the regional banks are private cooperatives that are owned and operated by their individual member institutions. Membership in the FHLBank system is open to any federally regulated depository or financial institution that engages in "long-term" home mortgage lending. To gain membership status, the eligible institution must purchase stock in the regional FHLBank that serves the state in which the institution's home office or principal place of business is found. Once an institution has purchased stock in its regional bank, it then becomes a partial owner of the regional FHLBank and is eligible to receive benefits such as dividend payments and FHLBank advances. As of September 30, 2009, membership in the FHLBank system exceeded 8,000 institutions, with collective assets measuring more than $13 trillion. Commercial banks represent over 70% of the total FHLBank system membership. The fundamental characteristic that allows the FHLBanks to provide low interest loans to member institutions is their collective status as a "government-sponsored enterprise" (GSE). Often described as a public/private hybrid, a GSE is a quasi-governmental, privately owned and managed, but federally chartered, financial lending institution whose activities are limited to certain public purposes. For example, the three housing GSEs can only purchase mortgages that have already been originated and either borrowing funds to hold the mortgages or packaging the mortgages into mortgage-backed securities (MBS). These MBS can be either held by the GSEs or sold to investors. GSEs do not normally receive explicit government funding. In addition to the FHLBank system, the other GSEs are Fannie Mae, Freddie Mac, the Federal Agricultural Mortgage Corporation (Farmer Mac), and the Farm Credit System. Although a federally chartered organization generally receives increased governmental supervision and cannot bind the government in any way, Congressional sponsorship brings with it the authority to exercise specifically enumerated governmental powers and a number of significant financial benefits. For instance, the FHLBank system enjoys a variety of special privileges such as exemption from federal, state, and local income tax. Although Fannie Mae's and Freddie Mac's stock is traded on the New York Stock Exchange, only members can purchase stock in their FHLBank. FHLBank shares are purchased from and sold to the FHLBank that issued them. Perhaps the most important benefit enjoyed by the FHLBank, however, is the so-called implicit guarantee that the federal government backs FHLBank obligations. The value of this implicit guarantee is, however, ambiguous. On the one hand, all debt issued by the FHLBank system, Fannie Mae, and Freddie Mac must state that repayment is not guaranteed by the federal government. On the other hand, Congress has assisted GSEs that were in financial difficulty. For example, when Fannie Mae was losing significant amounts of money in 1982, Congress passed the Miscellaneous Revenue Act of 1982 that provided tax benefits for Fannie Mae. The Farm Credit System was aided with the Agricultural Credit Act of 1987, which authorized the issuance of $4 billion in bonds to support system members. Furthermore, Section 1117 of the Housing and Economic Recovery Act of 2008 (HERA) authorized the Secretary of the Treasury to purchase any amount of GSE securities—debt or equity—necessary to provide stability to financial markets, prevent disruptions in the availability of mortgage finance, and protect the taxpayer. This authority, which expired December 31, 2009, was used by the Secretary of the Treasury to enter into a contract with Fannie Mae and Freddie Mac to supply an unlimited amount of equity between 2010 and 2012. Because of this implicit federal guarantee on FHLBank debts, FHLBank securities are considered to have little to no risk and regional FHLBanks can borrow funds from investors at very low interest. The FHLBanks played an active role in efforts to stabilize the financial system throughout the financial crisis. As other sources of funding fell, financial institutions increasingly turned to the FHLBank as a source for capital both to help cover losses and to allow members to continue making mortgages. FHLBank advances to member banks likely prevented a number of financial institutions from collapsing, and delayed the failure of other institutions long enough to allow a merger or acquisition by a third party. One result of the FHLBanks' role in the financial crisis has been an increased concentration of advances. For example, 62% of the San Francisco FHLBank's advances were to Citigroup, JP Morgan Chase, and Wachovia (currently owned by Wells Fargo). This concentration increased the potential losses to FHLBanks if a member, such as Wachovia, were to become insolvent. In modern finance, banks seek to have a large number of relatively small borrowers instead of a few large customers because they are better able to sustain more small losses than one large loss. Another result has been that because of mergers, advances will decline for some banks and other banks will increase advances. For example, the Seattle FHLBank lost its largest member and largest advance user when JP Morgan Chase purchased Washington Mutual. The FHLBank system (along with Fannie Mae and Freddie Mac) continue to be in various degrees of financial difficulty due to declining home prices, rising delinquencies and foreclosures, and previous decisions that turned out badly. All three balance profitability against providing support for the housing finance system and affordable housing opportunities. According to preliminary, unaudited 2009 financial reports, combined new operating income for 2009 was $1.9 billion compared to $1.2 billion for 2008. Four FHLBanks reported preliminary net losses: Boston (-$187 million), Chicago (-$65 million), Pittsburgh (-$37 million), and Seattle (-$162 million). According to the FHLBank Office of Finance, most of these losses were due to declines of fair market value of certain assets. In recent years, the FHLBanks' income has decreased for a number of reasons: Mergers between member banks have reduced the number of members and shifted membership (and borrowing) between the regional FHLBanks. FHLBank profitability has decreased because the difference ("spread") between FHLBanks' cost of borrowing funds and the interest rate charged on advances to members has been smaller than in previous years. The FHLBanks purchased private label MBS (MBS not issued by Fannie Mae, Freddie Mac or the federal government), which have not been as profitable as anticipated. The Chicago and Seattle FHLBanks developed programs to sell MBS in competition with Fannie Mae and Freddie Mac, but these programs produced losses and have since been terminated. More specifically, the Chicago FHLBank signed a consent order to cease and desist repurchasing capital stock, and the Seattle FHLBank is officially considered to be undercapitalized. Des Moines and Pittsburgh are, also, considered to be in less than satisfactory condition. Boston and Atlanta have suspended dividends to conserve capital. Table 1 provides more details on the conditions of each of the 12 banks. In the first nine months of 2009, FHLBank system assets decreased to $1,062 billion from $1,349 billion (21%) and total capital decreased to $45 billion from $50 billion (12%). For the first nine months of 2009 system net income was $1.3 billion compared to $1.9 billion for the same period in 2008. Decreasing mortgage market activity led to a reduction of bonds and notes outstanding (used mainly to finance advances to members) to $980 billion from $1,258 billion. Appendix Table A-1 contains more detailed financial information. The FHLBanks' recent financial troubles have led to questions as to what options would be available to handle the failure of one, or all, of the regional FHLBanks. Both the structure of the FHLBank system itself and federal law provide for certain procedures to stave off any system wide collapse. If necessary, however, FHFA has the same authority under HERA to seize control of one or more FHLBanks as it used to take over management of Fannie Mae and Freddie Mac. The FHLBank system is structured in a way that protects the viability of the system as a whole. Each regional bank is jointly and severally responsible for the liabilities and debts of all the other banks. Therefore, if one regional bank were to approach insolvency, the other regional banks would be required to cover the failing bank's debts. In most situations, the eleven remaining banks would likely be able to recover from such an incident without requiring any further federal involvement. However, if a number of regional banks fail, or if all 12 banks happen to be suffering severe financial stress at the time of a single failure, the cooperative structure of the FHLBank system may not be sufficient to produce a full recovery. FHLBanks are also authorized to engage in voluntary mergers with the approval of the Director of the FHFA and the boards of directors of the banks involved. There is no statutory requirement that the FHLBank system be comprised of 12 banks. Although there may not be more than 12, HERA amended the Federal Home Loan Bank Act to allow any reduction in the number of FHLBanks pursuant to a merger or liquidation. The voluntary merger of a struggling bank with a stronger FHLBank would therefore be another internal option for handling a single FHLBank failure. Where internal resources are insufficient, HERA provides the statutory authority for handling a financially troubled FHLBank in need of government intervention. Under the statutory scheme, HERA empowers the FHFA with a variety of options, allowing for various levels of government involvement, to respond to a potential FHLBank insolvency. Depending on the magnitude of the capital shortage, the agency has the authority to change the leadership of the banks, merge regional banks, liquidate individual banks, or place a regional bank under a conservatorship or a receivership. Additionally, HERA gave the Secretary of the Treasury the temporary authority to lend or invest as much money as is necessary in the event of a mortgage or financial market emergency. In conjunction with its authority to set minimum risk-based capital levels, the FHFA may enforce established levels through corrective action. The type of action available to the FHFA depends on the degree of undercapitalization. HERA sets up four classifications for undercapitalization: adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The Director of FHFA is required to "closely monitor" the condition of any undercapitalized FHLBank. If conditions worsen and the FHLBank becomes significantly undercapitalized, the FHFA must either order a new election for the board of directors of the affected bank, mandate the dismissal of directors or executive officers, or require the bank to hire "qualified executive officers." Should a bank become critically undercapitalized, HERA provides for the discretionary appointment of the FHFA as conservator or receiver of the FHLBank. The statute lists a number of grounds for this discretionary appointment, including but not limited to, insufficient assets, an inability to meet obligations, or the realization of significant losses. Where the statutory grounds are satisfied, the FHFA Director has the discretion to choose whether to place the bank in a conservatorship, a receivership, or neither. Generally speaking, a conservator is appointed to operate the institution, conserve its resources, and restore it to viability. A receiver is appointed to liquidate the institution, sell its assets, and pay claims against it to the extent available funds allow. As a conservator or receiver, the FHFA would exercise a high degree of control over the failing bank. The agency would be authorized to operate and manage the institution while exercising "all rights, titles, powers, and privileges of the regulated entity, and of any stockholder, officer, or director of the regulated entity." Explicitly granted powers include the authority to transfer assets, pay obligations, issue subpoenas, repudiate or enforce contracts entered into by the FHLBank, and any other action "necessary to put the regulated entity in a sound and solvent condition." In limited circumstances, HERA removes the Director's discretion and mandates that an FHLBank be placed into a mandatory receivership. Only where a bank's debts exceed its assets during the previous 60 days, or the bank generally has not been paying debts as they come due does HERA mandate that the bank be placed into a receivership. Under a receivership the FHFA is authorized to liquidate and sell any assets held by the FHLBank. However, whether the FHFA establishes a discretionary conservatorship or receivership or a mandatory receivership, the affected FHLBank may challenge the appointment in court. Additionally, the FHFA has broad authority to liquidate or reorganize an individual FHLBank. The liquidation or reorganization of FHLBank assets may occur "whenever the Director finds that the efficient and economical accomplishment of the purposes [of the FHLBank] will be aided by such action." Prior to taking action under this provision however, the FHFA must give the affected FHLBank 30 days' written notice of the basis for such a determination. The affected bank may then challenge the determination through a hearing before the FHFA. The authority given to the FHFA director which was used to place Fannie Mae and Freddie Mac into voluntary conservatorship based on their critical undercapitalization would apply to handling a critically undercapitalized FHLBank. HERA ensures that when any action is taken, the FHFA Director consider the differences between the FHLBanks and other GSEs like Fannie Mae and Freddie Mac. In other words, the Director is required by statute to consider the FHLBank's cooperative ownership, liquidity and affordable housing mission, capital structure, and joint and several liability before taking any formal or informal corrective action. The FHLBanks utilize the many benefits of their GSE status to provide their member banks with access to low-cost funding. During the recession that started in 2008 and the current liquidity crunch, the FHLBanks are likely to continue to play a large role in the ongoing recovery of the national housing market. The mortgage crisis, however, has left some FHLBanks in a precarious financial situation, with billions in unprofitable MBS weakening their financial books. Were an FHLBank to fail, the existing internal cooperative structure of the FHLBank may be able to stabilize the system as a whole. If internal corrections fail, however, statutory authority exists for a government intervention targeted at containing the disruption by stabilizing or liquidating the affected FHLBank. As of September 30, 2009 the FHLBank system had assets of slightly less than $1.1 trillion, with over 70% of those assets tied up in advances or mortgage loans. The FHLBank exercises no oversight over their advances once they are distributed to member banks. A member bank is limited, however, on how much it can borrow from the FHLBank based on the amount of stock the bank has purchased and the percentage of mortgage-related assets it holds.
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The Federal Home Loan Bank system is a cooperative, government-sponsored enterprise, created to provide liquidity to the nation's lenders with a special focus on low and moderate-income housing and community development, all under the supervision of the recently created Federal Housing Finance Agency. Each Federal Home Loan Bank (FHLBank) essentially acts as a lender to lenders. The 12 regional banks engage in no direct lending to the public. Instead, member banks turn to the FHLBank for on-demand low interest loans, which the member bank can then use to issue mortgages or other loans to the general public. The 12 regional banks that make up the FHLBank system, though unfamiliar to many, have been key players throughout the financial crisis and are likely to continue to play an important role in the ongoing economic recovery. The FHLBanks played an active role in efforts to stabilize the financial system throughout the financial crisis. As other sources of funding fell, financial institutions increasingly turned to the FHLBanks as a source for capital. FHLBank advances (loans to member banks) likely prevented a number of financial institutions from collapsing, and delayed the failure of other institutions long enough to allow a merger or acquisition by a third party. The FHLBanks are currently, however, suffering various degrees of financial difficulty due to declining home prices, rising delinquencies and foreclosures, and previous decisions that turned out badly. The FHLBanks' recent financial troubles have led to questions as to what legal options would be available to handle the failure of one, or all, of the FHLBanks. Both the structure of the FHLBank system itself and federal law provide for certain procedures to stave off any system wide collapse. Were an FHLBank to fail, the existing internal cooperative structure of the FHLBank system may be able to stabilize the system as a whole. If internal corrections fail, however, statutory authority exists for a government intervention targeted at either stabilizing or liquidating the affected bank. This report provides an overview of the FHLBanks, analyzes the current financial condition of the FHLBanks, and examines the legal issues that would be germane if one of the 12 regional FHLBanks were to become insolvent.
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On September 9, 2004, the House Committee on Appropriations reported a bill makingappropriations for the Departments of Veterans Affairs and Housing and Urban Development, andIndependent Agencies for FY2005 (VA-HUD appropriations bill) ( H.R. 5041 ). (1) Under H.R. 5041,the Veterans Health Administration (VHA) would receive $30.3 billion in FY2005. This is a $1.9billion increase from FY2004 and $1.2 billion more than the President's request. It includes $19.5billion for medical services, $4.7 billion for medical administration, $3.7 billion for medical facilities,$385 million for the medical and prosthetic research, and $2 billion in medical care collections. Furthermore, the Committee recommended approximately $370 million from the Construction Majoraccount, and nearly $162 million from the Construction Minor account for Capital Asset Realignmentfor Enhanced Services (CARES) activities. The Committee rejected the Administration's proposalto fund VHA through an alternative appropriations structure, in which the VHA budget would havebeen consolidated into two business lines: medical care, and medical and prosthetic research. It alsodisregarded the Administration's proposal to increase copayments and fees for lowest-priorityveterans. The Senate Committee on Appropriations reported its version of the VA-HUD appropriationsbill for FY2005 ( S. 2825 ) on September 21, 2004. (2) Under S. 2825VHA would receive $30.4 billion in FY2005. This is a $2 billion increase from FY2004, and $1.2billion more than the President's request. It includes $19.5 billion for medical services, (3) $4.7 billion for medicaladministration, $3.7 billion for medical facilities, $405 million for the medical and prosthetic research,and $2 billion in medical care collections. The Committee also recommended $370 million from theConstruction Major account, and $182 million from the Construction Minor account for CARESactivities. The Committee also rejected the Administration's proposal to fund VHA through analternate account structure and did not include any copayment changes that were proposed in thebudget. On November 20, 2004, both the House and Senate adopted the conference agreement toaccompany the Consolidated Appropriations Act, 2005 ( H.R. 4818 , P.L. 108-447 ). (4) Under P.L.108-447 VHAwould receive $30.3 billion in FY2005 an increase of $1.2 billion over the FY2005 appropriationrequest, and $1.9 billion over FY2004. None of the funds would be contingent upon an emergencydeclaration as proposed by the Senate Appropriations Committee ( S. 2825 ). P.L.108-447 provides $19.5 billion to finance medical services. Furthermore, it appropriates $4.7billion for medical administration, $3.7 billion for medical facilities, and $405 million for medical andprosthetic research. Funding for VHA includes $2 billion in medical care collections (MCCF). Theconference agreement also includes $370 million from the Construction Major account, and $182million from the Construction Minor account for CARES related activities. It should be noted thatthese amounts are not included in the total VHA budget since Construction Major and ConstructionMinor accounts are funded through separate construction accounts. The conferrees of theConsolidated Appropriations Act, 2005 rejected the Administration's proposal to fund VHA throughan alternative account structure, and did not include any copayment changes that were proposed inthe President's budget request. This report will first provide a brief summary of the FY2004 budget for VHA care alongwith a general discussion of the budget process in order to provide a context for this summary. Second, the report will provide information on the President's FY2005 budget request for VHA. (5) Third, it will discuss theAdministration's major legislative and regulatory proposals for VA medical care for FY2005. Thisreport has been updated to show the amounts recommended by the House and Senate, and enactedby Congress and signed into law by the President. The Department of Veterans Affairs (VA) provides benefits to veterans who meet certaineligibility rules. Benefits to veterans range from disability compensation and pensions, education,training and rehabilitation services, hospital and medical care, and other benefits such as home loanguarantees and death benefits (including burial expenses). VA provides these benefits to veteransthrough three major operating units: the Veterans Health Administration (VHA), the VeteransBenefits Administration (VBA) and the National Cemetery Administration (NCA). VA's budgetincludes both mandatory and discretionary spending accounts. Mandatory funding supports disabilitycompensation, pension benefits, vocational rehabilitation, and life insurance, among other benefits andservices. Discretionary funding supports a broad array of benefits and services, including medicalcare. In FY2004, discretionary budget authority accounted for approximately 47% of the total VAbudget authority, with most of this discretionary funding going toward supporting VA medical care. VHA operates the largest direct health care delivery system in the nation. (6) In FY2003, VHA operated160 hospitals, 134 nursing homes, 42 residential rehabilitation treatment centers, and 847 ambulatorycare and community-based outpatient clinics. VHA also pays for care provided to veterans byindependent providers and practitioners on a fee basis under certain circumstances. In addition, VHAprovides grants for construction of state-owned nursing homes and domiciliary facilities, andcollaborates with the Department of Defense (DOD) in sharing health care resources and services. During FY2003, VHA provided medical services to an estimated 4.5 million unique veteranpatients, a caseload that is expected to reach approximately 4.7 million in FY2004 and approximately4.9 million by the end of FY2005. (7) The total number of outpatient visits reached 49.7 million duringFY2003, and is projected to increase to 53.1 million in FY2004 to 56.4 million in FY2005. InFY2003, VHA spent approximately 50% of its medical care obligations on outpatient care. In addition, VHA manages the largest medical education and health professions trainingprogram in the United States. Veterans' health care facilities are affiliated with 107 medical schools,55 dental schools and more than 1,200 other schools across the country. Each year, about 81,000health professionals are trained in VA medical centers. To understand VA's medical care appropriations and the Administration's major policyproposals discussed later in this report, it is important to understand VA's enrollment process and itsenrollment priority groups. The Veterans' Health Care Eligibility Reform Act of 1996 ( P.L.104-262 )required the establishment of a national enrollment system to manage the delivery of inpatient andoutpatient medical care. The new eligibility standard was instituted by Congress to "ensure thatmedical judgment rather than legal criteria will determine when care will be provided and the levelat which care will be furnished." (8) For most veterans, entry into the veterans' health care system begins with application forenrollment. (9) A veteranmay apply for enrollment at any time during the year. Eligibility for VA health care is primarily basedon "veteran status" resulting from military service. "Veteran status" is established by active-dutystatus in the military, naval, or air service and a honorable discharge or release from active militaryservice. After "veteran status" has been established ,VA next places applicants into one of twocategories. The first is composed of the following veterans: veterans in need of care for a service-connected disability (10) ; veterans who have a compensable service-connectedcondition; veterans whose discharge or release from active military, naval, or air servicewas for a compensable disability that was incurred or aggravated in the line ofduty; veterans who are former POWs; veterans awarded the Purple Heart; veterans who have been determined by VA to be catastrophicallydisabled; veterans of World War I; veterans seeking care for disorders associated with exposure to hazardousagents (such as Agent Orange in Vietnam) while on active duty; and veterans who have annual income and net worth below a VA- establishedmeans-test threshold. In general, the above-mentioned veterans are regarded as "high priority" veterans, and theyare enrolled automatically in one of the first six priority groups. (A detailed list of priority enrollmentgroups is provided in Appendix 1 .) VA also looks at applicants' income and net worth to determinetheir specific priority category and whether they have to pay copayments for nonservice-connectedcare. In addition, veterans are asked to provide VA with information of any health insurancecoverage they have -- including coverage through employment or through a spouse. These payerswill be the primary payer for nonservice-connected conditions only. The second group is composed of veterans who do not fall into one of the first six categoriesabove. These veterans are primarily those with nonservice-connected conditions and with incomesand net worth above the VA-established means test threshold. In general, these veterans are enrolledin Priority Group 7 or 8, and must agree to pay copayments for the care they receive fornonservice-connected conditions. ( Table 1 provides information on what categories of veterans payfor which services.) Table 1. Veterans' Payments for Health CareServices Source: President's Task Force to Improve Health Care Delivery for Our Nation's Veterans Note: All veterans receiving prescriptions for nonservice-connected conditions who meet the low-income criteria (established by the means test), and veterans who are former POWs are exempt frommedication copayments. a. An annual medication copayment cap has been established for veterans enrolled in Priority Groups2-6. Medication will continue to be dispensed after copayment cap is met. An annualcopayment cap has not been established for Priority Groups 7 or 8 veterans. b. Veterans in receipt of a Purple Heart are in Priority Group 3. This change occurred with theenactment of the Veterans Millennium Health Care and Benefits Act ( P.L. 106-117 ) onNovember 30, 1999. c. Priority Group 7 veterans who are determined to be catastrophically disabled and who are placedin Priority Group 4 for treatment are still subject to the copayment requirements as a PriorityGroup 7 veteran. d. Priority Group 6 -- health insurance and all applicable copayments will be billed when care is forconditions not related to the veteran's experience or exposure. Veterans in this priority groupcould be subject to full medical care copayments or reduced inpatient copayments undermeans-test criteria for nonservice-connected conditions. Combat veterans receiving care fora potential service-related condition within two years of discharge from the military are inPriority Group 6. e. Priority Group 7 veterans -- For inpatient copayments only, veterans in this priority group areresponsible for 20% of the inpatient copayment (in traditional insurance this is known as adeductible) and 20% of the inpatient per diem copayment. The means-tested copaymentreduction does not apply to outpatient and medication copayments and veterans will beassessed the full applicable copayment charges for nonservice-connected care. f. Priority Group 8 veterans -- For inpatient copayments only, veterans in this priority group areresponsible for the full inpatient copayment (in traditional insurance this is known as adeductible) and the inpatient per-diem copayment. Veterans in this priority group are alsoresponsible for the full outpatient and medication copayments for nonservice-connected care. There is no means-tested copayment reduction. VHA is funded through multiple appropriations accounts that are supplemented by othersources of revenue. Although the appropriations account structure has been subject to change fromyear to year, traditionally the appropriation accounts used to support VHA include medical care,medical and prosthetic research, and medical administration. In addition, Congress also appropriatesfunds for construction of medical facilities through a larger appropriations account for constructionapplicable to all VA facilities. Furthermore, the Committees on Appropriations include medical carecost-recovery collections when considering the amount of resources needed to provide funding forVHA. VHA is authorized to bill some veterans and most health care insurers fornonservice-connected care provided to veterans enrolled in the VA health care system, to help defraythe cost of delivering medical services to veterans. The Balanced Budget Act of 1997 ( P.L.105-33 )gave VHA the authority to retain these funds in the Medical Care Collections Fund (MCCF). Insteadof returning these funds to the Treasury, VA can use this for medical services for veterans withoutfiscal year limitations. In general, the federal budget process begins with the submission of the President's budgetrequest to Congress. Following this submission, the Budget Committees of the House and Senatedevelop the annual budget resolution which sets forth aggregate spending and revenue levels, byfunctional levels of spending, for the upcoming fiscal year and at least the following four fiscalyears. (11) The budgetresolution is not binding and does not allocate funds among specific programs or accounts, but themajor program assumptions underlying the functional amounts are often discussed in theaccompanying report. (12) The House and Senate Appropriations Committees subdivide their allocations among their respective13 subcommittees, each of which is responsible for one of the regular appropriations acts. Authorizing committees for certain programs may also consider legislation that will affect spendingunder their programs. A committee has the discretion to decide on the legislative changes to berecommended. It is not bound by the program changes recommended or assumed by the BudgetCommittees in the reports accompanying the budget resolution. (13) Enumerated below aremajor highlights of the congressional budget process, beginning with the President's request to enactspending levels for VA medical care for FY2004. The Administration requested approximately $27.5 billion for VHA for FY2004; this includedapproximately $1.8 billion in medical care collections (see Table 2 ). The House Veterans Affairs,Housing and Urban Development, and Independent Agencies FY2004 appropriations bill (FY2004VA-HUD appropriations bill) recommended a new account structure for VHA. (14) The FY2004 VA-HUDappropriations bill proposed establishing four new accounts: medical services, medicaladministration, (15) medical facilities, (16) andmedical and prosthetic research. The FY2004 VA-HUD appropriations bill included approximately$16.4 billion for medical services, which included nearly $1.5 billion from the Medical CareCollections Fund (MCCF) (the bill language did not provide the $1.5 billion as a separate line item,and it is not shown under the MCCF line on Table 2 ). In addition, the FY2004 VA-HUDappropriations bill included approximately $4.9 billion for medical administration, $4 billion formedical facilities, and $408 million for medical and prosthetic research. In total, the House FY2004VA-HUD appropriations bill provided VHA approximately $25.7 billion. The Senate's appropriations bill ( S. 1584 ) did not propose modifying the FY2003account structure (17) and the Senate approved approximately $25.7 billion for medical care. In addition, S.1584 provided approximately $413 million for medical and prosthetic research, andprovided approximately $80 million for medical administration and miscellaneous operating expenses. In total, the Senate bill provided VHA approximately $28.6 billion for FY2004, includingapproximately $1.6 billion from MCCF. The Consolidated Appropriation Act, 2004 ( P.L. 108-199 ) (18) provided funding for VHAbased on the account structure proposed in H.R. 2861 . The new accounts that arefunded are medical services, medical administration, medical facilities, and medical prostheticresearch. According to the Conference Committee, this account structure will provide for "betteroversight and a more accurate accounting of funds." P.L. 108-199 provided approximately $17.9billion for medical services, $5 billion for medical administration, $4 billion for medical facilities, and$408 million for medical and prosthetic research. In total, P.L.108-199 provided $28.6 billion for theVeterans Health Administration, including a separate amount for MCCF. The following table shows appropriations to VA medical care programs for FY2003, and forFY2004, the Administration's request (based on the Conference Committee's account structure), theamounts recommended by the House and the Senate, and the amounts ultimately approved byCongress and signed into law by the President. Table 2. VHA AppropriationsFY2003-FY2004 ($ in thousands) Source: H.Rept. 108-401 . Note: Totals may not add due to rounding. FY2004 amounts do not include effects of the 0.59%across-the-board rescission in most discretionary accounts, as called for in P.L. 108-199 . a. This amount includes $1.3 billion in emergency funding for medical care. b. The Senate Committee on Appropriations included bill language delaying availability of $1.1 billionfor medical care to provide flexibility to VA to implement significant program changes. c. The Senate Committee on Appropriations included bill language that canceled budget authority of $270 million, representing prior years recoveries for medical care. d. Medical Care Collections Fund (MCCF) receipts are restored to the VHA as an indefinite budgetauthority equal to the revenue collected, estimated to be $1.386 billion in FY2003. Theamount initially projected for FY2004 was $1.8 billion; the conferees on the VA-HUDportion of the Consolidated Appropriations Act ( P.L. 108-199 ) used a later estimate of$1.564 billion. The Administration proposed a new account structure for VHA for FY2005, consolidatingseveral accounts under a medical care business line, and two accounts under a medical researchbusiness line. A brief description of the accounts consolidated into the two business lines is providedin Appendix 2 . On July 22, 2004, the House Committee on Appropriations approved by voice vote theFY2005 VA-HUD appropriations bill ( H.R. 5041 ). This bill was reported out ofcommittee on September 9, 2004 ( H.Rept.108-674 ). As reported, H.R. 5041 recommended $30.3 billion for VA medical programs for FY2005. This is an increase of $1.2 billionover the President's request and $1.9 billion over FY2004. The Committee did not adopt theAdministration's alternative appropriations structure and provided funding using the FY2004 accountstructure. According to the committee report, this was because the Administration's proposedaccount structure "does not address the needs of Congress in its role of reviewing and allocatingfederal budgetary resources." (19) Furthermore, the Committee asserts that the FY2004 accountstructure provides better oversight and a more accurate accounting of funds. The Senate Committee on Appropriations reported its version of the FY2005 VA-HUDappropriations bill ( S. 2825 ) ( S.Rept. 108-353 ) on September 21, 2004. The Committeealso did not adopt the Administration's account structure and provided funding using the FY2004account structure. In its report, the Committee advised the Administration "to be sensitive to theadministrative burden on VA staff in implementing major account changes, and to take this concerninto mind when exploring future account changes." (20) As reported, S. 2825 recommended $30.4 billion for VA medical programs forFY2005. This is an increase of $1.2 billion over the President's request and $2 billion over FY2004. Of the total amount appropriated for medical programs, the Committee designated $1.2 billion asan emergency requirement. (21) According to the committee report, this was due to"unanticipated and urgent need of veterans seeking medical treatment and services." (22) On November 20, 2004, both the House and Senate adopted the conference agreement toaccompany the Consolidated Appropriations Act, 2005 ( H.R. 4818 , P.L. 108-447 ). (23) The bill was signed intolaw by the President on December 8, 2004. Under P.L.108-447 , VHA would receive $30.3 billionin FY2005 -- an increase of $1.2 billion over the FY2005 appropriation request and $1.9 billion overFY2004. None of the funds would be contingent upon an emergency declaration as proposed by theSenate Appropriations Committee ( S. 2825 ). The conferees rejected theAdministration's proposal to fund VHA through an alternative account structure. According to theconference report, the conferees continue to believe the current account structure started in FY2004,composed of four accounts -- medical services, medical administration, medical facilities, and medicaland prosthetic research -- "will provide better oversight and achieve a more accurate accounting offunds." (24) Table 3 presents the President's FY2005 budget request as well as the amounts recommendedby the House Committee on Appropriations, the Senate Committee on Appropriations, and thecommittee of conference for FY2005. Note that the medical care total in the President's budgetrequest includes spending for medical services, medical administration, and construction of facilities. Table 3. VHA FY2004 Appropriation, FY2005 Budget Request,and Amounts Recommended ($ in thousands) Source : H.Rept. 108-674 ; S.Rept.108-353 ; H.Rept. 108-792 a. This amount includes $1.2 billion designated as an emergency requirement. Note: Appropriation amounts for FY2004 adjusted to account for the 0.59% across-the boardreduction in most discretionary accounts, as called for in P.L.108-199 . Includes rescission of $270million in unobligated balances remaining from prior year recoveries and reappropriated to MedicalCare in FY2004. FY2005 budget estimates are not adjusted to account for the 0.8%across-the-board rescission in most discretionary accounts as called for in P.L.108-447 . Much of VA's physical infrastructure was built decades ago when the agency's focus wasproviding inpatient care. VA has been shifting from a hospital-based system providing inpatient careto one that emphasizes outpatient care in outpatient hospital settings and community-based clinics. Today, more than 80% of the services that VA provides to veterans are on a outpatient basis. VA'sCARES initiative is an attempt to create a strategic framework to upgrade the health care-deliverycapital infrastructure and ensure that scarce resources are placed in the types of facilities and locationsthat would best serve the needs of the veteran population. In August 2003, VA released the DraftNational CARES Plan. Following the release of the draft plan, the VA Secretary appointed a16-member independent commission to evaluate the draft plan. The CARES Commission submittedits recommendations to the Secretary in February 2004. After reviewing the recommendations, theSecretary announced the final details of the CARES plan in May 2004. The plan proposes newhospitals in Orlando, FL, and Las Vegas, NV, 156 new community-based outpatient clinics, four newspinal cord injury centers, two rehabilitation centers for the blind, and expanded mental healthoutpatient services nationwide. In some cases, the plan also calls for transferring care fromantiquated facilities to more modern or better- situated VA facilities or contracting for care in localcommunities. By opening health care access to more veterans, VA expects to increase thepercentage of enrolled veterans from 28% of the veteran population today, to 30% in 2012 and 33%in 2022. The Secretary's final decision on the CARES Commissions Report deferred action on ninefacilities, pending completion of feasibility and/or cost-benefit studies. (25) Further study was directedto facilitate more specific conclusions about the regional health care requirements associated witheach facility. VA has developed a seven-year funding model to estimate the additional capital required toimplement the CARES program. The model was based on the preliminary data from the VeteransIntegrated Services Network (VISN) 12 CARES study. To assess capital requirements at a macrolevel, CARES used projections of beds and outpatient primary care, mental health, and speciality care. VA plans to revise the funding model as additional CARES data are available. It should be noted thatany CARES-related major construction project would still need to receive a specific appropriationfrom Congress. In the Administration's budget request for FY2005, a portion of the funds from theConstruction Major and Construction Minor accounts that are part of the medical care account in Table 3 (see Appendix 2 ) would be used to begin implementing recommendations stemming fromstudies associated with the Capital Asset Realignment for Enhanced Services (CARES) program. The House Committee on Appropriations recommended approximately $371 million fromthe Construction Major account, and nearly $162 million from the Construction Minor account forCARES program activities. In its report, the House Appropriations Committee expressed concernabout " the limited consultation by VA with local communities during some aspects of the CARESprograms." In addition, the Committee "directs VA to defer final action on any facility undergoinga feasibility study, as directed by the Secretary's final decision on the CARES Commission Report,until affected stakeholders have been given adequate opportunity to consult with the feasibility studytask forces and VA on the future of these facilities." (26) The Senate Committee on Appropriations recommended approximately $371 million from theConstruction Major account, and $182 million from the Construction Minor account for CARESprogram activities. In its report, the Committee strongly urges VA to establish an independent bodyto advise and monitor the progress of CARES in order to ensure that the implementation of theCARES program is "objective and not vulnerable to subjective changes." (27) The Committee also urgedVA to develop a plan for disposing of its vast inventory of vacant and unneeded infrastructure. The Consolidated Appropriations Act, 2005 ( P.L.108-447 ) provides $370 million from theConstruction Major account, and $182 million from the Construction Minor account forCARES-related activities. The accompanying conference report agrees with language in the Senatereport ( S.Rept. 108-353 ) urging the Secretary of Veterans Affairs to establish an independentCARES advisory body. Note that the Construction Major and Construction Minor accounts are funded throughseparate construction accounts, and not through the VA health care budget. These accounts do notappear on Table 3 . In its FY2005 budget request, the Administration proposed several regulatory and legislativechanges to VA's cost-sharing structure. According to the VA, these changes would have allowedthe agency to refocus the VA health care system to better serve the highest-priority core veterans. These veterans are those with service-connected conditions, those with lower incomes and those withspecial health care needs. Among the most significant legislative and regulatory proposals in thebudget are: Increasing veterans' share of pharmaceutical copayments from $7 to $15 (foreach 30-day prescription) for all enrolled veterans in Priority Groups 7 and 8; Increasing veterans' share of copayments for outpatient primary care from $15to $20 (for each medical appointment) for all enrolled veterans in Priority Groups 7 and8; Establishing an annual user fee of $250 for all enrolled veterans in PriorityGroups 7 and 8; Ending pharmacy copayments for veterans in Priority Groups 2 through 5 withincomes between $9,894 and $16,509; this would allow approximately 394,000 veterans to receiveoutpatient medications without having to make a copayment; (28) Ending long-term care copayments for former prisoners ofwar; Authorizing the department to pay for emergency room care or urgent care forenrolled veterans in non-VA medical facilities; Ending hospice copayments. A brief description of each of the above proposals follows. Increase Veterans' Share of PharmacyCopayments. The Administration proposed to increase the pharmacy copaymentsfrom $7 to $15 for all enrolled Priority Group 7 and Priority Group 8 veterans whenever they obtainmedication from VA on an outpatient basis for the treatment of a nonservice-connected disability. At present, veterans in Priority Groups 2-8 pay $7 for a 30-day supply of medication, includingover-the-counter medications. (29) The Veterans Millennium Health Care and Benefits Act of 1999 (P. L. 106-117) authorizedVA to increase the medication copayment amount and to establish annual caps on the medicationcopayment amount. (30) An annual cap was established to eliminate financial hardship for veterans enrolled in Priority Groups2-6. When veterans reach the annual cap, they will continue to receive medications without makinga copayment. For calendar year 2004, the cap is $840. There is currently no cap for veterans inPriority Groups 7 and 8. According to the VA's actuarial projections, the increase in prescriptiondrug copayments would have resulted in a reduction of $83 million in prescription drug costs andgenerated an additional $135 million in copayment revenue, allowing Congress to reduce the VAappropriation by $218 million. Increase Veterans' Share of Copayments for Outpatient PrimaryCare. The President's budget proposed increasing the primary care copaymentamount from $15 to $20 for a basic outpatient visit. This would have applied to all enrolled PriorityGroup 7 and 8 veterans. The current copayment rates of $15 for a primary care visit and $50 for nonservice-connectedspecialty care visit went into effect on December 6, 2001. (31) The new regulation implemented a three-tier copayment systemfor outpatient care. Services such as preventive screening and immunizations are free. Primary carevisits, which include diagnosis and management of acute and chronic conditions, and the largemajority of personal health care needs, cost $15. Specialty care, such as ambulatory surgery, MRIs,audiology, optometry, and care by specialists, which can be provided only through a referral from aprimary care provider, costs $50. According to VA's actuarial projections, the increase in theprimary care copayment would have resulted in a reduction of $8 million in health care costs andwould have generated an additional $7 million in copayment revenue, allowing Congress to reducethe VA appropriation by $15 million. Furthermore, VA asserted that the increase in the primary carecopayment from $15 to $20 would have had a minimal impact on utilization of VA health care. The Veterans Millennium Health Care and Benefits Act of 1999 ( P.L. 106-117 ), gave VA theauthority to change copayment amounts. Therefore VA does not need congressional approval toincrease the primary care copayment amount from $15 to $20 for an outpatient visit. Assess an Annual User Fee of $250. TheAdministration proposed to assess an annual user fee of $250 for all enrolled Priority Group 7 and8 veterans. According to the VA Secretary, the user fee would have been assessed only when aveteran sought care. VA believes that veterans with higher incomes rely less on VA for health careand have other health care options; therefore, it believes the fee will not have an impact on manyveterans. In its FY2004 budget submission, the Administration requested authority from Congress tolevy an annual "enrollment fee" on nonservice-connected Priority Group 7 and all Priority Group 8veterans. However, Congress did not approve imposing such a fee. In its FY2005 budgetsubmission, the Administration has once again proposed charging all Priority Group 7 and 8 veteransan "annual enrollment" fee. However, in subsequent testimony before Congress, Secretary Principidescribed this as an annual "user fee" that will be collected only when a veteran seeks medicalservices. According to the actuarial projections done by VA, the $250 initial user fee was expected toreduce the number of Priority Group 7 and 8 patients in FY2005 by approximately 211,000. Theinitial user fee would have resulted in a reduction of $141 million in health care costs and would havegenerated an additional $268 million in copayment revenue, allowing Congress to reduce the VAappropriation by $409 million. Pharmacy Copayment Relief for Some Veterans. The Administration proposed to eliminate the pharmacy copayment burden for nonservice-connectedconditions of Priority Group 2-Priority Group 5 veterans by raising the income threshold from $9,894 (if single) to $16,509 (if single). VA maintained that by using this rate it will be able to furtherfocus its resources on its core constituency -- that is, low-income veterans with service-relatedconditions. Ending Copayments for Former Prisoners of War(POWs). The Veterans Health Care, Capital Asset, and Business Improvement Actof 2003 ( P.L. 108-170 ) required VA to exempt former POWs from medication copayments for treatment of both service-connected and nonservice-connected conditions. With the passage of thislegislation, former POWs do not have to pay copayments for hospital and medical services (includingcopayments for medications). This applies to treatment of both service-connected andnonservice-connected conditions. However, former POWs do have to pay copayments for long-termcare services. The Administration asked Congress to exempt former POWs from copaymentobligations for long-term care services as well. This would have effectively ended any remainingcopayments obligations among former POWs for VA health care. Emergency Care for Insured Veterans. Undercurrent law, VA is authorized to reimburse all veterans for emergency treatment furnished in non-VAfacilities for nonservice-connected conditions if they meet the following criteria: (1) they haveenrolled in VA's health care system; (2) they have received care from VA within the 24-month-periodpreceding the provision of such emergency treatment; and (3) they are financially liable to theprovider for the emergency treatment. Veterans who have health insurance coverage for emergencycare, or are entitled to other federal benefits care (i.e., under Medicare or Medicaid), or have othercontractual or legal recourse are not eligible for reimbursement. (32) However, VA does notreimburse out-of-pocket expenses associated with such care. (33) In its FY2005 budget request, the Administration proposed that VA would pay insuredveterans' out-of-pocket expenses for emergency care services if emergency care is obtained outsidethe VA health care system. VA would have been a secondary payer to private insurance or Medicarefor emergency care services. VA would have paid for the out-of-pocket expenses, less the amountof the copayment the veteran would have been required to pay if the veteran had received care fromVA. Copayment Exemption for Hospice Care. Undercurrent law, veterans receiving hospice care for a terminal illness may be subject to copaymentobligations depending upon the type of VA facility in which they receive care. Hospice care receivedin a nursing home is exempt from extended-care copayments. Those veterans who seek hospice careat a hospital (not in a nursing home) are subject to an inpatient copayment. If veterans receivehospice care at home, they are subject to outpatient copayments for their hospice care. TheAdministration proposed that hospice care provided in all settings should be exempt from all inpatientand outpatient copayments. The FY2005 VA-HUD appropriations bills reported by the House and Senate Committeeson Appropriations and the final conference agreement to accompany the ConsolidatedAppropriations Act, 2005, did not include any of the copayment changes that had been proposed inthe President's budget request. On January 17, 2003, the Secretary of Veterans Affairs announced that VA would temporarilysuspend enrolling Priority Group 8 veterans. This was included as a policy proposal in theAdministration's FY2004 budget request. The FY2005 budget request continued this policy ofsuspending enrollment of new Priority Group 8 veterans. According to this policy proposal, those who enrolled in the VA health care system beforeJanuary 17, 2003 would not be affected by this suspension. VA justified suspending enrollment ofPriority Group 8 veterans by asserting that even with budgetary increases, the agency will be unableto provide all enrolled veterans with timely access to health care services because of the tremendousgrowth in the number of veterans seeking VA health care. In January 2003, VA estimated that there were almost 236,000 enrolled veterans who havebeen unable to schedule an appointment within less than six months of the desired date. (34) At present, VA isreporting that this number has been reduced to approximately 36,000. (35) VA contends thatresources should be focused on VA's core population -- those veterans with service-connecteddisabilities, with lower incomes, and special needs such as the blind and those with spinal cordinjuries. Although the Administration included this proposal in the budget request, VA does not needcongressional approval to implement it. The Veterans' Health Care Eligibility Reform Act of 1996( P.L. 104-262 ) gives the Secretary the authority to suspend enrollment when there are insufficientresources to provide quality health care. Suspending enrollment of Priority Group 8 veterans affected approximately 164,000 veteransfor FY2003. If this suspension continues, it would affect an estimated 360,000 veterans by the endof FY2004, and 522,000 veterans by the end of FY2005. According to VA, it will continue to enrollveterans in Priority Groups 1 through 7, adding approximately 380,000 veterans during FY2003 intothese categories. A veteran who is not enrolled will still be eligible for hospital and outpatient care for certainconditions, including the following: (1) conditions related to military sexual trauma, (2) head or neckcancer related to nose or throat radium treatment while in the military, (3) readjustment counselingservices, (4) treatment related to service-connected conditions. Moreover, recently dischargedveterans who have served in combat theaters such as Afghanistan and Iraq can receive health care forconditions potentially related to their services for up to two years. Source : Department of Veterans Affairs Note: Service-connected disability means with respect to disability, that such disability was incurredor aggravated in the line of duty in the active military, naval or air service Medical Care. The medical care appropriationwould provide for medical care and treatment of eligible veterans, and certain dependents andsurvivors of veterans. In addition, this appropriation would also provide for training of medicalresidents and interns and other professional paramedical and administrative personnel in the healthcare field. Medical Care Collections Fund (MCCF). VAdeposits copayments collected from veterans obligated to make such payments for either medicalservices or inpatient pharmacy benefits for outpatient medication, (36) and third- party insurancepayments from service-connected veterans for nonservice-connected conditions into the MCCF. (37) However, copayments,third-party insurance payments, and fees for services other than medical services or inpatientpharmacy benefits were deposited in several medical collections accounts. In FY2004, the Administration's budget proposed consolidating several medical collectionsaccounts into the MCCF. The conferees of the Consolidated Appropriations Act [ H.Rept.108-401 ] (38) recommended that collections which would otherwise be deposited in the entities formerly known asthe Health Services Improvement Fund, the Veterans Extended Care Revolving Fund, the SpecialTherapeutic and Rehabilitation Activities Fund, the Medical Facilities Revolving Fund, and theParking Revolving Fund be deposited in the MCCF. The funds deposited in the MCCF would beavailable for medical services for veterans. These collected funds do not have to be spent in anyparticular fiscal year and are available until expended. The following describes former collectionaccounts now consolidated under the MCCF, and current programs. Pharmacy Copayments (formerly collected in the Health Services Improvement Fund --HSIF). In FY2002, Congress created a new fund (the Health Services ImprovementFund) to collect increases in pharmacy copayments (from $2 to $7 for a 30-day supply of outpatientmedication) that went into effect on February 4, 2002. The Consolidated Appropriations Resolution,2003 ( P.L. 108-7 ) granted VA the authority to consolidate the HSIF with the MCCF and grantedpermanent authority to recover copayments for outpatient medications. Long-Term Care Copayments (formerly Veterans Extended Care RevolvingFund). (39) This fund received per diems and copayments from certain veteran patients receiving extended careservices from VA providers or outside contractors. According to the Administration's budgetdocuments, extended care services are defined as geriatric evaluation, nursing home care, domiciliaryservices, respite care, adult day health care, and other noninstitutional alternatives to nursing homecare. (40) Compensated Work Therapy Program (formerly the Special Therapeutic andRehabilitation Activities Fund). (41) The Compensated Work Therapy (CWT) program is acomprehensive rehabilitation program that prepares veterans for competitive employment andindependent living. The major goals of the program are: (1) to use remunerative work to maximizea veteran's level of functioning; (2) to prepare veterans for successful reentry into the community asproductive citizens, and; (3) to provide a structured daily activity to those veterans with severe andchronic disabling physical and/or mental conditions. As part of their work therapy, veterans produceitems for sale or undertake subcontracts to provide certain products and/or services (such asproviding temporary staffing to a private firm). Funds collected from the sale of these productsand/or services were used to fund the program. Compensation and Pension Living Expenses Program (formerly the Medical FacilitiesRevolving Fund). (42) Under this program, veterans who do not have either a spouseor child would have their monthly pension reduced to $90 after the third month he or she is admittedfor nursing home care. The difference between the veteran's pension and the $90 was used for theoperation of the VA medical facility. Parking Program (formerly the Parking Revolving Fund). The programprovided funds for construction and acquisition of parking garages at VA medical facilities. VAcollects fees for use of these parking facilities. National Program Administration (Formerly MedicalAdministration and Miscellaneous Operating Expenses, MAMOE). The NationalProgram Administration provides support to VA's comprehensive and integrated health care systemby headquarters staff. Specific activities include the development and implementation of policies,plans, and broad program activities; assistance for the networks in attaining their objectives andnecessary follow-up action to ensure complete accomplishment of goals including the capital facilitiesmanagement and development functions. Construction Major. Funds from this accountwould be for construction, altering, extending and improving any of the facilities used by VA. Anyproject that costs more than $7 million falls under this category. Construction Minor. Funds from this accountwould be used for construction, altering, extending and improving any of the facilities used by VA.Any project that costs $500,000 or more, and less than $7 million falls under this category. Grants for Construction of Extended-CareFacilities. Under this program grants are provided to states to acquire or constructstate owned and/or funded nursing home and domiciliary facilities, and to remodel, modify, or alterexisting buildings for furnishing domiciliary or nursing home care for veterans in state nursing homes. The Veterans Health Care Act of 1992 ( P.L. 102-585 ) granted permanent authority for this program. The Millennium Health Care and Benefits Act ( P.L. 106-117 ) reformed the construction grantprogram by giving higher priority to critically needed renovations, such as projects involving fire- andlife-safety improvements in existing state homes. Prior to the enactment of this law, such projectswere given lower priority than grants for constructing new state nursing homes. VA/ DOD Health Care Sharing Incentive Fund. The National Defense Authorization Act for FY2003 ( P.L. 107-314 ) directed the Secretaries ofDefense and Veterans Affairs to enter into agreements and contracts for the mutually beneficialcoordination, use, or exchange of use of health care resources with the goal of improving access to, and the quality and cost-effectiveness of, the health care provided to beneficiaries. Under this act,VA and the Department of Defense must establish a joint incentive fund, with each Departmentcontributing a minimum of $15 million to the fund. At present, the two Departments are in theprocess of establishing the fund and developing criteria for its use. The program is set to expire in2007. (43) Medical and Prosthetic Research. In addition toproviding medical care, VA conducts medical, rehabilitative, and health services research. Themedical and prosthetic research program is an intramural program. Funds from this appropriation are allocated to support VA employees conducting research projects. In addition to funds from thisappropriation, reimbursements from DOD, grants from the National Institutes of Health, and privatesources support VA researchers. Medical research supports both basic and advanced clinical studies. The prosthetic research program is involved in the development of prosthetic, orthopedic, andsensory aides to improve the lives of disabled veterans. The health services research program focuseson improving the outcome effectiveness and cost efficiency of health care delivery for veterans. Medical Care Research Support. Prior to theproposed new account structure, funds appropriated under the medical care account were used forthe indirect cost of VA research. These indirect costs include costs of heating, lighting, and otherutilities associated with laboratory space, administrative costs associated with human resourcesneeded for research, and supply services attributed to research.
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The Department of Veterans Affairs (VA) provides benefits to veterans who meet certaineligibility rules. Benefits to veterans range from disability compensation and pensions to hospital andmedical care. VA provides these benefits to veterans through three major operating units: theVeterans Health Administration (VHA), the Veterans Benefits Administration (VBA) and theNational Cemetery Administration (NCA). VHA is primarily a direct service provider of primarycare, specialized care, and related medical and social support services to veterans through anintegrated health care system. Veterans are enrolled in priority groups that determine payments forservice and nonservice-connected medical conditions. In FY2004, Congress appropriated $28.4billion for VHA to be spent through an account structure composed of four new accounts: medicalservices, medical administration, medical facilities, and medical and prosthetic research. For FY2005, the Administration submitted its budget request to Congress using a newaccount structure that consolidated several accounts into two "business lines": medical care, andmedical and prosthetic research. The Administration requested $29.1 billion for VHA for FY2005. On September 9, 2004, the House Committee on Appropriations reported the FY2005appropriations bill for the Departments of Veterans Affairs and Housing and Urban Development,and Independent Agencies for FY2005 ( H.R. 5041 ) ( H.Rept. 108-674 ). The Committeerejected the alternative appropriations structure recommended by the Administration andrecommended $30.3 billion for VA medical programs for FY2005. This is an increase of $1.2 billionover the President's request and $1.9 billion over FY2004. On September 21, 2004, the SenateCommittee on Appropriations reported its version of the FY2005 VA-HUD appropriations bill, S. 2825 ( S.Rept. 108-353 ). Under S. 2825, as reported, VHA would havereceived $30.4 billion in FY2005. This is a $2 billion increase from FY2004, and $1.2 billion morethan the President's request. On November 20, 2004, both the House and Senate adopted theconference agreement to accompany the Consolidated Appropriations Act, 2005 ( H.R. 4818 , P.L. 108-447 ). The bill was signed into law on December 8, 2004. Under P.L.108-447 , VHAwould receive $30.3 billion in FY2005 -- an increase of $1.2 billion over the FY2005 appropriationrequest, and $1.9 billion over FY2004. In its budget submission to Congress, the Administration also proposed several legislative andregulatory changes to increase certain copayments and other cost- sharing charges for lower-priorityveterans and to reduce copays for certain veterans. The House and Senate Committees onAppropriations, and the final conference agreement did not accept any of the Administration'scost-sharing proposals for VHA. This report will not be updated.
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